Indian Hotels, Hotel Leela

*Indian Hotels *consolidated profits grew by 49% in FY07, in line with our estimates. Future growth will be driven by the group's plans to add c.6,500 rooms over the next three years to its existing inventory of 9,900 rooms. We believe that pricing power will remain with the industry for the next 12months and have upgraded our earnings estimates for FY08 and FY09 by 3% and 6% respectively. Given the company's diversified portfolio across the country and increasingly internationally, Indian Hotels is our top pick in the sector.

*Hotel Leela's *revenues grew by a disappointing 16.5% during FY07. Ebitda margin declined by 70bps as inspite of increase in tariffs, as other expenses increased with increase in advertisement and marketing budgets. However, net profit grew by 72.5% on the back of higher other income from sale of Business Park in Mumbai and non cash interest income on the deposits with Hudco. With no major additions to room inventory before FY10, we expect Leela's growth to lag its peer group. Further with Bangalore accounting for an estimated 45% of its room revenues, the impact of any correction in tariffs in Bangalore is the highest for Leela.

*Saregama *is India 's leading music company with a repertoire of over 300,000 tracks. The company's revenue mix is fast changing led by publishing income from mobile, radio and internet mediums. Saregama's FY07 publishing income was up 132% driving the 70% jump in Ebitda. For physical sales Saregama is now focussing on large format retail stores and corporate clients. While its distribution muscle in the international markets, esp. in US/UK is growing it is expanding its TV content and films production also. We see Saregama's 46% Cagr in publishing income leading the 50% Cagr in Ebitda over FY07-09CL. The stock trading at 15x FY09CL earnings is an
attractive music play.

*Entertainment Network* , a subsidiary of Times Group, is India 's leading FM radio broadcaster. ENIL's radio business turned around with the shift from licence fees to revenue share. Today the brand Radio *Mirchi *operates in 12 cities, including four metros and is targeting to rollout 20 new stations in FY08. ENIL's out of home media order-book is rising and includes Rs5bn contract of three years for Mumbai/Delhi Airports. It is also ramping up the event management business to be a "city-centric solution" media company. Led by the business ramp-up we estimate ENIL profits to rise 65%Cagr over FY07-09CL however valuations at 28x FY09CL earnings are rich.