Preserve 4G for subscription-led growth, says Ronnie Screwvala

Ronnie Screwvala, CEO & Founding Chairman, UTV Group feels the Indian entertainment industry will fall woefully short of reaching a size of $100 billion by the end of this decade from $15 billion now, unless it moves from an advertising-led growth model to subscription-led growth, undertakes research into audience preferences, ensures enforcement of anti-piracy laws, and innovates to make the industry a truly creative business.

Stressing on the need to segregate gut feel from what the audience wanted, he urged the younger players in the media and entertainment business to regard research as a good guiding force, by which one could pre-empt what is going to be successful or otherwise.

He also lamented the fact that the consumers were still not paying for the content being consumed by them. "That explained the heavy dependence of the industry on advertising revenues - 80% - rather than on subscription," he said.

In this context, he said, introduction of 4G spectrum would be a game changer. A 4G system is expected to provide a comprehensive and secure all-IP based mobile broadband solution to laptop computer wireless modems, smart phones, and other mobile devices. Facilities such as ultra-broadband Internet access, IP telephony, gaming services, and streamed multimedia may be provided to users. “Let us therefore preserve 4G as a subscription-led growth tool,” he urged the industry players.

Referring to piracy, Screwvala said that the menace had to be controlled, for which, 'we will have to put up large sums of money upfront'. The proliferation of piracy, he said, was primarily due to lack of enforcement, not lack of regulation.

Optimism rises on Phase III rollout of FM radio services

This story first appeared in DNA Money edition on Tuesday March 29, 2011.

Eight hundred new frequencies across 300 towns. That’s what the rollout of Phase III of FM radio services in the country will mean. While the development has been eagerly awaited by stakeholders of the Rs1,000 crore sector for some time now, the refrain now is that a rollout should happen sooner than later this year.

Tarun Katial, CEO, Reliance Broadcast Network, said 2010 was a year of waiting for the industry at large. “While there has been some delay in the process, we feel 2011 will be a year of action and the exercise (Phase III) should happen sometime this year,” he said. Katial was speaking on the second day of the Ficci Frames 2011 conference in Mumbai recently.

Under the phase, private FM radio stations can come up in every town with a population of over 1 lakh, there will be multiple frequencies in bigger towns (which is expected to engender content plurality), the licensing will be for 15 years from 10 now, and news broadcasting will be allowed through feeds from Prasar Bharati.

“This will allow players to make considerable investments, afford a lot of networking which will make smaller radio stations viable,” said Prashant Panday, executive director & CEO, ENIL.

But beyond the optimism lurk concerns. For instance, strategic investors are yet to find the best exit routes. Salil Pitale, head of media and telecom at broking house Enam Securities said the policy today is still very restrictive in terms of exits for strategic investors. “Also, I don’t think there are too many cities that can absorb more than five or six radio stations which will eventually restrict the diversity of programming that is being spoken of,” Pitale said.

There are worries over the auction process to award new frequencies too. “There is talk of e-auctions similar to what the government did to award 3G licences. But this could lead to unusual rise in costs, which can test viability. We have already seen the outcome during Phase I. There could be new players wanting to foray which will skew the pitch for existing ones,” said Rahul Gupta, director, SPML, which runs Radio Mantra in Tier II and III markets.

While policy matters are being mulled over for long, its implementation is getting even longer thereby putting hurdles in the overall growth process. “I think it is very important for the government to identify ways and to make radio profitable. Speeding up of policy matters and implementing them can help the players grow and make their businesses profitable,” said Harrish Bhatia, CEO, 94.3 MY FM.

However, there are others in the radio media monitoring/ research sector who feel the industry is being too cautious. L V Krishnan, CEO, TAM India, said, “The sector is growing in the right direction. While there are issues, the fraternity seems more worried about them than working to overcome them,” he said.

DB Realty director quits, company ‘reconstituting’ board

This story first appeared in DNA Money edition on Tuesday March 29, 2011.

DB Realty, the troubled Mumbai-based real estate developer whose name figured in the 2G spectrum investigations, has lost its fourth director since February.

