In a first in the Indian private equity space, Daman Hospitality Pvt Ltd (DHPL), which is building a casino, is raising Rs 35 crore from Madison India Real Estate Fund, a $150-million fund managed by Paracor Capital Advisors, informed sources told VCCircle. DHPL's casino project is coming up with a luxury resort in Daman, near the coast of Maharashtra.
The resort is being developed and managed by the $172-million, NYSE-listed global gaming, entertainment and hospitality chain Thunderbird Resorts. Srinidhi Rao, country manager of Thunderbird, has confirmed this development to VCCircle. When contacted earlier this week, Anil Pathak, CEO and MD of Paracor Capital Advisors, declined to comment on the transaction. Paracor’s previous investments in realty have been in hotel chain Sabari Inn and a residential development near Chennai.
In India, casinos are legal only in Daman & Diu, Goa and Sikkim. Globally, however, many casino destinations are international tourist hotspots such as Las Vegas, which came up in the middle of the Nevada desert in the US. Macau, located near Hong Kong, is the latest to join the league of gaming hubs.
Interestingly, the PE investment in an Indian casino comes at a time when the global casino industry is fraught with depressed consumer spending sentiment and huge debt overhang. Take the case of Station Casinos, one of the largest in Las Vegas, which became the biggest PE-controlled firms to file for bankruptcy earlier this year. Britain's biggest bingo club operator Gala Coral--owned by PE firms Candover, Cinven and Permira--is in danger of being taken over by its lenders.
In India too, this deal is interesting to note when the investor community is upping its focus on “need to have” segments such as education, healthcare and affordable housing. In fact, PE deal flow in leisure and hospitality segments, largely driven by consumer sentiments and discretionary spending, has suffered a steep fall in the first nine months of 2009. While PE firms invested $127 million across 11 deals in January-September 2008, they pumped only $40 million across 9 deals so far in 2009, according to VCCEdge, the financial research platform of VCCircle.
DHPL's hotel, which is targeting to start operations by the year-end, will carry the brand name Thunderbird. The project, spread across 40,000 square metres, will entail a total cost of around Rs 375 crore for developing a 175-room sea-facing luxury resort.
Daman Hospitality is promoted by Ketan Patel, son of former Daman & Diu Congress MP Dahya Patel. Prior to this venture, Ketan Patel was the president of Daman and Diu district panchayat from where he resigned following his father’s electoral defeat in the general elections this year.
CLARIFICATION: Jal Goiporia, country head (sales & marketing), Thunderbird Resorts wrote to VCCircle saying the following:
The article is incorrect in stating that the Madison India Real Estate Fund managed by Paracor Capital Advisors has invested in the Casino. This has obviously and understandably disturbed our investors and promoters.
The facts as they stand are:
1. Thunderbird has invested in DHPL for the development of a resort.
2. DHPL is developing a resort – it is not (and has no intention of) developing a casino.
3. Thunderbird is in discussions with Madison to raise funds for the resort.