Pride Hotels plans IPO, Rs 350cr expansion

Hospitality sector player Pride Hotels is planning an expansion programme to take the number of rooms in its properties from 438 now to about 700 in the next three years.

The expansion programme will entail a capital outlay of Rs 350 crore, S P Jain, chairman of the company said today.

Jain said the company will leapfrog capacity expansion by increasing the number of rooms in its properties and will parallelly look for fresh opportunities to build or acquire properties.

Pride owns and manages four properties - one each in Pune, Nagpur, Ahmedabad and Chennai, with an aggregate room stock of 438.

"We are planning to expand the Pune, Nagpur and Ahmedabad hotels with the additon of 176 rooms... Formalities such as approval of building plans in these places are nearing completion. Additionally we are building a 105-room hotel off Bangalore's upmarket Richmond Road which is expected to be ready by mid-2008, when the company would have 700 rooms in its network, Jain said.

Pride is also in advanced-stage negotiations to buy land at Hyderabad and Mumbai to build new hotels. Resorts at Goa, Alibaug (near Mumbai) and Mahabaleshwar are also on cards. Of these Goa and Mahabaleshwar are finalised while the company is doing a feasibility study to decide the format for the Alibaug property, Jain said.

Jain said the company will need about Rs 350 crore for the proposed expansion. "We are examining various options including bank finance, equity issue or a combination of the two... If the company decides to go for equity issue, it will offer 30% of the share capital to the public, he said.

Kotak India Real Estate Fund has recently picked up 11% equity stake in the company for a consideration of Rs 45 crore to part finance the expansion. The IPO will see Kotak's stake also coming down to 7%, Jain said.

Jain said the company is also looking at marketing and management of hotel properties as a profitable business and will set up a chain of hotels under its management called "Pride Biznotel." One such property at Chinchwad, near Pune, has been signed up so far and the company is close to a couple of deals in Nashik and Chennai, he said. The company is targeting about 20 such properties with an aggregate roomstock of 1500 by the year 2010, Jain said.

According to Jain the company's sales turnover was Rs 58 crore in the year FY07 and the company has been growing at about 100% every year for the last three years or so.