Milestone Capital founder Ved Prakash Arya dies in an accident

Founder, managing director and CEO of Milestone Capital Advisors, Ved Prakash Arya passed away in an accident on Thursday (August 25, 2011). Forty-one year-old Arya, was taking a morning walk when a tree fell on him. He is survived by his wife and two children.

A driving force for Milestone, Arya successfully launched eight private equity schemes and prior to Milestone, he was chief operating officer (COO) and director of Pantaloon Retail (India) Ltd, a position he quit in February 2007. Prior to that he was associated with a department store chain - Globus - in the capacity of its CEO. He'd also founded this (Globus) retail chain in 1998 during his over a decade-old tenure with the Rajan Raheja group.

Arya was also the founder and director of the Retailers Association of India - RAI. An engineering graduate with an MBA from IIM, Ahmedabad he also spent one year in ESSEC (France) doing research and completed his Advanced Management Programme from Harvard Business School.

Carlyle to invest $26 million in Value & Budget Housing

While one side real estate companies are finding it tough to attract investments, Bangalore-based value & Budget Housing Corporation (VBHC) has roped in The Carlyle Group for a private placement in its venture.  The global alternative asset manager has agreed to invest $26 million in VBHC that pioneered the construction and development of affordable entry level housing in India. Avendus Capital served as the sole financial advisor to VBHC for the transaction.

Wayne Tsou, managing director and head of Carlyle Asia Growth Capital, said, VBHC is a play on the strong unmet demand for affordable housing in India, which is estimated at more than $200 billion. “The demand for affordable housing will continue to grow quickly due to urbanisation, increasing number of nuclear families, rising income levels and strong desire for home ownership,” said Tsou.

The funds to be placed in VBHC will be from Carlyle’s FCG IX which is a part of Carlyle Asia Growth Partners IV (CAGP IV) – a $1.04 billion sector-agnostic growth capital fund. Existing investors in VBHC have also committed additional capital alongside Carlyle though detailed financial terms were not made public.

Co-founded by Jaithirth Rao and P S Jayakumar to build one million affordable entry level homes over 10 years across urban India, VBHC has already sold more than 1,000 units in the last 12 months and the sale of another 900 units is expected to start next month. VBHC is setting up an expansive network of integrated housing projects across the country using the latest industrial engineering and construction technology to improve the construction process and build scale through standardisation.

According to Jaithirth Rao, chairman, VBHC has been focusing on delivering high quality affordable entry level homes to its customers. “Through The Carlyle Group association, we hope to leverage their relationships as we continue to fulfill our vision of building a million affordable entry level homes in this country,” he said.

Transforming real estate development into a lean industrial process amenable to mass production with the use of the ‘form’ technology for construction, “VBHC plans to replicate the success of project Vaibhava in Bangalore and aims to develop a strong nationwide footprint,” said P S Jayakumar, managing director, VBHC.

Oberoi Realty ropes in a global contractor for key Worli project

This story first appeared in DNA Money edition on Wednesday August 24, 2011.

Despite the real estate sector going through a tough time, a section of developers continue to pursue signature projects in Mumbai with undiminished exuberance.

Oberoi Realty has brought on board Samsung C&T Corporation as its general contractor for its ambitious mixed-use, high-rise luxury project in Worli, Mumbai.

The deal marks the entry of Samsung C&T, which has constructed many of the world’s tallest landmarks including Petronas Towers in Kuala Lumpur and Burj Khalifa in Dubai, in the Indian real estate space.

Vikas Oberoi, chairman and managing director, Oberoi Realty, said, “This association will enable us to strengthen and grow our vision of bringing the best international construction practices to India and contribute one more landmark to the skyline of Mumbai,” he said.

To be developed by Oasis Realty, a joint venture between Sahana and Oberoi Realty, the development will feature a luxury hotel, luxurious branded residence (managed by a hotel operator) and high-end commercial office space with a likelihood of luxury retailing area.

