Thomas Cook denies move to sell stake

This story first appeared in DNA Money edition on Friday, January 13, 2012.

Thomas Cook India (TCIL) said its UK parent has no plans to sell stake in the Indian business.

Media reports had earlier indicated that the Indian unit’s founders—Thomas Cook UK and TCIM Ltd — 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.

“Thomas Cook India will not comment on any market speculation,” a company spokesperson said.

In a media statement, Madhavan Menon, managing director, Thomas Cook (I) Ltd, said, “The creation of a pledge by Thomas Cook Group Plc is a standard requirement in procurement of its enhanced financial facilities. In fact, TCIL has been reaffirmed with a rating of A1+ for short-term borrowings and AA- for its long-term debt by Crisil. This is a clear indication of our strong and viable commercial standing. I would like to re-iterate that the statement issued by Thomas Cook Group Plc has no impact on TCIL’s financial position or operational performance.”

Thomas Cook India officials maintained that it is completely independent of the parent. The standalone entity and has no financial inter-dependencies with Thomas Cook Group Plc which is only a shareholder in the Indian unit.

According to Pawan Agrawal, director, Crisil Rating, the recent rating action on Thomas Cook India was a reaffirmation of an already existing one.

“Like any other rating, reaffirmation has been done after analysing the company’s business and financial risk profile on a standalone basis. We expect that the Indian entity will neither receive nor provide any financial support to its UK parent. TCIL has a healthy and stable business profile coupled with average debt protection metrics — this is indicated by a comfortable gearing of 0.85 times as at December 31, 2010 —the gearing continues to remain at similar levels at the end of September 2011 as well.”

Crisil also said that while the UK parent has a weak credit profile, the Indian entity continues to enjoy a good credit profile which is unlikely to be affected even if the sale happens. For nine months in 2011, TCIL registered net revenues of Rs286 crore and the profit figure stood at Rs51 crore.

Thomas Cook Group Plc had earlier said that a pledge has been created on the securities held by the promoters, TCIM Ltd and Thomas Cook UK Ltd in Thomas Cook (I) Ltd of their total shareholding of 163471449 shares, representing 77.11% of the issued share capital.

TCIL claims to have registered impressive growth in the last summer holiday season and will continue to see strong demand for all their products.

“Our forward bookings are showing strong demand on the holiday side as well. This development (pledging of shares) will have no impact on our business, people, customers, suppliers and the services we provide. We continue to operate business as usual,” said Menon.

Hyatt makes a splash, to add 950 guest rooms in 2012

This story first appeared on the web-version of DNA Money edition on Friday, January 13, 2012.

The NYSE-listed Hyatt Hotels Corporation will be adding approximately 950 guest rooms across six new hotels in the country in 2012. The global hospitality chain currently owns hotels under the Hyatt Regency, Grand Hyatt and Park Hyatt banner and the new launches will be under Park Hyatt, Hyatt and Hyatt Place brands.

The new hotels will be operated under Park Hyatt Hyderabad (209-room with 42 serviced apartments), Park Hyatt Chennai (204-room), Hyatt Raipur (104-room), Hyatt Place Hampi (116-room), Hyatt Place Pune, Hinjewadi (117-room) and Hyatt Place Bangalore, Whitefield (200-room). Once operational, Hyatt’s India portfolio of operational hotels will go up to 14 hotels — from 8 hotels — taking the total number of guest rooms to 3,639 rooms from 2,989 earlier.

In a related development, Hyatt will be introducing a new extended-stay brand in India christened Hyatt House and a management agreement has already been signed in North Mumbai to this effect.

Steve Haggerty, global head of real estate and development, Hyatt Hotels Corporation, said, “The introduction of Hyatt House in India, combined with our decision to make India the first location outside the US for our Hyatt Place brand, reflects our commitment to offering our extended-stay and select-service brands in one of the world’s fastest-growing markets.”

