Kishore Biyani has built stores, even entire malls. Now, the man behind Future Group—which runs the Pantaloon retail chain—wants to build hotels, three-and four-star ones.
“We will invest in and develop international four-star hotels on our own. In addition, we may also invest in development of other categories of hotels from our proposed $200-250 million (Rs840- Rs1,050 crore) hotel fund,” said Shishir Baijal, managing director and chief executive officer (CEO), Kshitij Investment Advisory Co. Ltd, the group’s asset management company. Baijal, who has worked at ITC Hotels and Malaysia’s Berjaya Hotels, added that the group would “tie up with reputed hotel management companies to manage these hotels.”
According to Ambika Mehta Gautam, head of international and real-estate practice at hospitality consulting firm HVS, there is a huge gap between demand and supply, “especially for four-star hotels in India.” Another factor is the built-up area. Amol Rao, an analyst at Mumbai brokerage Pioneer Intermediaries Ltd, said “malls generally have a floor space index of 1.5-1.8, while it is 2.5 for hotels.” That means a company developing hotels can build more on a plot of land than one developing a mall.
The Future Group’s hotel fund will be part of Future Capital, the group’s finance arm of which Kshitij is an associate. Sameer Sain, the CEO of Future Capital, estimates that the funds being managed by the company and its associates will soon touch $1 billion. It already has two retail funds which together manage assets of around $430 million.
“The hotel fund will be raised primarily from overseas investors,” said Baijal. Sain claimed to have roped in three to four anchor investors for the fund. On Tuesday, The Economic Times reported that Lehman Brothers could invest in this fund. Lehman Brothers, Goldman Sachs and Blackstone Capital have large investments in hotel properties and Goldman is also an anchor investor in the Indivision fund that Future Capital manages but Sain said the investment bank would not be an anchor investor in the hotel fund.
Real-estate consulting firm Knight Frank Newmark Global estimates total hotel rooms in India at 1.1 lakh. China has 10 times as many and the US 40 times more. Even the New York metropolitan region has as many rooms as all of India, said the firm in a recent report. The Future Group’s hotel fund aims to cash in on this opportunity to cater to the demand-supply gap. This gap in supply is expected to continue on the back of double-digit growth in tourist traffic.