Hotel Leelaventure sells Chennai IT park building to Reliance Industries for $31.2M

Hotel Leelaventure Ltd, which owns and operates The Leela Hotels brand, has sold its Chennai IT park building to Reliance Industries for $31.24 million ( Rs 170 crore) as it pushes ahead with its corporate debt restructuring plan.

Leelaventure, which has Rs 4,550 crore in debt, has asked lenders including public sector banks State Bank of India, Bank of Baroda, Oriental Bank of Commerce, to convert loans into equity in future.

Leelaventure has also sought shareholder approval for its CDR plan, which could lead to a lower interest rate, longer repayment period or conversion of overdue interest into the loan principal.

As part of the CDR plans, the promoters of the company will also pump in Rs 200 crore, of which Rs 100 crore has already been infused. The rest could be infused by the end of the fiscal year.

Leelaventure, which was founded by Captain Krishnan Nair, started its first hotel in Mumbai in 1987. The company, which raised capital to build and own hotels in the country, was debt free till 2004-05. Last fiscal year, Leelaventure posted revenue of Rs 571.09 crore.

Leelaventure is also looking at selling its hotel properties and retaining rights to manage them.

The first such transaction came in on August 11, 2011 when the hotel company sold its iconic property in Kerala at Kovalam beach for Rs 500 crore to non-resident Indian Ravi Pillai. Leela, however, retained its rights to manage the property for the next 30 years.

The company is further looking at selling about 70 per cent stake in its other luxury properties in Chennai and Bangalore, which could fetch Rs 2,000 core– 2,200 crore.

Leela is also shelving its plans for further development of its 3.85 acre luxury property in Banjara Hills, Hyderabad, which could fetch up to Rs 125 crore. Similarly in Pune, Leela has shelved its plan to build a luxury hotel and has decided to sell or jointly develop its 8.42 acres (approximately) of land which could fetch up to Rs 150 crore.

In 2012, amid reports about a probable hostile takeover by ITC, Captain Nair had reportedly entered into a strategic arrangement with Reliance Industries chairman Mukesh Ambani to retain control of the group.

The current portfolio of Leela Hotels Resorts and Palace includes eight properties in Mumbai, New Delhi, Gurgaon, Bangalore, Chennai, Goa, Udaipur and Thiruvananthapuram.

A string of hotel companies have applied for CDR recently. Bangalore-based Royal Orchid Hotels, Mumbai-based Kamat Hotels and Gujarat-based Neesa Leisure got approval for CDR in the last two years.

Further, a number of companies have been raising equity to own and build hotels in the country including Samhi Hotels. In 2011, Samhi raised $100 million from GTI Capital and Equity International.

Companies like Berggruen Hotels, Sinclair Hotels and Lemon Tree Hotels have raised substantial capital to own and operate hotels under their brands. Berggruen Hotels raised $100 million from Berggruen Holdings in 2006. Sinclairs Hotels got funding by Xander Advisors in three tranches in 2007, 2008 and 2009 of $1.54 million, $4.17 million and $4.96 million respectively. Lemon Tree Hotels raised $45 million from Warburg Pincus India and $6.77 million from Kotak India Real Estate Fund I in 2006, $30 million from Shinsei Bank, Kotak India Real Estate Fund I and Kotak Alternate Opportunities India Fund in 2007.

Most recently, the company got funding of Rs 650 crore from APG in 2012, apart from the capital invested by the Dutch PE in joint venture with the company.

(Edited by Prem Udayabhanu)

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