Rattan Keswani quits after over three decades with Oberoi Hotels & Resorts

An edited version of this story first appeared in DNA Money edition on Monday, February 13, 2012.

Rattan Keswani

Rattan Keswani, president-Trident Hotels at East India Hotels (EIH) – Ltd is set to part ways with the company (popularly known as Oberoi Hotels & Resorts) he has been associated with for over three decades now. Industry sources said that Keswani has already put in his papers and is currently serving notice period.

“Keswani is serving notice period till end of April. While there is no concrete information about his new endeavour, there are talks he is launching own venture,” said a source privy to the development.

While Keswani could not be reached for a comment, EIH Ltd spokesperson confirmed the development saying, “He (Rattan Keswani) is moving out of Oberoi Hotels & Resorts to start a new venture,” without sharing any further details.  “And we have not appointed anyone in his place as yet,” added the spokesperson when asked if the company has got a replacement in place.

Keswani began his association with the Oberoi group as a student of Oberoi School of Hotel Management (OSHM) – now Oberoi Centre for Learning & Development (OCLD) – in the year 1981. Except for a brief stint with Holiday Inn Worldwide in 1987-88, Keswani has been an ‘Oberoi’ man for his entire professional life thus far. Starting as an assistant front office manager at The Oberoi in Mumbai in 1983, Keswani has held various responsibilities (India and overseas) in the group before taking over the reins of Trident Hotels in April 2008 as president of the five-star business hotel chain.

For PRS ‘Bikki’ Oberoi promoted Oberoi Hotels & Resorts this will be the second high profile movement in the company in the last 12-odd months. Last year Liam Lambert stepped down from his position as president of Oberoi Hotels & Resorts after serving notice period in April 2011. In-charge of The Oberoi chain of luxury hotels, Lambert joined the Oberoi Group on May 01, 2009 after serving as director of operations, Europe, Middle East and Africa at Mandarin Oriental Hotel Group.

What is really surprising though is that even after almost a year since Lambert’s resignation, the EIH management has not appointed any one to take over his responsibilities at Oberoi Hotels & Resorts. Considering EIH spokesperson’s statement that no replacement has been identified as yet for the president’s post at Trident Hotels, this could be a possible indication of a shift in the Oberoi management’s approach to manning the two top positions in the company.

Deutsche Bank exits Lodha with 55% returns

This story first appeared in DNA Money edition on Friday, February 10, 2012.

Deutsche Bank has got a 55% return on its Rs1,640 crore placement in Lodha Developers, despite having invested at the peak of 2007-08. The lender got back Rs2,542 crore — including fresh debt of Rs825 crore and Rs1,720 crore from internal accruals — from Cowtown Land Development Ltd, a Lodha subsidiary.

Lodha, which has earlier provided exits to JP Morgan and HDFC Venture Fund from its other projects, currently has investments from the likes of ICICI Ventures and Old Lane, besides HDFC Venture Fund.

Earlier this year, private equity firm Kotak Realty Fund took the promoter buyback route to exit its stake in 3C Company’s information technology park project in Noida. The investment firm said it earned a return of less than 30% from this exit.

With most funds nearing expiry of their term and investments getting matured over the years, industry experts feel 2012 and 2013 will see a good number of transactions in the real estate space.

“When the fund expires, private equity (PE) firms have to return a significant amount of money to investors. Besides, demonstrating returns is very crucial if one is raising a new fund. Given the current market situation, deliberated and negotiated exits will be more in number as compared to natural exits, wherein the latter (natural exits) would see superior returns,” said Amit Bhagat, chief executive officer and managing director, ASK Property Investment Advisors.

Jones Lang LaSalle said in a report recently that 2012 will be a big year for real estate exits by private equity players. It sees PE exits worth $2.5-3 billion (around Rs15,840 crore) this year — that’s equivalent to the total quantum of PE exits in the last four years.

According to Shobhit Agarwal, joint managing director - capital markets, Jones Lang LaSalle India, multiple investments took place in the 2005-2008 period involving both domestic and foreign funds.

Thomas Cook will sell India arm lock, stock & barrel

This story first appeared in DNA Money edition on Thursday, February 9, 2012.

