Bangalore project valued at Rs 203cr: Viceroy Hotels

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Bangalore project valued at Rs 203cr: Viceroy Hotels

The Viceroy Hotels’ board has agreed to hive off Bangalore project division via slump sale.

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The Viceroy Hotels ' board has agreed to hive off Bangalore project division via slump sale.

In an interview with CNBC-TV18's Reema Tendulkar and Ekta Batra, P Prabhakar Reddy, MD of the company, spoke about the recent happenings in his company and the future ahead.

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: Could you clarify what is happening with your Bangalore project. You indicated sometime back to the exchanges that you are planning to hive off your Bangalore project via slump sale. What is the update on that?

A: There is quite a bit of progress on the slump sale. We have taken the approval of our board and are in the process of taking the approval from the shareholders through ballot. It will require mandatorily 30 days time.

Q: Have you come up with a valuation?

A: It's been transferred to the 100% subsidiary at the same valuation.

Q: What is that?

A: Bangalore project is now a part of Viceroy Hotels Limited and is valued at Rs 203 crore. This Rs 203 crore will be transferred to the 100% subsidiary. From the 100% SPV level, we are divesting around 60% stake in favour of JP Morgan and for that they are investing Rs 90 crore for picking up 60% stake.

Q: When exactly is your Bangalore project coming on stream? Do you think that you would be open to possibly divesting more of your capex in a similar fashion, going forward?

A: No. We have decided this long back, so it's more or less on the same line. Instead of the demerger process, we have decided to do it on a slump sale basis. By the end of this month, everything should fall in place. The Bangalore project will be hived off into SPV and JP Morgan will be picking up 60% stake at SPV level.

Q: Going forward, what are you expectations in terms of occupancies, ARRs and the revenue potential from the Bangalore market?

A: Bangalore is a very strong market. During the recession, there was some slippage on occupancy levels as well as ARR. But right now, all the hotels are having good occupancies and have almost reached the peak levels. Going forward, hotels which are in the central business district (CBD) will do very well. Our hotel, Renaissance, is right in the centre of the city, on the race course road, so we have a location advantage.

Q: It has also been reported that you are planning to add about three properties in this year and the total capital expenditure for this is about Rs 1,200 crore. How are you planning to raise this and how much will be the equity debt?

A: It's roughly around Rs 800 crore of debt and Rs 400 crore of equity. We have already raised debt and equity with Rs 90 crore from JP Morgan. We will also be completing the equity portion.

Q: And what about the remaining Rs 300 crore?

A: About a couple of years back, we did a private placement and raised around Rs 170-200 crore and internal generation with all that. We have tied up both debt and equity for these projects.

Q: How is your Hyderabad project doing considering you generate maximum of your revenues there? How exactly is ARR and occupancy shaping up for you because first half is pretty weak?

A: First half was very weak because of various reasons which are peculiar to Hyderabad. Fortunately, the previous quarter and this current quarter have shown lot of improvement. Even this quarter is better than the last quarter. The ARR and the percentage of occupancy are almost same as we saw in the year 2007 and 2008, which were considered to be the peak period in the hospitality industry. We have come back to that level.