GVKNSE 0.51 % Group is in exploratory talks with Indian-born Canadian billionaire Prem Watsa’s Fairfax Holdings to sell its nearly 50% stake in luxury hotel chain business TAJGVK Hotels and Resorts, a joint venture with Tata Group’s Indian Hotels Company NSE -1.18 %.
Fairfax, which recently bought out GVK’s stake in Bangalore airport, has had multiple rounds of talks with the Hyderabad-based infrastructure conglomerate, people with direct knowledge of the matter told ET.
GVK, which has a net debt of Rs 11,458 crore as on March 31, is exploring ways to sell its non-core businesses to strengthen its balance sheet, they said. “They have to reduce their debt problem,” one of the sources said.
“In addition, they need to raise fresh capital for the Navi Mumbai airport project. So, the company has identified a few non-core businesses and this hotel business is one among them,” the person said.
As per its Tuesday’s market capitalisation, GVK’s stake TAJGVK is valued at around Rs 700 crore. Shares of the hotel chain closed 3.5% higher at Rs 213.40, outperforming the benchmark Sensex that ended 0.32% higher.
When contacted both GVK and Indian Hotels declined to comment.
A mail sent to Fairfax on Monday remained unanswered as of press time Tuesday.
Formed in 2010, TAJGVK now has seven 5-star properties across the country, including four in Hyderabad, and one each in Chennai, Chandigarh and Mumbai where it operates Taj Santacruz, near the airport.
Both the promoters hold 25.52% stake each in the company, with some individuals from GVK Group owning an additional 23.9%.
Siddharth Thaker, managing partner at hotel consulting firm Prognosis Global Consulting, said TAJGVK will witness significant improvement in its return ratios and valuations if the company can successfully manage its repayment of debt and bring down its debt-equity ratio from the 0.6% currently.
“Favourable occupancy and ARR trends in Hyderabad, Mumbai and Chennai will provide the necessary impetus for growth in terms of topline, profitability and margins with the Taj Santacruz leading the growth momentum for the company,” he said.
Source: Economic Times