This story first appeared in DNA Money edition on Tuesday, April 16, 2013.
A delay of 2-3 months appears inevitable in the launch of JK Lakshmi
Cement’s (JKLC) greenfield project at Durg, Chhattisgarh, following
violent disruption of project work by irate local villagers seeking
employment for all of them earlier this month.
It is learnt only around five locals lost their land due to the project getting located at Durg. Now, the plant may be commissioned by the first quarter of next fiscal,
said a Karvy Stock Broking report written after a meeting with top JKLC
officials.
The Durg project is expected to expand JKLC’s clinker capacity by 1.8
million metric tonne (mmt) and grinding capacity by 2.7 mmt. JKLC
officials could not be reached for a comment.
The Karvy report said JKLC management expects damage caused to the new
plant to be around Rs 150 crore. A precise figure will be arrived at
over the next few days when equipment manufacturers and surveyors
ascertain the actual damage.
There is low probability that such protests may recur, the management said in an analyst guidance.
Rajesh Kumar Ravi, research analyst at Karvy, said such agitations are
mostly politically motivated and are part of business risks associated
with large greenfield capital expenditure (capex).
“We do not expect any negative impact in our sales volume assumption
for FY15E as we have already modelled this capacity to be effective in
the second quarter of fiscal 2015 (2QFY15). With the financial damage
covered under insurance, the expected loss of up to Rs 150 crore should
not impact its near-term cash flow,” said Ravi.
A Religare Institutional Research note last week said JKLC had
estimated an initial loss of Rs 250-300 crore when it first filed the
first information report with the police. But this was revised down to
Rs 120-150 crore on further examination. The insurance company will take
around ten days to determine the actual loss.
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Tuesday, 16 April 2013
Broadcasters threaten to snap signals to MSOs
This story first appeared in DNA Money edition on April 5, 2013.
Cable television subscribers may bear the brunt of delays in finalising commercial agreements for Phase II digitisation between broadcasters / aggregators and the multi-system operators (MSOs).
With not much progress happening, some broadcasters may switch off the signals to some MSOs on account of contention over fee amount and piled up dues.
MSOs are large cable operators that distribute channels to local cable operators.
Atul Pande, CEO-sports business, Zee, said that the broadcaster is having issues with Hathway Cable and Datacom Ltd, which is not only refusing to pay them the right fee, but has also not made payments for the last 6-7 months.
"We have no option but to switch off the signal to Hathway or black the screen. Unfortunately, this will lead to a lot of consumer discomfort, but there is no other alternative," said Pande.
As a result, football fans may miss the UEFA Champions League on Hathway network as it faces a blackout of Ten Sports channel, which broadcasts the event.
Despite repeated attempts, Hathway officials did not offer a comment.
Pritesh Mistry, a football analyst, said, "The sporting event has a huge follower base in India and not being able to watch the matches will be very unfortunate thing to happen for the fans."
While commercial agreements between broadcasters and MSOs for Phase I digitisation are being implemented, doing the same for Phase II, which involves digitisation in 38 cities, is turning out to be a huge challenge.
Gaurav Gandhi, chief operating officer, IndiaCast Media Distribution Pvt Ltd, said the delay in commercial deal making for Phase II digitisation is not because of the broadcasters or aggregators.
"There are a few MSOs who are either unwilling to come to the discussion table or are trying their best to let the status quo continue. This is impacting the implementation of Phase II digitisation," he said.
Industry sources said there have been instances of some MSOs trying to use strong arm tactics to pressurise broadcasters in doing deals on lines of the analog regime deals -- both on subscription and carriage.
The MSOs fraternity, however, feels there is no serious disconnect between broadcasters and MSOs over negotiating the deals.
"This is a time for both parties to work together to create a good ecosystem as opposed to behaving like business partners at war. This is first time wherein there is flexibility in terms of options for the customer to choose from. There is real viewership and price to be discovered," said M G Azhar, COO, DEN Networks.
Follow Ashish K Tiwari on twitter@ashishktiwari
Cable television subscribers may bear the brunt of delays in finalising commercial agreements for Phase II digitisation between broadcasters / aggregators and the multi-system operators (MSOs).
