 "Indian Hotels' Rakesh Sarna set to be 2nd highest paid CEO in Tata Group")
Hyatt Hotels Corporation’s former development head Rakesh Sarna, who was appointed as managing director of Indian Hotels Company, has broken into the league of India's highest paid CEOs, beating ITC's Y C Deveshwar and Wipro's Azim Premji.
If approved by shareholders, Sarna will get a remuneration package of $2.51 million (Rs 15.82 crore) a year making him the second-highest paid CEO within the Tata Group, only trailing N Chandrasekaran, managing director and CEO, Tata Consultancy Services who’s annual compensation last year was Rs 18.68 crore.
Sarna, who came on board in September last year, is also slated to get an additional one-time joining bonus of $300,000 (Rs 1.8 crore) from IHCL. In addition to working for IHCL, Sarna will be an employee of International Hotel Management Services Inc , USA, a wholly-owned subsidiary of IHCL. A notice to this effect was sent by the Mumbai-based company to its shareholders seeking their approval.
Before joining IHCL, the 57-year-old Sarna spent 35 years at Hyatt Hotels where in his last position as executive vice president and group president (Americas) he oversaw nearly 400 properties in that region.
“In this role Mr Sarna would be responsible for steering the profitable growth of the organisation as it continues to be positioned as a strong India based hotel chain with strategic presence in chosen markets outside India,” IHCL stated in the notice.
IHCL, which owns and operates four brands – Taj, Vivanta by Taj, Gateway and Ginger – that cover budget to luxury categories, has been brought on board to push the company's global business. With nine overseas properties, including hotels in New York and London, about 40% of the company's total revenue is generated outside India.
With competition levels hitting the roof on its home turf from specialists like Hyatt, Marriott, Intercontinental, and Starwood, among others, Sarna is expected to push IHCL's agenda for global growth. IHCL has entered into contracts to manage hotels in China and Africa.
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Interestingly, Raymond Bickson, the former expat MD and CEO of IHCL, who was at the helm for a decade, was paid Rs 10.4 crore a year, to which shareholders voiced their opposition at the 2013 Annual General Meeting of IHCL.
In 2013, Bickson’s contract was extended by another five years, despite a section of shareholders raising concerns over IHCL’s poor financial performance. In 2013-14, IHCL’s losses increased 113% to Rs 590 crore from Rs 277 crore the previous year. Income during this period remained nearly flat, at Rs 1,977 crore. By comparison, in the same financial year, rival Oberoi Hotels made a profit of Rs 50 crore on a revenue of Rs 1,157 crore. Bickson resigned last year abruptly, four years before completing his contract.
Huge finance costs have eroded IHCL's margins so far this year too. The company recorded a loss of Rs 70.67 crore for the nine months ended December, 2015. It, however, managed to trim its losses from Rs 393 crore posted during the same period last year.
Given the large number of new hotels opened in the recent past and the increase in supply in the market the company is now looking at strategic consolidation while aggressively pursuing growth opportunities as they unfold, said IHCL.
"Taking into account the significant investment that the company has made in recent years in the overseas assets, the MD and CEO (Sarna) is expected to devote a fair amount of his time to address matters relating to the overseas acquisitions and improve the performance of this portfolio,” the company said.