In addition to Hyatt House Mumbai, the hotel major has also signed new agreements for five additional Hyatt brands viz. two Andaz hotels in Jaipur and Delhi; one Hyatt hotel in Raipur; 14 Hyatt Place hotels in Chakan, Delhi, Gurgaon (2), Goa, Hampi, Hyderabad, Jamshedpur, Kochi, Mohali, Munnar, Nashik, Sriperumbudur, and Thiruvananthapuram; three Hyatt Regency hotels in Raipur, Hyderabad and Neemrana and two Park Hyatt hotels in Delhi and Jaipur. With this, the total number of announced Hyatt-branded hotels under development stands at 53. The hotel chain currently has eight operational properties with 2,689 guest rooms under Hyatt Regency, Grand Hyatt and Park Hyatt

brands. On the upcoming Hyatt House concept, company officials said it was unveiled in September 2011 and is rooted in extensive consumer research and offers casual hospitality in a smartly designed, high-tech and contemporary environment.

Located near Mumbai’s vital commercial and industrial districts and within close proximity of Chhatrapati Shivaji International Airport, the hotel will feature 170 guestrooms, a multi-cuisine restaurant and bar, and meeting rooms, as well as business and fitness centres and a swimming pool. “We are leveraging our more than 30-year experience in India to become the most preferred hospitality brand for a growing number of affluent, domestic travellers within the country. Guests will soon be able to enjoy our full portfolio of brands in many of India’s most popular business and leisure markets,” Haggerty added.

UPDATES from Hyatt Hotels Corporation On July 13, 2012.

Hyatt Hotels Corporation said that Hyatt affiliates signed management agreements for an Andaz hotel in Gurgaon and a Grand Hyatt hotel in Kochi, bringing the total number of announced Hyatt-branded hotels under development in India to 56.

"We are focused on creating preference by enhancing distribution of our full-service, extended-stay and select service brands in both new and established markets in India where our guests are increasingly traveling," said Ratnesh Verma, senior vice president - real estate and development, Asia Pacific for Hyatt Hotels & Resorts. "Creating a strong presence for our complete brand portfolio in India is critical to Hyatt's leadership in the global hospitality sector."

"The new agreements, along with the previously announced properties under development, demonstrate growing confidence among owners and developers in the strength of Hyatt-branded hotels in India," said President and Chief Executive Officer Mark Hoplamazian.

Slated to open in Q4 2014, Andaz Gurgaon will offer 275 guestrooms and 75 serviced apartments. Additionally, the hotel will feature a three meal multi-cuisine restaurant, a specialty restaurant, a bar and a gourmet store, a six-treatment room spa, a fitness center, and a swimming pool. The hotel will also offer more than 11,500 sq ft of meeting space, including five Andaz Studios and a ballroom. Located in Gurgaon, the industrial and financial center of the state of Haryana, Andaz Gurgaon will be situated on the junction of the National Highway 8 (NH-8) and Northern Peripheral Road (NPR), which provides access to many of the city's main business districts, including Cybercity and Udyog Vihar, and manufacturing districts, including Industrial Model Township (IMT).

Grand Hyatt Kochi, will be located on Bolgatty Island in Kochi, which is situated on the eastern coast of the Indian state of Kerala. It will feature 250 guestrooms and amenities including a three-meal multi-cuisine restaurant, two specialty restaurants, a bar and lobby lounge, a 10-treatment room spa, fitness center, swimming pool, and Grand Club lounge. The hotel will also offer more than 60,000 sq ft of meeting and event space, including a 26,000 sq ft ballroom. Expected to open in Q1 2017, Grand Hyatt Kochi will be in close proximity to many key areas of the city, including Ernakulam, the main commercial district; Fort Kochi, the main tourist center of the city; Willingdon Island, which houses Kochi Port, the Kochi Chamber of Commerce and Industries, the Naval Air Base; and the International Container Transhipment Terminal, one of the largest container terminals in India.

Hyatt plans to open three new hotels in India in the remainder of 2012 across its Park Hyatt and Hyatt Place brands, including:

-- Park Hyatt Chennai, a 204-room hotel set to open in late 2012, will be situated in the capital city of the state of Tamil Nadu. The property will offer an innovative food and beverage outlets, residential style meeting and event space, and recreational facilities, including a spa and fitness center.

