Leela to divest 14.5% to PEs for Rs 600 crore

To also raise Rs 950 crore through commercial development

Luxury hotel chain operator Hotel Leelaventure plans to raise Rs 600 crore through sale of preferential shares to private equity (PE) companies.

This will be a part of Rs 1,550 crore to be raised over 24-30 months, to be entirely used to retire the Rs 3,800-crore debt that Hotel Leela has, a senior executive stated.

About Rs 950 crore would be raised through four projects. These include selling of Leela Business Park, a commercial property in Chennai, and real estate development in Pune, Hyderabad and Bangalore, in association with developers.

Vivek Nair, vice chairman and managing director, said: “The entire proceeds will go towards reducing the debt on the company. We have shareholders’ approval. We will start negotiations with some PE players. We would like to have investors like the sovereign wealth funds, who have a long-term horizon.”

The promoters’ stake will come down by four per cent after the issue, to 50.6 per cent from 54.61 per cent now. The idea is to offload just enough stake below the 15 per cent cutoff to avoid a mandatory open offer.

Nair said the issue would not be made at the current stock price (closed at Rs 38.95 on the Bombay Stock Exchange today) and would wait for further appreciation when added cash is generated from two new properties, Delhi and Chennai. While Delhi has started operation, Chennai is expected to open by September this year.

About Rs 250 crore will be generated through the sale of the commercial property in Chennai ,while Rs 400 crore will be raised through projects in Pune and Hyderabad. Leela has got proposals from developers to manage these two projects and will enter into joint ventures.

Additionally, two acres which the company holds in Bangalore is to be used to develop apartments, for which the company has entered into a contract with a leading developer, Nair added.

“Once Delhi and Chennai become fully operational this year, we will look at the increased Ebitda (earnings before interest, taxes, depreciation and amortisation) level. We will look at a five-year discounted cash flow before arriving at the right valuation. The company has an enterprise value of Rs 8,000 crore presently,” added Nair.

Leelaventure had taken debt of Rs 3,000 crore to develop properties in Delhi, Chennai and Jaipur, in addition to buying land in Agra, Pune and Hyderabad. The Goa property was also renovated and one at Kovalam, Kerala, bought four to five years before.

Revenue from the real estate business in Bangalore will take time, as construction of apartments will taking at least two more years to complete.

Shares of the company rose nearly 4 per cent to the day’s high of Rs 39.6 on Friday morning.