 "Sea Rock hotel debt more than buyout cost")
Indian Hotels Company’s (IHCL) most high-profile asset purchase during the past seven years has to be the sea-facing, multi-storied Sea Rock luxury hotel at Bandra in this city, which had stopped operations after a 1993 bomb blast.
Bought in 2009, three years before the retirement of Ratan Tata, it paid Rs 680 crore, hoping to create a property no less than the iconic Taj Mahal Palace at Colaba, according to then chief R K Krishnakumar.
The 440 rooms were razed some years earlier but the project — including the building of convention centres, banquets and retail outlets — is yet to take off. It has, however, become a drain on the company's financials, given the interest costs and accumulated debt.
By company disclosures, as of 2015-16, debt of Rs 1,403 crore accumulated on Sea Rock, of which Rs 693 crore was repaid last year. The balance of around Rs 700 crore has been refinanced at a lower cost. IHCL’s total net consolidated debt as of 2015-16 was Rs 4,717 crore; standalone net debt was Rs 2,268 crore. Net debt to equity at the consolidated level stood at 1.47, and 0.58 at a standalone level. In 2014, IHCL made an impairment provisioning of Rs 500 crore on its investment. Of this, Rs 400 crore was for standalone operations. This was over and above the Rs 678 crore it had already written off on investments in Belmond (formerly Orient Express Hotels).
On foreign properties, Mistry said, “Many foreign properties of IHCL and holdings in Orient Express have been sold at a loss. The onerous terms of the lease for the Pierre in New York are such that it would make it a challenge to exit.”
Earlier, environmental clearance was believed to be the reason behind the inordinate delay in starting project work at the Sea Rock site. A public interest suit over grant of Floor Space Index (FSI) complicated matters. IHCL had got the commencement certificate for a 2.5 FSI but stated it would not start construction unless it got 5.5. The company was confident of settling the legal dispute in 2015-16.
“Recognising the importance of reassuming overall control over the Sea Rock asset, your company has pursued the strategic objective by, firstly, purchasing the balance 80.1 per cent in Lands End Properties Pvt Ltd from the other shareholders and thereafter seeking to amalgamate Lands End Properties with itself. This would permit your company to evaluate and pursue the most value-accretive option for this unique asset in a time-bound manner,” IHCL had stated in its latest annual report.
Bought in 2009, three years before the retirement of Ratan Tata, it paid Rs 680 crore, hoping to create a property no less than the iconic Taj Mahal Palace at Colaba, according to then chief R K Krishnakumar.
The 440 rooms were razed some years earlier but the project — including the building of convention centres, banquets and retail outlets — is yet to take off. It has, however, become a drain on the company's financials, given the interest costs and accumulated debt.
By company disclosures, as of 2015-16, debt of Rs 1,403 crore accumulated on Sea Rock, of which Rs 693 crore was repaid last year. The balance of around Rs 700 crore has been refinanced at a lower cost. IHCL’s total net consolidated debt as of 2015-16 was Rs 4,717 crore; standalone net debt was Rs 2,268 crore. Net debt to equity at the consolidated level stood at 1.47, and 0.58 at a standalone level. In 2014, IHCL made an impairment provisioning of Rs 500 crore on its investment. Of this, Rs 400 crore was for standalone operations. This was over and above the Rs 678 crore it had already written off on investments in Belmond (formerly Orient Express Hotels).
On foreign properties, Mistry said, “Many foreign properties of IHCL and holdings in Orient Express have been sold at a loss. The onerous terms of the lease for the Pierre in New York are such that it would make it a challenge to exit.”
Earlier, environmental clearance was believed to be the reason behind the inordinate delay in starting project work at the Sea Rock site. A public interest suit over grant of Floor Space Index (FSI) complicated matters. IHCL had got the commencement certificate for a 2.5 FSI but stated it would not start construction unless it got 5.5. The company was confident of settling the legal dispute in 2015-16.
“Recognising the importance of reassuming overall control over the Sea Rock asset, your company has pursued the strategic objective by, firstly, purchasing the balance 80.1 per cent in Lands End Properties Pvt Ltd from the other shareholders and thereafter seeking to amalgamate Lands End Properties with itself. This would permit your company to evaluate and pursue the most value-accretive option for this unique asset in a time-bound manner,” IHCL had stated in its latest annual report.