-- Hyatt Place Hampi, a 115-room hotel planned to open by the end of the year, will be situated near the Bellary industrial district. Hampi, which features spectacular views of the Sandur ranges and is home to a group of monuments classified as a UNESCO World Heritage site, also serves as a popular leisure destination. The property will include a multi-cuisine restaurant, meeting rooms, and a fitness center, and swimming pool.

-- Hyatt Place Pune, Hinjewadi, a 117-room property set to open at the end of the year, will be located within the Rajiv Gandhi Infotech Park at Hinjewadi, a prominent software hub. The hotel will feature a multi-cuisine restaurant and meeting space, as well as a business center, fitness center, and swimming pool.

With 56 hotels under development in India, Hyatt currently plans to offer its full portfolio of brands, including:

-- 18 Hyatt Regency hotels under development, in addition to five already open

-- 5 Grand Hyatt hotels under development, in addition to two already open

-- 5 Park Hyatt hotels under development, in addition to two already open

-- 23 Hyatt Place hotels under development

-- 3 Andaz hotels under development

-- 1 Hyatt House hotel under development

-- 1 Hyatt hotel under development

As part of this expansion, Hyatt is seeking to attract and develop high-quality talent in India in order to drive future growth. Currently, more than 3,500 associates are employed at Hyatt hotels in India, and with the development effort, it is expected that more than 7,000 new associates will be welcomed into the Hyatt family. Hyatt is investing in training curriculums and accelerated leadership programs in order to ensure that new associates support the company's mission to deliver authentic hospitality and to develop new professional opportunities for its associates.

Yash Birla Group to invest Rs13,000 crore in Andhra Pradesh

Marking its foray into the development of sports and wellness related infrastructure development, the Yash Birla group has submitted a proposal to the Andhra Pradesh (AP) government for setting up an international-standard sports city in its Pearl city- Hyderabad.  Group chairman, Yash Birla proposed an investment plan of Rs13,000 crore in his meeting with the Andhra Pradesh chief minister N Kiran Kumar Reddy. This project would be the largest investment made in the state by any conglomerate making it a one-of-a-kind venture.

Yash Birla, chairman, The Yash Birla Group, ”Our investment is part of the group’s plan to develop the sports sector in Andhra Pradesh. This will not only be the single largest investment made by the Yash Birla Group but will also boost sunrise sectors- alternative energy, healthcare and education in the state. Our constant endeavour has been to innovate and deliver the best lifestyle experience to the society.”

The outlay includes investment of Rs 10,000 crore for a polysilicon-plant by power solutions. The company will be producing solar grade polysilicon, silicon wafers, solar photovoltaic cells, solar photovoltaic panels at the plant. The Group has sought 450 acres near the Rajiv Gandhi International Airport at Shamshabad and another 250 acres for a wellness centre. The capital will be generated through private equity dilution, internal accruals and proposed IPO.

A global integrated ayurvedic village by Birla Wellness and Healthcare division will be set up with an investment of Rs1,000 crore. This investment will house an integrated ayurvedic centre promoted by Birla Wellness and Healthcare division, which will provide ayurvedic products and services to offer comprehensive range of both preventive and curative treatments. The total project investment would be Rs 750 crore. The integrated ayurveda complex would generate employment opportunities for 4,500 people.

Birla Edutech is aiming for a sports city with an investment of Rs2000 crore. The sports city will have all kinds of sports infrastructure along with a manufacturing centre and a wellness centre. At the facility, local sporting talent will be developed to match international standards. The sports city aims to be a leading development project with a distinct focus on sport and sporting excellence that will attract local, regional and international participants. The complex will have facilities built to specifications for international sports bodies and will host academies for swimming, track and field, volleyball, tennis, golf, badminton courts among others. The project will include high rise towers, banks, business centres and shopping malls making it completely self- sufficient.

The Yash Birla Group is an Rs30 million conglomerate of over 20 diversified companies which run the gamut from established sectors like auto and engineering, textiles and chemicals, and power and electricals to emerging sectors of today like wellness and lifestyle, education and IT. The group currently has 10 listed entities in India.

30% local sourcing curbs retailer play

My colleague Promit Mukherjee is the lead writer of this story which appeared in DNA Money edition on Wednesday, January 11, 2012.