Sundaram V Rajagopal, a non-executive director, submitted his resignation on March 21, which was accepted by the company’s board on Monday, DB Realty informed the stock exchanges. DNA had reported on the possibility of this on February 18.

Rajagopal is currently the managing director of private equity firm Starwood Capital India Advisors Pvt Ltd for India and Southeast Asia. He joined the firm in July.

A DB Realty statement said Rajagopal was appointed as a nominee of Lehman Brothers pursuant to its investment prior to the initial public offering of the real estate company.

“The right to appoint nominee directors by all such investors ceased to exist on October 1, 2010. Post his joining Starwood Capital, his current schedule and commitments do not permit him to continue to be on company board and hence he has taken the decision to resign. DB Realty is in the process of consolidating and reconstituting the board to make it focused,” the company statement said.

Attempts to contact Rajagopal were not successful. However, private equity industry sources, said that Starwood Capital would have directed Rajagopal to resign.

On DB Realty’s future, industry experts feel being a highly owner driven company its promoters will now have to work very hard towards regaining credibility in the market.

“The promoters will probably have to disassociate with the management by bringing in a very professional board that will eventually help the realtor to weather out shadows surfacing time and again. This will not only help in overall business restructuring but also in streamlining the company operations, thereby avoiding a situation wherein the realtor’s development projects will get severely impacted,” said a senior official from an investment firm.

DB Realty was earlier in talks with real estate PE funds to raise money for its government Bandra colony project. While the company management was believed to be in talks with Starwood Capital for a possible placement, industry sources said the deal was not approved by Starwood’s investment committee.

Thereafter, the realtor was understood to be talking to domestic investors to raise Rs600-800 crore in the project. Industry sources, however, believe that Rajagopal’s resignation will only make it tough for the realtor to raise money.

“Going by the uncertainties faced, I don’t think fundraising from domestic or international investors will be possible anymore,” said a real estate analyst from a leading domestic brokerage firm.

Updates from DB Realty Management on March 29, 2011.

Two senior officials of DB Realty - Asif Balwa and Rajiv Agarwal - were arrested by the Central Bureau of Investigation (CBI)today in Delhi. They have been arrested in their capacity as Directors and shareholders of Kusegaon Realty Pvt Ltd. Both Asif Balwa and Rajiv Agarwal on various occasions have cooperated fully with the CBI and continue to do so.

The company maintains that neither official has done anything inappropriate or illegal. The company fully supports them and is offering the best legal expertise. The company has the highest respect and confidence in the Indian legal system and is confident that ultimately the truth will prevail.

DB Realty enjoys immense trust and support from all its stakeholders. The company would like to assure all its stakeholders that the company is managed by a core team of accomplished professionals and thus the day-to-day management is not affected by these developments, all work is carrying on smoothly without any delay.

Observation:

Interestingly, retail investors seem to have taken fancy to the D B Realty stock which surged 16% and 18.79% on March 29 and March 30, 2011 respectively. It would be interesting to see how the stock progresses in the coming days.

Innovative funding, transparency luring corporates back to film making

This story first appeared in DNA Money edition on Friday March 25, 2011.

Despite entertainment sector receiving industry status, organised funding still eludes film making. However, the situation is changing with innovative funding options, transparency in dealings and extensive use of technology to monitor costs luring back corporates/ investors, film makers said at FICCI Frames 2011.

Bobby Bedi, managing director, Kaleidoscope Entertainment, said, “There are times when the box-office numbers show that a particular movie has made so many crores in the opening week. And despite that the film financier continues to lose money. Actual reporting of business numbers is very crucial to attract investments without which funding will always remain a challenge.”

Industry experts said that film makers have to get realistic while budgeting their movies and going out to raise funds. There have been times when film makers adopt the bubble-up strategy, making financial institutions to pay up the entire cost of production, they said, adding that many with access to public money got greedy and misused the funds for their personal gains.

“A few lucky ones who got funding from corporates and investment funds have even gone to the extent of splurging it like water, thereby making their projects non-viable leading to losses for their investors,” said a top official from a leading production house.