It’s official. Thomas Cook is exiting its Indian subsidiary.
After a series of denials over the last three weeks or so, travel and tour operator Thomas Cook (India) Ltd, or TCIL, has informed the Bombay Stock Exchange that its UK parent has finalised plans to sell its entire 77.1% stake in the entity.

The sale is part of a global restructuring exercise that will see Thomas Cook Group Plc close 200 of its 1,300 high-street stores.
The UK parent is launching a formal sale process for its stake, said the filing, adding that it has received a number of unsolicited, informal expressions of interest from third parties to acquire the stake.

The company stressed, however, that the sell-off will happen only if a compelling bid is received.

“If the offers are attractive, the company will consider selling the stake and use the proceeds to continue to strengthen the group’s balance sheet. TCIL is a strong business, operating in an attractive market. Both the business and the market are growing and Thomas Cook will only sell its stake if a compelling offer is received,” Sam Weihagen, group CEO of Thomas Cook, was quoted as saying.

However, the filing did not disclose either the profiles of potential buyers or the likely timeframe for concluding the deal.

The market, however, is rife with rumours of potential suitors including the likes of Cox & Kings and Travelex in addition to leading global private equity players KKR, Actis, Bain and Carlyle. DNA Money could not independently confirm the participation of any of these entities.

The UK parent reported a pre-tax loss of £151.7 million ($241.2 million) in the three months to December 31 compared with a loss of £99.3 million a year earlier even as revenues increased 3% to £1.86 billion mainly because the operating expenses climbed 10% to £482.1 million.

The group, which has been under financial stress for a while now, sold off its Spanish hotel chain Hotels Y Clubs De Vacaciones to Grupo Iberostar for 72.2 million euro last year.

A Sunday Times report had, on February 4, 2012, said that the UK parent has hired Credit Suisse Group AG to sell the foreign exchange business in India. The BSE filing did not mention any such detail.

TCIL management continued to remain silent on the entire development.

TCIL has presence in 70 Indian cities across 153 owned locations and has close to 65% revenues coming from the foreign exchange business. The company employs 2,700 people in India and has a network of 110 ‘Gold Circle Partners’ and 184 preferred sales agents in over 100 cities in the country. It also has operations in Mauritius and Sri Lanka.

High Street back with a vengeance

An edited version of this story first appeared in DNA Money edition on Wednesday, February 8, 2012.

India witnessed addition of over 15 million square feet (msf) of organised retail mall space across primary and secondary locations in the calendar year (CY) 2011. Interestingly, approximately 60% of the overall space i.e. more than 9 msf was added in the period between July-December (H2) 2011.

And according to a CB Richards Ellis (CBRE) report, more than 90% of the entire organised mall supply during the review period was led by cities like Mumbai, Pune, Bangalore and Chennai.  The CBRE study reviewed retail real estate developments in seven cities including NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.

Anshuman Magazine, CMD, CBRE South Asia Pvt Ltd, said the increased retail activity across key cities is an indication of the growing confidence of both domestic and international retailers in the India growth story. “On the back of growing urbanisation and an increase in the acceptance of organised retail, retailers have been expanding their operations across the country. The government allowing 100% FDI in single brand retailing has been a welcome step, however the caveats put by the government like making it mandatory for retailers to source 30% of their requirements locally are a dampener,” he said.

Presenting a promising outlook based on considerable increase in retailer inquiries, the report further said that retail mall rentals witnessed growth in prime city micro markets. However, the rental were stable in suburban (supply laden) destinations in key cities like NCR, Mumbai and Bangalore. A few micro markets of Pune, Chennai and Hyderabad witnessed correction but only with select mall developments.

While CBRE expects a significant increase in the transaction activity and size as a result of anticipated incremental demand, the experts also envisage a possible downside owing to large, retail mall supply pipeline in most leading cities. ‘This might lead to a demand – supply mismatch which might eventually lead to long-term pressures on retail rents in select micro markets’, the report said.