The hotel and branded residences, industry sources said, will likely be operated by luxury hotel company, Mandarin Oriental Hotel Group.

The Oberoi-Samsung tie-up substantiates the trend of hiring specialist international companies to create products that would appeal to not only the crème de la crèmein India but also potential buyers across the globe who wish to boast of owning a residence in one of world’s most expensive real-estate markets, experts said.

Earlier, Lodha Developers had awarded the construction contract of World One, its flagship project in Worli, to a joint venture formed by Middle-East based construction firm, Arabian Construction Company, and India’s Simplex Infrastructures.

Experts said the approach of bringing renowned global partners for real estate projects is to create a wider appeal for the developments and attract global buyers.

“For instance, Lodha’s World One was being premiered across the globe, more so in New York and Tokyo in addition to key cities in India. As a result, the developer was able to pre-sell World One and close a significant percentage (around 40% of the overall inventory) of bookings during that period,” said a source.

YeonJoo Jung, president and CEO, Samsung C&T, said the deal was a remarkable milestone for the company as it would be their first such project in India.

“We apply extensive experience, expertise and knowledge in construction and project management especially for high rise buildings, therefore the successful completion of this iconic building would also be vital for our future growth in the Indian market,” said Jung.

The Oberoi project is likely to be launched this October.Sources said details of the Oberoi project have not been made public as yet because, “the developer is still in the process of getting a clear picture on the floor space index allocation for it”.

Ritz-Carlton set for India debut in April 2012

India's first Ritz-Carlton branded hotel is set to receive guests by April 2012. The 250-room five-star luxury hotel is being developed by Bangalore-based BSE-listed realtor Nitesh Estates Ltd. Work on the hotel is in fairly advanced stages and the asset owning company intends to hand it over to the Ritz-Carlton pre-opening team by the year end or max by January 2012.

Ritz-Carlton is Marriott International's luxury hotel brand which is currently operational in 76 locations across the globe. The hotel has been developed under a special purpose vehicle (SPV) wherein Citi Properties (now Apollo Global Management Ltd) had acquired 74% stake investing to the tune of $100 million back in 2007-8.

Nitesh Estates on its part (26% stake) has already pumped in around Rs85 crore and another Rs30 crore will be invested over the next two quarters to complete the project. The overall cost of developing the property, according to company management is around Rs 680 crore.

Once operational the hotel will also feature a designated retail area housing a host of domestic and international luxury brands.

Among Nitesh’s other hospitality development include another high-end luxury hotel in Chennai which has signed with Ritz-Carlton as well and it will be India's second such branded property when operational. Another hotel property is expected to come up at Kochi for which Nitesh Estates is believed to have approached ITC for a possible association in addition to other hotel management companies.

On the Chennai development, being a chunky one and the overall project cost is likely to be Rs 400-800 crore or more depending on how the entire development evolves. Industry sources however, said that the Chennai land parcel is facing some legal hurdles and hence will take more than expected time to start work.

The Ritz-Carlton, Bangalore will offer several restaurants, extensive meeting and events space, a luxurious spa and outdoor swimming pool, and an entire floor dedicated to high-end retail store boutiques. In addition to spacious rooms and suites, the hotel will include The Ritz-Carlton Club, a private floor accessible only by elevator key and offering light fare and dedicated concierge service throughout the day. 

The Ritz-Carlton Hotel Company, LLC of Chevy Chase, Md., (USA) is an independently operated division of Marriott International, Bethesda, Md.

Vegas casino company Caesars plans to enter India

This story first appeared in DNA Money edition on Wednesday August 17, 2011.

After global hospitality brands, it is the turn of the American casino-gaming companies to make a wager on India.

Caesars Entertainment Corp (CEC), a Las Vegas-based gaming company, has lined up plans to enter entertainment and hospitality sector in India through Caesars Global Life, which it recently set up to develop branded luxury hotels, restaurants and other lifestyle amenities in resort destinations around the world.

