The Tata group’s Indian Hotels Company (IHCL), one of India’s largest hotel companies, is hopeful of forging a partnership with Orient Express Hotels (OEH), despite no positive overtures from the Bermuda-based company.
IHCL, which operates through brands such as Taj, Vivanta and Gateway, owns 6.9 per cent in OEH, which has a chain of luxury hotels and trains across many countries. IHCL has been pursuing a partnership with OEH, without any headway so far. In 2007, IHCL had acquired a 10 per cent stake in OEH for $211.3 million. However, since then, its investment has eroded, as OEH shares fared poorly. Since IHCL did not participate in an OEH rights issue, its holding in the company declined.
At the 111th annual general meeting of the company, IHCL Chairman Ratan Tata had said, “There is a great strategic opportunity for us, though there is nothing we can say or do. But if you look at that company, it is very similar to Indian Hotels, in the sense it has iconic properties in various countries. We are two companies that are very similar in their search for properties.”
Recent reports stated IHCL had been scouting for opportunities to shore up its stake in OEH, though it has maintained it did not favour a hostile takeover.
“There has been an erosion of value (of investment). If something strategic happens, I hope we can look back and say we hung in there for a long period of time and it paid off. If we were to write-off the investment we have made, at some stage, there will be a view of impairment. But I think the opportunity to do something strategic together is something we should be looking at,” Tata said. He added three US-based properties and a hotel in Cape Town, South Africa, had not been able to generate profits and this was pulling down the company’s performance at a consolidated level.
He sought the support of shareholders for turning around the company’s US operations. “In the past few years, various geographies have been under great stress. We have gone into those geographies. Maybe, the timing has been inappropriate, but these have to be viewed as long-term investments. We have to make the US operations profitable so that they stop hemorrhaging the rest of the operations. The amount to refurbish and renovate are exceedingly high. So, bear with me, like you have in the past. I just want to say when we bought JLR (Jaguar Land Rover) in an environment so negative, it was pulling down operations, analysts and the media had attacked us. Now, it’s the other way. Foreign operations are profitable and Indian operations are under stress,” he stated.
Tata also said operations at the budget brand Ginger were independent of IHCL operations, with the company having its independent management. He added he planned to launch an initial public offering for Roots Corporation, a 100 per cent subsidiary of IHCL.
IHCL plans to increase its room supply 40 per cent in the next five years. The company would add 46 new properties, with 6,390 rooms, through the management and ownership route. Currently, it has 112 properties with 13,629 rooms across 12 countries.