 "Hotel Leela")
Steep valuations marred by a weak real estate market have severely impacted Hotel Leelaventure’s plans to sell its properties to cut its burgeoning debt that had burnt a hole in its margins.
The Mumbai-based loss making company had formally put its two prime properties in Delhi and Chennai on the block after seeking shareholders’ approval last month.
The two hotels boasting of multiple luxurious features such as chandeliers made of hand-blown glass from Murano, Corinthian pillars of Turkish limestone, Rolls Royce cars to ferry guests and large windows overlooking the Bay of Bengal had become too costly for anybody to buy.
The two hotels boasting of multiple luxurious features such as chandeliers made of hand-blown glass from Murano, Corinthian pillars of Turkish limestone, Rolls Royce cars to ferry guests and large windows overlooking the Bay of Bengal had become too costly for anybody to buy.
Promoters of the company, the Nair family, had put both the properties on the block in early 2014 itself wanting to sell them in a packaged deal. However, concerns over their high valuations kept the conclusion of the deal at bay.
Under the stewardship of the late Capt C.P. Krishnan Nair Hotel Leelaventure spent a staggering Rs 3,200 crore on building both the hotels (Delhi Rs 2,000 crore and Chennai Rs 1,200 crore). Unofficially the Leela Delhi, located at the busy Chanakyapuri area, is the costliest hotel in India.
While Delhi property was formally opened in April 2011 the Adyar beach facing Chennai hotel was opened in 2013. A weak real estate market coupled with impractical investments to make them luxurious has disallowed valuations to rise any further, believe market experts.
As of the end of last financial year, Hotel Leela's debt stood at Rs 4,300 crore, the primary reason behind its consistent losses. Like the Tata Group-promoted Indian Hotels Company, Hotel Leelaventure hasn't realised profits since 2011-12.
With the ‘go-ahead’ secured from the shareholder sovereign wealth funds have reportedly evinced interest in buying the two stressed assets of the company.
However, this is the not the first time that sovereign wealth funds of the middle east have come calling. In early 2014 such funds of Abu Dhabi, Qatar and Malaysia had nearly struck a deal to buy both the properties for a knocked down price of Rs 1,850 crore.
It was also agreed that Hotel Leelaventure would continue to manage the property under a multi-year management contract. The company has such arrangement already in place for the Goa hotel and Kovalam hotel, both of which have been sold.
JM Financial Institutional Securities had been given the exclusive mandate as financial advisor for the sale of Chennai and Delhi properties. The Leela Palace Chennai has a capacity of 326 rooms while the The Leela Palace New Delhi has capacity of 254 guest rooms.
"The company has been seeking a viable restructuring package from its lenders, but the lenders have advised that the debt level of the company be reduced. The company has already reduced its debt by selling the Goa hotel. The company has been in discussion with the lenders in relations to steps for further reduction of debts", said the company in a disclosure sent to BSE earlier.
Stock of the company was trading 3.69% higher on the Bombay Stock Exchange at Rs 18.25.
