Analysis of Credit Worthiness of Firms in the Hotel Industry with Special Emphasis on Sheraton New Delhi Hotel.

INDRANI KULKARNI

School of Management International Institute of Information Technology 2011

Acknowledgment
The work presented in the thesis entitled Analysis of Credit Worthiness of Firms in the Hotel Industry with Special Emphasis on Sheraton New Delhi Hotel is a result of investigation carried out by the candidate.

Signature of Candidate Date:-

I2IT IGNOU CENTRE OF EXCELLENCE FOR ADVANCED EDUCATION AND RESEARCH

Certificate
This is to certify that Ms. Indrani Kulkarni of August 2010 batch has satisfactorily completed the thesis entitled, Analysis of Credit Worthiness of Firms in the Hotel Industry with Special Emphasis on Sheraton New Delhi Hotel in partial fulfillment of the requirements for the award of MBA with specialization in Finance.

Name and Signature of Internal Mentor

Date: Place:

Name and Signature of HOD

Name and Signature of External Mentor

Seal of the Institute

TABLE OF CONTENTS Acknowledgments Abstract List of Figures List of Tables Chapter 1. INTRODUCTION 1.1 1.2 _________________ 1.3 _________________ Chapter 2. _____________________ 2.1 ___________________ 2.2 ___________________ . . Appendix A . . . References iv v ix x 1 4

INTRODUCTION
In recent times, there has been a lot of media coverage given to the news that Standard & Poors (S&P) dropped United States of America's credit rating from AAA to AA. But there is still a lot of confusion amongst people as to what exactly is credit rating. This project aims at trying to explain what credit rating is, what its applications are & how is it carried out. The concepts of credit rating and creditworthiness came in India during the 1990s. In this period, banks and other lending institutions found that a lot of firms came to them for loans. As such, they needed to know whether or not to lend to these firms. It was from this need that creditworthiness of firms was established. The banks hired other agencies, which conducted detailed studies of the firms and gave reports to the banks on whether or not to invest in the firms. These agencies are now known as Credit Rating Agencies (CRAs). The concept has now evolved to include even countries, as exhibited by the recent news of USA's credit rating being dropped. The actual meaning of this action is that investing in the USA economy during this time is riskier than it was before the credit rating was dropped. This shows us that credit rating and creditworthiness are relative measures, even though there are certain factors which are objective, like the ratios which are used for determining the credit rating. 1.1 Objectives of the Project 1. To understand and explain the concept of credit rating and creditworthiness. 2. To study the applications of credit rating. 3. To study the role of credit rating agencies in the Indian economy. 4. To understand and apply the quantitative methods used by credit rating agencies to rate firms in the hotel industry in the Delhi/NCR area. 5. To project future positions using horizontal and vertical analysis methods. 1.2 Methodology Used 1. Sample size The collected data is from five major hotels in Delhi/NCR region. The data is for the past three years. Sample selection was done by judgment sampling. 2. Sources The data was taken from the Annual Reports of the five hotel chains.

3. Data Analysis The collected figures are used to calculate ratios, that are in turn used to rank the hotels. The figures are also used to project for further 3 years. 4.