Indian Hotels, GIC to launch a dozen hotels in three years

In a first of its kind deal framework in Indian hospitality, Indian Hotels Company Ltd (IHCL) will launch about a dozen hotels in the next three years through its partnership with Singapore’s sovereign wealth fund GIC, managing director Puneet Chhatwal told ET.

IHCL had announced last month that it was setting up a three-year, Rs 4,000 crore investment platform with GIC to acquire hotels in the luxury, upper upscale and upscale segments in India. These hotels would be owned by special purpose vehicles, to be funded equally with debt and equity. The local company would put in 30% equity with 70% to be brought in by GIC.

Chhatwal said the hotel mix held under the platform would include new and some existing IHCL-owned properties with a total of 2,000-2,500 rooms, including 1,500-1,700 which would be newly added. Most hotels would be under the Taj brand, but some might carry the Vivanta tag.

“For example, an IHCL-owned hotel will be moved to the platform to bring down its shareholding to 30% and 70% will then be monetised. So, IHCL’s equity is being funded through its own assets while the company will use that money to reduce debt,” he said. “Already the debt is down to Rs 1,900 crore and the net debt to Ebitda ratio is down to 2.11 from 6.5 earlier. The idea is to bring debt to less than Rs 1,000 crore.”

Chhatwal, who is also the company’s chief executive, had previously told ET that the company was looking at assets that were distressed, including those undergoing the bankruptcy and insolvency process, and being sold at a compelling value.

“When we said we will grow our portfolio by 50%, we had 16,000 rooms, so we needed 8,000 more. We have signed 3,500 in the last three months, we will get 2,000-2,500 rooms from here (platform with GIC) … we are on track to meet our target,” he said.

IHCL and GIC plan to look for acquisitions in India’s top 10 cities besides state capitals.

Since, the investment platform has been envisaged for three years, Chhatwal said when the time comes, the partners would explore various viable options, including new investment structures. “We have several drag along and tag along clauses in the contract to deal with various situations,” he said.

As a part of its Aspiration 2022 strategy, IHCL is planning to sell its non-core assets and become less ownership driven.

“Growth is an important part of Aspiration 2022. Half of that growth will come through new assets and management contracts, and growth through monetisation of apartments and some hotels. Last year, we got Rs 200 crore through monetisation. Now secondary and tertiary markets don’t need our capital, there is enough equity in the market, so why not monetise it. Return on capital employed on management contracts is higher,” Chhatwalsaid.

IHCL reported revenue from operations of Rs 4,512 crore for the last fiscal year through March, up from Rs 4,103 crore the previous year. Profit rose to Rs 296 crore from Rs 103 crore.

Source:-https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/india-hotels-gic-to-launch-a-dozen-hotels-in-three-years/articleshow/69749081.cms