Caesars that operates over 50 casinos, hotels, and seven golf courses under several brands is the third casino-gaming company to foray into India after MGM Mirage Hospitality and Thunderbird Resorts Inc.

Neera Chanani, South Asia Head, Caesars Entertainment Hospitality, said the company management sees exciting opportunities across multiple sectors in India. “We are looking forward to partnering with world-class developers,” she said.

Caesars will develop non-gaming presence and build a range of luxury hotels in South Asia with entertainment and retail as integral components, the company said.

According to a company statement, Caesars plans to launch multiple brands from its portfolio in addition to a new lifestyle brand that is under development.

However, it is not clear whether Caesars will take equity positions or focus on management contracts in India.

“Caesars will be focusing on major top-tier cities, as well as resort and holiday destinations,” said the company, which manages properties under the Harrah’s, Caesars and Horseshoe brands, about India plans.

MGM Mirage, the earlier entrant, has already signed two projects with New Delhi-based Blue Coast Hotels for its MGM Grand and Skylofts brands. New York-based Thunderbird’s India foray is in the form of a five-star deluxe hotel/resort in the Union territory of Daman.

Recently, BSE-listed Delta Corp had acquired a controlling stake in Daman Hospitality, which was setting up Thunderbird Resorts to be operational by this year end.

Phoenix renegotiates lease rentals with anchor tenants

This story first appeared in DNA Money edition on Thursday August 18, 2011.

Phoenix Mills Ltd (PML), a Mumbai-based retail centre developer, has achieved a significant success in renegotiating lease rental rates with its anchor tenants at High Street Phoenix (HSP) in Lower Parel.

Close to 150,000 square feet of retail space occupied by brands including Lifestyle, Big Bazaar and Pantaloons has come up for renewal this year. While the new rates for Lifestyle have been firmed up, negotiations for Pantaloons are expected to be completed by November.

Shishir Shrivastava, group CEO and joint managing director, PML, said in an analyst call, “This time the arrangement with Lifestyle for 50,000 sq ft is `91 per square foot (psf), or 7% of revenue share, whichever is higher.”

Big Bazaar has surrendered 16,000 sq ft from the 50,000 sq ft it was occupying at HSP. This surrendered area has now been converted into retail space branded as Grand Galeria Connect and is currently been leased out at an average price of `200- 250 psf.

The balance area with Big Bazaar has also seen an increase in the leasable area owing to loading (re-zoning and re-planning of retail space) being done by the asset owner. With this, the Big Bazaar area has effectively become 39,000 sq ft.

Also, the effective rate for the area occupied by Big Bazaar and GG Connect has now risen to average `134 psf from `68 psf earlier.
About 90% of the GG Connect area has been leased out and stores would start operations by September.

PML said it is identifying the best possible options for the third major anchor client, Pantaloons, whose contract would come up for renegotiations in November.

On the residential side, PML has already launched first phase of residential development in Chennai and is actively working on a
land parcel in Bangalore West.

Delhi HC orders status quo after IRCTC cancels venture with Cox & Kings

This story first appeared in DNA Money edition on Thursday August 18, 2011.

Cox & Kings Ltd (C&K), a travel and tour operator, has moved the Delhi High Court against the Indian Railway Catering and Tourism Corporation Ltd (IRCTC) over the latter’s notice to terminate their joint venture that operates the pan-India super luxury tourist train, Maharajas’ Express.

The equal-stake joint venture, Royale Indian Rail Tours Ltd (RIRTL), was launched in March 2010.

C&K officials declined to comment on the matter as it is sub-judice. However, in a filing with the Bombay Stock Exchange, the company said that the Delhi High Court, in an interim order, has directed IRCTC to maintain status quo on the venture.

The C&K plea had argued that the notice served by IRCTC was illegal as its consent was not obtained before terminating the agreement.

