Bay Capital Investments (formerly Indus Hospitality Fund) has hiked stake in portfolio firm Sterling Holiday Resorts (India) Ltd by purchasing another 1.1 per cent in the firm through open market transaction for Rs 3.8 crore. This takes the investment management firm’s holding in the hotel and timeshare hospitality firm to over 20.6 per cent, thus strengthening its position as the largest equity holder in the company.
Bay Capital hiked its stake through its India Discovery Fund – an India-dedicated fund which uses a non-leveraged private equity approach to investing in the public markets. India Discovery Fund, which focuses on mid-market companies chasing deals in the infrastructure and domestic consumption story, already held 3.45 per cent stake in the hospitality company as of December, 2010.
The investment management firm also owns 16.11 per cent stake in Sterling Holiday Resorts (India) through Indus Hospitality Fund Ltd. Its aggregate ownership is already much higher than that of the promoters who own 14.4 per cent in the firm.
In February this year, the company had inducted Siddharth Mehta (founder of Bay Capital Partners and an independent director on the board of IL&FS Investment Managers Ltd) as a vice-chairman and Shahzaad Dalal (vice-chairman & managing director of IL&FS Investment Managers Ltd) as an independent director, along with Walid Hasan Kattan as a board member.
Sterling Holiday Resorts is also in the process of raising Rs 100 crore through a qualified institutional placement for completing on-going projects, refurbishing resorts and strengthening financial position of the firm.
The company’s board had recently given a go-ahead to evaluate possible alliances with strategic partners for expanding the business.
Sterling is into vacation ownership business and has a network of 14 resorts in 12 holiday destinations across India. The company closed the last financial year (ending March 2010) with revenues amounting to Rs 30 crore and had been into losses for the last four years.
It has been looking to increase destination footprint by developing new resorts and expanding inventory in existing resorts. However, this will require fresh cash.
In July, 2009, Bay Capital (then Indus Hospitality Fund) had acquired over 15 per cent stake in Sterling through preferential allotment for around Rs 28 crore. This had triggered an open offer for another 20 per cent as per the Indian takeover code. The open offer that came out in November, 2010, did not find many takers and the acquirers including India Discovery Fund (as persons acting in concert) held 19.37 per cent stake post the offer.
Sterling Holiday operates in a field where its peers include much larger firms such as Mahindra Holidays & Resorts and Country Club. Hospitality is a lucrative business to capture India’s domestic consumption story and has been attracting investments from both strategic and financial investors.
Also, Axis Private Equity-backed hospitality firm Neesa Leisure Ltd (operating under the brand Cambay) is in the queue to raise Rs 200 crore through a fresh public issue. While Axis PE is part exiting the Gujarat-based firm, ad-for-equity investor HT Media is selling out completely in the IPO.