One of the country's largest hospitality firm Hotel Leela Ventures is
looking to divest as much as 14.95% stake through a fresh issue of
shares to unnamed investor(s) besides selling non-core assets
including a major portion of a commercial office space next to its
hotel in Chennai.
The company, that runs the luxury hotel chain, has also decided to
enter into a joint development agreement with builders for developing
its own land in Hyderabad and Bangalore for residential/commercial
development similar to its recent move in Pune.
It expects to generate about Rs 950 crore from such sale of land and
joint development, which would be used for reducing its debt.
The other decision to sell a stake will bring around Rs 270 crore ($60
million) additionally as cash into the firm, according to estimates
based on current market price. The strategic or financial investor
will pick just a tad less than 15% stake, that would trigger an open
offer.
According to Vivek Nair Hotel Leela venture vice chairman and managing
director said, "the above measures will help in substantial reduction
in the company`s debt, resulting in lower interest costs. The debt was
raised to set up the Udaipur, Delhi and Chennai hotels and to purchase
the land banks in Pune, Hyderabad, Bangalore and Agra"
He further added, "with the Udaipur hotel operational in the second
half of 2010 and the Delhi hotel at Chanakyapuri already commissioned
and with the Chennai hotel opening in a few months, the company`s
turnover and EBIDTA would go up substantially".
The promoter Nair family own 54.61% stake in the company as of
December 31, 2010 that will dilute to 46.4% after the issue of fresh
shares, unless the promoters go for further fresh preferential
allotment themselves.
Other large shareholders in the company include diversified consumer
products and services firm ITC that also operates its own hospitality
business. ITC and its investment firm that manages its treasury
operations together own 11.7% stake in Hotel Leela Ventures.
Thus studying the fundamental aspect of Hotel Leela we recommend a
STRONG Buy on Hotel Leela at CMP 40 with a target of Rs 58.
Click the following link for more recommendations
http://www.smartprofit.in
DISCLAIMER:- Smart Profit has taken due care and caution in
compilation of data for its reports. The market view and investment
tips expressed on Smart Profit are in no way a guarantee either
express or implied. However, Smart Profit does not guarantee the
accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained
from the use of such information. The directors of Smart Profit may
hold a position in the recommended script.
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SUMAN JAIN
(CEO)
+919820041126
Email: sumanjain@smartprofit.in
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(Director)
+919819854402
Email: ankita@smartprofit.in
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(Research Analyst)
+919820260291
Email: dipak.mangela@smartprofit.in
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(Customer Care Executive)
+919320907684
Email: mansingh.rai@smartprofit.in
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(Customer Care Executive)
+919967394114
Email: shailesh.gowda@smartprofit.in
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