Jan 23, 2013, 07.08 PM IST | Source: CNBC-TV18

Hope to reduce debt of Rs 2,750 crore soon: Hotel Leela

Forex loans raised by infrastructure and manufacturing companies can be used to retire rupee loans. Now, hotel companies too could do the same. This facility of replacing expensive rupee loans with cheap foreign exchange loans was extended to hotel companies as well.

Hotels earn foreign exchange between 20-50 percent depending on the location

Vivek Nair

VC & MD

Hotel Leela

Forex loans raised by infrastructure and manufacturing companies can be used to retire rupee loans. Now, hotel companies too could do the same. This facility of replacing expensive rupee loans with cheap foreign exchange loans was extended to hotel companies as well.

Vivek Nair, vice chairman & MD, Hotel Leela , says that the company has plans to reduce debt by Rs 2,750 crore in near future and transaction of Leela Business Park in Chennai will be completed soon.

Also read: Improving dynamics in India, China attracting flows: HSBC

Below is the edited transcript of his interview to CNBC-TV18.

Q: Will you use the facility of replacing expensive rupee loan with forex loans that is now available?

A: Yes, we have been clamoring for this for last several years. We have been asking RBI to include infrastructure lending in the list. To a certain degree it was passed in March 1, Cabinet Committee on Infrastructure meeting but only hotels in the rural areas outside city limits of 10 lakh are benefitted. They are still working to extend it throughout the country because currently only 95 percent of the hotel projects are in infrastructure.

The benefit of being under infrastructure lending list is that one could replace existing rupee debt by ECBs. Hotels earn foreign exchange between 20-50 percent depending on the location because the food and beverages and other banquet income normally is in rupees.

We put forth that argument and even though the infrastructure lending list has not been extended throughout the country, thanks to the initiative that we have taken through our federation, the government has agreed to replace the rupee debt by foreign currency loans, which are at the lower level. We have a natural hedge that we earn in dollars so we can repay in dollars.

Q: How will you react to it for Hotel Leela itself? You have Rs 3,000 crore debt, immediately what are the plans?

A: A cap is placed that we can only avail ECBs to the extent of 50 percent of the last three years earnings, which is disappointing. All along we told them that do not apply to us because only 15-20 percent of the total debt exposure on books of an average hotel company whether it is Leela or any other would be covered under this and that does not make it meaningful. We are in talks with them to enhance the limit because the current ceiling only affects 20 percent and 80 percent continues in rupee debt.

The same applies to our company too, only 20 percent of our debt would be eligible under this present qualifier. However, I am sure we can convince them to make it meaningful to increase the criterion. So in our case, it will be around Rs 400-500 crore. I am sure we can convince the ministry of finance and RBI to change the criteria to make it more meaningful.

Hotel Leela stock price

On April 17, 2014, Hotel Leela Venture closed at Rs 18.15, up Rs 0.10, or 0.55 percent. The 52-week high of the share was Rs 22.00 and the 52-week low was Rs 14.00.


The latest book value of the company is Rs 27.22 per share. At current value, the price-to-book value of the company was 0.67.

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