Hotel Leelaventure may sell up to 24% stake

Luxury hospitality player Hotel Leelaventure Ltd has sold its Goa property for Rs 725 crore ($110 million) as per a stock market disclosure. It may sell up to 24 per cent stake to a financial investor to raise cash to pare its debt pile, the company's chairman and managing director Vivek Nair separately told Mint.

It is in talks with three-four international investors including sovereign funds and tourism-related conglomerates.

The proposed deal would stop short of the trigger point for making a mandatory open offer for another 26 per cent stake. Given the current market value, a preferential allotment for 24 per cent stake would be worth at least Rs 318 crore ($48 million).

The promoters own 63.45 per cent stake in the firm, almost all of which is pledged with financial institutions. Business conglomerate ITC, that also has a luxury hospitality business, owns 11.8 per cent in Hotel Leelaventure as a public shareholder.

If the firm makes a preferential allotment worth up to 24 per cent, the promoter holding would shrink to 48.6 per cent, as per VCCircle estimates.

As of March 31, 2015, Hotel Leelaventure had debt of around Rs 5,000 crore. Part of this debt was piled up from the property it bought to set up its first hotel at the heart of Delhi.

The company had been looking to sell assets to bring down its borrowings for several years. Last year, a proposed bridge loan from an arm of private equity giant Kohlberg Kravis Roberts (KKR) did not materialise as the company did not agree to terms offered by the PE major.

Earlier, Leela sold its IT park in Chennai for Rs 170 crore to Reliance Industries and its property in Kovalam to Ravi Pillai for Rs 500 crore.

It sells Goa property

Last week, the company sold its Goa property The Leela Goa to Malaysian company MetTube Sdn. Bhd. for Rs 725 crore as part of its debt restructuring process, as per a stock market disclosure. The Leela Goa, built in 1991, is spread across 50 acres at Cavelossim on the Mobor beach with 206 guest rooms and suites.

It is said to be one of the best performing hotels for the firm. During the financial year ended March 31, 2015, the Goa property contributed Rs 119 crore (15 per cent of the total income). Its key rival Taj Hotels has four properties in Goa, including one positioned as a direct competitor in the luxury segment under Taj Exotica.

Hotel Leelaventure had put this property along with that in Chennai on the block early this year. The luxury hotel chain had engaged JM Financial for the sale of the properties.

It will, however, continue to operate the Goa property under the Leela brand for a management fee.

Meanwhile, Nair told Mint that the company can emerge from its debt woes in six months, adding its days of struggling with valuations and debt burden are over.

He said the firm is trying to avoid further asset sale. It now plans to sign contracts with hotel owners to operate their properties under the Leela brand, under management contracts.

Globally, several hotel chains operate under this asset-light model partnering property builders and others who own the real estate, while the hospitality firms lend their brand and manage the hotels.

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