ET INTELLIGENCE GROUP: The performance of Indian Hotels in the September quarter has instilled confidence among investors that the turnaround story of the Tata Group-promoted iconic chain of hotels is intact. Its debt is receding, while operating profitability is improving, thanks to the strategy of divesting some loss-making overseas ventures and better cost control.In the quarter, the company's net loss reduced to Rs 26.7 crore from Rs 151.9 crore in the corresponding quarter last year, helped by the sale of Taj Boston and gains from currency hedging. It was also able to curtail operating costs -fuel costs fell 9% and employee expenses were down 5%. As a result, operating profit before depreciation (EBITDA) increased by 14% to Rs 70.6 crore. This is despite a 1.1% drop in revenue to . 884 crore.` The turnaround journey began in 2014 when Cyrus Mistry , the then chairman of Tata Sons and the current chairman of Indian Hotels, appointed Rakesh Sarna as the chief executive officer. Under Sarna's leadership, the company sold off loss-making assets, including the Taj Boston property and stake in Belmond (formerly Orient Express Hotels). Together, these divestments brought in Rs 1,100 crore, which came in handy to reduce the company's debt.Sarna also focused on improving efficiency through cost control and enhancing customer engagement. Introduction of new customer loyalty programmes, cutting food and beverage expenses, developing a centralised system for resource allocation and enabling direct room booking through hotel websites to save on commissions paid to third-party agents were the key initiatives.The results of the strategy are visible. The consolidated net loss was reduced to Rs 60.5 crore in FY16 from Rs 553 crore in FY14. In addition, after seven consecutive fiscals of decline, the company's standalone EBIDTA margin improved to 18.8% in FY16 from 17.7% in the prior fiscal, a report by Emkay Research said. According to the brokerage, the company's net debt fell to Rs 4,070 crore in FY16 from Rs 4,130 crore in FY15.The reversal in the company's performance has not gone unnoticed on the bourses. The stock gained 37% in a year till the day Tata Sons announced the dismissal of Cyrus Mistry as chairman on October 24.Since then, however, it has lost over 14%.Analysts expect the company to turn profitable at the net level by the end of the current fiscal. According to Bloomberg consensus estimates, Indian Hotels would record a net profit of Rs 88.8 crore for FY17 and . 247.8 crore for FY18 after post` ing losses for four straight fiscals. In view of the turnaround efforts and optimism among analysts, the decision of the company's board of directors to support Cyrus Mistry as chairman of Indian Hotels doesn't come as a surprise.Considering FY18 estimated earnings, the company's enterprise value is 16.8 times EBIDTA compared with the threeyear average of 24.