Singapore sovereign wealth fund GIC and Indian Hotels Company Ltd, operator of Taj luxury hotels, have signed an investment framework for about Rs 4,000 crore ($600 million) to acquire hotels in India.
"The capital platform will be used to acquire fully operational hotels mainly in the luxury, upper upscale and upscale segments in India," Indian Hotels said in a stock-exchange filing.
GIC will contribute 70% of money to the investment platform while Indian Hotels will chip in with the remaining amount over a period of three years, the Tata group company said.
Indian Hotels also said the platform will allow it to pursue acquisitions in an asset-light format. The company will manage the hotels acquired within the framework under its marquee brands.
Indian Hotels is working towards an Aspiration 2022 to improve its inventory growth. According to The Economic Times report from 2018, this plan involves the company divesting non-core assets like residential apartments and land banks, becoming less ownership-driven, and diversifying from luxury to other categories via its brands Vivanta and Ginger Hotels.
As part of its domestic expansion strategy, Indian Hotels has been focusing on adding asset-light hotel properties within the country.
According to recent media reports, CEO Puneet Chhatwal is aiming to add 1,900 rooms by FY20.
The Indian hospitality industry has seen tremendous investor activity though some deals have faced problems recently. Canadian firm Brookfield Asset Management Inc.'s plan to buy assets of Hotel Leelaventure Ltd has hit a hurdle.
In 2018, Piramal Capital & Housing Finance Ltd, a wholly-owned subsidiary of diversified Piramal Enterprises Ltd, invested Rs 650 crore in hotels owned by Gurugram-based hospitality firm SAMHI Group, backed by Goldman Sachs.
The same year, The Connaught, a 31-year premium Delhi hotel sealed off for two years after murder controversy, attracted bids from Indian Hotels, Sarovar Hotels, as well as The Byke Hotels and Resorts.
In December 2018, VCCircle reported that private equity firm Warburg Pincus is setting up a joint venture with Lemon Tree Hotels Ltd that plans to invest as much as Rs 3,000 crore ($426 million) to develop full-service accommodation for students and young working professionals.
GIC is one of the most active sovereign wealth funds in India. It strikes equity market deals as well as big-ticket transactions in real estate and private equity-style transactions. It is also a large limited partner, or investor, in many Indian private equity and venture capital funds.
For GIC, this investment in Indian Hotels is smaller than its $714 million commitment to Bharti Airtel reported in March 2019.
GIC’s other large investments were in mortgage lender HDFC and real estate developer DLF.