Recommendation Review: The Byke Hospitality

The Byke Hospitality owns, operates and manages hotels and resorts in India. From the original count of three hotels, the company now has six hotels - two in Matheran and four in Goa. Besides, the company is also planning to open six new star category hotels at various locations including Manali, Shimla, Lavasa, Jodhpur, Khopoli and Kudal. Its presence in good locales and the overall growth in the tourism industry have worked to the company’s advantage.

We had recommended The Byke Hospitality in DSIJ Vol. 28, Issue No. 15 (dated July 14, 2013), when it was trading at a price of Rs 257, based on the company’s financial results track record for the past few quarters. In the second quarter of the current fiscal too, it reported a good set of numbers, doubling its topline to Rs 32.27 crore from Rs 16.01 crore in Q2FY13. Interestingly, the company's net profit for the quarter moved strongly up to Rs 3.35 crore, more than 3x the net profit figure of Rs 0.77 crore during the corresponding quarter last fiscal.

The promoters are continuously raising their stake in the company and have purchased almost 2.80 per cent (current holding is 44.01 per cent) in the past three quarters. This confidence of the management in the business is also reflected in the price appreciation on the bourses. It is currently up by almost 13 per cent from our recommended price. Considering the volatility in the markets, we believe that one should take the gains made so far off the table. Only long-term investors with high risk tolerance should continue to hold the stock.