Lenders may have prompted Leela chairman to forgo salary

Salary of chairman and MD Vivek Nair dropped to Rs 17.12 lakh during last financial year, a plunge of 93%

Salaries of Hotel Leelaventure chairman and co-chairman last year were reduced to less than one-tenth compared to the salaries drawn by them two years ago as creditors tighten noose around the company.

From a total package of Rs 2.42 crore in 2013-14 salary of chairman and managing director Vivek Nair dropped to Rs 17.12 lakh during last financial year, a plunge of 93 per cent.

Brother Dinesh Nair, co-chairman and managing director, who had identical pay packages in earlier years saw similar drop during last year. The salary paid by the company during last year to the two top executives was less than the monthly salary of Rs 20.16 lakh.

But a note in the 2015-16 annual report of the company stated, 'Vivek Nair and Dinesh Nair have drawn remuneration only for one month', without specifying reasons. 

“As already disclosed in our Annual Report, since restructuring plans to reduce debt are currently in progress, the chairman and co-chairman of The Leela group, Mr Vivek Nair and Mr Dinesh Nair have not been drawing any remuneration from the company since May 2015," a Hotel Leelaventure spokesperson said.

However sources say JM Financial Asset Reconstruction Company who bought almost the entire loan exposure of lenders to Hotel Leela led by State Bank of India two years ago, asked the senior management to forego their salaries as part of efforts to reduce the financial burden on the company.

The remuneration paid last year was only for the April and no more salaries were paid thereafter. While it is not unusual for lenders to tighten financial screws on troubled companies the case of Hotel Leela is unique considering its size and operations.

As of the end of last financial year, Hotel Leela's debt stood at Rs 4,300 crore, the primary reason behind its consistent losses since the past five years. The company posted a loss of Rs 180 crore last year on a revenue of Rs 670 crore.

In August the company announced that it will sell Chennai and Delhi properties to cut debt and later take them on management contracts.

However, the company has not been able to find a buyer since nearly two months. But this is not the first time Leela decided to sell the two properties. In 2014 too the company wished to sell the two properties as a packaged deal. Concerns over their high valuations kept the conclusion of the deal at bay.

Under the stewardship of the late Capt C.P. Krishnan Nair Hotel Leelaventure spent a staggering Rs 3,200 crore on building both the hotels (Delhi Rs 2,000 crore and Chennai Rs 1,200 crore). Unofficially the Leela Delhi, located at the busy Chanakyapuri area, is the costliest hotel in India.

While Delhi property was formally opened in April 2011 the Adyar beach facing Chennai hotel was opened in 2013. A weak real estate market coupled with impractical investments to make them luxurious has disallowed valuations to rise any further, believe market experts.

"The company has been seeking a viable restructuring package from its lenders, but the lenders have advised that the debt level of the company be reduced. The company has already reduced its debt by selling the Goa hotel", said Leela in a disclosure sent to the BSE.

This will be the third such sale by the Nair-family (promoters of the company) in five years. From a total of seven properties, Leela's ownership was down to five by the end of 2015-16. The Mumbai-based company sold and subsequently took on management contract the Kovalam and Goa properties.