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Beacon India PE Picks 1% In Sterling Holiday

10 January, 2012

Mumbai-based Beacon India Private Equity Fund has acquired close to 1 per cent stake in Bay Capital and Rakesh Jhunjhunwala-backed public-listed hospitality firm Sterling Holiday Resorts (India) Ltd through a secondary market transaction for Rs 4.5 crore on Tuesday.

The shares were acquired for Rs 84.5 a piece. Sterling Holiday scrip rose 2.8 per cent to close at Rs 86.16 on the BSE in a strong Mumbai market.

Incidentally, Beacon India, a growth capital PE firm, is on road to raise its second fund with a targeted corpus of $250 million.

Beacon India PE’s investment comes months after Sterling Holiday raised around Rs 120 crore through a preferential allotment of shares and equity convertible warrants to a group of investors including a few marquee domestic individual investors, investment funds and its own promoter.

Among those who subscribed to shares/warrants were names like Rakesh Jhunjhunwala and Radhakishan Damani. The preferential allotment was at a price of Rs 75 per share.

The fund raised was to be used to strengthen the ?nancial position and the net worth, besides augmenting long-term resources.

Sterling is into vacation ownership business and has a network of 14 resorts in 12 holiday destinations across India. The company, which closed the last financial year (in March 2011) with revenuez of Rs 39.5 crore, has been into losses for the past five years or more.

It has been looking to increase destination footprint by developing new resorts and expanding inventory in existing resorts. However, such initiatives will require fresh cash.

The company had recently hired Ramesh Ramanathan as its new managing director. Ramanathan, who was earlier with the RPG Group as president of FoodWorld Supermarkets and managing director of Health & Glow, was heading Mahindra Holidays and Resorts India Ltd for the last seven years. Incidentally, Ramanathan was part of the Sterling Holiday Resorts in early 1990s.

In July 2009, Bay Capital (formerly 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, which 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-offer.

Bay Capital, together with India Discovery Fund, had raised its stake and as of March 31, 2011, held 22.8 per cent in the company. While Bay Capital is also among the entities subscribing to the preferential allotment, its total holding will shrink a bit.

Sterling Holiday operates in a field where its peers happen to be much larger firms, such as Mahindra Holidays & Resorts and Country Club. Hospitality is a lucrative business to capture India’s domestic consumption story and it has been attracting investments from both strategic and financial investors.


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Beacon India PE Picks 1% In Sterling Holiday

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