Oberoi's East India Hotels drops stake in joint venture

Oberoi

The Oberoi-controlled East India Hotels has decided to write off its 16-percent stake, valued at Rs41.86 crore, in the joint-venture company Golden Jubilee Hotels. The joint venture was created for the development of two hotel properties—a Trident and an Oberoi—in Hyderabad, India.

East India Hotels did not disclose the reasons behind the decision, but a study of the reports of the credit rating agencies ICRA and CARE, over a span of four years, shows that the project had suffered delays, significant cost overruns, changes in plans "due to changing market dynamics" and intense competition. ICRA downgraded the joint venture company to default-grade once in 2013 for delays in debt servicing (although it is worth knowing that the company later arranged the funds from the bankers).

The SPV was majority-owned by Core Hotel Ventures at an 83.4-percent stake. Core Hotel is itself a joint venture between lead developer LN Sharma & Associates, Basil Infrastructure Projects, and PE investors JP Morgan India Property Mauritius and Indus Hotel Reality (Mauritius).

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The project was to set up to open the Trident and Oberoi at Madhapur Hitec City in Hyderabad. The Trident hotel was originally slated for a September 2012 opening, and the Oberoi hotel was expected to open by July 2013. The Trident project in Tower 1 started soft operations in September 2013, but the Oberoi Hotel was converted into a business hotel-cum-service apartment with project completion revised initially to 2014 and then to 2015. The soft run for a portion of retail area in Tower 2 commenced in September 2015.

Source: DNA India

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