Bay Capital Investments (formerly Indus Hospitality Fund)-backed Sterling Holiday Resorts (India) Limited is looking to raise Rs 100 crore through a qualified institutional placement for completing ongoing projects, refurbishing resorts and strengthening financial position of the firm.

The company’s board has also given a go ahead to evaluate possible alliances with strategic partners to expand business.

Sterling is into vacation ownership business and has a network of 14 resorts in 12 holiday destinations in India. The company that closed last financial year (in March’10) with revenue of Rs 30 crore has been into losses for the last four years.

It has been looking to increase destination footprint by developing new resorts and expanding inventory in existing resorts. This would require fresh cash.

Given the quantum of fund proposed to be invested, it could well be looking at a significant equity dilution. The firm had market cap of Rs 348 crore as of Wednesday. At the last traded price of Rs 72.1 per share the company would need to go for 22% equity dilution through the fresh issue of shares to institutional investors.

Indus Hospitality Fund had in July 2009 acquired over 15% stake in Sterling through preferential allotment for around Rs 28 crore. This had triggered an open offer for another 20% as per Indian takeover code. The open offer that came out in November 2010 did not find many takers and the acquires including India Discovery Fund (as persons acting in concert) held 19.37% stake post the offer.

Sterling Holiday operates in a field where its peers includes much larger firms such as Mahindra Holidays & Resorts and Country Club. Hospitality is a lucrative business to capture India's domestic consumption story and has been attracting investments from both strategic and financial investors.

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