However, a few significant industry developments in the recent past are changing the way finances are being handled by investors and production houses to make it a win-win situation for those involved.

“Technology and software are being extensively used by film makers these days to structure, streamline and monitor their production schedules and costs on a real-time basis. This approach is certainly helping to bring in transparency in the business thereby instilling confidence in the corporates, banks and investment firms/funds to look at this business afresh,” said Bedi.

Ashok Wadhwa, group CEO, Ambit Capital, said aspects like collaboration with international studios for a global appeal, increased transparency, focus on delivering results, return on investment, monetising the product across streams, etc by some of the leading producers and production houses are making a great difference.

“These are primarily the reasons why organised funding institutions are keen to explore relationships with players who not only focus on offer a great product, but also back it up with a bouquet of other resources that give assured returns as against looking at theatrical release as the key source of revenue. In fact, my personal view is that there are quite a few foreign investment firms currently looking to invest in international markets especially countries like China & India,” said Nirvaer Sidhu, VP-media and entertainment, Goldman Sachs India.

Karan Ahluwalia, executive vice-president, media and entertainment, Yes Bank, said a very lucrative yet untapped financing option is securitisation of intellectual property rights.

“Intangible assets like movie libraries and even music libraries can become a means to raise capital. This is a well established option in the West and it is only a matter of time before Indian companies realise the value of this resource,” he said.

Ranu Vohra, managing director and CEO, Avendus Capital, suggested tapping the high networth individuals and family business houses which have built their wealth from scratch. He said between Rs 500 crore and Rs 700 crore would available for investment from the family houses.

“These are people with growing family businesses, have already invested across various asset classes and are now looking at other alternative options to build their wealth. Any family house with over $100 million for investments in this high-risk high-return industry would make for a potential investor. Catalysing this set of investors is, however, still a key challenge,” said Vohra.

Intel, Hungama Digital to launch HD movies' download service

This story first appeared in DNA Money edition on Thursday March 24, 2011.

World leader in computing innovation Intel is all set to offer a high definition (HD) movie watching experience to its customers. With the launch of its second generation core processor — Intel Insider — the US chip maker will be offering a service that will allow users to download and stream HD movies on their desktop/laptop computer.

The new service, offered in association with Hungama Digital, will make available a selection of popular Bollywood and international movies, including blockbusters from Yash Raj Films, Paramount Pictures, T-Series and Reliance Home Video.

Speaking on the sidelines of FICCI Frames 2011, R Sivakumar, managing director, sales and marketing group, Intel South Asia, said film lovers can now watch the latest blockbusters and favourite films in high definition format right on their PC. “The technology also offers a ‘proactive queue’ capability that will help consumers pre-download films ahead of the release date, and give them the ability to purchase those films, securely, even if they are not connected to the internet. This will allow consumers to start watching their movies immediately on the release date without waiting to download during peak traffic times. The technology is available on all the second generation core processor-based PCs with built-in visuals,” he said.

Movie buffs will be able to avail the new service within a month from now. To start with 50 movies in HD format and 100 movies in standard definition (SD) format will be available on Hungama Digital’s website www.hungama.com. Price points for each of these downloads are currently being worked out though a broad range would be anything from `10 for a catalogue movie going up to Rs199 for a new release.

Neeraj Roy, managing director and CEO, Hungama Digital Media Entertainment Pvt Ltd, said, “Financials are currently being worked out. The ratios would depend on the nature of arrangement we will have with the intellectual property rights owners. The idea currently is to launch the facility for movie downloads expanding the bouquet of choices gradually,” said Roy.

Interestingly, the Intel Insider technology when combined with IntelWireless Display (WiDi), will also allow streaming of premium, high-definition movies from a PC/laptop to an HD television, without cables.

