New Delhi: Real estate and hospitality company Vatika Group plans to hive off its unit running Vatika business centres as a separate entity with a view to let it raise money through an initial public offering (IPO) in fiscal 2009-10.
Sharper focus: Vatika’s director (marketing & ops) Gaurav Bhalla.
“We have an action plan for hiving it (business centres) off as operational efficiencies are restricted when the unit is part of the company,” said Gaurav Bhalla, director, marketing and operations, Vatika Group. “The decision-making process is slower because of lack of focus.”
The business centres are part of the hospitality arm of Vatika Group. Vatika business centres, spread over 20,000 sq. ft of space, are ready-to-move-in offices with executive suites and conference facilities.
The company charges a licence fee for the use of the centres, which is around Rs18,000-35,000 a seat. The centres are leased out for short periods of time, sometimes as little as an hour, but in what seems to be a lucrative business, the return on investment could run as high as 40-45%, claims Vatika.
“The return on investment could change depending on the location of the centre. But we expect the centres to yield an average return of 25-30%,” Bhalla said. “Also, the turnaround time of the centres is less as it takes only four months to build a centre.”
Vatika has four business centres in Gurgaon, Pune and Hyderabad, and the company plans to add four more centres in Chennai, Bangalore, Dubai and Shanghai during the fiscal year 2008-09.
“Once we have eight or more business centres, we will look at forming a separate company for the centres,” Bhalla said.
The company is also looking to offload equity in the business centres once it is hived off. Vatika is in talks with a few private equity players to sell 10-12% equity, an additional reason why it wants to hive off the business centres.
“We expect to get a better valuation when it is a separate company,” Bhalla said. “Also, certain equity investors prefer operational businesses.”
An IPO is expected to happen in fiscal 2009-10, though the company has not decided on the amount it wants to raise through the public offer.
Vatika Group itself plans to make an IPO next year. The company has an estimated valuation of Rs8,000 crore based on the $250 million (Rs983 crore) funding it has received from three international financial institutions. The group signed agreements with Wachovia Bank, Baer Capital and Goldman Sachs for divesting 10% stake in the company in November last year.
The disbursement of the funds has started and the transaction is expected to be completed by March. Vatika plans to use the funds for its existing projects and to consolidate its land bank. The company has a land bank of 400 acres and it plans to increase this to around 700 acres.
Vatika Group has interests in townships, commercial complexes, information technology parks and special economic zones.
The company has integrated townships in Gurgaon and Ambala in Haryana, and Jaipur in Rajasthan.