Indian Hotels Company Limited (IHCL) of the Tatas has joined hands with Singapore’s sovereign wealth fund, GIC to build a Rs 4,000-crore war chest that will buy premium hotels in India within a three-year horizon.
IHCL currently operates 179 hotels in 12 countries and over 80 locations under its brands — Taj, SeleQtions, Vivanta and Ginger.
The partnership with GIC also envisages the acquisition of distressed properties.
Under the terms of the agreement, the duo will set up a separate legal entity (special purpose vehicle) for each of the hotels they buy. GIC will invest 70 per cent in the SPV and Indian Hotels, the rest. Indian Hotels will manage the hotels under its different brands.
“This collaboration is in line with Aspiration 2022 and our vision to scale up and create greater enterprise value and make IHCL South Asia’s most iconic and profitable hospitality company. Through this platform, we expect to acquire strategic and marquee assets that need new ownership, branding and positioning,” said Puneet Chhatwal, managing director and CEO of IHCL.
Under Aspiration 2022, IHCL plans to expand its portfolio, improve operating margins and unlock capital through restructuring.
The hospitality firm has seen a shift in its business mix with the share of properties under management contract improving in 2018-19.
“We have given the guidance of having a balanced portfolio in which we would have 50 per cent fee-based business contracts and 50 per cent leased or owned properties. As the portfolio stands, after this financial we have been able to increase our management contracts from 32 per cent to 40 per cent of the portfolio. So there is a clear shift in the business model as we go forward,” Chhatwal informed analysts at the company’s earnings call for 2018-19.
The IHCL share was up 0.78 per cent at Rs 143 over the previous close on the Bombay Stock Exchange.
“GIC is pleased to partner with IHCL, a leading hotel owner and operator, to build a quality hospitality portfolio in key destinations across India,” said Kok Sun Lee, chief investment officer, GIC Real Estate.
IHCL has posted a net profit of Rs 122.56 crore for the quarter ended March 31, 2019, against Rs 79.30 crore in the corresponding quarter a year ago. The company’s total
income during the quarter was Rs 1,281.55 crore against Rs 1164.02 crore in the year-ago period.