Thanks everyone for the information on Sindhudurg.

So, it looks like the future potential is very bright.

Does this Hotel chain have a first mover advantage in that sindhudurg region? In that case, it makes it a great buy , both on the basis of financials as well as business wise. Although I am totally incompetent to talk on business model but wrt hotels, we all understand its business maintainability thats more crucial than financials. thats why an Advani hotels is trading at such levels and a leela is trading at such levels. The valuation gap is a bit too much to simply make a call on the basis of financials

The first thing that any prospective investor should be aware of is that Kamat Hotel derives 95% of its current revenues from its 2 properties in Mumbai, The Orchid Hotel (245 rooms) near the domestic airport and Lotus Suites(190 rooms) in Andheri near the Sahar International Airport. This exposes KHIL to a huge event risk but I feel the current valuations (Market Capt 250 crores) limits the downside risk.

Future Plans

1. KHIL plans to double its room capacity from 450+ to 1000+ by FY10. This would involve adding 100 rooms in The Orchid hotel(ARR Rs 8200 and Occupancy rate of 88%) and new properties in Nagpur, Raipur and Baddi. The company is clearly concentrating on emerging business hubs in Tier II and III cities and trying to establish its Lotus Suites, Orchid and VITS brand through both greenfield and brownfield projects. It must be noted that none of these cities have an existing big player like Taj, Oberoi etc.

2. KHIL also intends to manage 1000+ rooms by Fy10. It involves no Capex expenditure and the company usually charges 2-3% of revenues and 6-8% of EBITDA as fees which I believe goes straight to the bottom line.

3. Apart from the business segment, KHIL also intends to own/manage various 4-5 star heritage/tourist properties in Sindhudurg, Pune and Katra(Vaishnodevi). The Jadhav Gadhi fort in Pune is expected to start operations in Nov. It has a 42 room capacity and average room rents are supposed to be Rs 15,000.
Kulman,I believe you have been booked their for a couple of weeks, your good friend PKB dada is picking up the tab. Please, let me know about your experience and your take on its prospects.

Valuations
1. KHIL current market cap of 250 cr factors in its Mumbai properties (435 rooms) at a replacement cost of 57 lakhs per room which I feel is quite low given that its properties are at prime locations and green field projects have an establishment cost of 1 cr per room in Mumbai.

2. KHIL should be able to do revenues of about 210 cr by FY10 and net profit of 42 cr post expansion. I would add another 8 crores to the bottom line via the management fees for 1000+ rooms.

3. I don't have much idea about how the Restaurant business is progressing but according to the management KHIL intends to have 50 restaurants by FY10. My rough calculation on the conservative side would be 10 lakhs per restaurant to the bottomline.

Overall, KHIL has a decent probability of doing a net profit of Rs 60 cr on an expanded equity base of 17.3 cr which would mean an EPS of about Rs 34-35. If it were to trade at a PE ~ 20, the market price would be about Rs 700 and that would be ~ 4x from current levels.

Additional triggers:
Kamfotel chain with HPCL and the stake in Concept Hospitality which is a group company and manages quite a few hotels in India, South Africa & Ulan Bator!!!

Conclusion
Heads I make ~ 4x, tails I hardly lose anything (maybe opportunity cost).

Heads I make ~ 4x, tails I hardly lose anything

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Interesting. Good thesis.

Soon I would be traveling on vacation & will make sure, wherever possible to have breakfast meals at Vithal Kamat's.