Hotel Leela shedding assets to pay debt

BL :niveditag: June 24,2012

Future projects to be funded through sale of non-core properties

MUMBAI, JUNE 24: 

Hotel Leelaventure Ltd is planning to shed some of its properties and be an ‘operator/manager’ in its future expansion projects.

This method, also known as an Asset Light Strategy, is adopted by companies when their debt servicing costs mount and they want to reduce capital expenditure.

Future expansion

Leelaventure has already done this in its properties in Gurgaon and Kovalam. Now, its new properties too would be taken up for Management Contracts.

Mr Vivek Nair, Vice- Chairman and Managing Director, Hotel Leelaventure, told Business Line, “Such projects are planned in Jaipur, Bangalore near the international airport and in Noida, apart from the land banks the company has in Agra facing the Taj Mahal and Lake Ashtamudi, close to its Kovalam Beach Resort.”

With the launch of the Chennai hotel, the Group would have eight operating hotels with 2,222 guestrooms. Last year, the company hived off its Kovalam property for Rs 500 crore. The move managed to bring some respite to the company saddled with a debt of Rs 4,300 crore.

Non-core properties

As part of its fund raising initiatives, Hotel Leelaventure has also identified non-core real estate properties to be sold off.

Mr Nair said, “The Business Park constructed next to the Chennai hotel having a total built-up area of 2.25 lakh sq.ft. will be sold immediately.

The plot of land in Hyderabad is on an outright sale basis, instead of waiting for the joint development with a developer which would entail the company’s share to be received only in the next three to four years.” Other non-core real estate properties identified include the company’s share from the joint development in Pune for a residential complex and the company’s share from the joint development for residential development with Prestige Estates at a two-acre site adjoining its Bangalore hotel.

Both the Pune and Bangalore construction are scheduled to start in the next few months.

Hotel Leelaventure posted a higher net profit of Rs 210 crore for the quarter ended March 31, 2012 on the back of the sale of its Kovalam property.

The account was referred to the Corporate Debt Restructuring (CDR) cell last year. It has outstanding loans of Rs 4,300 crore borrowed from a consortium of 17 bankers.