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Last Updated : Jun 01, 2020 10:38 AM IST | Source: Moneycontrol.com

Hoteliers rush to raise funds to meet working capital needs

Lemon Tree Hotels and Indian Hotels Company, two of the biggest listed companies in the hotel space, will raise Rs 450 crore

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With nearly no business for two months and fixed costs eating into savings, hotel companies are hitting the road to raise funds to meet working capital needs.

Lemon Tree Hotels and Indian Hotels Company, two of the biggest listed companies in the hotel space, will raise Rs 450 crore using certain borrowing instruments to fund their working capital.

This comes on the back of occupancy levels falling to single digits across the country following the national level lockdown enforced by the government. As per estimates, the hotel industry will take two years to reach pre-coronavirus levels in room rates pushing back breakeven of new properties.

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Lemon Tree Hotels, which has about 8,000 rooms, 80 hotels across 48 destinations and seven brands has proposed to raise Rs 150 crore either through a rights issue, preferential allotment or qualified institutional placement.

“The management will evaluate the proposal to raise funds and present the same before the Board of Directors to consider and approve the timings, quantum and mode of raising the funds”, said a statement from Lemon Tree.

There are about 28 hotels in the pipeline adding a further 2,700 rooms and 20 cities to Lemon Tree’s kitty in the coming period.

Tata Group promoted Indian Hotels Company (IHCL), which runs the Taj chain of luxury hotels has proposed to raise Rs 300 crore. This is the second time this year that the Mumbai-based company has come out to raise funds this financial year. In April IHCL had issued NCDs to Axis Bank to raise Rs 150 crore.

IHCL has approved raising funds by way of issuance of rated, unsecured, listed, redeemable, non-convertible debentures (NCD) by way of a private placement, to ICICI Bank. The NCDs are proposed to be listed on the wholesale debt market segment of the National Stock Exchange and the tenor of the instrument is three years.

IHCL, which runs four main hotel brands, one home stays brand, air catering and retail services, has about 24 hotels in the pipeline having 2,800 rooms.

With the payback period getting pushed back by at least a year lenders will keep a watch on funding requirements of hotel companies who are hitting the road for capital, said experts.

“New hotel development will be impacted as there will be limited lender appetite, particularly in more volatile resort markets. 2020 started with a strong deal pipeline estimated at about $1 billion worth of tradeable assets. Investment action will likely get deferred as the sector rebuilds itself after containment of COVID-19, however, we estimate that more assets may fall in the ring for sale in the latter half of the year”, a report from JLL India said.

As per TOPHOTELCONSTRUCTION database, there are a total of 158 hotel projects in the pipeline in India having 25,700 rooms. This includes 65 projects coming on stream in 2020 and the rest in 2021, 2022, 2023 and beyond.
First Published on Jun 1, 2020 10:38 am
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