Other short stories from the summit

Mumbai Mantra brings Sundance Screenwriters Lab to India

Mumbai Mantra, the media and entertainment division of the $7.1 billion Mahindra Group , has partnered with Robert Redford founded Sundance Institute to launch a new initiative called Sundance Screenwriters Lab in India. According to Rohit Khattar, director, Mumbai Mantra Media Ltd, the lab will provide an opportunity to budding Indian screenwriters to develop their works under guidance from accomplished scriptwriters from across the globe. The lab has already kick-started application process for their first workshop to be held in March 2012. As part of the open submission process, any Indian screenwriter can apply through the company website www.mumbaimantra.com. Also, there is no language barrier for submission of works.

S Kumars Online’s new avatar

S Kumars Online (SKOL), the e-commerce venture of apparel and textile major S Kumars Group, is launching a new portal for professionals associated with the Indian advertising, media and entertainment industry. The web portal, according to company officials, has been designed as a one-stop-shop (online resource) for people working with the bollywood film industry and those wanting to find work in the film, TV and advertising industry. SKOL is also entering into other media and entertainment related businesses like hiring of film equipment under the banner moviegear, state-of-the-art studio and conferencing facility christened bta:studio, a business vertical called Hexacan that  is basically involved in storing and shipping of film negatives / prints globally and a hi-end e-commerce vertical christened www.vto.in that facilitates online sales of apparels, jewellry, accessories, art etc. The vto vertical, according to Chandra Mundhra, managing director, SKOL, is largely targeted at the non-resident Indian (NRI) audience who do not have direct access to such a range of products.

Shemaroo riding the digital wave

Four decade old entertainment company Shemaroo is all set to capitalize on the popularity of digital distribution of its entertainment content. With a repertoire of approximately 2000 movies across genre, the company has invested close to Rs 25 crore in setting up a technology back-end that takes care of digitizing all the content they have accumulated over the years. The company is also innovating film / movie products to monetize the advent of 3G services being rolled out by various telecom companies. Pioneering a new concept, the company has created a bank of new products wherein a three hour movie has been edited into a 15 minute movie which can be viewed on new media devices like mobile phone, tablets etc. It currently has a bank of 30 such movies and has already tied up with Tata Docomo and Reliance Communications to make it available to their subscribers.

India's creative force still a sleeping tiger, says James Murdoch

This story first appeared in DNA Money edition on Thursday March 24, 2011.

James Murdoch, chairman and chief executive officer, News Corporation for Europe and Asia, believes that India’s creative force is still a sleeping tiger waiting to be awakened.

Speaking at the inaugural function of FICCI-Frames 2011in Mumbai, he said that the impressive achievements of the country, in the last two decades, have not even begun to fulfil the potential and that one can only imagine what the way forward will be.

“When I say imagination, I’m not talking about pie in the sky.I’m thinking about the possibilities in a real and tangible way,” said Murdoch. “If India’s economy had a creative sector on the scale, relative to the overall GDP, of Britain for example, instead of a $15 billion industry we would be talking about a $120 billion industry. And if the industry was anywhere close to that number, imagine how many million jobs a creative sector that size would produce each year for Indian people,” he said.

Given the magnitude, the industry would have had a significantly wide reach, thereby revolutionising sectors like education and health care, while ensuring that the country has a voice matching its importance in global affairs. “We all know that even at rest tigers are impressive and other animals are careful to give them respect. Yet only when a tiger is awake and engaged can we appreciate its force and majesty.That is our challenge with India’s creative sector - to imagine what this slumbering tiger might do in the right environment,” he said.

So what would such an environment really look like?

“It would be one that puts a premium on creativity.An economy that encourages people to take risks to bring new and better products to market and rewards them when they are successful.It would also be infrastructure that takes advantage of the best that modern technology has to offer and ensures that Indians can compete with anyone, anywhere, any time,” he said.

Achieving this, he said, requires focus on to two broad areas - digitisation of infrastructure and bringing Indian creators and storytellers to the world’s conversations.

“Digitisation is the key to unlocking the potential of the creative sector.With digitisation, the Indian industry will finally have the incentives to invest and create.More importantly, Indian customers will have content and choice worthy of their nation’s rich diversity. As for taking creative talent to the world that can only be done by ensuring that India’s creative market is competitive at home,” he said.