After playing to the tunes of allies and coalition partners for almost a month, the government took the bold step of notifying 100% foreign direct investment (FDI) in single-brand retail in India.

This means global brands such as Gucci, Tommy Hilfiger, Zara, Adidas, Nike and others can set up fully owned businesses — till now, they had to have an Indian partner who held 49% stake.

But what skews this milestone development, retailing experts say, is the 30% rule — where foreign companies have to source nearly a third of their products from Indian ‘small / village and cottage industries, artisans and craftsmen’ if they want to go purely solo.

“I really do not understand the logic behind the 30% local sourcing pre-condition for foreign single-brand retailers looking to set up operations in India. It is like saying we are open to investments but you cannot really invest. It clearly shows the government doesn’t really understand the concept of single brand retailing,” said a top official from a leading retail consulting firm in India, who did not wish to be named.

The caveat defines small industries as those with a total investment in plant and machinery of around Rs5 crore. This valuation refers to the value at the time of installation, without providing for depreciation.

Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a ‘small industry’ for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.

“This basically also means that the government doesn’t really want the small industries to grow their business and remain where they are forever,” added the official.

Arvind Singhal, chairman of Technopak Advisors, feels while the pre-condition may work for a handful of categories, it’s a hurdle for a whole lot of others where local sourcing is not really possible at least in the first few years of setting up front-end operations in the country.

“What the government could have done instead is make it mandatory for such retailers to export 30% - 40% of the value of their overall sales generated from the Indian market. This approach would work faster compared with what has been put together at present,” he said.

Anil Talreja, partner, Deloitte India, said companies which already source locally can be in a sweet spot but concurs others may have to relook at their expansion strategies.

“This may also lead to staggered buyouts or giving away the sourcing part to its Indian partner,” said Talreja.

Govind Shrikhande, managing director, Shoppers Stop, said retailers operating in categories such as bed linen which are already sourcing from India will be the key beneficiaries.

“However, luxury goods retailers will not be able to source from India because they have to maintain global standards for their brands and hence manufacture it from a single location. Such players will continue to operate the way they have been doing thus far,” he said.

Terming the government’s decision a move in the right direction, Kishore Biyani, founder and group CEO, Future Group, said, “Going forward, increased level of activity can be witnessed in categories such as home and apparels.”

Kumar Rajagopalan, CEO of Retailers Association of India (RAI), says larger fashion houses (without India sourcing) will have to start looking at ways to comply with the 30% condition if they want to set up beachheads.

The government first allowed 51% FDI in single-brand retail in 2006. In four years since, India drew close to $200 million in FDI.

Government figures show there are as many as 94 proposals for FDI with the government of which 57 have been approved so far.
“This is expected to rise exponentially now,” said Harish Bijoor, independent retail consultant. The 30% sourcing rule, according to him, will only expand the time between ideation and incubation of businesses.

According to Sageraj Bariya, managing partner, Equitorials, a Mumbai-based equity research firm, another plus point would be that foreign brands that are already in India will be able to take quicker business decisions and therefore make more investments since they will not have to wait for their partner’s ability to raise funds.

Disney to launch open offer for UTV Software Communications on Jan '16

Global entertainment giant Walt Disney Co said that it will launch am open offer on January 16, 2012 to acquire publicly held shares in BSE-listed UTV Software Communications Ltd (UTV). The open offer is for buying around 30% stake held by minority shareholders for up to Rs 1,000 a share. Once concluded successfully, the US company which currently holds 50.4% in UTV will take it private and delist the firm from the stock exchanges.

Following Walt Disney’s announcement, promoters of UTV Software have mooted another proposal to offer Disney a stake in its gaming subsidiary operating under the banner Indiagames Ltd.

When contacted, UTV officials were not available for a comment. An email sent to company spokesperson soliciting details viz. extent of stake to be offered, its valuation, shareholding post the offer, etc. remained unanswered at the time of going to print.

However, in a notification to the Bombay Stock Exchange (BSE), UTV said, “It is proposed that, in the event the delisting offer by The Walt Disney Company (Southeast Asia) Pte Ltd is successful, the company may assign to Disney or its affiliates its rights to acquire such shares of Indiagames.”

