Hotel Leelaventure has confirmed that it has signed a pact with Travancore Enterprises to transfer its hotel property in Kerala to a special purpose vehicle (SPV), which would be overtaken by the latter for Rs. 500 crore. Hotel Leela will continue to operate the hotel through a long-term management contract to be finalised with the SPV, it said in a statement as per Reuters

The hotel’s vice-chairman Vivek Nair said that it had agreed to sell the property at Kovalam to non-resident Indian industrialist B. Ravi Pillai, who owns Travancore Enterprises for about Rs. 500 crore. The decision was taken to reduce the company’s debt and the hotel operator is actively reviewing proposals for other management contracts in other parts of the country.

Leela Group bought this property in 2005 for about Rs. 150 crore, a source with direct knowledge of the matter said. The group, which manages luxury hotels in Bangalore, Gurgaon, Mumbai, New Delhi and Goa among others, has a debt of around Rs. 3,800 crore.

The group has plans to raise about Rs 1,000 crore through a share sale to institutions by December to trim its debt pile. The qualified institutional placement (QIP) would involve a dilution of the promoter stake, currently around 58%, by about 14%, Vivek Nair said.

"We have been advised because of the current situation to wait until September-October, until the market settles down. Then we can look at the QIP issue," Nair said. However, Nair said the promoters would try to keep their stake at more than 50% in future through creeping acquisitions.

Larger rival ITC held nearly 13% stake in the company at end-June, stock exchange data showed. The firm had earlier planned to raise Rs 600 crore by selling stake to private equity players, but is now looking at a QIP as the preferred mode, he said.