The best way to accelerate the liberalisation of digital broadcasting, Murdoch said, would mean allowing greater investment and greater latitude for innovation, including vertical integration of content companies and satellite distributors.

“Transparent, deregulated, market-based and addressable digitisation will unleash a content revolution in India. Viewers deserve choice. In a vast and diverse country like India, no channel can try to be everything to everyone and yet the prevailing regulatory system forces channels to adopt a uniform ad-dependant business model,” he said.

Kamat Hotels may merge some promoter companies

This story first appeared in DNA Money edition on Wednesday March 23, 2011.

Mumbai-based Kamat Hotels (India) Ltd (KHIL) is looking to merge some of the promoter group hotel and restaurant companies with itself.

Kurian Chandy, chief financial officer, KHIL, confirmed the development saying a board meeting to this effect will be held on March 26, 2010, to decide which companies will be considered for this merger exercise.

Industry sources said KHIL management wants to bring in the profit-making businesses onto the books, thereby strengthening the KHIL balance sheet. “These are zero-debt, profit-making hotels wherein the asset is owned by the promoters and are outside of KHIL books. Similar is the case with the restaurant business which is already profitable. The hotels to be merged are under management wherein KHIL only gets a management fee. With the new arrangement, the P&L of these hotels and the restaurant business will come under KHIL books,” said a source.

Merging of the hotels and restaurant business will give the promoters additional stake in the listed entity. As a result of this move, hotels owned by the promoter group companies in markets like Goa and Murud are likely to merged with KHIL. A few other similar projects outside of KHIL will come under its fold over a period of time.

“For instance, hotels in Silvassa, Bhubaneshwar etc will eventually be brought onto KHIL books. These are properties where expansion is currently going on and may have debt on their books. Once the properties become debt-free, they will be merged with KHIL,” the source said.

The company currently operates around 34 restaurants in Maharashtra, Orissa and Rajasthan. The company management has plans to expand this business through franchise model in addition to owned and managed outlets. “It is poised to be a highly profitable business and hence makes good sense to bring it onto KHIL books,” said the source.

Update from Kamat Hotels' Management on March 26, 2010

Kamat Hotels informed that promoters have taken major decisive step towards consolidation of its business into Kamat Hotels India Ltd by merging the profitable hotel business and the highly profitable recession proof restaurant business owned by the promoters into KHIL. KHIL's Board has approved, in principle, the amalgamation of Kamat Restaurants, Lotus Resort Murud (48 rooms) and Lotus Resort Goa (52 rooms) into KHIL.

Upon merger, with over 53 units KHIL will be one of the largest hotel chains in the country. This will enhance the top line, bottom line, cash flows, and other financial parameters of KHIL.

Vithal Kamat, ECMD, KHIL, said, “Finally owing to the settlement and removal of cross holdings within the families, we have initiated this as it was long overdue. This is a major step to align all Kamat group properties by bringing in the most profitable hotels like Lotus Goa and Murud into KHIL. The few remaining promoter properties are in various stages of renovations and are in companies which have inherited debt components and not having immediate EPS accretion to KHIL. At an opportune time the remaining Promoter owned units will merge into KHIL, thus aligning all promoter interests into KHIL.”

Continuing on a positive note Kamat said, "The restaurants are poised for higher growth in the next 3 years and the business is set to scale up to 150 units with very low capex as most of the restaurants are developed under franchise and 'company owned company operated' (CoCo) route, the profitability and other financial parameters of KHIL will improve with this amalgamation as these are already debt free profit making companies.”

HDFC enters online property search business

This story first appeared in DNA Money edition on Friday March 18, 2011.

The entry of HDFC Ltd has stirred the online property search business segment.The country’s top mortgage lender has launched its own real estate search portal www.hdfcred.com. The venture will be operated under its wholly-owned subsidiary HDFC Developers Ltd.

“Our portal is a logical extension of our real estate business. Some of the grouses we came across during our research is that the typical home buyer was not able to get all the details to facilitate their property search process. While there is a lot of information lying around across various mediums it is largely scattered. What we have attempted to do with our portal is bring all of it under one platform in a detailed structured manner,” Renu Sud Karnad, managing director, HDFC Ltd, said.

