Hotel Leela

Hotel Leela was in the news yesterday after the company announced that it sold off its IT Park building in Chennai to Reliance Industries Ltd for a consideration of Rs 170.17 crore. The company plans to reduce its debt by Rs.2750 crore in the near future. Its total debt currently stands at Rs.4750 crore.  It is in talks with financial investors for selling at least 70% stake in its luxury properties at Chennai and Bengaluru and this is expected to fetch Rs 2,000-2,200 crore. It plans to create a Special Purpose Vehicle to facilitate this sale and would not be going in for an outright sale.

The company did not have a very good Q3FY13 with its net loss widening to Rs.97 crore from Rs.92 crore in Q2FY13. Listless occupancy, which is typical of the hotel industry in Q2 and Q3 affected the performance. Its revenue rose 39% (QoQ) at Rs.183 crore. But its interest outgo at Rs.118 crore which is 64% of the revenue earned plus the operating costs at Rs.131 crore pushed the company into the red. Things are tough for the company mainly on account of its debt and it is doing its best to pare it down. It has shelved a plan to build a luxury hotel at Banjara Hills, Hyderabad, in its 3.85 acres of land and instead proposes to sell it now, expecting it to fetch around Rs.125 crore. In Pune too, it has shelved plans to build luxury hotels, and it has decided to sell or jointly develop the land of 34,102 sq. m that is expected to fetch Rs 150 crore. And with being a part of the CDR programme now, promoters will infuse Rs 200 crore of which Rs.100 crore has already come in and another Rs.100 crore will come in during current quarter. FY14 could see the company emerge out of this tight situation.