Whilst core business of hotels has fared well, the Group has also benefitted from other income via exchange gain, capital gains, dividend and interest income. This is due to timely and prudent investment strategies and their mix pursued by Thambiayah and his team.
The Group comprises Renuka City Hotels Plc and Cargo Boat Development Company Plc, which are public listed companies and the unlisted entities Renuka Hotels Ltd., Renuka Properties Ltd., Crescent Laundries and Dry Cleaners Ltd., Renuka Consultants and Services Ltd.,
Amalgamated Theatres Ltd., and Lancaster Holdings Ltd.
The combined after-tax profit in the financial year ended on 31 March 2012 was Rs. 1.06 billion, up by 14% over the previous financial year, Chairman and top business leader Ravi Thambiayah told the Daily FT.
The Group especially listed companies have been commended for its consistent dividend policy which ensures benefits of improved bottom line are shared with shareholders.
Renuka City Hotels Plc, in FY12 saw its after tax profit rise by 166% to Rs. 457.8 million from Rs. 171.7 million in the previous year. Dividend paid was Rs. 6, up from Rs. 5.50 in FY11. At Cargo Boat, which had a satisfactory year as far as its core business of office space rental is concerned, but profits dipped due to lower other income, declared a Rs. 2 dividend for FY12, though lower in comparison to Rs. 4 in the previous year.
At Renuka City Hotels, the core business has been improving as well. Its revenue for FY12 was Rs. 188 million, up from Rs. 99 million in the previous. Gross profit grew from Rs. 81 million to Rs. 164 million. However other income made the biggest contribution of Rs. 401.5 million, more than double from Rs. 177.4 million achieved in FY11. Other income include exchange gain (Rs.114.3 million), and profit on sale of shares (Rs. 138.7 million), up from Rs. 11 million and Rs. 101.4 million respectively in the previous year. Interest and dividend income too had been higher.
Overall the Renuka Hotels Group has both a trading investment portfolio and medium term basket of shares focused on dividends and capital gains. Some of its major investments include in financial services sector such as DFCC Bank and Commercial Bank as well as manufacturing, services and leisure sector.
Thambiayah explained the secret of his success as far as listed equity investments by stating, “I am not a gambler though I am not risk averse, I buy and sell good stocks when they at a good level. Overall we pursue cautious and prudent investments.” In fact the good mix of investment strategies focusing on equities and debt as well as forex swaps has boosted returns from the overall portfolio.
Whilst investments continue to be a great source of income, for Thambiayah, hotel industry remains his passion.
Renuka City Hotels by December hopes to complete the addition of 18 deluxe rooms with an investment of Rs. 200 million. This expansion will give the Group a base of 100 quality and upgraded rooms in the city thereby strengthening its prospects in the business travel market, which has been strong especially since the end of the conflict in mid-2009.
The new wing apart from having 18 rooms will include a roof top infinity swimming pool and a well equipped gymnasium, both giving enhanced value to Renuka’s clientele.
According to Renuka City Hotels Annual Report for 2012, it had enjoyed an impressive 93% occupancy, which the Chairman Thambiayah attributed to efforts in maintaining good quality standards by the management the staff alike. Renuka Hotels have also benefitted from the Government-mandated minimum rates for city hotels.
Apart from helping the industry to meet with rising costs, the minimum room has helped for hotels to reinvest in upgrading and expansion in addition to higher revenue to the Government as well.
The upcoming new deluxe rooms at Renuka City Hotels will feature an array of state of the art amenities, flat screen TV, safety deposit locker, mini bar, tea/coffee making facility, and Wi-fi internet. The roof top infinity swimming pool and children’s pool which overlooks the serenity of the Indian Ocean will create a tranquil and relaxed atmosphere for individuals and families staying at Renuka City Hotels. The new fully stocked Pool Bar will serve delectable snacks and Renuka says it will be ideal for small corporate gatherings and cocktails. The state of the art fitness centre will give significant value addition to its guests with a unique fitness experience.
As an appreciation for the contribution made by employees, the new wing will also have offices, changing and lunch rooms for all Renuka Hotel staff.
“This will boost the morale of our team, which is important in the hospitality industry,” Thambiayah said. The new facilities for employees is in addition to the staff quarters already available within five minutes walking distance to the hotel for those who work overnight.
Given the end of the war phenomenon, Renuka Hotels Group Chairman is optimistic on prospects for both leisure and capital market investments provided some of the perennial issues and new challenges are addressed with the right policies and effective and private-public sector coordinated measures.