Leelaventure looks to raise R2,500 cr via divestment

Written by Shubhra Tandon | Mumbai | Updated: Dec 4 2012, 07:09am hrs
Hotel Leelaventure is looking to raise R2,500 crore over the next two years, either through divestments or by way of rights or bond issue or qualified institutional placement (QIP) as equity markets improve. The company is going through R4,300-crore debt restructuring exercise approved by lenders in June this year, and is already in the process of selling its non-core assets as part of the programme.

It is planning to divest stake in at least two of its existing properties and take them back on management contract, or raise the said amount through a rights issue, foreign currency convertible bonds (FCCB) or QIP. The company recently sold its Kovalam property in Kerala to NRI industrialist B Ravindran Pillai for R500 crore, and took it back on management contract from him for 30 years, without making a complete exit. It already manages a property in Gurgaon.

Replying to queries from FE, Vivek Nair, vice-chairman and managing director, Hotel Leelaventure, said in a letter, The company will take a decision in the next two years on the divestment of its existing properties and taking it thereafter on long term management contract with its brand intact. He said the company is also open to raising the money by way of rights issue, FCCB or QIP.

Of the six properties that Leela currently owns in Bangalore, Goa, Mumbai, New Delhi, Udaipur and Chennai, the company could look at divesting stake in its recently opened Chennai property and one more, which Nair refused to divulge. Chennai has just opened and has been received well in the market over our competition. We would wait perhaps a year or so for the RevPars to improve, so that we get a good valuation, said Nair. RevPar indicates revenue per available room, a performance metric for the hospitality industry.

Hotel industry circles are abuzz with news that Leela is already in talks with potential investors for its Chanakyapuri property in New Delhi, too, saying an Asian hotel chain has evinced interest in it.

However, Nair has denied any such move. It is not true that Chanakyapuri property is on the block. We own it and it is a marque property for us. We have heads of states among other esteemed guests staying with us. There is no such plan for that property, he said.

He also said that even for the two properties where the company is evaluating divesting stake, it will only be to a financial investor, on the lines of the sale of Kovalam property.

Leela had hived off its Kovalam property into a special purpose vehicle and sold it off to Travancore Enterprises. Leela continues to manage the property with its own brand name through a long-term management contract.

Hotel Leelaventure posted a net loss of R92.49 crore for the second quarter ended September and revenues of R132.4 crore.

As part of its debt restructuring package, Leela has been selling its non-core assets to prune debt.

The company finalised a deal for the sale of Chennai Business Park for R175 crore. Nair said that non-core assets of the company, which include the joint development of the residential properties in Pune and Bangalore, are progressing well. The company expects to get over R100 crore through sale of its Hyderabad land, he added.

The Indian hotel sector has been reeling under the effect of the economic downturn in Europe and in the US, leading to fall in tourist numbers to India. The RevPar has been progressively falling on account of this as well as due to the increased supply of guest rooms whose construction was initiated during the boom time from 2006 to 2008.