The court has sought a response from IRCTC on the matter and a hearing has been scheduled for today.

C&K officials had earlier said that RIRTL has a long-term lease of 15 years for operating the Maharajas’ Express tourist train in the country.

Banking on the project, C&K said it had invested `30 crore for its stake in the JV and has been aggressively promoting the product in the international markets, especially as high business season starts in October till early 2012. With 23 coaches, the luxury train has a passenger capacity of 84.

The train has four distinct configurations and features five deluxe cars, six junior suite cars, two suite cars and a presidential suite that occupies one entire car.

Itineraries offered by it include the Celestial India Tour, the Classical India Tour and The Princely India Tour.

The cost per journey for various itineraries ranges between $5,600 per person on a twin-sharing basis to $20,000 in a presidential suite.

Tata Global hikes stake in Rising Beverages of the US

This story first appeared in DNA Money edition on Thursday August 11, 2011.

Tata Global Beverages Ltd has increased stake in The Rising Beverages Company LLC through its UK subsidiary.

Rising Beverages is a US-based performance beverage and bottled water manufacturer that sells products under the brand Activate.

Tata Global, the world’s second-largest tea company, had in October last year made a $21 million investment in the US firm for an undisclosed minority stake.

“During the first quarter of the current financial year, our international subsidiary has increased investments in Rising Beverages. Our holding in the company currently stands at 43.1%, calculated on a fully diluted basis. The subsidiary also has an option to further increase the stake in the future,” said Percy Siganporia, managing director, Tata Global Beverages Ltd.

“The incremental investment has been made based on achievement of certain milestones set while making the earlier investment,” Siganporia said.

He did not disclose the details of existing and incremental investments made in the company or comment on the possibility of acquiring a controlling stake going forward.

In another development, Tata Global has discontinued the TiON brand, which the company launched in Chennai sometime in 2009, marking its foray into the cold beverages segment.

“The product did not meet the set matrix envisaged by the management at the time of its launch and hence a decision was taken to drop it from the portfolio of products in the Indian market,” said Siganporia. The brand was pulled out of the market last quarter, he said.

Tata Global’s current offerings in the Indian market include Tata Tea, Tetley and natural mineral water brand Himalayan.
Owing to increased volatility in the commodities market, the company had taken a single-digit hike in one of its products, Tata Tea Premium, towards the end of June. The impact of this price increase, according to the company management, will be seen in the coming quarters.

For the first quarter of this fiscal, Tata Global’s consolidated net profit was up a whopping 253% at Rs161 crore even as consolidated operating income rose just 6% at Rs1,467 crore.

The profit growth was mainly on account of an exceptional gain of Rs89 crore from sale of non-core assets —- sale of investments made in stocks of group and non-group companies.

“The growth in business has been witnessed primarily because of the volumes, while value growth has been very minor at present. However, with the increase in prices in June this year, we will start seeing some value growth happening post second quarter,” said Siganporia.

Asked if the company was looking at introducing any of its international brands in the Indian market, he replied in the negative.

The company’s international portfolio includes brands like Good Earth and Eight O’clock coffee.

Siganporia also did not comment on the status of the company’s joint venture with Pepsi, saying the details would be announced in due course.

Tata Coffee talks supplies with Starbucks

This story first appeared in DNA Money edition on Wednesday August 10, 2011.

Tata Coffee is at an advanced stage of discussion with the Starbucks management to start manufacturing coffee for their retail sales.

“We are in talks with Starbucks management for a manufacturing arrangement, Hameed Huq, managing director, Tata Coffee, said.

“This basically means all coffee meant for retail sales by Starbucks will be produced and packaged by us. While talks are at advanced stage it will be difficult to put a timeframe as to when this deal will get concluded.”

Huq, however, did not specify if the manufacturing for retail sales will be specifically for the Indian market or include some of Starbucks’ international markets as well.

