AGS earmarks Rs 100cr for more buyouts

AGS Hotels and Resorts Limited (AGS), the new hospitality entity formed by the Kalpathi business group, has earmarked a shopping budget between Rs 80-100 crore for more property buyouts after committing Rs 18 crore to buy and develop Ooty Dasprakash.

"We are looking at developing a chain of hotel and resort properties in south India initially, after we understand the financials involved in this business over the next nine to 10 months. The acquisitions will happen sometime in the fag end of this year, development of the properties will begin early next year and the operations should start by end of next year," said Kalpathi S Suresh, director, AGS. All properties will cater to the middle class segment by providing certain star quality amenities.

In keeping with its strategy of developing properties but seeking a professional partner to manage the business, AGS is speaking to about three to four companies with a proven track record in the hospitality space to manage Ooty Dasprakash and is hoping to seal the deal in the next one month.

"The key is to zero in on companies who can give us a commitment on returns. Initially, we are not looking for any investments from these companies but might consider it going forward," Suresh said.

The company is actively considering managing Ooty Dasprakash on its own if it does not find a partner that can make a commitment on delivering favourable returns. It is also mulling tying up with a partner that has marketing linkages to a chain of hotels like Comfort Inn.

The Kalpathi business group is planning on funding the proposed buyouts through a combination of internal accruals and lines of credit from banks. "About 60-70 per cent of the funding will come from external sources depending on interest rates and credit terms, while the rest of it will come from the group businesses," Suresh added.

The company is planning on buying about two to three properties in 2005-06 depending on the cost, profitability and equity of the real estate involved.

The Kalpathi business group has interests in IT education and services through SSI Education and Aptech Limited. It entered the real estate business with the acquisition of the 70-acre Binny property, which is being developed into a township.