Indian Hotels sells stake in Belmond at loss

Industry:    2016-02-29

Indian Hotels Company (IHCL), one of the country’s largest and oldest hotel chains, said on Friday its subsidiary Samsara Properties sold 1.24 per cent stake in Belmond for $11.96 million (Rs 81.32 crore). After the sale, Samsara Properties continues to hold 5.73 per cent of the class A common shares of Belmond. The company intends to exit Belmond in due course. The sale price is substantially lower than what IHCL had paid for acquiring the stake in 2008-10, which is when shares of Belmond (formerly Orient Express Hotels) were at an all-time high. IHCL, which owns and operates hotels and resort properties in India and abroad under the brands of Taj, Vivanta by Taj and Gateway, had been looking to exit Belmond for some time. At an average price of $9.4 a share, IHCL is taking a massive hair cut compared with the price it paid to buy the shares, which was nearly $35 a share, six to seven years ago. It has collectively paid Rs 1,000 crore for the shares. The sale price is also lower than the $12.63 a share offered by IHCL to buy Belmond in 2012. “Samsara Properties, the company’s indirect overseas wholly-owned subsidiary, has sold, through market transactions, 1,270,715 class-A common shares of the face value of $0.01 each of Belmond, representing 1.24 per cent of the total outstanding class A common shares for a net consideration of $11.96 million,” IHCL said. Last year, IHCL had said it would look to liquidate its holding in Belmond even as continued efforts by former chairman Ratan Tata to take over the Bermuda-based hotel chain remained fruitless. The sale proceeds will be utilised for retirement of gross consolidated debt, which as of December stood at Rs 4,833 crore. The company aims to reduce debt by at least 30 per cent by the end of the next financial year by unlocking value in some of its assets. IHCL is taking fire from competition at home even as its international expansion has taken a back seat. The company exited management contracts in Dubai and Morocco, while it sold a property in Australia in 2014. It also exited management contracts in Jodhpur and Ahmedabad in 2015. IHCL has posted losses for three consecutive year ended March 31, 2015. During the nine months ended December 31, 2015, the company posted a loss of Rs 8.81 crore as high finance cost continued to erode margins. In comparison, the Marriott-Starwood merger deal announced last year effectively created the largest hotel chain in India in terms of inventory pushing IHCL to the second spot. Every small and major foreign hotel brand are forging new partnerships for expanding in India putting pressure on players such as Taj.

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