Mumbai-based Hotel Leelaventure, the luxury hotel chain run by hotelier C P Krishnan Nair, is raising Rs 750 crore, primarily to cut debt and expand the Delhi property, which has turned out to be the company’s most expensive property till date.
The board decided to issue Rs 350 crore through the qualified institutional placement (QIP) route by August, while the rest may be raised through the issue of foreign currency convertible bonds (FCCBs) in July.
This will bring down the promoters’ holding in the company to 46 per cent from the 53.32 per cent as of March-end. However, a senior official stated the holding will be then increased to 51 per cent and later to 55 per cent, over the next three years.
While the funds raised through QIP, with a mix of internal accruals, will be used for bringing down the company’s debt of Rs 2,800 crore, proceeds raised through FCCBs will be used for expanding current properties.
Vivek Nair, vice-chairman and managing director, said: “We are utilising the FCCB funds to expand the Delhi property by a further 50 per cent and for setting up a new property in Chennai. Both properties will collectively see an investment of Rs 350 crore. The increase in the Delhi hotel is a result of higher FAR (floor area ratio) allotted by the government. The hotel will now have more restaurants and public areas.”
The Delhi property, in upmarket Chanakyapuri, will see an overall investment of Rs 1,490 crore. It will come up in time to serve the Commonwealth Games, which are in October. The property will now have an additional 70 guest rooms, spas and restaurants and larger banquet halls.
The property in Chennai will come up facing the sea and will be one of a kind in the city. It will sport a large convention centre, a banquet hall and restaurants. To open in May 2011, with 332 rooms, it would be built on the lines of a century-old Chettinad Palace in interior Tamil Nadu.
Market up, rates less steady
The company is witnessing a resurgence in the market, with occupancies already up by 20 per cent in April-May. It expects the trend to improve in the coming months, as enquiries and booking requests have started coming in for prime properties located in Goa and Kerala.
“Booking requests for Goa and Kerala have started on a robust note from our overseas clients. We are expecting occupancies to be in the range of 85-90 per cent in both the properties during the peak season,” added Nair.
Pressure on room rates, a result of the economic slowdown, is still being experienced by the company, as well as other hoteliers in the market. Take the Bangalore hotel, which generates the largest chunk of revenue for the company. “We used to operate the Bangalore hotel at an average rate of Rs 19,000 per room,which had dropped to Rs 11,000 during the economic slowdown. This has increased to Rs 12,500, with occupancy expected to touch 85 per cent,” said Nair.
The Mumbai property, also the company’s oldest hotel, is witnessing pressure in the form of competition due to additional supply of rooms in the market. Its average room rate is down by 10 per cent compared to last year. However, room occupancy is better than the previous year.