With not much progress happening, some broadcasters may switch off the signals to some MSOs on account of contention over fee amount and piled up dues.
MSOs are large cable operators that distribute channels to local cable operators.
Atul Pande, CEO-sports business, Zee, said that the broadcaster is having issues with Hathway Cable and Datacom Ltd, which is not only refusing to pay them the right fee, but has also not made payments for the last 6-7 months.
"We have no option but to switch off the signal to Hathway or black the screen. Unfortunately, this will lead to a lot of consumer discomfort, but there is no other alternative," said Pande.
As a result, football fans may miss the UEFA Champions League on Hathway network as it faces a blackout of Ten Sports channel, which broadcasts the event.
Despite repeated attempts, Hathway officials did not offer a comment.
Pritesh Mistry, a football analyst, said, "The sporting event has a huge follower base in India and not being able to watch the matches will be very unfortunate thing to happen for the fans."
While commercial agreements between broadcasters and MSOs for Phase I digitisation are being implemented, doing the same for Phase II, which involves digitisation in 38 cities, is turning out to be a huge challenge.
Gaurav Gandhi, chief operating officer, IndiaCast Media Distribution Pvt Ltd, said the delay in commercial deal making for Phase II digitisation is not because of the broadcasters or aggregators.
"There are a few MSOs who are either unwilling to come to the discussion table or are trying their best to let the status quo continue. This is impacting the implementation of Phase II digitisation," he said.
Industry sources said there have been instances of some MSOs trying to use strong arm tactics to pressurise broadcasters in doing deals on lines of the analog regime deals -- both on subscription and carriage.
The MSOs fraternity, however, feels there is no serious disconnect between broadcasters and MSOs over negotiating the deals.
"This is a time for both parties to work together to create a good ecosystem as opposed to behaving like business partners at war. This is first time wherein there is flexibility in terms of options for the customer to choose from. There is real viewership and price to be discovered," said M G Azhar, COO, DEN Networks.
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Monday, 15 April 2013
Maruti Suzuki in talks with RPG Life Sciences to acquire 3.5 acre in Navi Mumbai
Auto major Maruti Suzuki India is in advanced stage of negotiations to acquire leasehold rights of a part of land parcel held by RPG Life Sciences in Navi Mumbai. The auto company said it has entered into a Memorandum of Understanding (MoU) with RPG Life Sciences Ltd through Deed of Assignment (DoA) in respect of land admeasuring 14,148.90 sq mtr (3.5 acre) out of total land admeasuring 48,632 sq mtr (12 acre) - that's 30% of the total land parcel.
When contacted, RPG Group officials did not share further details on the valuations pertaining to the land transaction or for that matter by when do they intend to close the deal. "Maruti Suzuki is currently in the due-diligence stage and any further information can only be disclosed once the deal has been concluded," said the company official.
The land parcel in discussion is situated at Kopar Khairane in the Trans-Thane Creek (TTC) Industrial Area on the Thane-Belapur Road wherein RPG Life Sciences runs a small facility.
Commenting on the possible valuation of this transaction, industry experts said that since the land parcel is largely for commercial use being in the MIDC area, the deal size may not be very huge. Assuming a floor space index (FSI) of 1:1.75 and FSI cost of Rs 600 per square feet (psf) the cost per acre would come around Rs 50 lakh. Based on this back of the envelope calculations the overall deal size would be around Rs 1.75 crore.
"A lot also depends on the marketability and residual tenure of the lease period among other factors that play a key role in the pricing part," said Pankaj Kapoor, founder and managing director, Liases Foras Real Estate Rating & Research Pvt Ltd.
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Follow Ashish K Tiwari on twitter @ashishktiwari
Sunday, 14 April 2013
Buying hotels to demolish and sell as part of real estate play
An interesting observation was made about property appreciation in
relation to hotel assets, at the recently concluded Hotel Investment
Conference South Asia (HICSA) in Mumbai.
Leading hotelier Arun Saraf, MD, Juniper Hotels and MD, Asian Hotels East Ltd (a BSE listed company), said he is considering buying hotels not to run them as hotels because the real estate value is significantly higher than the built hotel. "It makes a lot of sense to demolish the hotel after a particular period and sell it as a land parcel instead as part of your real estate play," he said.
