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Vivek Nair, Leela: Need US $160 million to expand, retire debt

Leela Hotels is planning to raise US $60 million to fund its expansion and reduce its enormous debt. US $100 million will be from Foreign Currency Convertible Bonds (FCCB) while US $60 million will be via a Qualified Istitutional Placement (QIP) issue.

Speaking to TV channel CNBC-TV18, Vivek Nair, vice-chairman and managing director at Hotel Leelaventure said the two financial instruments will be place seperately, though both will be "brought out before March 31, 2010".

"The objective of the FCCB and both these issues would be to fund the expansion of our property and to reduce debt," he said.

For the Chanakyapuri Delhi project under construction, Leela is making use of the new 2.25 FAR against the original FAR of 1.5 increased specifically for the Commonwealth Games. This allows for another 120 rooms for which Nair is seeking more funds.

The Chanakyapuri project is already India's most expensive hotel under development. Company sources have disclosed that the project cost is in the region of Rs 1,150 crore.

"Secondly, we would like to utilise our funds to reduce our debt on the books. These are the two objectives for this issue," Nair said.

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Leela's promoters, the Nair family, are also planning to increase their holdings this financial year. "We have 53% of total equity and we can go to 55% by March 31 this year which we plan to do," said Nair in response to a question on ITC's increasing interest in his company.

Leela's Q3 '09 performance has been stellar with the company posting a net profit of Rs28 crore and a net income rise of 5%.Click here for the full article

Nair attributes this to a range of issues. "After the economic downturn and November 26 incident in Mumbai, the IT centric destination like Ahmedabad, Chennai and Bombay to extent and the biggest is Bangalore found a great decline in occupancy levels mainly because the IT companies in the US and Europe decided to cut down on travel. For our hotel, there has been the best performing hotel in India for the last four year with the highest average room rate of about Rs18,000-19,000.

With 85% occupancy of about 80-85%, the Dip being weekends when the foreigners go back but now its come down to Rs13,000 which is the average daily rate. This is a marked reduction from the Rs18,000 figure we had earlier. The good news is that occupancies have gone up to about 65-70%. So the revenue per available room has gone down compared to the same period last year. However, we are still operating on 50% gross operating margins. Hence, there are healthy contributions to our internal accruals because of that," he said in the TV interview.

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Source: CNBC-TV18/Moneycontrol.com