Indian Hotels may look inward to trim debt

Likely to sell foreign properties and focus more on India market

Investors in Indian Hotels say the company should sell part of its foreign business to trim its debt pile and focus on reviving growth at home. The luxury chain controlled by Tata Sons had Rs 3,818 crore ($602 million) of debt as of March, according to data compiled by Bloomberg. The company, with 22 resorts from the US to Mauritius, reported a loss of Rs 19.1 crore for June quarter as costs increased and said it plans to spin off its foreign holdings by March.

A stake sale will allow Chairman Cyrus Mistry to exploit reviving growth in the US even as India's $1.8-trillion economy expands at the slowest pace in a decade. The depreciation of the rupee, Asia's worst performing currency this year, may lure foreign tourists to the nation's heritage sites such as the Taj Mahal, helping boost revenue at the nation's hotel operators, according to Krishnakumar Srinivasan, head of equities at Sundaram Asset Management Co.

"We would like them to focus on their Indian assets rather than overseas assets, which have been a drag on the balance sheet," said Nilesh Shetty, an associate fund manager with Quantum Asset Management Co, who added to his holding of Indian Hotels last month. A stake sale "will help unlock value of those assets, de-leverage and improve liquidity".

The company is working on a restructuring plan to move all its foreign assets into a "step-down subsidiary" and estimates to complete revamping the business by March, Anil Goel, executive director for finance, told reporters on August 12. He didn't elaborate.

Mistry is changing strategy from aggressively pursuing acquisitions to "consolidate" the group's assets, said A K Prabhakar, senior vice-president of equity research at Anand Rathi Financial Services Ltd.

Former chairman Ratan Tata sought to expand the group by offering to acquire Orient-Express Hotels, owner of New York's 21 Club restaurant and the Hotel Cipriani in Venice. The proposal was rejected by Orient-Express in November, saying the bid undervalued the company. The Tata group company offered a premium of 43 per cent to Orient-Express's 20-day average price then. Indian Hotels owns 6.9 per cent of Orient-Express.