Leela Group sells hospitality assets to sovereign funds

Leela Group sells hospitality assets to sovereign funds

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In one of the biggest deals in the Indian hospitality industry, sovereign wealth funds of Abu Dhabi, Qatar and Malaysia are vying with each other to acquire two of India’s marquee properties for about US$322 million, said a news report.

All the three funds are big time investors in leisure and tourism assets.

Abu Dhabi Investment Authority, the world’s third biggest sovereign fund with US$627 billion of assets, recently bought Australia’s largest owner of hotels, Tourism Asset Holdings.

Similarly, Qatar Investment Authority, which owns luxury department store Harrods, plans to expand the brand into hotels. And Khazanah Nasional owns themed resorts in Malaysia.

Backed by their cash-rich governments, the funds are in discussions to pick up 74 per cent stake in Leela Group’s Delhi and Chennai hotels for over Rs 2,000 crore (US$322 million), the Times of India reported.

The deal, if it goes through, will also mark the entry of sovereign fund investment in the sector, it said.

The Leela chain, in which ITC Hotels holds a 12 per cent stake, has been in the red for the past several quarters, hit by business slump, competition and demand-supply mismatch.

As part of its restructuring, the group had decided to hive off the two properties into separate entities, with Leela retaining 26 per cent stake and continuing to manage the five-star hotels, said the report.

The Leela Group is ceding majority ownership in its Chennai and New Delhi hotels to pare liabilities after moving the corporate debt restructuring (CDR) cell.

Unlike an outright sale, as was done in the Kovalam hotel’s case, this time the group prefers to retain some ownership. The move is also in line with the broader industry trend where hotel ownership is separated from hotel management, it said.

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