Saraf's current hotel development pipeline comprises nine upscale and mid-market hotels in various cities such as Raipur, Hampi, Lucknow, Sarnath, Guwahati, Ahmedabad, New Delhi, Jaipur, and Thiruvananthapuram. These projects are being developed by two of his companies viz. Juniper Hotels Pvt Ltd and Chartered Hotels Pvt Ltd.
Asset owners are of the opinion that that property appreciation has got no meaning in hotel industry because when the asset owner wants to sell the hotel, it will never be bought on the land or replacement value. "The kind of business being done by the hotel decides its selling price in the market," added Atul Chordia, CMD, Panchshil Realty.
Industry players were also of the view that if the buyer is a pure institutional ownership company, the company is very likely t see some asset reallocation within portfolio in the long term. "And if the allocation gives the company a higher value than what a public or private market offers then it certainly is time to sell the reallocated asset," stressed Ashish Jakhanwala, managing director and CEO, Samhi Hotels Pvt Ltd.
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Leading hotelier Arun Saraf, MD, Juniper Hotels and MD, Asian Hotels East Ltd (a BSE listed company), said he is considering buying hotels not to run them as hotels because the real estate value is significantly higher than the built hotel. "It makes a lot of sense to demolish the hotel after a particular period and sell it as a land parcel instead as part of your real estate play," he said.
Saraf's current hotel development pipeline comprises nine upscale and mid-market hotels in various cities such as Raipur, Hampi, Lucknow, Sarnath, Guwahati, Ahmedabad, New Delhi, Jaipur, and Thiruvananthapuram. These projects are being developed by two of his companies viz. Juniper Hotels Pvt Ltd and Chartered Hotels Pvt Ltd.
Asset owners are of the opinion that that property appreciation has got no meaning in hotel industry because when the asset owner wants to sell the hotel, it will never be bought on the land or replacement value. "The kind of business being done by the hotel decides its selling price in the market," added Atul Chordia, CMD, Panchshil Realty.
Industry players were also of the view that if the buyer is a pure institutional ownership company, the company is very likely t see some asset reallocation within portfolio in the long term. "And if the allocation gives the company a higher value than what a public or private market offers then it certainly is time to sell the reallocated asset," stressed Ashish Jakhanwala, managing director and CEO, Samhi Hotels Pvt Ltd.
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Apeejay Surrendra Park Hotels launches new brand
As part of brand expansion plan, Apeejay Surrendra Park Hotels has made a new addition to its portfolio of hospitality offerring. Continuing with its design-led philosophy, the company has launched a new brand in the upscale segment called ‘Zone by The Park’.
Speaking on the sidelines of Hotel Investment Conference South Asia (HICSA) 2013, Priya Paul, chairperson, Apeejay Surrendra Park Hotels Ltd, said, though different from The Park, the company wanted to create a brand that would channel its inimitable spirit.
"Zone will cater to the gap in the Indian hotel market for the burgeoning Indian middle class and international traveller looking for budget travel. The hotels will be priced around the $80 - 100 mark," said Paul.
The new brand will primarily be managed properties and four hotels have been signed already. The hotels are expected to come up at Dehradhun, Raipur, Delhi and Coimbatore. A mix of brownfield and greenfield developments, these properties will ideally have 100 rooms and will be developed at a cost of Rs 40 lakh per room.
The first hotel will be operational by the year end. The company is targeting at having 25 hotels under the new brand in the next five years.
Follow Ashish K Tiwari on twitter @ashishktiwari
Speaking on the sidelines of Hotel Investment Conference South Asia (HICSA) 2013, Priya Paul, chairperson, Apeejay Surrendra Park Hotels Ltd, said, though different from The Park, the company wanted to create a brand that would channel its inimitable spirit.
"Zone will cater to the gap in the Indian hotel market for the burgeoning Indian middle class and international traveller looking for budget travel. The hotels will be priced around the $80 - 100 mark," said Paul.
