The country’s largest realty firm DLF has bought out its foreign partner Hilton in its hospitality firm DLF Hotels (formerly known as DLF Hilton Hotels Ltd) for an undisclosed sum.
DLF held majority stake in the 74:26 joint venture that clocked revenues of Rs 22.95 crore with profit after tax of Rs 14.5 crore during the year ended March 31, 2011. The financial details of the latest transaction stands undisclosed but it would run into several crores.
Although the JV did not manage to scale up as fast as hospitality industry analysts had hoped for, arguably due to the economic slowdown that hit the hospitality business specially hard during 2008-10, the JV had paid up capital of Rs 534.5 crore as per balance sheet disclosure for FY2011.
Among the listed peers, a company like Hotel Leelaventure Ltd is currently trading 34 times its FY2011 net profit. If this is taken as a benchmark, DLF Hotels could be valued at around Rs 510 crore or more and Hilton’s stake could then be worth around Rs 130 crore ($25 million), as per VCCircle estimates.
DLF, which also owns and operates the luxury segment hospitality brand Aman Resorts across the world, had formed an alliance with Hilton for development and management of hotels in India a few years ago.
The debt-laden realty firm had been taking a hard look at the hotel business and among the many options, it has been looking at the possibility of selling Aman Resorts.
DLF had formed the JV with Hilton a few years ago, in one of the first large foreign direct investment transactions in the hospitality sector in the country. Although various international hotel brands operate in India, with some of them having been here for decades, most of them entered the market through management contracts by lending their brand names to local partners.