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Neesa Leisure heads for debt restructuring

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After heading for (CDR), now Axis Private Equity Fund-backed hospitality firm Ltd (NLL) is on its way for a debt recast.

The case was referred to the CDR forum in March and a package is under discussion. The total exposure of lenders to this company is a little over Rs 400 crore, said a senior public sector bank executive. The lenders with significant exposure to NLL include ICICI Bank, Axis Bank and the Small Industries Development Bank.

L& T Infrastructure and have also a lent to the Ahmedabad-based hotel company. NLL has eight operational properties with 971 rooms, mainly in Gujarat and Rajasthan. The company is promoted by Sanjay Gupta, a former IAS officer, and operates hotels under the ‘Cambay’ brand. Gupta holds 79 per cent stake in NLL.

The other major shareholders include Axis Infrastructure Fund-I (13.5 per cent stake). Axis PE also holds compulsorily convertible preference shares (CCPS) of Rs 40 crore. Gupta did not respond to telephone calls or to messages sent to his mobile phone.

HOLIDAY GONE SOUR
Rs 400 crore:
Total exposure of lenders to Neesa Leisure Ltd

operational properties owned by the company
971 
rooms, mainly in Gujarat and Rajasthan
79% 
of total revenue accounted by hotels and resorts 
17% 
came from membership-based income from timeshare ownerships and club memberships
Rs 148 crore 
was the company’s operating income in 2010-11
Rs 5.9 crore 
was the figure f or profit in 2010-11
79% 
stake in NLL held by promoter Sanjay Gupta, who operates hotels under the ‘Cambay’ brand
13.5% 
stake held by Axis Infrastructure Fund-I 
Rs 40 crore 
worth compulsorily convertible preference shares held by Axis PE
Rs 401.9 crore 
of term loans and fund-based facilities downgraded by rating agency Icra in March 2012 
Rs 25 crore 
worth non-convertible debentures were also downgraded

In March 2012, rating agency Icra downgraded its rating for term loans and fund-based facilities for NLL aggregating Rs 401.9 crore, from BBB+ to B. Its non-convertible debentures worth Rs 25 crore were also downgraded.

Icra said the ratings revision of Neesa factored in the stretched liquidity position due to the sharp decline in profits in 2011-12. Its profits in FY12 dipped due to factors such as increase in interest and financing expenses, large funding commitments on its capital expenditure and delay in the proposed Initial Public Offering (IPO). Besides raising fresh funds, some existing investors were to sell their stake through the IPO, Icra said.

NLL had filed a draft prospectus for the IPO with the Securities and Exchange Board of India in March 2011. It was to use IPO funds to develop new properties in places like Lucknow and Raipur, and retire some old loans.

Icra said the fund infusion from the promoters and proposed recast of debt terms had not progressed as expected. Further, the cash flow adequacy would remain sensitive to the ability of NLL to ensure adequate occupancy and returns in all its properties, and the effective management of receivables from the timeshare business.

In 2010-11, hotels and resorts accounted for 79 per cent of its total revenue. About 17 per cent came from membership-based income from timeshare ownership and club memberships. Operating income in 2010-11 was Rs 148 crore, with profit of Rs 5.9 crore. In the first six months of 2011-12, it reported income of Rs 75.8 crore, with profit of Rs 4.4 crore.

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