UTV also said that the proposal is subject to execution of necessary documents and compliance with applicable law. As far as Disney’s reaction to this initiative is concerned, UTV said that, “As on the date of this letter, no definitive decision has been taken by the company or Disney in this regard."

Earlier in October 2011, the UTV management had informed the stock exchange about its intentions to acquire 30.02% in Indiagames for Rs 94.56 crore from founder-promoter Vishal Gondal and other employee-shareholders. While the deal has not been concluded as yet, the transaction (once completed) will increase UTV’s holding to 86.02% from the existing 56% in Indiagames Ltd.

While the Indiagames deal with promoter and employee shareholders continues, UTV is simultaneously working on acquiring stakes from other shareholders in the gaming company. According to a report in VCCircle.com, UTV management has struck a deal to buy out Adobe Systems Incorporated’s 6.29% stake in the country’s largest digital gaming company – Indiagames Ltd.

While deal value was not disclosed, the report said that ‘the agreement for sale has already been inked’. It also estimated taking the recent deal as a benchmark that UTV will pay around Rs 20 crore to Adobe to raise its holding to 92.31%. UTV is also understood to be in talks to acquire 7.69% held by Cisco Systems thereby which will make the gaming company its wholly owned arm.

Earlier in October 2011, Disney entered into an agreement to buy out around 20% stake in UTV Software held by the original promoter group that includes Rohinton (Ronny) Screwvala, Unilazer Exports and Management Consultants, Unilazer (Hong Kong) and Zarina Mehta. While these promoters are not expected to participate in the delisting offer, they are likely to exit the firm if the delisting offer is successful.

According to a Reuters report, assuming an exit price of Rs 1,000 per share (Disney has mentioned this as the maximum it is willing to pay), Disney will have to spend over Rs 1,400 crore to buy 29-30 per cent stake held by public shareholders, including convertible securities. With the buyout of the remaining promoters, the overall deal size might be around Rs 2,150 crore at the same share price.

Mahindra Holidays acquires The Retreat by Zuri Goa for Rs 112 crore

Mahindra Holidays & Resorts I Ltd (MHRIL) has acquired a 106 room hotel in Pedda, Salcette, Goa. The hotel was acquired from Bangalore-based The Zuri Group which currently operates four hotels in India - excluding the Pedda property which was earlier operated under the banner The Retreat by Zuri, Goa.

Rajiv Sawhney, managing director, Mahindra Holidays & Resorts I Ltd (MHRIL), said, “While discovering new destinations and placing them on the holidayer’s map has been a strong tradition at Mahindra Holidays, we always aim to ensure that our members can holiday where they want. This launch will significantly augment our capacity in Goa which is one of our most preferred destinations.”

While MHRIL did not disclose the deal value, industry sources confirmed the transaction was closed at a little over Rs 1 crore per key giving The Zuri Group Rs 112 crore from the sale of this asset.

Confirming the sale of the hotel, Bobby Kamani, managing director, Zuri Group Global, said, divesting the property was a planned and strategic decision by the hotel company primarily because the company was over exposed in the leisure destination with two properties. “It was quite an interesting deal that Mahindra made us for The Retreat and it works in our benefit. The money that this deal will bring in will primarily be used for the revamp of our other property - The Zuri Whitesands, Goa Resort and Casino built on a 37 acre beach front land parcel," said Kamani.

this move, Zuri top management said, is in line with the group’s intention of pursuing an aggressive growth for the immediate future. "The decision taken will help reduce debt and completely refurbish the five-star luxury Goa and Kumarakom resorts. More investments will be pumped in to further expand the hospitality basket under Zuri Group Global," said Priti Chand, vice president - corporate communications and public relations for Zuri Group Global.

Post acquisition, MHRIL has re-branded the property as Club Mahindra Emerald Palms resort taking its tally to 336 rooms in South Goa. The Club Mahindra management also said that the Goa hotel was the first of a series of launches in the next six months, whereby several new destinations will be added along with a significant increase in its room count.

