Benares Hotels Ltd. :509438-IN: Earnings Analysis: 2017 By the Numbers : July 24, 2017

Benares Hotels Ltd. reports financial results for the year ended March 31, 2017.


  • Gross margins widened from 39.13% to 40.34% compared to the same period last year, operating (EBITDA) margins now 28.47% from 29.09%.
  • Change in operating cash flow of 15.94% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 495.69 499.74 471.66 431.94 391.97
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 68.17 84.79 92.26 89.8 85.76
Earnings Growth (YOY) -19.6 -8.1 2.74 4.71 38.5
Net Margin 13.75 16.97 19.56 20.79 21.88
EPS 52.44 65.22 70.97 69.08 65.97
Return on Equity 11.8 16.37 19.99 22.37 24.93
Return on Assets 8.83 12.24 15.44 17.05 18.86

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Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 29.09% to 28.47%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 39.13% to 40.34%. For comparison, gross margins were 39.13% and EBITDA margins 29.09% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

509438-IN‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 117.77, compared to last year’s level of 70.25 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

509438-IN‘s year-on-year change in operating cash flow of 15.94% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 23.76% to 19.10% and (2) one-time items that contributed to a decrease in pretax margins from 25.74% to 21.65%

EBIT Margin History
PreTax Margin History

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Company Profile

Benares Hotels Ltd. engages in the business of hoteliering. It owns and operates The Gateway Hotel Ganges and Nadesar Palace hotels in Varanasi. The company was founded on November 3, 1971 and is headquartered in New Delhi, India.

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