Business
Indian parents infuses $ 9 mn. to help clear foreign debt
Taj posts marginal operating loss after financial restructure

Taj Lanka Hotels Limited which benefited from a financial restructuring last March has posted a marginal operating loss of Rs. 5.3 million on a turnover of Rs. 299.3 million in the year ended March 31, 2001, down from an operating profit of Rs. 127.4 million on a turnover of Rs. 422.6 million, the company’s annual report reveals.

Taj Chairman Zubin Dubash said that performance during the year was adversely affected due to the main areas of the hotel closing for refurbishing involving the lobby, three restaurants, the lobby bar and 125 rooms during a major part of the year.

He said that the restructuring had resulted in the reduction of the company’s external liabilities through a process of a waiver and infusion of fresh capital. The lenders waived approximately US$ 21 million including a capital waiver of US$ 3.5 million, he said.

The deal, concluded as a one-time settlement, saw US$ 18 million paid to the consortium of lending banks in return for the capital and interest waiver of US$ 21 million. This cash was raised by the Taj group infusing additional equity of US$ 9 million from two group companies - Tank Asia Limited (US$ 5 million) and the Indian Hotels Company Limited (US$ 4 million).

A loan of Rs. 525 million was also obtained from the National Development Bank that will protect the company from any future currency fluctuations, the directors said.

The company’s financial director, Mr. Lakshman Ekanayake explained that the US$ 18 mn. paid to the lenders was raised by the fresh equity ($ 9 mn.) the NDB loan (approx. $ 5 mn.) and internally generated cash of $ 3 mn.

Dubash said that the Taj group had reiterated its commitment to the revival of Taj Lanka Hotels and the development of tourism in Sri Lanka by bringing in equity of the magnitude of US$ 9 million.

As a result of the financial restructure, the company’s issued share capital has more than trebled to Rs. 1.4 billion from Rs. 405.3 million a year earlier. Also, its accumulated losses have come down to Rs. 1.9 billion from Rs. 3 billion the previous year.

Dubash said that the year under review had begun on a dismal note for the industry with the escalation of the war in the North resulting in the country being placed on a war footing. This resulted in negative travel advisories from tourism generating countries and a drop in arrivals.

This situation, together with the October 2000 general elections, saw arrivals dip 12% from the comparative period the previous year. But the last quarter saw an unprecedented influx of British tourists coming here for the English Test series boosting arrivals. However, the full year arrivals picture was significantly less than the previous financial year.

Dubash said that their hopes of a recovery and enhanced business levels with a refurbished hotel was belied by the Katunayake airport attack last June and the resulting negative travel advisories by European countries. He expected that this, together with the cancellation of several inward charters, will have an adverse impact on occupancies during the peak winter season and future business.

The most recent terrorist attack in the US "will only compound the local tourism industry’s woes as any prospects of military action in the Persian Gulf may further deter European tourists travelling to South Asian destinations,’’ he said.

"However, the tourism industry in Sri Lanka has shown to be incredibly resilient in the pat and we look forward with optimism to the revival of the industry, specially with the concerted efforts of the Ministry of Tourism and the Ceylon Tourist Board, to promote the destination.’’

Despite the financial restructuring, the Taj Lanka share price has remained depressed at around Rs. 3.50 partly attributable to the dilution of the issued capital by the fresh capital infusion.

The share traded at a high of Rs. 4 and a low of Rs. 2.50, closing at Rs. 3.50 at the end of the year under review. The company has declared no dividends since its inception 21 years ago.

The Indian Hotels Company (42.8%), Taj Asia (30.8%) and Taj International Hotels (HK) Ltd. (8.6%) are the major shareholders of the company in which the International Finance Corporation (3.1%), the Secretary to the Treasury (2.7%) and an individual shareholder, Mr. S. F. D. de Silva, owns 2%.

The directors of the company are: Messrs. Z. Dubash (Chairman - w.e.f. 24.09.2001), C. Panjabi (Resigned 30.06.2001), N. B. Daruwala (Retired 16.11.20200), S. F. D. de Silva (Alternate A. Atukorale), T. B. Q. A. M. Al Zawawi, J. P. Summers, C. L. B. Ekanayake, U. L. Kadurugamuwa, A. Sharma (Resigned 16.11.2000), P. K. Mohankumar, R. Gujral, M. Keerthiratne, B. K. Chaudhary (w.e.f. 20.09.20201), A. Chaudhary (w.e.f. 24.09.2001) and C. S. Jalan (w.e.f. 24.09.2001).


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