In fact, pressure on retail mall rentals has started showing up in a select few categories already. The developer of the recently launched Phoenix Market City Kurla was faced with the challenge of leasing the multiplex space in the mall. Industry sources said that, while PVR Ltd was initially approached by the mall developer for the multiplex lease, the film exhibition company (PVR) turned it down citing higher lease rentals.

“Eventually, a deal was inked with Reliance BIG Cinemas. However the multiplex chain walked out of the deal at the time of taking delivery as it felt the lease rentals were on the higher side. The mall developer then re-approached PVR with a mutually workable lease rental rate. PVR is currently in the process of getting the multiplex ready for launch which is likely to happen within the next few quarters,” said the source familiar with the development.

The general feeling in the retail sector is that while re-negotiations haven’t started yet, the process is likely in the first quarter of financial year 2013 (Q1FY’13). “Retailers who have already negotiated rates will take stock of the market situation by the end of current fiscal. Given the current economic scenario with financial standing of real estate companies, it is very likely that retailers will discuss rentals which will lead to some correction in the market. Having said that, high street locations will continue to enjoy a premium,” said a top official from a leading Indian retail company.

Echoing the sentiments, Pankaj Ahuja, proprietor, Rapid Deals (a Mumbai-based real estate consultancy firm), said rate negotiations are not happening in the established malls operating in south central and western suburbs of Mumbai. “However, some of the new mall developments that are not fully operational are facing challenges with lease rental rates. I wouldn’t be surprised if some of them take to reducing the rentals per square feet in an attempt to fill the retail space,” he said.

The quality of retail real estate is another problem faced by the Indian retail industry. A recent report by the research and real estate intelligence service of Jones Lang LaSalle (JLL) India cited that while substantial mall space is being built, only half of it is worth a second glance from retailers.

Ashutosh Limaye, head - Research and Real Estate Intelligence Service, Jones Lang LaSalle India, said in the report , “The trend is not confined to Mumbai as almost all cities in India are witnessing it. We are still stuck with the mistakes we made three or four years ago - jumping on the bandwagon and creating too many malls without reason. Few understood that building and running malls is a science, and that factors like catchment viability, location, supply benchmarking and mall management matter in their success.”

JLL estimates that 2011 saw a retail real estate supply of 13.8 million square feet hit the market, with 10.7 million square feet getting absorbed – it amounts to 130% of the figures for the years 2009 and 2010 put together.

With delays in completion and few retail-conducive projects being launched, it is malls, malls everywhere and nowhere to go for retailers. “Retailers have finally decided that enough is enough and have started scouting for stand-alone properties. With their eyes on old mansions, mixed-use buildings and small office blocks in established as well as emerging locations, big-format retailers and giant chains are mandating property firms to broker these deals for them,” said Limaye.

So while high streets were never out of form, they are now back with a vengeance. Properties which, with retrofitting, can enable retailers to start selling in no time at all are fast becoming precious assets for big retail companies. Even constructing glass cubes on plots that house the 'building next door' is seen as preferable over having to wait for properly located and configured malls to come along.

“In the world of retail, stagnation is the same as dying and these retailers have no intention of slipping into a market-induced coma. Moreover, these stand-alone stores are the perfect way of giving shoppers a personalised experience that many shopper often find missing in malls,” said Limaye.

‘Credit Suisse will steer Thomas Cook foreign exchange business sale’

This story first appeared in DNA Money edition on Tuesday, February 7, 2012.

UK-headquarterd Thomas Cook Group has appointed Credit Suisse Group to sell off its foreign exchange business in India, according to a Sunday Times report. The paper didn’t divulge the source though.

The tour operator is learnt to be pushing ahead with divestments of its non-core assets to raise £200 million in an attempt to lighten its debt load and shore up the balance sheet. Repeated calls and an e-mail seeking clarifications to the management went unanswered.

All along, the company has been in a denial mode. In a statement last month, Madhavan Menon, MD, Thomas Cook (India) (TCIL), had said the UK parent has no plans to sell its stake in the Indian entity. Media reports had earlier indicated that the Indian unit’s founders — Thomas Cook UK and TCIM — have pledged their TCIL’s 77.1% stake in favour of Royal Bank of Scotland (RBS) and that RBS has been engaged to find a buyer for the Indian unit.

