This story first appeared in DNA Money edition on Wednesday March 23, 2011.
Mumbai-based Kamat Hotels (India) Ltd (KHIL) is looking to merge some of the promoter group hotel and restaurant companies with itself.
Kurian Chandy, chief financial officer, KHIL, confirmed the development saying a board meeting to this effect will be held on March 26, 2010, to decide which companies will be considered for this merger exercise.
Industry sources said KHIL management wants to bring in the profit-making businesses onto the books, thereby strengthening the KHIL balance sheet. “These are zero-debt, profit-making hotels wherein the asset is owned by the promoters and are outside of KHIL books. Similar is the case with the restaurant business which is already profitable. The hotels to be merged are under management wherein KHIL only gets a management fee. With the new arrangement, the P&L of these hotels and the restaurant business will come under KHIL books,” said a source.
Merging of the hotels and restaurant business will give the promoters additional stake in the listed entity. As a result of this move, hotels owned by the promoter group companies in markets like Goa and Murud are likely to merged with KHIL. A few other similar projects outside of KHIL will come under its fold over a period of time.
“For instance, hotels in Silvassa, Bhubaneshwar etc will eventually be brought onto KHIL books. These are properties where expansion is currently going on and may have debt on their books. Once the properties become debt-free, they will be merged with KHIL,” the source said.
The company currently operates around 34 restaurants in Maharashtra, Orissa and Rajasthan. The company management has plans to expand this business through franchise model in addition to owned and managed outlets. “It is poised to be a highly profitable business and hence makes good sense to bring it onto KHIL books,” said the source.
Update from Kamat Hotels' Management on March 26, 2010
Kamat Hotels informed that promoters have taken major decisive step towards consolidation of its business into Kamat Hotels India Ltd by merging the profitable hotel business and the highly profitable recession proof restaurant business owned by the promoters into KHIL. KHIL's Board has approved, in principle, the amalgamation of Kamat Restaurants, Lotus Resort Murud (48 rooms) and Lotus Resort Goa (52 rooms) into KHIL.
Upon merger, with over 53 units KHIL will be one of the largest hotel chains in the country. This will enhance the top line, bottom line, cash flows, and other financial parameters of KHIL.
Vithal Kamat, ECMD, KHIL, said, “Finally owing to the settlement and removal of cross holdings within the families, we have initiated this as it was long overdue. This is a major step to align all Kamat group properties by bringing in the most profitable hotels like Lotus Goa and Murud into KHIL. The few remaining promoter properties are in various stages of renovations and are in companies which have inherited debt components and not having immediate EPS accretion to KHIL. At an opportune time the remaining Promoter owned units will merge into KHIL, thus aligning all promoter interests into KHIL.”
Continuing on a positive note Kamat said, "The restaurants are poised for higher growth in the next 3 years and the business is set to scale up to 150 units with very low capex as most of the restaurants are developed under franchise and 'company owned company operated' (CoCo) route, the profitability and other financial parameters of KHIL will improve with this amalgamation as these are already debt free profit making companies.”
Mumbai-based Kamat Hotels (India) Ltd (KHIL) is looking to merge some of the promoter group hotel and restaurant companies with itself.
Kurian Chandy, chief financial officer, KHIL, confirmed the development saying a board meeting to this effect will be held on March 26, 2010, to decide which companies will be considered for this merger exercise.
Industry sources said KHIL management wants to bring in the profit-making businesses onto the books, thereby strengthening the KHIL balance sheet. “These are zero-debt, profit-making hotels wherein the asset is owned by the promoters and are outside of KHIL books. Similar is the case with the restaurant business which is already profitable. The hotels to be merged are under management wherein KHIL only gets a management fee. With the new arrangement, the P&L of these hotels and the restaurant business will come under KHIL books,” said a source.
Merging of the hotels and restaurant business will give the promoters additional stake in the listed entity. As a result of this move, hotels owned by the promoter group companies in markets like Goa and Murud are likely to merged with KHIL. A few other similar projects outside of KHIL will come under its fold over a period of time.
“For instance, hotels in Silvassa, Bhubaneshwar etc will eventually be brought onto KHIL books. These are properties where expansion is currently going on and may have debt on their books. Once the properties become debt-free, they will be merged with KHIL,” the source said.
The company currently operates around 34 restaurants in Maharashtra, Orissa and Rajasthan. The company management has plans to expand this business through franchise model in addition to owned and managed outlets. “It is poised to be a highly profitable business and hence makes good sense to bring it onto KHIL books,” said the source.
Update from Kamat Hotels' Management on March 26, 2010
Kamat Hotels informed that promoters have taken major decisive step towards consolidation of its business into Kamat Hotels India Ltd by merging the profitable hotel business and the highly profitable recession proof restaurant business owned by the promoters into KHIL. KHIL's Board has approved, in principle, the amalgamation of Kamat Restaurants, Lotus Resort Murud (48 rooms) and Lotus Resort Goa (52 rooms) into KHIL.
Upon merger, with over 53 units KHIL will be one of the largest hotel chains in the country. This will enhance the top line, bottom line, cash flows, and other financial parameters of KHIL.
Vithal Kamat, ECMD, KHIL, said, “Finally owing to the settlement and removal of cross holdings within the families, we have initiated this as it was long overdue. This is a major step to align all Kamat group properties by bringing in the most profitable hotels like Lotus Goa and Murud into KHIL. The few remaining promoter properties are in various stages of renovations and are in companies which have inherited debt components and not having immediate EPS accretion to KHIL. At an opportune time the remaining Promoter owned units will merge into KHIL, thus aligning all promoter interests into KHIL.”
Continuing on a positive note Kamat said, "The restaurants are poised for higher growth in the next 3 years and the business is set to scale up to 150 units with very low capex as most of the restaurants are developed under franchise and 'company owned company operated' (CoCo) route, the profitability and other financial parameters of KHIL will improve with this amalgamation as these are already debt free profit making companies.”
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