SBI buys 2% in MHRIL for Rs 80 cr

Hospitality and leisure major Mahindra Holidays & Resorts (MHRIL), part of $4 billion Mahindra group, has signed a pre-IPO placement of 2 per cent stake with State Bank of India (SBI), India's largest bank, for Rs 80 crore. Investment bankers have valued the company at $1 billion.

MHRIL has filed a draft red herring prospectus with Securities and Exchange Board of India (Sebi) last month and targeting an IPO in the first quarter of the year. The issue would constitute 13 per cent of the fully diluted post-issue paid-up capital of the company.

The issue comprises 4.1 million equity shares and an offer for sale of 6.5 million equity shares by Mahindra Holdings & Finance, the holding company of MHRIL and a fully-owned subsidiary of M&M.

"With SBI being the largest bank in the country, we thought of going with them for the pre-IPO placement," said Arun Nanda, chairman, MHRIL.

"The placement shows our focus on the hospitality sector and confidence of consumers and investors in Club Mahindra as a leading player," he said. Nanda said though there is an option of one more pre-IPO placement of 1 per cent, they have not decided on executing the same," he said.

The IPO proceeds are expected to go towards financing of expansion of existing resorts and setting up of new projects, the company said in its draft prospectus.

The company is expanding its existing resorts in Coorg and Manali and planning to build new resorts in Pondicherry, Kumbalgarh in Rajasthan, Kodambakkam in Tamil Nadu, Binsar in Uttarakhand, Theog in Himachal Pradesh and Tungi in Maharashtra.

MHRIL has a network of 21 resorts, including two leased resorts in Thailand. Shares of group's flagship company M&M closed at Rs 830.10, a 2.41 per cent jump from Monday's closing price.

According to sources, the Rs 4,000 crore valuation for MHRIL, which was started with an initial capital of Rs 18 crore, would also push up the valuation of M&M.