Hotel Leela

Five-star hotel operator Hotel Leelaventure Ltd is getting a financial makeover by moving towards an asset-light model. The company is planning to raise around Rs 1,000 crore through a share sale to institutions by December to trim its massive debt pile.The qualified institutional placement (QIP), where companies are allowed to raise capital from its domestic markets without the need to submit any pre-issue filings to market regulator, would involve a dilution of the promoter stake, currently around 58 percent, by about 14 percent. However, promoters are trying to retain at least 50 percent shareholding through creeping acquisitions. (A process in which the promoters of a company who hold less than 50% of its shares, increase their stake by buying 2% of the company’s equity (the maximum permissible) each year.) The company has hired Morgan Stanley as a merchant banker for the placement.Earlier in the year, the company  was in talks with  private equity investors to raise up to Rs 450 crore to help reduce its debt burden but is now looking at QIP as the preferred model.Apart from the equity infusion, the company also plans to raise Rs 850 crore by selling non-core assets over a three-year period. The hotel group, which runs luxury hotels in Bangalore, Gurgaon, Mumbai, New Delhi and Goa among other locations, has also agreed to sell its Kerala property in Kovalam for Rs 500 crore.In order to fund its expansion, the company raised loans aggregating to Rs 3,800 crore over the past four years. Rising room rates led Hotel Leela to expand its operations across other cities. While it is setting up a 329-room hotel in Chennai, it is also expanding its Goa property  by  constructing another 20 rooms. On completion, the number of rooms will increase to 2,218  from 1,869.The company is also  in talks with developers in Pune and Hyderabad to monetise land parcels that it owns and expects to raise Rs 250 crore   over the next two months by selling the Leela Business Park in Chennai.Indian hotel chains have been raising funds of late through equity offerings, but prefer to use the cash to clean up their balance sheet and complete existing projects rather than draw new plans.Incorporated in 1981 in collaboration with Penta Hotels, UK, this Rs 1,580 crore 5-star hotel company has come a long way. It set up its first hotel, Leela Kempinski, in collaboration with Kempiniski Group in Bombay in 1986 . Since then, it has expanded to a pan-Indian footprint. Today, it operates six hotels located in Mumbai, Bangalore, Goa, Kerala, Udaipur and New Delhi and has also entered into a contract with the ‘Ambience’ group to mange a property at Gurgaon.