October 2, 2023

Hotel, tour operator stocks gain as RBI announces special liquidity window

Shares of hotels, parlours and tour operators showed gains after the Reserve Bank of India…

Hotel, tour operator stocks gain as RBI announces special liquidity window

Shares of hotels, parlours and tour operators showed gains after the Reserve Bank of India (RBI) on Friday announced a separate liquidity window for contact-intensive sectors such as restaurants, hotels and those involved in the tourism sector.

Royal Orchid Hotels jumped 10{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 92.70 on BSE, followed by EIH up 9.59{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 121.15, Taj GVK Hotels & Resorts advanced 7.68{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 147.20, Indian Hotels gained 6.35{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 144, and Lemon Tree Hotels rose 5.02{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 45. In comparison, the benchmark index, Sensex was down 0.11{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 52,174 points. Meanwhile, Kaya Ltd gained 10.40{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} to 347. Tour operators stocks Thomas Cook and Cox & Kings gained 5{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} each.

“In order to mitigate the adverse impact of the second covid-19 wave on contact-intensive sectors, a separate liquidity window of 15,000 crore is being opened till 31 March 2022, with tenors of up to 3 years at the repo rate,” Das said.

Under the scheme, banks can provide fresh lending support to hotels, restaurants, tourism and travel operators, adventure and heritage facilities, aviation ancillary services (ground handling and supply chains) and other services that include private bus operators, car repair services, rent-a-car services providers, event/conference organizers, spa clinics and beauty parlours and saloons.

“The on-tap liquidity window of 15,000 crore for contact-intensive sectors is a material liquidity boost to companies operating in the hospitality, travel and tourism, and aviation ancillary services sectors, which have been hit hard by the second wave of the covid-19 pandemic,” said Subodh Rai, chief ratings officer and senior director, Crisil Ratings Ltd.

“It is timely because companies in these sectors have been reeling under a demand shock—the current quarter could see a contraction of 30-50{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5} sequentially. They also have high leverage of more than 2.5 times, which reduces their ability to withstand such jolts to demand. This move and the expanded emergency credit line guarantee scheme (ECLGS) will go a long way in supporting liquidity for contact-intensive sectors,” he added.

RBI will incentivize banks by allowing them to park excess liquidity, equivalent to such loan books, under the reverse repo window, at 3.75{ffe0afc3723be1abfdcff2272b490245f37403ad5880287a5cb59aa23febe4c5}, 40 basis points (bps) higher than the reverse repo rate.

The second wave of the covid-19 pandemic has hit small businesses the hardest and RBI’s measures will come as a sigh of relief. While it is not clear if banks would like to lend to these sectors, given the higher risk profiles, those that do will be able to avail of the RBI incentive.

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