DB Hospitality in talks with Sahara to sell Grand Hyatt Hotel in Goa

This story first appeared in DNA Money edition on Thursday, December 22, 2011.

DB Hospitality, a sister company of DB Realty whose promoters have been mired in the 2G scam, is in talks with the Sahara Group to sell its newly launched five-star hotel Grand Hyatt Goa, according to industry sources.

“The deal is currently at the due diligence stage,” said an industry source familiar with the development.

An email sent a week ago, seeking comments, to a Sahara Group spokesperson remained unanswered and when contacted a DB Hospitality spokesperson said, “This is not true.”

But industry sources said the asset owners were demanding a huge premium for the hotel, which opened for guests in August 2011, and as a result the mandate has travelled from one firm to another. It is not clear which firm is finally advising on the deal.

In terms of valuation, sources said DB Hospitality is seeking Rs1,000 crore, which they felt is quite high, especially for a project in Goa.

“Assuming overall development cost of around Rs1.25 crore a key in an ideal situation, the promoters would have invested (including debt) around Rs390 crore for 314-room hotel, excluding the land cost. However, one will also have to factor in the almost a year-long delay, which would have increased the project cost by 15%-20% on a conservative note,” said a top official of one of the big four international property consultants.

“The general market practice with most hotel owners in Mumbai is to value the asset at Rs2 to 2.5 crore per key. However, the per-key figure will certainly be lower in Goa. Based on these assumptions, Rs1,000 crore for a 314-room hotel appears quite steep, that too in such a stressed market environment,” said the official.

Grand Hyatt Goa is not the only asset that DB Group’s hospitality vertical is understood to have put on the block. The group’s Mumbai hotel, managed by Hilton Worldwide, is also up for grabs, sources said.

The promoters are looking to raise Rs450 crore from the sale of this 171-room boutique hotel, which was launched back in 2000 under the Le Royal Meridien brand.

The deal has been doing the rounds in the market for a while now with no potential suitor willing to pay the valuation sought. DB promoters are targeting to raise a total of Rs1,500 crore by divesting the two hotels, sources said.

Nestled in a 28 acre beach front land parcel, the hotel is part of a 140 acre high-end mixed-use development called Aldeia De-Goa and located in Dona Paula in North Goa.

DB Hospitality has four operational hotels and several in pipeline.

Hotel buyers sniff a chance to rake it in

This story first appeared in DNA Money edition on Tuesday, December 20, 2011.

The fairly quick rebound following the economic downturn in 2008-09 had upset all calculations for hospitality asset buyers, who now have a reason to rejoice. A looming double-dip recession means 2012-13 is likely to open another window of opportunity for them to make a killing.

Real estate consultants - both domestic and international - and individual brokers these days are working overtime on mandates involving buying and selling of hotel projects. While the phenomenon, experts said, is quite evident in key metros, the level of activity is quite similar in non-metros as well. And as the sector has already witnessed a handful of deals being concluded in the recent past, there is a feeling that the momentum will pick up in the coming year.

“There is some degree of stress in the market for sure, especially with land parcels and incomplete structures. As for sale of operational hotels is concerned, it is largely in the case of companies with heavily leveraged balance sheets,” said an industry expert.

Companies with high debt on books and those struggling to access capital to start or complete work on their respective projects are taking to divestment seriously. Besides, the not-so-exciting economic environment, which is likely to impact hospitality, travel and tourism sectors in the coming year, has only added to the urgency in sales.

Among hotel assets already in the market for sale are those from leading realty firms like DLF Hotel Holdings, a subsidiary of DLF Ltd, and DB Hospitality, a part of DB Realty. According to sources, there are assets also from companies like Bangalore-based Royal Orchid Hotels (ROHL) and Indore-based mixed-used developer Entertainment World Developers Pvt (EWDPL) which are understood to be seeking buyers for some of their projects.

Similarly, another BSE-listed hotel company Kamat Hotels India (KHIL) is in the process of divesting four of its hotel land parcels - ranging from 2 acres to 40 acres -in cities like Coimbatore, Amravati, Raipur and Nagpur. The assets were earlier in the development pipeline.