The new brand will primarily be managed properties and four hotels have been signed already. The hotels are expected to come up at Dehradhun, Raipur, Delhi and Coimbatore. A mix of brownfield and greenfield developments, these properties will ideally have 100 rooms and will be developed at a cost of Rs 40 lakh per room.
The first hotel will be operational by the year end. The company is targeting at having 25 hotels under the new brand in the next five years.
Follow Ashish K Tiwari on twitter @ashishktiwari
FDA probe cloud clobbers Wockhardt
This story first appeared in DNA Money edition on Saturday, Apr 13, 2013.
Wockhardt is understood to be facing issues with the United States Food and Drug Administration (USFDA), which has sought clarifications on its injectables facility in Aurangabad.
A USFDA team inspected the facility last month.
Wockhardt officials did not share details on the clarifications sought, whether Wockhardt has provided the necessary information to the USFDA and the stage the matter is in now.
“It is a routine matter and there is nothing more to disclose on this as yet,” said a company spokesperson.
But the company’s stock has corrected more than 20% in the last 3-4 days. Market sources attributed the decline to concerns expressed by USFDA on the unit.
According to Bhavika Thakker, research analyst, IIFL, the company has been issued FDA 483 letter, which is generally followed by a warning letter if the agency is not satisfied with the responses.
“However, it’s not something to be worried about as the said unit doesn’t contribute more than 3-4% of Wockhardt’s US revenues,” said Thakker.
To be sure, the Aurangabad unit does not manufacture Toprol XL, Flonase or any other high value product.
Whether a warning letter has been issued to Wockhardt as well is not yet known. But even if it were, it would only affect new approvals in injectables and not the current revenue stream, according to analysts.
“We estimate less than 5% impact to earnings, should this facility get a warning letter, assuming no new launch takes place from the same,” said an analyst. “We believe the sell-off is overdone, especially noting there is still no visibility of an adverse USFDA action as well as limited impact from the unit in consideration.”
Going by the analyst, the management believes the issues can be resolved and there would be clarity post the USFDA’s revert on their responses, expected in 3-4 weeks
Follow Ashish K Tiwari on twitter @ashishktiwari
Wockhardt is understood to be facing issues with the United States Food and Drug Administration (USFDA), which has sought clarifications on its injectables facility in Aurangabad.
A USFDA team inspected the facility last month.
Wockhardt officials did not share details on the clarifications sought, whether Wockhardt has provided the necessary information to the USFDA and the stage the matter is in now.
“It is a routine matter and there is nothing more to disclose on this as yet,” said a company spokesperson.
But the company’s stock has corrected more than 20% in the last 3-4 days. Market sources attributed the decline to concerns expressed by USFDA on the unit.
According to Bhavika Thakker, research analyst, IIFL, the company has been issued FDA 483 letter, which is generally followed by a warning letter if the agency is not satisfied with the responses.
“However, it’s not something to be worried about as the said unit doesn’t contribute more than 3-4% of Wockhardt’s US revenues,” said Thakker.
To be sure, the Aurangabad unit does not manufacture Toprol XL, Flonase or any other high value product.
Whether a warning letter has been issued to Wockhardt as well is not yet known. But even if it were, it would only affect new approvals in injectables and not the current revenue stream, according to analysts.
“We estimate less than 5% impact to earnings, should this facility get a warning letter, assuming no new launch takes place from the same,” said an analyst. “We believe the sell-off is overdone, especially noting there is still no visibility of an adverse USFDA action as well as limited impact from the unit in consideration.”
Going by the analyst, the management believes the issues can be resolved and there would be clarity post the USFDA’s revert on their responses, expected in 3-4 weeks
Follow Ashish K Tiwari on twitter @ashishktiwari
Will ad agencies go head to head with IT cos?
This story first appeared in DNA Money edition on Friday, Apr 12, 2013.
IT companies have some serious competition at hand – from advertising agencies.
“We have over 2,000 professionals with skills in web and creative design, content, and front-end development. The designers play an important role in understanding the customers’ brands, and extending their brand values onto the digital channels and experience,” said Sairaj Vaithilingam, assistant vice-president, Cognizant Interactive.