On speculation in the British media about the parent company selling its foreign exchange business, reports had earlier quoted Menon saying, “We do not have such plans.”

TCIL’s foreign exchange business mainly deals in small-value remittance with Thomas Cook Express and money transfers with Moneygram or Express Money.

In 2006, the travel company had acquired LKP Forex and has over the years expanded its operations to 72 cities from the earlier 17.
Forex operations contribute approximately 65% of TCIL’s revenue. The company currently enjoys a sizeable market share — close to 50% — in the business and is witnessing a growth of 9-10%.

Thomas Cook swung to an annual loss last year after a series of profit warnings and the resignation of chief executive Manny Fontenla-Novoa in August. The mass-market travel group has taken a big blow from the economic slump, as consumers increasingly turn to the Internet to book their own vacations.

Dish TV eyes biggest pie of digital switch

This story first appeared in DNA Money edition on Friday, February 3, 2012.

Dish TV India, the country’s top direct-to-home (DTH) player, is gearing up to garner the maximum share of subscribers who would migrate to digital from analogue cable television in the four metros before June, the deadline for the switchover.

Industry experts say about seven million homes are likely to make the switch (from analogue to digital cable) in Mumbai, Kolkata, Delhi and Chennai, thereby opening up a potential market of 10 million new subscribers (homes with multiple television sets) for DTH and cable TV operators.

Of the six DTH players in the country, Dish TV India, the biggest, is optimistic of garnering a giant’s share of the new subscribers.

RC Venkateish, CEO, Dish TV India, said since digital cable has considerable presence in the four metros, close to 60% of the new subscriber base will be tapped by the DTH players.

“We expect to get anything between 26% and 28% of the new subscriber base that will switch from analogue to digital,” he said.

The Dish TV management has been working on this by readying the infrastructure to meet the surge in demand and will be pursuing it aggressively through above-the-line (ATL) and below-the-line (BTL) ad spend in the coming months. A new promotional campaign featuring film actor Shah Rukh Khan is on air.

In another technological innovation in the DTH industry, Dish TV has introduced a new product that offers unlimited recording capacity.

Christened Dish truHD+, the high definition (HD) box is being offered at no extra cost and will be sold at the price of existing box.

Salil Kapoor, chief operating officer, Dish TV India, said the unique feature of this box is its compatibility with any universal serial bus (USB) flash drive or hard disk drive (HDD).

“The new HD box comes with a software upgrade that allows consumers to simply plug-n-play an existing USB stick or HDD and builds an entire library of their favourite programmes. While most DTH operators charge a premium for their digital video recorders (DVRs), our idea is to expand the DVR market by making it accessible at the price of a normal HD box,” he said.

Dish truHD+ has a dual advantage of all HD and DVR features and the price includes the new box, along with one month Dish truHD Royale Pack.

As part of the promotional offer, Dish TV will provide a four gigabyte USB flash drive free.

Finding the best drinking water — by accident

This story first appeared in DNA Money edition on Wednesday, February 1, 2012.

In early 1990, Naveen Luthra, then just over 30, and his friend Deepak Mohan, who was the captain of an oil tanker, drove down through the sylvan, thickly forested Sahyadiri ghats towards Mulshi, about 100 km from Lonavala.

It was to be a fateful trip.

“He had made his pot of money and wanted to invest in land in India,” Luthra recalls.

They arrived in Luthra’s Maruti Gypsy at a site where they met some landowners, but the captain found the land valuations very high and soon gave up on the idea of investing.

“Deepak went back to the sea and unfortunately died two years later. However, I quite liked the place and ended up buying 100 acres as an investment with the idea of doing something when I would retire from my Customs clearance business,” said Luthra.

Later, during the monsoon sometime in 1996, Luthra took another trip and was completely mesmerised by Mulshi’s ethereal beauty. He started accumulating more land between 1996 and 2000.

“It’s a little over 1,500 acre now. I initially bought at Rs5,000 an acre but at the end of the entire exercise, my average buying price was about Rs10,000 per acre. While land prices were reasonably cheap then, my buying price would still be termed expensive in those days,” he said.

