Hotel Leela to sell part stake in Chennai, Bengaluru assets

After selling its IT park in Chennai last week for Rs 170 crore to Reliance Industries Ltd, Debt-laden Hotel Leela Venture is now aiming to pare it debt by Rs 2,200 crore by 2013-14 end with sale of its non-core assets and luxury hotel projects.

The company is all set to sell part of its stake in Chennai and Bengaluru luxury projects. The company has already started the process of finding partners and expects to complete procedures within three-four month from now. 
"The aim is to reduce further debt and our plan is not to divest them totally. It will be a joint venture (JV) with investor and we will continue to operate the property in our name and on the long-term management contract," Vivek Nair, Vice Chairman and Managing Director Hotel Leela Venture told CNBC TV18.
In the similar way, Hotel Leela had earlier sold its luxury hotel Leela Kovalam to Travancore Enterprises, owned by Dr B. Ravindran Pillai, for Rs 500 crore, but had continued to manage the five-star property with its own-brand name.
"The whole idea is to reduce the debt so that we become a buoyant company once again," Nair said.
With debt of around Rs 4,750 crore in its book, Hotel Leela had to pull up its sleeves and chart a strategy for turnaround. The company plans to sell many of its non-core assets and individual luxury projects to get rid of its huge pile of debt.  
"If we finish these two transactions, it will bring down debt by approximately Rs 2,200 crore, which indeed be a great reduction in the overall debt. At the most, it might spillover to one month beyond the next financial year. But this is our strong determination to bring down the level," Nair said.
Apart from selling its properties the company is also grabbing several opportunities in the management contract field. It has tied up about six management contracts not requiring any investments. These contracts will bring income for the company without any equity infusion, Nair said.
Most of the company's hotels especially Goa and Kerala have started doing well, showing signs of pick up in occupancy. These hotels had an occupancy of 75-80 percent recently, Nair said.
In order to further bring down its debt the company may also look at some equity offering in future. "We are planning to have right sort of qualified institutional buyer (QIB) or even a foreign currency convertible bond (FCCB) but then the present market price does not allow us to do so. Perhaps once these disinvestments take place and the prices corrected then we could look at that option," Nair said. 
The Leela group manages luxury hotels in Bangalore, Gurgaon, Mumbai, New Delhi and holiday escapes at Goa, Kovalam and Udaipur. The Group is also constructing a luxury hotel in Chennai. It has marketing alliances with Germany-based Kempinski, US-based Preferred Hotels and Resorts and is a member of Global Hotel Alliance-based in Switzerland.