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ITDC stock gains 800 per cent in 5 months: Here's why

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New Delhi:

The stock market is abuzz with talks that there could be a deliberate attempt to bump up the share price of state-owned India Tourism Development Corporation (ITDC), the public sector undertaking under the aegis of the Ministry of Tourism.  

The company's stock has returned more than 800 per cent in the past five months.

On Friday, continuing the upward spiral, the stock once again hit the upper circuit of 5 per cent, as was the case through the week, to close the day on the Bombay Stock Exchange at Rs 1,192.80.

The stock was at Rs 206.40 in August 2012.       

Here are five reasons why the stock may be rallying:

1. Shares of hotel companies in general are on the rise. This is largely due to a recent upbeat data from the Tourism Ministry on foreign exchange earnings from tourism and foreign tourist arrivals in the country. According to the data, foreign exchange earnings from tourism saw a jump of 13.4 per cent to $1.776 billion in November 2012 as against the same period the previous year. Also, foreign tourist arrivals in India between January and November 2012 was at 58.99 lakh, which is a growth of 5.9 per cent as compared to the corresponding period in 2011. This data seems to be trigger for the ongoing rally that the stock is witnessing along with other hotel stocks. Also, these encouraging figures comes at a time when the sector is facing turbulent times globally.

2. After seeing losses for two straight years, ITDC was back in the black with a profit before tax of Rs 22 crore for 2011-12. The turnover of the company increased by about 8 per cent as compared to the previous year. The turnover rose to Rs 423.06 crore from Rs 392.36 crore in the said period, which is a 7.82 per cent increase. The company attributed this improvement in its finances to several steps that included cost-cutting measures and a rise in room occupancy rate by about 8 per cent at its various hotels. The company at present has 1,200 rooms in its 15 hotels across India.

3. Thanks to the low volume of business, ITDC is losing its attractiveness as a potential joint venture business partner for prospective international operators at elite airports. However, the company has found a way to circumvent this infirmity by aiming at second-rung airports, many of which are now in line for getting international status. This is a big positive for the company.

4. The pioneer of duty-free shopping in India, ITDC is now betting on duty-free business at seaports in the country. In fact, the company has changed its business focus from operating duty-free shops at internatinal airports to the country's ports. Recently, ITDC launched a new duty-free shop at the Mangalore seaport.

5. Commonwealth Games, 2010, gave a big boost to the company's brand besides making way for major renovation and product upgradation at its three hotels in Delhi - Ashok, Samrat and Janpath. The company claims that the product upgradation during this overhaul saw inclusion of top-of-the-line products as well as brands, and that its target clientele has also accordingly upgraded since then.

Story first published on: December 15, 2012 11:12 (IST)

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