This story first appeared in DNA Money edition on Saturday March 5, 2011.
Sterling Holiday Resorts (India) Ltd plans to expand overseas post its restructuring exercise which began in 2008. After having streamlined its operations, the company has chalked out aggressive growth plans that include acquiring resort properties overseas as well as in India. As part of this strategy, the Chennai-based BSE-listed, vacation ownership and leisure hospitality company plans to add six properties to its existing portfolio of 14 resorts. The additions are likely to be done within the next 12 months from now.
Siddharth Mehta, vice chairman, Sterling Holidays, said the management has already identified potential properties and is currently in negotiation with the respective asset owners for acquisitions and long-term lease arrangements. “Our international presence will include destinations that are within five to six hours of flying distance from India. Thus, destinations in the South Asia Pacific region will fit well in this plan because asset prices and the cost of debt are cheaper there compared to India. We are hoping to close these transactions in the next few quarters. This apart, we will also commission two greenfield projects this year. Construction is expected to begin shortly and these resorts will get online by 2014.” he said.
Mehta is also chief executive officer of Bay Capital Partners which currently owns 31% in Sterling Holidays. The acquisition was made in two tranches. So far, Bay Capital has invested $13.8 million.
Of the six additions, three will be international destinations (Far East, Thailand, Indonesia, Malaysia and Sri Lanka) while the remaining three resorts will be located in Goa, Kumarakom and a religious tourism destination. The company also plans to add nearly 800 guest rooms to its current inventory of 1,221 rooms across 12 destinations such as Kodaikanal, Ooty, Yercaud, Munnar, Goa, Lonavala, Manali, Mussorie, Darjeeling, Puri, Gangtok and Yelagiri. By March 2012, Sterling Holidays is targeting an inventory of over 2,000 in its network of properties across 20 to 22 locations.
The new additions, according to company officials, are expected to add Rs300-350 crore in revenues. “As these (acquisitions) are operational assets, we are confident about increasing revenues from the current Rs50 crore to Rs400 crore in a couple of years from now,” said Mehta.
Funding for the growth will initially come through internal accruals. However, the management will raise funds once the inorganic plans start fructifying. Besides cash on books, the company has arranged debt required for initial capital expenditure (capex). The management has also taken a call on raising funds through a mix of financial instruments (equity and debt) at a later stage. “While we haven’t put an exact figure to the quantum of money to be raised, it is likely to be in the $30-40 million bracket,” said Mehta.
Sterling recently brought Shahzaad Dalal, vice chairman of IL&FS Investment Managers Ltd (IIML), on board as director. Dalal, had in February 2011, resigned as an independent director from the troubled real estate company DB Realty’s board.
On how Sterling would benefit with Dalal’s appointment, Mehta said Dalal is among the largest private equity investors in the country and his expertise with a host of businesses will come in handy while repositioning Sterling as the leading hospitality company in the country.
The company has also embarked on a major refurbishment drive wherein 35% of its overall inventory has already been refurbished while another 40% will be done in the second cycle, post the peak season starting April 2011.
On the management side, Sterling has hired close to 1,000 people across various levels in the last 14 months. According to industry sources, a significant chunk of this workforce has moved from the leading player and a competitor in the vacation ownership business namely, Mahindra Holidays & Resorts, popularly known as Club Mahindra.
Sterling Holiday Resorts (India) Ltd plans to expand overseas post its restructuring exercise which began in 2008. After having streamlined its operations, the company has chalked out aggressive growth plans that include acquiring resort properties overseas as well as in India. As part of this strategy, the Chennai-based BSE-listed, vacation ownership and leisure hospitality company plans to add six properties to its existing portfolio of 14 resorts. The additions are likely to be done within the next 12 months from now.
Siddharth Mehta, vice chairman, Sterling Holidays, said the management has already identified potential properties and is currently in negotiation with the respective asset owners for acquisitions and long-term lease arrangements. “Our international presence will include destinations that are within five to six hours of flying distance from India. Thus, destinations in the South Asia Pacific region will fit well in this plan because asset prices and the cost of debt are cheaper there compared to India. We are hoping to close these transactions in the next few quarters. This apart, we will also commission two greenfield projects this year. Construction is expected to begin shortly and these resorts will get online by 2014.” he said.
Mehta is also chief executive officer of Bay Capital Partners which currently owns 31% in Sterling Holidays. The acquisition was made in two tranches. So far, Bay Capital has invested $13.8 million.
Of the six additions, three will be international destinations (Far East, Thailand, Indonesia, Malaysia and Sri Lanka) while the remaining three resorts will be located in Goa, Kumarakom and a religious tourism destination. The company also plans to add nearly 800 guest rooms to its current inventory of 1,221 rooms across 12 destinations such as Kodaikanal, Ooty, Yercaud, Munnar, Goa, Lonavala, Manali, Mussorie, Darjeeling, Puri, Gangtok and Yelagiri. By March 2012, Sterling Holidays is targeting an inventory of over 2,000 in its network of properties across 20 to 22 locations.
The new additions, according to company officials, are expected to add Rs300-350 crore in revenues. “As these (acquisitions) are operational assets, we are confident about increasing revenues from the current Rs50 crore to Rs400 crore in a couple of years from now,” said Mehta.
Funding for the growth will initially come through internal accruals. However, the management will raise funds once the inorganic plans start fructifying. Besides cash on books, the company has arranged debt required for initial capital expenditure (capex). The management has also taken a call on raising funds through a mix of financial instruments (equity and debt) at a later stage. “While we haven’t put an exact figure to the quantum of money to be raised, it is likely to be in the $30-40 million bracket,” said Mehta.
Sterling recently brought Shahzaad Dalal, vice chairman of IL&FS Investment Managers Ltd (IIML), on board as director. Dalal, had in February 2011, resigned as an independent director from the troubled real estate company DB Realty’s board.
On how Sterling would benefit with Dalal’s appointment, Mehta said Dalal is among the largest private equity investors in the country and his expertise with a host of businesses will come in handy while repositioning Sterling as the leading hospitality company in the country.
The company has also embarked on a major refurbishment drive wherein 35% of its overall inventory has already been refurbished while another 40% will be done in the second cycle, post the peak season starting April 2011.
On the management side, Sterling has hired close to 1,000 people across various levels in the last 14 months. According to industry sources, a significant chunk of this workforce has moved from the leading player and a competitor in the vacation ownership business namely, Mahindra Holidays & Resorts, popularly known as Club Mahindra.
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