Clearly, the digital space is not just about putting a banner advertisement on a website anymore. Engaging the consumer, developing applications for smart phones have become an integral part of the process. The game could change further as the cost of devices like the iPad and tablets comes down further.
“People earlier did not think that a large set of consumers will transition from desktops to mobile devices and advertisements were never made keeping mobile devices in mind. This is certainly a huge problem for marketers and brand managers. Advertising agencies will thus have to stay ahead of the curve. Their job is never done, as, by the time they've finished, it's already become obsolete,” Bhasin signed off.
IT companies have some serious competition at hand – from advertising agencies.
As ad agencies staff up to deliver
increasingly complex, cutting-edge digital content, they have been
pushing into what has traditionally been the IT players' turf. Going
forward, it isn't entirely unlikely that they will compete for a
piece of the same pie with the likes of TCS, Infosys, Cognizant and
Wipro, feel industry sources.
“The blurring of lines is going to be
a reality, so you might as well be ready for it,” said Madhukar
Kamath, group CEO & MD, DDB Mudra Group.
Ashish Bhasin, CEO -
South East Asia and South Asia and, chairman - India, Aegis Media,
couldn't agree more. “It’s like how the IT majors do tech
development in their areas globally. There is nothing that prevents
advertising companies from doing it as well.”
Aegis Media, for
one, is putting together a large tech team, including the likes of
programmers and net developers.
The agency currently employs 18 people
and plans to at least double that number in the next few months to be
able to efficiently deliver the digital and mobile communication
needs of its existing and future clients.
“If the approach works well, we can
easily look at 200 people in the near future. This team will be doing
just tech and the business vertical will cater to the global market
and not just India,” said Bhasin.
With the digital, social and mobile
space significantly influencing the customer's buying decision,
corporates today are seeking more meaningful – and innovative –
engagement on these platforms.
Ad agencies are therefore required to
offer a better combination of creative minds and effective technology
to deliver the client's message.
“One can conceive and create a great
idea, but delivering it will be impossible if you don’t have an
equally great tech team,” said Bhasin.
But it's not a one-way
street.
Cognizant, for example, has a vertical
called Cognizant Interactive, which, the advertising fraternity
believes, is very close to what they do for meeting the client's
digitial/ mobile advertising and communications needs. The vertical
has three key practices – Web Solutions, eLearning, and User
Documentation.
“We have over 2,000 professionals with skills in web and creative design, content, and front-end development. The designers play an important role in understanding the customers’ brands, and extending their brand values onto the digital channels and experience,” said Sairaj Vaithilingam, assistant vice-president, Cognizant Interactive.
Clearly, the digital space is not just about putting a banner advertisement on a website anymore. Engaging the consumer, developing applications for smart phones have become an integral part of the process. The game could change further as the cost of devices like the iPad and tablets comes down further.
“People earlier did not think that a large set of consumers will transition from desktops to mobile devices and advertisements were never made keeping mobile devices in mind. This is certainly a huge problem for marketers and brand managers. Advertising agencies will thus have to stay ahead of the curve. Their job is never done, as, by the time they've finished, it's already become obsolete,” Bhasin signed off.
Rural demand to lead cement turnaround
This story first appeared in DNA Money edition on Thursday, Apr 11, 2013.
The Indian cement sector is set for a recovery this fiscal on the back of a likely strong growth in rural housing and a pick-up in roads and railways sectors.
Experts are also expecting a margin expansion as demand growth improves to 7% vis-a-vis 5% in fiscal 2013, with housing growing at 8% and infrastructure at 5%.
Anubhav Aggarwal, Kush Shah and Chunky Shah, analysts with Credit Suisse, said in a report on Wednesday that housing constitutes two-third of the cement demand, with rural housing accounting for 40% of the total demand.
“We expect cement demand from housing to grow at an 8% CAGR, with the bulk of growth coming from rural India,” they said.
Mahendra Singhi, executive director, Shree Cement, a manufacturer, said growth in rural housing will certainly have a positive impact on the sector.
“The government’s initiatives in this direction will take at least two quarters to start showing results,” he said.