India’s online property search market is currently estimated to be around `60 crore. It includes general real estate websites like www.99acres.com, www.magicbricks.com, and classifieds portals like www.sulekha.com. The overall market has been growing at 50%.

Sanjeev Bikhchandani founded and BSE-listed Info Edge (India) Ltd’s online vertical 99acres.com is leading this growth with growth rates pegged at 70-75% year-on-year. Vineet Singh, executive vice-president and business head, 99acres.com and naukrigulf.com, said, “99acres pioneered the property search portal business in India and has been aggressively growing the market ever since its launch in 2006. We have been successfully acquiring market share in this space and by the end of this fiscal we will have close to 60% of the revenue share in the market. In fact, we are also at a stage where we will break even this year.”

When asked how HDFC Developers’ foray into this segment is different from existing market offerings, Karnad said existing players are into pure real estate and do not deal with developers in terms of project financing. “In our case however, we have a long-standing (close to 30 years) relationship with the top 1,000 builders/developers in the country. Besides, we also know the credibility of these developers to a large extent. These are some of the critical factors that differentiate us from the other players in the market.”

Other features offered by the portal include searching for properties in key Indian cities at the click of a button, use of filters to narrow down search, add properties to favourites, compare them, and even find out useful information regarding social infrastructure and facilities available in the neighbourhood.

The revenue model in this space revolves around online advertising revenues. For instance, all of 99acres.com’s revenues are online and largely comprises display advertising fee. “We charge a fee for listing new properties and do online campaigns for builders/developers and brokers. A small and growing percentage is the listing revenue wherein brokers buy listing packs to advertise resale and rental properties. Average entry level advertising rates for a broker could be anywhere in the region of Rs5,000 to Rs10,000 per year while bigger brokers spend between `50 lakh and a crore. The average ticket size for property developers/ builders is around Rs5 lakh for a quarter,” Singh said.

The market has its own challenges. Singh is of the opinion that a critical mass in terms of online traffic pertaining to real estate is a must to boost growth. “Until that happens, the explosion in the volume or value of online business (people transacting online) is not going to increase. There is an increase in the number of people taking the online route for property search so internet platform itself is adding to the growth by 30% odd to this business.”

On competition in the form of HDFCRED, Singh said, “We don’t see them as competitors and the coming few years will tell us how serious a player they are in this space. This is not that simple/easy a business to run and manage. We have domain expertise in the internet classifieds’ model and have managed successful business verticals in this space like naukri.com and jeevansaathi.com. This is an execution business and we have a four-year headstart over anybody who wants to get into this space.”

However, Singh also feels that if HDFCRED comes into the market with a worthwhile proposition, they will actually grow the space as against acquiring market share from existing players. “If they are able to do this successfully, they will also increase the credibility of internet as a media for the builder and broker community,” he said.

As for his company’s consolidation plans, he said, “My personal view is that instead of spending money on acquiring an existing player, we’d rather spend that money in marketing, advertising and building better products. I think that will be money better spent rather than going out and acquiring competition.”

Hilton set to upstage leader Starwood in Delhi market

This story first appeared in DNA Money edition on Thursday, March 17, 2011.

Hilton Worldwide is set to unsettle global hospitality major Starwood Hotels & Resorts from the number one position in the New Delhi hospitality market.

With five properties in the five-star deluxe and luxury segment under Le Meridien, Luxury Collection, Sheraton and Westin brands, Starwood currently is the largest international hotel chain operating in the Delhi/National Capital Region market. Hilton, which currently runs two hotels in Delhi (Hilton Jankapuri and Hilton Garden Inn Saket), is set to add three projects to its portfolio in calendar year 2011.

Its DoubleTree by Hilton and Garden Inn properties are expected to open in Gurgaon in the second half of 2011. Also, another property under development in Gurgaon would be managed by Hilton.

