Newstrack

Hotels use new funding route

Savio Rodrigues - Mumbai

Taking a road not travelled before, Indian hotel companies are now looking at offering equity placement in their respective companies to generate funds for their expansion plans within the country.

Domestic as well as international venture capitalists, identified as the most preferred partners to forge alliances with by hotel companies, are looking at capturing a slice of the booming Indian hospitality and tourism market. Currently funds worth over US $5 billion are in the offing for Indian hotels), trade analysts state.

In the last one year, the hotel sector has witnessed several such alliances, starting with Hotel Leelaventure offloading close to 12 per cent stake to IDFC, IL&FS and HDFC for US $45 million. Royal Orchid Hotel (formerly Baljee Group of Hotels) too offloaded 10 per cent stake to Westbridge Capital Partners for Rs 250 crore. Similarly, ICICI Venture Funds acquired 26 per cent stake in Viceroy Hotels for Rs 800 crore while Sarovar Hotels forged alliances with Bessemer Venture Partners and New Vernon Advisory for Rs 100 crore. Speaking on the recent Leela alliances with financial fund houses, R Venkatchalam, financial director at Hotel Leelaventure, stated, "Fund houses have always evinced interest in our company. With our current extensive expansion plans on the card, the management has decided to opt for diluting its equity placement in order to generate funds."

Following close on its heels is Oberoi, Kamats Hotels, Leela and Bharat Hotels that are currently pursuing active talks with international fund houses such as Blackstone, Dawnay, Day Group and Indian Real Estate Opportunities Fund (IREO). While Bharat, Oberoi and Leela groups are looking to raise over Rs 1,000 crore through equity placements, Kamats is looking at raising close to Rs 200 crore.