The deal, according to sector analysts, is in line with the Tata Coffee management’s strategy of building long-term relationships with coffee brands globally.

MD Kumar, executive director-finance, Tata Coffee, categorically said that the company is aggressively working towards becoming the preferred brand (of coffee manufacturer) for all the private label coffee brands globally.

“It’s an approach to put in place a more successful and sustainable business model without getting into branding ourselves. The idea is to be the brand behind the brands, build relationships with private labels and ensure continuous supply of coffee to established/leading brands globally,” said Kumar.

On the instant coffee front, the company is looking to expand current capacity from 6,000 tonne to over 8,000 tonne in the immediate future. The overall plan however, according to Huq, is to double the current capacity to 12,000 tonne within this financial year.

“We are building capacity at the Madurai plant which will see capacity addition of 2,000 tonne very soon. The overall capex required for this will be to the tune of Rs50 crore,” said Huq.

Having helped some of the Russian and Japanese coffee brands with their packaging in addition to manufacturing their requirements, Tata Coffee is also looking to set up a few packaging units in the international market.

“The idea is to save on the freight cost, create efficient logistics management and be able to make timely supplies to markets like Europe, Africa and Russia and Japan. Going forward we will be looking to set up a packaging plant in Europe to start with and a second one in Russia if the situation demands then,” Huq
said.

Tata Coffee’s profit after tax atRs12.92 crore was up 127% compared to the same period last year while its turnover at Rs120 crore was up 29% from the corresponding period last year.

Shangri-La to debut in Mumbai by year end

This story first appeared in DNA Money edition on Friday, August 05, 2011.

After seeing numerous delays since 2009, the Shangri-La Hotel is finally set to debut in Mumbai by the year-end.

Phoenix Mills Ltd (PML), the asset owning company, had earlier planned to soft-launch the property at its Parel compound with 50% inventory in the second quarter of the last fiscal.

However, the company ran into problems with one of its contractors and the work suffered till a new contractor was appointed.

Work resumed towards the end of 2010 and PML is now optimistic about handing over the hotel to the management company, Shangri-La Hotel and Resorts, for a soft launch by December 2011.

Shishir Shrivastava, group CEO and joint managing director, PML, told DNA that the company will be handing over the hotel’s public areas to the management company by September.

“The hotel will be opened in a phased manner and the soft launch is likely by December. We are targeting to open with three restaurants, a little over 50% of the overall guestroom inventory and banqueting space. Work on the balance guestroom inventory will continue and is likely to be completed by April 2012,” said Shrivastava.

PML wants to hit the market in time for business season and achieve efficiency in cost of operations. It expects the average room rates during the soft launch to be above `10,000 for a night’s stay.

Shangri-La, which would be soft-launched with 250 guestrooms, would have 410 rooms and 23 serviced apartments when fully operational.

The property is being developed by Pallazzio Hotel and Leisure Ltd, a special purpose vehicle of Phoenix Mills. The hotel cost is over Rs700 crore, of which Pallazzio has already pumped in `483 crore as equity, while the balance is debt.

“We have invested close to Rs625 crore as of now and additional investment of Rs175- 200 crore will be made to complete this property. The equity part has already gone in and we are now drawing down the debt component as and when required based on the extent of work completed,” he said.

Pune-based Avinash Bhosale Group is among the investors in Pallazzio Hotel. It holds an instrument that will convert to 27% stake at the time of maturity. “The conversion is time bound and is not linked to any performance parameter. It will happen in April 2015,” Shrivastava had earlier said.

PML’s other hotel projects at Kurla (Mumbai), Chennai, Pune and Agra are also held under different special purpose vehicles with investments by Phoenix Hospitality, a PML group firm. PML has already signed management contracts with Marriott International for its Kurla and Agra hotels.

For its Pune hotel, PML has signed a letter of intent with a international hotel chain. Industry sources said the hotel is likely to be operated by Hilton under one of its upscale brands.