This apart, Hilton is in talks for management contracts for three more hotels, including two under development, with New Delhi-based realtor Eros group. These hotels (of Eros) will get onstream in the next 18-24 months, taking the overall portfolio to Hilton to eight in the Delhi / NCR hospitality market alone.

“The Hilton management is in the final stages of signing management contracts for realtor Eros Group’s three projects in New Delhi and the deal is likely to get through,” said the source.

Eros Group has a 214-key five-star deluxe hotel currently managed by InterContinental Hotels Group (IHG) under its InterContinental brand in addition to two developments, InterContinental and Holiday Inn, coming up at Mayur Vihar.

This entire portfolio is likely to undergo a rebranding exercise wherein Hilton Worldwide is expected to take over management control post the early termination of agreement between Eros and IHG.

Rajesh Punjabi, vice-president-development, India, Hilton, said, “As part of our ongoing development efforts, we speak to a number of developers and owners. For reasons of confidentiality we are not able to provide any of the details. We would also like to confirm that the Nehru Place and Mayur Vihar hotels stated in your query are not part of our pipeline.”

Industry sources, however, said Eros and Hilton were in an advanced stage of negotiations and were fine-tuning the management agreements.

Officials at InterContinental Eros Nehru Place did not comment.

When concluded, this development will mark resurgence of Hilton’s presence in the Indian hospitality market especially after its association with PRS Oberoi-promoted East India Hotels fell through. This development saw a wipe-out of Hilton branded hotels in the Indian market until Hilton Janakpuri and Hilton Garden Inn Saket opened doors in 2009-10.

While asset owners of the DoubleTree by Hilton are not known yet, the Hilton Garden Inn, Gurgaon is owned by DLF and is part of the Hilton-DLF joint venture pipeline that is expected to see a rollout of four projects. DLF also owns the operational Hilton Garden Inn at Saket which is Hilton’s first hotel in India under that brand.

The 440-room hotel-cum-convention centre in Gurgaon currently under development is owned by the Piccadilly Group (owners of the Hilton hotel at Janakpuri) and will be operated by Hilton.

Indian Hotels’ arm to sell stake to private equity firm Omega TC Holdings

This story first appeared in DNA Money edition on Thursday March 17, 2011.

Roots Corporation Ltd (RCL), a subsidiary of Indian Hotels Co Ltd (IHCL) that runs the Ginger brand of hotels, is selling a minority stake to Singapore-based private equity firm Omega TC Holdings Pte Ltd for Rs150 crore.

According to the IHCL management, Omega will acquire stake in RCL by making investments in various tranches. “Omega will also acquire compulsorily convertible preference shares from some existing holders for an aggregate consideration of Rs70 crore. This apart, Omega will have an option to invest a further Rs100 crore in RCL by March 2014, subject to satisfaction of certain conditions,” IHCL told the Bombay Stock Exchange.

RCL, however, did not disclose the purpose behind the fundraising and its deployment plan. Prabhat Pani, CEO of RCL, was unavailable for comment.

Industry experts, however, said that fundraising was pretty much on cards and it would have happened much earlier but the plans had to be deferred due to economic meltdown post 2008.

“Fundraising was scheduled by the IHCL management after achieving the critical mass of 20-25 Ginger hotels. In fact, the deal has come at a time when Roots has 24 hotels with around 2,400 guestrooms across the country,” said a source.

Interestingly, IHCL has shared no information about Omega TC Holdings in terms of its overall corpus and other investee companies.

The PE placement could also pave the way for RCL’s initial public offering which is likely to happen in the next couple of years. During the IHCL annual general meeting in August 2010, Ratan Tata, chairman, Tata Group, had responded to a shareholder query saying, “The Ginger hotel chain would be listed in the next couple of years depending on a series of circumstances.”

While a significant proportion of the Ginger portfolio is owned, there are a few other projects such as Ginger Rail Yatri Niwas (operated under PPP arrangement) and two management contracts in Manesar and Agartala.

The Ginger pipeline currently comprises 10 hotels under various stages of development including the brand’s Mumbai debut at Airoli in Navi Mumbai. These hotels are likely to add 1,000 guestrooms.