Indian Hotels Company, Hotel Leelaventure see financial boost by going asset-light

(Hotel Leelaventure Goa)

There’s a light at the end of the tunnel for Tata-owned Indian Hotels Company (IHCL). After selling off several assets, an estimated fourth of the company’s Rs 4,700-crore net debt could be eliminated.

The near-total equity exit from the Bermuda-based Belmond (formerly Orient Express Hotels) and the sale of the Taj Boston brought  Rs 1,250 crore to IHCL’s coffers, about 12 times its profit before tax of Rs 102 crore last year. And investors are pleased, as the company’s stock has increased by nearly 12 percent since early June. 

The Mumbai-based company has reportedly failed to generate profits at a consolidated level in any year since 2011-12. This and heightened competition from foreign entities such as Marriott, Starwood and Accor, has put hotel companies like IHCL under pressure.

The sale of the Taj Boston was part of the company’s strategy to go “asset-lighter” and to shift priorities from ownership to management. 

Hotel Leelaventure

Then there’s Hotel Leelaventure, controlled by Mumbai’s Nair family. The luxury chain, operating under the Leela brand, sold its second property, at Goa, for Rs 725 crore last year. The sale came under four years of selling its first hotel at Kovalam for Rs 500 crore, bringing its owned properties down to five.

The company is reportedly “open to selling more [hotels] to reduce debt, including the property at Chennai which began operating only in 2013.”

As of the end of the most recent fiscal year, Leela's debt is estimated to have been right behind that of IHCL at Rs 4,500 crore, and like IHCL, Hotel Leelaventure hasn't seen any profits since 2011-12. As such, the company is “presently adopting an asset-light strategy” and focusing on management opportunities. 

Leela has four managed properties (Goa, Kovalam, Gurgaon and Delhi), and is nearly divided in half between owned and managed rooms.