An ACC spokesperson said India has the largest homeless population in the world and rural housing offered a huge opportunity.
“However, doing affordable housing is also a huge challenge in India. While demand for such housing is tremendous in rural India the question to ask is how will they get money to build those houses,” the spokesperson said.
The Credit Suisse analysts said that rural housing demand is expected to grow at 11%, mainly due to strong rural wage growth (about 18-20%).
“Demand from rural housing is driven by government-supported schemes (15% of demand) and rising rural income (85%). Penetration of pucca houses in rural India is low at 52% (versus 83% for urban). Demand growth last fiscal was impacted with the government spending only 80% of its budget on the rural housing schemes, but we expect a rebound this fiscal with the budget set 70% higher,” the analysts said.
Follow Ashish K Tiwari on twitter @ashishktiwari
The Indian cement sector is set for a recovery this fiscal on the back of a likely strong growth in rural housing and a pick-up in roads and railways sectors.
Experts are also expecting a margin expansion as demand growth improves to 7% vis-a-vis 5% in fiscal 2013, with housing growing at 8% and infrastructure at 5%.
Anubhav Aggarwal, Kush Shah and Chunky Shah, analysts with Credit Suisse, said in a report on Wednesday that housing constitutes two-third of the cement demand, with rural housing accounting for 40% of the total demand.
“We expect cement demand from housing to grow at an 8% CAGR, with the bulk of growth coming from rural India,” they said.
Mahendra Singhi, executive director, Shree Cement, a manufacturer, said growth in rural housing will certainly have a positive impact on the sector.
“The government’s initiatives in this direction will take at least two quarters to start showing results,” he said.
An ACC spokesperson said India has the largest homeless population in the world and rural housing offered a huge opportunity.
“However, doing affordable housing is also a huge challenge in India. While demand for such housing is tremendous in rural India the question to ask is how will they get money to build those houses,” the spokesperson said.
The Credit Suisse analysts said that rural housing demand is expected to grow at 11%, mainly due to strong rural wage growth (about 18-20%).
“Demand from rural housing is driven by government-supported schemes (15% of demand) and rising rural income (85%). Penetration of pucca houses in rural India is low at 52% (versus 83% for urban). Demand growth last fiscal was impacted with the government spending only 80% of its budget on the rural housing schemes, but we expect a rebound this fiscal with the budget set 70% higher,” the analysts said.
Follow Ashish K Tiwari on twitter @ashishktiwari
Hotel conversions picking momentum in Indian hospitality market
This story first appeared in DNA Money edition on Wednesday, Apr 10, 2013.
Hotel conversion – more popularly referred to as flag-hopping – appears to be gaining currency in India as the economic environment makes it harder for new properties to come on stream.
The concept basically involves replacing an existing hotel brand with a new brand. The idea is to leverage the distribution network of the new hotel operator, thereby improving the hotel’s topline and bottomline.
If 2011 saw only one conversion – the Le Royal Meridien at Sahar, Mumbai converted to Hilton Mumbai International Airport Hotel in January – 2012 saw as many as eight. Among these, Hyatt took over five Ista hotels from IHHR Hospitality, while Keys took over three standalone properties, including a Biznotel from Pride Group.
The trend has continued this year.
Just last week, Starwood Hotels & Resorts took over the management of Royal Orchid Central Ahmedabad hotel from SAMHI Hotels Pvt Ltd.
Earlier this year, Boston East India Hotels LLC launched its first property in North Goa under the banner The Sofala 15°74 by Troca Hotels. The hotel, owned by Sun Leisure (India) Pvt Ltd, was earlier operated under The Sol brand.
More conversions are on the way.
Among others, Keys is set to convert two more hotels in the National Capital Region, said Sanjay Sethi, MD & CEO, Keys Hotels.
On its part, ITC Hotels, India’s second largest hospitality chain, is in a very advanced stage of finalising a deal with the owners of the erstwhile upscale hotel Lebua at Dwarka in New Delhi, a source said. “ITC will take over management of this property and operate under one of its own brands (that’s not associated with Starwood),” the source said, adding, the move is in line with ITC’s asset-light expansion strategy.
