In one of the biggest deals in the Indian hospitality industry, sovereign wealth funds of Abu Dhabi, Qatar and Malaysia are vying with each other to acquire two of India's marquee properties.
Backed by their cash-rich governments, the funds are in discussions to pick up 74% stake in the Leela Group's Delhi and Chennai hotels for over Rs 2,000 crore. The deal, if it goes through, will also mark the entry of sovereign fund investment in the sector.
The Leela chain, in which ITC Hotels holds 12% stake, has been in the red for the past several quarters, hit by business slump, competition and demand-supply mismatch.
As part of its restructuring, the group has decided to hive off the two properties into a separate entity/ies, with Leela retaining 26% stake and continuing to manage the five-star hotels.
All the three funds are big time investors in leisure and tourism assets. Abu Dhabi Investment Authority, the world's third biggest sovereign fund, with $627 billion of assets, recently bought Australia's largest owner of hotels, Tourism Asset Holdings. Similarly, Qatar Investment Authority, which owns luxury department store Harrods, plans to expand the brand into hotels. And Khazanah Nasional owns themed resorts in Malaysia.
The Leela Group is ceding majority ownership in its Chennai and New Delhi hotels to pare liabilities after moving the corporate debt restructuring (CDR) cell. The transaction, managed byIDBI Capital and SBI, is expected to be completed in the next few weeks. SBI is the lead banker for the group's CDR processes - a mechanism where borrowers seek extension of loan period and adjustment of interest rate.
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