Luthra wanted to do something related to tourism and planned to develop a one-of-its-kind-in-Asia ‘cave-room’ hotel project at the site.

He had absolutely no idea how to source water for the project — as also for his personal bungalow being built there.

“I realised I will need huge supplies especially for the hotel project and started looking around. I even approached the Tatas to buy water from the Mulshi lake which they have a lease on, but they turned my request down. Digging borewells was very expensive in those days, especially because my requirement was 3 lakh litres per day, and I didn’t know how many borewells would have been needed for that.”

One day, a local familiar with Luthra’s land informed him about a natural spring on the property as the solution to his water problem.

An excited Luthra got two pumps installed and started drawing it out, just to assess the quantity available.

“It was May and we were pumping out over 3-4 lakh litres from the spring and the water level refused to drop any further. We realised there was enough, so we ran a test to see if it was also potable. We got the tests done from 3-4 different places and on the day the report came to my office, I showed it to my friend who was in the business of importing filtration equipment and exporting water treatment plants. On reading the reports, my friend inquired about the source saying the water was of very high quality. Another unique aspect was that the water was pesticide free,” he said.

What Luthra had drilled into was a biological hotspot, or “biologically richest and most endangered ecoregions”.
British environmentalist Norman Myers, who pioneered the concept, said a region must meet two strict criteria to qualify as a hotspot: it must contain at least 0.5% or 1,500 species of vascular plants as endemics, and it has to have lost at least 70% of its primary vegetation.

To put in perspective, India has 2,800 water brands of which only two are free of pesticides — Mulshi, and Aava from Sheelpe Enterprise, a Gujarat-based firm.

Luthra then spent another four years trying to identify the best way and means to bottle the water without disturbing its natural qualities. He launched the Mulshi Springs water brand briefly in 2008 but stopped to fine-tune it, and made the product ready for launch in 2009.

Immediately after the launch, a friend sampled Mulshi spring water with Oberoi Group chairman P R S or ‘Biki’ Oberoi,who personally visited the Mulshi spring, inspected the treatment and bottling plant and approved its use across his Oberoi and Trident hotels under their private label L’Quila.

Today the Oberoi group buys 17,000 bottles of Mulshi spring water every day. The pinnacle of acceptance for Luthra has been at Colette, one of the finest water bars in the world based in Paris.

“We consciously chose to be in Colette because gaining acceptance there would mean getting accepted globally. The thought was since I have one of the finest waters in the world, there is no reason why it should not be available at Colette,” Luthra said.

“Besides, it didn’t take me too much of a sales effort to convince them. The deal was concluded in a 30-minute conversation with the Colette management, of which 25 minutes was taken by them just to digest the fact that this water was coming from India especially because they didn’t think very highly about Indian quality and hygiene standards. We were able to change that perception and are now the only Indian water brand available in Colette. We may look at commercial exports in 2013-14,” he said.

Apart from Oberoi, private-label deals are on the cards with The Leela Group and ITC Hotels.

If you feel like taking a sip in Mumbai, it’s also available at BIG Cinemas, fine dine restaurants such as Hakkasan and Yauatcha and world food store dolce*vita at the Palladium Mall at Phoenix Mills.

RPG’s Spencer Retail is also likely to create a private label water brand to be sold in its retail stores across the country.

Today, Luthra Water Systems has a capacity for 25,000 glass bottles of and 40,000 PET bottles of water — which is not enough to meet the growing demand.

Another bottling plan with a capacity of 150,000 bottles is underway and will be operational by Diwali this year.

“Together the plants will have a capacity of 215,000 bottles daily. Work on the new plant will start immediately after 80% funding is cleared from Oriental Bank of Commerce. Total capex for the plant is around Rs25 crore,” he said.

A 750ml bottle of Mulshi Springs is priced at Rs50 in Maharashtra and Rs55 outside the state.

The 52-year-old Luthra said when the capacity expansion is completed; the company could be doing business of Rs30 lakh a day.

Not a bad rate of return from a parcel of land bought at Rs10,000 per acre.

Whoever invented the phrase money flows like water clearly had Luthra in mind.