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Hotel Leela to cut debt by Rs700-900 crore

Hotel Leela to cut debt by Rs700-900 crore
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First Published: Tue, May 25 2010. 04 25 PM IST
Updated: Tue, May 25 2010. 04 25 PM IST
Mumbai: Hotel Leelaventure Ltd, which owns five-star hotels, plans to launch a share sale to institutions after July to raise about Rs375 crore and aims to cut debt by Rs700-900 crore, a top official said.
It is planning to raise another Rs375 crore by issuing foreign currency convertible bonds (FCCBs) in the next two months, vice chairman Vivek Nair told Reuters on Tuesday.
Its board late on Monday approved raising up to Rs750 crore via qualified institutional placement (QIP) or foreign currency convertible bonds.
“We would like to bring down the existing debt in the books,” Nair, also the managing director, told Reuters.
Its total debt, including FCCBs stands at about Rs2,500 crore at present, he added.
“The QIP will help bring that down, plus our internal accruals will also go towards debt reduction,” adding that the company plans to reduce almost Rs700-900 crore of debt this year.
Hotel Leela is opening Leela Palace in New Delhi in July and will use proceeds from the FCCBs to add more rooms in that property ahead of the Commonwealth Games in October, said Nair.
“The QIP is also planned because correspondingly we have to have the equity issue to get the debt equity ratio in line, it will be done after we go into operations in Delhi, which will be in July this year,” Nair added.
Hotel Leela is also adding a hotel in Chennai in the next one year.
The total cost for Delhi and Chennai projects is about Rs2,100 crore of which it has already spent 70%, Nair said.
The hotel chain currently operates business hotels in Bangalore and Mumbai and resort hotels in Goa, Kovalam in Kerala and Udaipur in Rajasthan. Bangalore and Mumbai account for 65% of its revenue.
It also operates a hotel in Gurgaon under management contract and owns plots of land in Agra, Hyderabad and Pune.
The company, whose consolidated annual revenue fell 5% to Rs433 crore for the year ending 31 March, expects revenue to grow by 20-25% in FY11, as room rates and occupancies recover.
Its consolidated FY10 net profit had plunged to Rs41.04 crore from Rs145 crore on slowing demand.
India’s hotel and tourism industry is currently recovering from a near two-year economic slowdown made worse by the terror attacks in Mumbai in November 2008, which hit tourism traffic.
Hotel Leela’s average room rates have risen by an average of 15% across both its business and resort hotels since November 2009.
Room rates currently stand at around Rs9,500 in Mumbai and about Rs12,500-13,000 in Bangalore. Rates in Bangalore are seen rising to around Rs15,000 by winter, he said.
“Occupancies are back, average room rates are up by about 15% compared to a drop of 30% in the aftermath of the slowdown and the Mumbai attacks.”
Shares of Hotel Leela ended down 10.08% to Rs44.15 in a stock market down 2.71%.
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First Published: Tue, May 25 2010. 04 25 PM IST