ITC Hotels did not offer a comment on this. An email remained unanswered at the time of going to print.
Industry officials are gung-ho on the possibilities.
Conversion offers an exciting new growth channel for Starwood, said Nikhil Manchharam, vice-president - acquisitions and development, South Asia, Starwood Hotels & Resorts Worldwide.
Abhijeet Beej Das, president and chief executive officer, Boston East India Hotels, said his company will be primarily looking at conversions to build a portfolio of hotels in India. “We have also introduced a new brand Troca Hotels and will be targeting key gateway cities in India for conversions,” he said.
“The concept has been very popular with franchised hotels. However, with new-built hotels experiencing significant delays, a tweaked version – combination of branding and management contract – of this strategy is being aggressively pursued by hotel chains,” said a top hospitality consultant, who did not want to be named.
Also, in a situation where there is little new supply of hotel rooms, “conversions reduce stress on pricing,” said Sethi.
Among a few other hotel conversions that are likely to be announced soon include Hotel Golden Tulip, Jaipur that will not be branded and managed by Patu Kesawni and Rattan Keswani promoted Carnation Hotels India P Ltd. Similalry, Lebua Hotels & Resrots is set to convert an ancient palace hotel in New Delhi as part of its expansion plans in India.
Follow Ashish K Tiwari on twitter @ashishktiwari
Hotel conversion – more popularly referred to as flag-hopping – appears to be gaining currency in India as the economic environment makes it harder for new properties to come on stream.
The concept basically involves replacing an existing hotel brand with a new brand. The idea is to leverage the distribution network of the new hotel operator, thereby improving the hotel’s topline and bottomline.
If 2011 saw only one conversion – the Le Royal Meridien at Sahar, Mumbai converted to Hilton Mumbai International Airport Hotel in January – 2012 saw as many as eight. Among these, Hyatt took over five Ista hotels from IHHR Hospitality, while Keys took over three standalone properties, including a Biznotel from Pride Group.
The trend has continued this year.
Just last week, Starwood Hotels & Resorts took over the management of Royal Orchid Central Ahmedabad hotel from SAMHI Hotels Pvt Ltd.
Earlier this year, Boston East India Hotels LLC launched its first property in North Goa under the banner The Sofala 15°74 by Troca Hotels. The hotel, owned by Sun Leisure (India) Pvt Ltd, was earlier operated under The Sol brand.
More conversions are on the way.
Among others, Keys is set to convert two more hotels in the National Capital Region, said Sanjay Sethi, MD & CEO, Keys Hotels.
On its part, ITC Hotels, India’s second largest hospitality chain, is in a very advanced stage of finalising a deal with the owners of the erstwhile upscale hotel Lebua at Dwarka in New Delhi, a source said. “ITC will take over management of this property and operate under one of its own brands (that’s not associated with Starwood),” the source said, adding, the move is in line with ITC’s asset-light expansion strategy.
ITC Hotels did not offer a comment on this. An email remained unanswered at the time of going to print.
Industry officials are gung-ho on the possibilities.
Conversion offers an exciting new growth channel for Starwood, said Nikhil Manchharam, vice-president - acquisitions and development, South Asia, Starwood Hotels & Resorts Worldwide.
Abhijeet Beej Das, president and chief executive officer, Boston East India Hotels, said his company will be primarily looking at conversions to build a portfolio of hotels in India. “We have also introduced a new brand Troca Hotels and will be targeting key gateway cities in India for conversions,” he said.
“The concept has been very popular with franchised hotels. However, with new-built hotels experiencing significant delays, a tweaked version – combination of branding and management contract – of this strategy is being aggressively pursued by hotel chains,” said a top hospitality consultant, who did not want to be named.
Also, in a situation where there is little new supply of hotel rooms, “conversions reduce stress on pricing,” said Sethi.
Among a few other hotel conversions that are likely to be announced soon include Hotel Golden Tulip, Jaipur that will not be branded and managed by Patu Kesawni and Rattan Keswani promoted Carnation Hotels India P Ltd. Similalry, Lebua Hotels & Resrots is set to convert an ancient palace hotel in New Delhi as part of its expansion plans in India.