Leading international property consultants (IPCs) like Cushman & Wakefield (CW), Ernst & Young (E&Y) and Jones Lang LaSalle Hotels (JLLH), among others, too confirmed the rising flow of mandates for buying and selling of hotel assets across the country. But putting a figure to the number of hotel assets on the block is difficult because each one works on a slew of exclusive mandates and there are non-disclosure agreements in place to protect the identity of the buyer or the seller.

Akshay Kulkarni, executive director - residential services, Cushman & Wakefield, said: “The current activity level is certainly high and I’m confident that the sector will see a good number of transactions getting concluded in 2012-13. In fact, we are working on a few hotel transaction mandates and are likely to close some deals by the first quarter of the next fiscal.”

Deals currently being pursued by the IPCs are a mixed bag of operational hotels, incomplete structures and land parcels earmarked for hotel projects. While cities like Mumbai, Delhi, Bangalore and Chennai are certainly on the radar, others like Pune, Hyderabad, Kerala and Goa are joining the brigade, too. Interestingly, ‘sell’ mandates seem to be on the higher side vis-a-vis ‘buy’, thus making it very challenging for the broking community to find potential buyers.

Talking about the profile of prospective buyers, Chintan Patel, director, real estate and hospitality services, E&Y India, said strategic and financial investors are best suited for land parcels and incomplete structures. “The current market scenario, however, is more opportunistic for high net worth individuals (HNIs) in the case of already operational hotels. In fact, the timing is much better also because of a depreciating rupee,” Patel said. Reasons to sell hotel assets vary for different companies. While DLF is keen to shift focus from non-core assets, for DB Hospitality, the priority is to raise funds to mitigate debt pressure on the books. And as for ROHL and KHIL, ramping up hospitality presence in key metros to access capital is a big driver.

But are valuations realistic for faster closure of deals? A senior consultant with one of the domestic hospitality consultant companies said, “Deals generally take longer to conclude mainly because of valuation issues between the buyer and the seller.”

So, is distress one of the reasons for companies to sell hotel assets? The IPCs feel otherwise. “There is some stress in the market for sure but it certainly has not reached the distress situation. While buyers are not giving high premium, sellers have also become realistic with their expectations. This is why the market has seen a few deals getting concluded in the recent past.

This momentum will only increase next year,” said Patel. Some of the deals that are expected to get concluded include projects from BSE-listed Viceroy Hotels, which is expected to complete the sale transaction of its Chennai hotel and residential projects with Mahal Hotel Pvt and Esteem Housing Developers Pvt, respectively. The deal size reportedly is in the region of Rs500 crore.

Similarly, DLF Hotel Holdings — which recently acquired Hilton’s 26% stake in the JV for Rs120 crore — is rumoured to have sold its four land parcels to Kolkata-based Square Four Housing & Infrastructure Pvt for Rs550 crore.

Rajesh Exports to expand jewellery stores six-fold

This story first appeared in DNA Money edition on Tuesday, December 20, 2011.

Rajesh Exports has embarked on an ambitious expansion of its retail chain ‘Shubh Jewellers’ with a goal to become the largest jewellery retailer in the country.

The BSE-listed jewellery exporter which operates 73 stores in Karnataka is planning to increase it to 550 across the south Indian states in the next three years.

It plans to invest about Rs6,600 crore for the expansion and expects revenues of Rs25,000 crore by 2014.

Siddharth Mehta, chief strategist, Rajesh Exports, said that the company aimed to have 125 stores in Karnataka by April 2012.

“Another 50 stores will be added in Karnataka after which we will expand into Tamil Nadu, Andhra Pradesh, Goa and Kerala. All stores follow a unique franchisee model, wherein established jewellers are brought into the network,” Mehta said. These stores are refurbished according to the Shubh format and require an investment of Rs15-20 lakh from the franchisee, he said, adding that day-to-day management and other operating costs would be taken care of by the franchisee and Rajesh Exports would invest in the inventory at these stores.

“The franchisee’s share in the overall revenues generated from the store is 2.3% of the profit,” he said. The average size of a Shubh store is 500-600 square feet, though the company also has stores that are as small as 300 sq ft going up to 3,000 sq ft.
With a rollout of these 125 stores by April 2012, the company expects to become the largest retail jeweller in the country.

