IHG unveils new hotels in India, but loses out on FTSE

One of the world's largest hotel chains has announced a deal to build 13 new hotels in India, which will apparently create 2,000 jobs over there, and 'safeguard' hundred of jobs over here.

by Michael Northcott
Last Updated: 05 Aug 2014

Presumably it is not a coincidence that one of the UK’s largest companies has decided to announced new investment in India just as David Cameron is over there with the largest trade delegation in prime ministerial history. 

It certainly isn't. The chief executive of InterContinental Hotels Group in Asia, Middle East and Africa, Jan Smits, is actually taking part in the trade mission alongside the prime minister. 

Smits said: ‘India is an extremely important market for IHG. We have our second largest pipeline [eh? We thought IHG was a hotel group, not an oil company] in Asia Pacific here after China. With international tourism increasing year on year and the continued strength of domestic tourism, we see incredible opportunities for growth.’ 

It is a significant investment in IHG’s existing India business – it will take its total to 47, and the company claims this will add 2,600 jobs to the existing 3,400. It also said that the expansion will help to safeguard IHG’s HQ operation in the UK where hundreds of people are employed. 

But, as with most things, it’s not entirely a bed of roses for IHG. The group's shares made the single biggest loss on the FTSE 100 index this morning, with the price falling 2.6%. This is disappointing for bosses because the firm has enjoyed a 14.5% rally since the start of 2013. But analysts say the reason is that the finances, although good, weren’t quite strong enough to get investors excited.

Annual profits were $614m, which is up 11% compared with the previous year and beat forecasts by $9m. But part of the catalyst for investors to flee was that the financial reports contained no mention of making a capital return to investors. There had been hopes that some of the group’s major landmark hotels would be sold and that the proceeds would be paid out to shareholders.

Still, the group is obviously doing well, and it has expansion plans in a rapidly growing market afoot. Perhaps investors are expecting too much…?

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