Follow Ashish K Tiwari on twitter @ashishktiwari
DDB Mudra Group foresees double-digit growth this year
This Q&A first appeared in DNA Money edition on Wednesday, Apr 3, 2013.
The acquisition of Mudra Communications by DDB, an Omnicon group company, 15 months ago saw the advertising agency undergo a quick transition. Madhukar Kamath, Group CEO & MD, of the 1,150 people strong DDB Mudra Group, spoke about how the past year was for the company, business post transition, key developments and the outlook. Excerpts from the interview:
On transition
2012 was a very tough year. And we completed a tough job of migration, transition and integration in that year. All this required a great degree of resilience, will power, staying power and determination from the agency.
On completing a year as DDB Mudra Group
It’s been a series of milestones that we have been having in the last few months. The journey so far has been a very exciting for us. We utilised this opportunity to streamline a lot of our offerings and collect them into different areas and brand them independently. So today DDB Mudra Group consists of nine distinct business streams -- eight within DDB Mudra Group and one standalone (Interbrand) – each catering to varied needs of our clients. Today, we are the only integrated marketing services and communications company in the top five in the country.
On business prior to and post acquisition
These are early days. We have streamlined / integrated the entire organisation with the DDB network. We have always had good organic and inorganic growth in business, so that is continuing. What we have seen increasing in the course of last one year is interactions both at the regional and global levels. Being a large integrated group, several Omnicom Group companies are accessing us to work in partnership or to look at India entry strategies.
On India entry strategies for Omnicom companies
I can’t speak on behalf of Omnicon nor am I the spokesperson for these companies. Having said that, talks are at various stages with the Diversified Agency Services (DAS) group of companies that have various agencies such as healthcare, research, experiential, licensing, branding and design consultancies. So 2013 will certainly see more of these DAS companies foraying into the Indian market.
On overall business environment in 2013
Having completed the transition and integration last year, we’ve internally begun the year with the expectation that the tough year will be left behind. So 2013 is certainly a growth year and we are looking at a double-digit growth this year. After being acquired, we cannot share any financial details, market
share or growth percentages.
Follow Ashish K Tiwari on twitter @ashishktiwari
The acquisition of Mudra Communications by DDB, an Omnicon group company, 15 months ago saw the advertising agency undergo a quick transition. Madhukar Kamath, Group CEO & MD, of the 1,150 people strong DDB Mudra Group, spoke about how the past year was for the company, business post transition, key developments and the outlook. Excerpts from the interview:
On transition
2012 was a very tough year. And we completed a tough job of migration, transition and integration in that year. All this required a great degree of resilience, will power, staying power and determination from the agency.
On completing a year as DDB Mudra Group
It’s been a series of milestones that we have been having in the last few months. The journey so far has been a very exciting for us. We utilised this opportunity to streamline a lot of our offerings and collect them into different areas and brand them independently. So today DDB Mudra Group consists of nine distinct business streams -- eight within DDB Mudra Group and one standalone (Interbrand) – each catering to varied needs of our clients. Today, we are the only integrated marketing services and communications company in the top five in the country.
On business prior to and post acquisition
These are early days. We have streamlined / integrated the entire organisation with the DDB network. We have always had good organic and inorganic growth in business, so that is continuing. What we have seen increasing in the course of last one year is interactions both at the regional and global levels. Being a large integrated group, several Omnicom Group companies are accessing us to work in partnership or to look at India entry strategies.
On India entry strategies for Omnicom companies
I can’t speak on behalf of Omnicon nor am I the spokesperson for these companies. Having said that, talks are at various stages with the Diversified Agency Services (DAS) group of companies that have various agencies such as healthcare, research, experiential, licensing, branding and design consultancies. So 2013 will certainly see more of these DAS companies foraying into the Indian market.
On overall business environment in 2013
Having completed the transition and integration last year, we’ve internally begun the year with the expectation that the tough year will be left behind. So 2013 is certainly a growth year and we are looking at a double-digit growth this year. After being acquired, we cannot share any financial details, market
share or growth percentages.
Follow Ashish K Tiwari on twitter @ashishktiwari
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