Mumbai: Hotel Leelaventure Ltd said on Tuesday it plans to cut its debt by raising about Rs 950 crore over next two years via sale of a property and also by foraying into real estate development, sending its shares over 11%.
“We are setting up residential projects in Pune, Hyderabad and Bangalore and selling a commercial business park in Chennai,” cice-chairman Vivek Nair told Reuters in an interview.
The group, which manages luxury hotels in Bangalore, Gurgaon, Mumbai, New Delhi and Goa among others, has a debt of around Rs 3800 crore.
Nair expects to complete the Chennai property sale within the next three-four months. The real estate projects will take over two years to complete, he said.
“These will be in joint collaboration with prominent developers in these three cities. We will realise our portion of it within 28 months,” Nair added.
Shares of Hotel Leela rose up to 11.7% to hit a day high of Rs 40.55. The stock ended at 39.55, up 8.95%, in a Mumbai market which rose 3.5%.
Nair also said the company has put on hold its plan to sell shares to institutional investors and also to issue foreign currency convertible bonds. He said it would now wait for market conditions to pick up.
In May last year, Hotel Leela had announced plans to raise up to Rs 750 crore through the FCCB issue and share sale.
“The stock exchange has gone down since then. We have held back the QIP and FCCB,” he said. Hotel Leela’s shares have fallen over 20% in the past one year.
The company that has recently launched a hotel in New Delhi will launch another in Chennai later this year.
“So we will have good revenues kicking into our balance sheet. And our Ebitda will also be much higher than what it is”.
Hotel chains in India are riding high on robust occupancy as business travel booms in Asia’s third largest economy.
Rival EIH had told Reuters last month that the firm’s occupancy level in February was expected to be over 90% due to the buoyancy in corporate demand and the cricket World Cup.
Nair said loans has also become cheaper after the Reserve Bank of India removed hotels from the classified real estate category (CRE) last year.
“After hotels got removed from CRE, pricing of loans has also come down by 1.5%. So funding for our projects have been taken care of,” he said.
Nair said Hotel Leela is also considering bringing in a private equity investor to raise up to 6 billion rupees once it completes the sale of its business park in Chennai.
This could be an alternative to the QIP and FFCB, though nothing has been finalised, he said.
Nair, who is also the chairperson of the World Tourism and Travel Council India Initiative (WTTCII), said the industry body has appealed to finance minister Pranab Mukherjee to withdraw new service tax that was announced in the budget on Monday.
The federal budget for 2011-12 has proposed that hotel accommodation over 1,000 rupees per day and services provided by air-conditioned restaurants with licence to serve liquor be brought under service tax net.
“The proposal to levy a service tax of 5% on room charges would drive foreign tourists away from India at a time when the tourism industry is just picking up after the economic slowdown and terrorist attacks in Mumbai,” he said.
India at present gets about six million foreign tourists, lower than neighbouring China’s 15 million, he said.