Through the network of 550 stores, the company is eyeing 8% of the domestic retail gold jewellery trade.

For the first half, the company generated Rs650-700 crore sales through 48 stores. “Around 25 stores were added during the Diwali period and hence revenues from those stores haven’t been included in the figure.The net profit from 48 operational stores was in the range of Rs42-45 crore,“ said Mehta.

The expansion would be funded through a mix of internal accruals, external commercial borrowings and credit from suppliers. The company has Rs2,000 crore of internal accruals and is at an advanced stage of negotiations for debt with foreign financial institutions at a rate of Libor + 4.5%. It expects to close the ECB by May-June 2012.

Yummy! Ready-to-eat foods eye centre of thali

My colleague Shailaja Sharma is the lead writer of this story which first appeared in DNA Money edition on Wednesday, December 21, 2011.

Ready-to-eat (RTE) foods are no longer a no-no. Packaged French fries, cheese nuggets, parathas, samosas, aloo tikkis... all are tickling the Indian tastebuds.

The RTE segment is growing at 25-30% annually, say analysts. “It was crawling a few years ago. Now, it has started to walk. The segment will run in a few years,” says Sushil Sawant, vice-president, Godrej Tyson Foods.

Analysts think urbanisation, rise in the number of working women, higher disposable incomes and evolving consumer habits are all making processed foods popular, promising rapid growth for the segment.

Vadilal was among the early movers. In 2000, it began export of ready-to-eat curries, parathas and snacks to 20 countries. Rajesh Gandhi, managing director, says organised retail has expanded with the entry of new players in the last two years. “Indian consumers are ready to try these products.”

Vadilal now sells frozen products like plain and stuffed parathas, samosas, kachoris and springrolls in India under its brand Quick Treat. Given brisk sales, it expects to notch up Rs15 crore from new launches alone this year.

Other players are optimistic, too. Come February 2012, Signature International Foods will launch a range of Indian naans, kulchas and parathas as well as international items like tortilla wraps and pizza bases. Its massive Nashik unit boasts a daily capacity of 1 million chapatis and 5 lakh naans.

Given the Indian consumer’s penchant for good deals, Signature will offer a pack of four naans weighing 80 grams for Rs65, says Gaurang Bhasin, head, sales and marketing.

McCain Foods swears by similar strategy. The Toronto-based firm recently introduced smaller trial packs of its frozen French fries, Super Wedges and Smiles, priced Rs25, after winning customers for its Aloo Tikki, Crunchy Potato Bites, Tandoori Vege Nuggets and Vege Burger.

Other players such as Venky’s India, Temptation Foods and Al Kabeer are keen to garner market-share. Godrej believes frozen foods sales will touch $700 million in four years. “Snacking has always been an integral part of our culture. The snacks industry is getting organised. The opportunity is huge,” says Sawant.

Yet, frozen foods have not reached the centre of the thali (platter) at Indian households. But firms like Godrej and Vadilal, with their strong distribution networks, are seeking to make convenience foods part of Indian lifestyle.

They are confident the task won’t prove daunting , given that over 40% of the household spend is on food. The share of packaged foods may be small, but with a 30% growth, anything is possible.
Industry estimates suggest consumer spend on food in India will grow from $330 billion now to $900 billion by 2020. Processed foods account for $40 billion already, with packaged food market estimated at $10 billion (and likely to reach $20 billion by 2014).

Such heady facts and figures are encouraging processed food firms to bet big on India. For instance, West Coast Fine Foods, a distributor of frozen foods in India and owner of frozen seafood brand Cambay Tiger, is launching Malaysian frozen paratha brand Kawan in India this month.

Rahul Kulkarni, director, marketing, says the time-starved working Indian consumer “is spending less time in the kitchen and is adopting the branded ready-to-heat-and-eat option to suit her lifestyle”.

What does all this signify? “The sign is unmistakable: the urban Indian household is undergoing a quiet revolution. The trend is accelerating because of both socio-economic factors and lifestyle reasons,” says Kulkarni.