Indian Hotels to stay the course on asset monetisation for growth

Hospitality chain says its needs 'see what we need and what we don't' as it goes on monetisation plan.

Indian Hotels will focus on monetising and unlocking value from its assets to earn profits as it follows a three-year plan called Avhaan 2025, said on Monday the hospitality arm of the Tata Group.

Indian Hotels Co Ltd (IHCL) will be part of efforts to simplify the holding structure of group companies as it follows chairman N Chandrasekaran’s 'S philosophy' of simplification, synergy and scalability.

“We are a 120-year-old company. We need to see what we need and what we don’t,” said Puneet Chhatwal, managing director and chief executive of IHCL. Non-core assets the company has identified include a land parcel in Gurugram and the Gateway Hotel on Beach Road in Visakhapatnam. It’s also looking to sell flats in buildings bought decades ago to house company executives.

The monetisation plan includes selling hotels in towns and small cities and getting into the management contracts with buyers. The company has in the last four years monetised assets worth Rs500 crore, said Giridhar Sanjeevi, chief financial officer. He declined to share the guidance for the years ahead. 

The owner of Taj, Vivanta and Ginger hotel brands is unlocking value from assets giving negative returns. For instance, the land on which it is building a 3000-plus room Ginger hotel in Santracruz is expected to be up by the end of the current fiscal. The property used to have a flight kitchen, set up in 1991. This had been lying unutilised all these years yielding a negative return. Once the property gets ready IHCL plans to sell it and get into a long-term lease of 70-80 years with the owner. The model will help in getting an EBITDA margin as high as 55 per cent and earn revenue of Rs100 crore, said Chhatwal, adding that it would take eight to ten management contracts to reach similar levels of profitability.  

Chhatwal said IHCL will develop the iconic Sea Rock hotel in Mumbai and is in talks with government ministries, secretaries and the commissioners. “It’s a real real-estate project and on the drawing board. It would be a game changer.” The project was delayed in the third wave of Covid-19 and is now on track.

As part of Ahvaan 2025, IHCL is looking at increasing its margin by 800 basis points to 33 per cent, optimising costs, strengthening the balance sheet with focus on free cash flows and being a zero net debt company. New businesses like Ginger will be an important growth vehicle in the plan and will scale to 125 hotels, ‘amã Stays & Trails’, a branded offering in the homestay market will be a portfolio of 500 and Qmin, IHCL’s culinary and home delivery platform will expand to 25 plus cities. The new businesses including Ginger, Ama and Qmin which contribute 10 per cent to the overall revenue are expected to see a revenue share of 25 per cent by 2025.

IHCL also aims to re-structure its portfolio and achieve a 50:50 mix between its owned/leased and managed hotels. The company has signed the highest number of new hotels in India over two consecutive years 2020 and 2021 and boasts of a strong pipeline of 60 hotels. It is present in 100 destinations across India. Its luxury brand, Taj, is slated to grow to 100 hotels worldwide. Vivanta and SeleQtions will scale to a portfolio of 75 hotels, over the next three years.