Taj-owner to raise up to Rs 700 crore

MUMBAI: Indian Hotels Company , owner of Taj hotels, is raising between Rs 500 crore and Rs 700 crore through nonconvertible debentures, of five years and 10 years tenures, to refinance a portion of its existing debt.

The instruments, being offered at discounts to face values , will carry coupon (interest ) rate of 2% per annum. However, when the discounts are taken into consideration, yield-to-maturity works out to 9.25% for the 5-year papers and 9.85% for the 10-year papers . The NCDs have been rated AA+ by two credit rating firms — CARE and Icra.

A person familiar with the development said the proceeds would be used to refinance a part of IHCL's existing debt as well as refinance a loan of its US arm. On Wednesday, the IHCL stock closed at Rs 94 on the BSE, down 2.13%.

The hospitality arm of the Tata group, which has a consolidated debt of over Rs 4,000 crore, is trying to deleverage its balancesheet and has been looking at solutions to migrate its short term debts into a long term ones, and also reduce its cost of borrowings and improve its liquidity

Some months ago, IHCL acquired a controlling interest in Mumbai's Sea Rock Hotel for Rs 680 crore. The plan is to demolish the existing hotel property and undertake a new development that would be integrated with its adjacent property — Taj Lands End. It also opened the Taj Pierre in the US after spending $100 million on its renovation.

Aggressive spending on acquiring assets, funded largely through debt, have pushed up its debt to equity ratio, pointed out analysts tracking the hotel company.