Five-star hotel operator Hotel Leelaventure Ltd plans to raise about Rs 10 billion through a share sale to institutions by December to trim its debt pile, a top official said.
The qualified institutional placement (QIP) would involve a dilution of the promoter stake, currently around 58 per cent, by about 14 per cent, Vice Chairman Vivek Nair told Reuters on Thursday.
"We have been advised because of the current situation to wait until September-October, until the market settles down. Then we can look at the QIP issue," Nair said.
Nair however said the promoters will try to keep their stake at more than 50 per cent in future through creeping acquisitions.
Larger rival ITC Ltd held nearly 13 per cent stake in the company at end-June, stock exchange data showed.
The firm had earlier planned to raise Rs 6 billion by selling stake to private equity players, but is now looking at a QIP as the preferred mode, he said.
On Wednesday, the group, which runs luxury hotels in Bangalore, Gurgaon, Mumbai, New Delhi and Goa among other locations, agreed to sell a property in Kerala for Rs 5 billion to cut debt.
The firm is moving towards an asset-light model by pursuing more management contracts, which will cut debt incurred on setting up of properties in Udaipur, Delhi and Chennai.
Indian hotel chains have been raising funds of late through equity offerings, but prefer to use the cash to clean up their balance sheet and complete existing projects rather than draw new plans.
Most Indian hoteliers have been struggling with mounting debt since the global slowdown of late 2008 that forced a reality check on the exuberance of previous years, when they bought land at astronomical prices and borrowed heavily.
"We have got 4 or 5 other proposals offered to us for management of properties not owned by us," Nair said. The firm already has one hotel in Gurgaon under management contract.
Earlier this month, the firm reported a net loss for the quarter ended June on higher interest and depreciation costs due to the opening of the New Delhi property. Its current debt stand at about Rs 43.46 billion.
Nair expects the debt to eventually come down to Rs 21.36 billion following the proposed share sale and development of its land bank into residential apartments.
Hotel Leela last month executed a joint venture with Prestige Estate Projects to develop premium apartments on part of its land in Bangalore.
The residential projects will be under the Leela brand with co-branding by respective developers.
The firm is also in talks with developers in Pune and Hyderabad to monetise land parcels that it owns and expects to raise Rs 2.5 billion over the next two months by selling the Leela Business Park in Chennai.
"In 2013/14 when Delhi and Chennai will be fully stabilised we will have our turnover and EBITDA at very comfortable levels and at that time the debt equity (ratio) will go down from 1.8 at present to less than 0.65," Nair said.
He also expects a 10-15 per cent rise in tourist arrivals this year, despite an impending slowdown in Euope and the U.S.
"Recent developments have been a bit of a dampener in the US and Europe but we feel the overall market should still show buoyancy," he said.
Nair, who is also chairman of th e World Tourism and Travel Council India Initiative (WTTCII), said the industry body has appealed to the government to include hotels in the central bank's infrastructure lending list to avail of easier lending norms.
At 2:42 p.m., Hotel Leela shares were down 2.36 per cent at Rs 37.3 in a weak Mumbai market.
