Have 3 operational hotels, plan to add 2 more: Brigade

The board of Brigade Enterprises has approved the restructuring of its business by hiving off the hotel business into a separate subsidiary.

In an interview with CNBC-TV18, Suresh Kris, CFO of Brigade Enterprises said that the company took this decision as its hospitality business had grown with a substantial number of rooms.

The company currently has 1,000 keys and three operational hotels and plans to add two more hotels going ahead.Below is the verbatim transcript of Suresh Kris’s interview to Anuj Singhal, Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Anuj: What was the rationale for this decision and what are the next plans for the wholly owned subsidiary? A: Actually this was our discussion for about one or two years which we wanted to hive off the hospitality segment after we go and achieve a sizable number of rooms. We are going towards above 1,000 keys now and we have about three operational hotels and another one will be operational in a couple of months and fifth one will be during the first quarter of the next year. So, by that you will be having more than 1,000 keys and in long term we may add another four to five hotels, one in Ahmedabad, one in Cochin and two in Bangalore like that. So, we will be able to reach around 2,000 keys in about three years time. So, once we go and reach these sizable number it is appropriate to have a separate company and then invite the private equity (PE) investors into that SPV so that we can monetise some portion and it can grow on its own. Latha: So you won't list it? A: Listing we don't want to do immediately because it will not give any values to the company but again going forward definitely we will list again depending on the wish of the investor. Sonia: Can you give us some growth parameters. You told us that you are looking to go from 1,000 keys now to 2,000 keys over the next three years for the hospitality business but the turnover in FY16 was around Rs 140 crore. What kind of growth in turnover are you looking at for this transferred entity over the next 1-2 years? A: It will be minimum of Rs 200-250 crore at least by next year because we will be adding another two hotels into this portfolio, operating hotels. And once we reach this around 2,000 keys we will be having more than Rs 300-350 crore. Latha: What is the feel in the real estate market post demonetisation and even otherwise, the Bangalore market? Are you getting a sense that prices may fall? A: Especially in Bangalore you cannot expect price to fall because we all are operating in very thin margin and then again compared to inner city the prices in Bangalore is very less. But definitely when you see the feel in the demand or I would say the sentiment is very bad because of the bad news to the market by many people. Maybe the prime real estate will get affected because of the sentiment. I don\\'t think there will be a huge price decrease into this market.