Race to acquire two hotels of Leelaventure Ltd begins again

NEW DELHI: Sovereign wealth funds, private equity firms and family offices are once again in the race to acquire two Hotel Leelaventure Ltd properties, one in Delhi and the other in Chennai. The combined deal value would be about Rs 3,000 crore, two people with knowledge of the matter told ET.

The assets are under the control of JM Financial Asset Reconstruction Co, which acquired Leelaventure’s debt two years ago when the company failed to find buyers for the properties.

Abu Dhabi Investment Authority (ADIA) and Qatar Investment Authority (QIA), the sovereign funds of the emirate and the nation, respectively, are contending for The Leela Palace New Delhi, a downtown property with 254 rooms.PE firms, Middle East family offices and a sovereign fund are said to be bidding for the Chennai hotel, which has 326 guest rooms. A successful sale will mark a further dismantling of the legacy of CP Krishnan Nair, who opened his first hotel in 1987.

“The discussion with the sovereign funds for The Leela Palace Delhi is at an advanced stage and is expected to close in the third quarter,” said one of the persons cited above. “Unlike the last time in 2014, when they were in discussions to sell the Delhi hotel, this time the response is much better and they have much superior offers.” In 2014, sovereign wealth funds ADIA, QIA and global buyout fund KKR had been in discussions on a possible purchase but talks fizzled out over valuation. Bids for the Delhi property this time around are better than last time, said the second person, who pegged the 2014 offers at Rs 1,500-1,600 crore.


“As part of our strategy to reduce debt and expand in India and overseas through an asset light approach, we are exploring various options, including the disinvestment of some properties,” a Hotel Leelaventure spokesperson said in an email to ET. “We expect to arrive at a decision in the coming months.” ADIA declined to comment.

QIA did not respond to emailed queries.

Increased FAR ratio

The valuation of the Delhi hotel has risen significantly after authorities increased the floor area ratio (FAR) – the ratio of floor area of a building to the size of the plot on which it is built — to 3.75 for hotels in 2014 from the previous 2.25. This means a higher number of floors can be built on the same plot.

Leela had acquired the three-acre Delhi hotel plot in 2007 for Rs 611 crore.

“The increased FAR would release about 2 lakh square feet for the company. Leela Palace in Delhi will have the opportunity to add over 125 guest rooms or add separate service apartments,” said the second person. “This has given a huge headroom of about Rs 300-400 crore in valuation for the entire property.”

JM Financial Institutional Securities is financial adviser on the sale of both assets. Cash-strapped Hotel Leelaventure was unable to raise Rs 2,031 crore by March 2014 through asset sales to meet corporate debt restructuring requirements. Its biggest lenders then assigned the debt to JM Financial Asset Reconstruction Co (JMFARC) with effect from June 2014.

Having acquired the debt for a little less than Rs 4,000 crore, the ARC is in charge of the properties and is looking after the asset sale. It sold Leelaventure’s Goa hotel to Malaysiabased conglomerate MetTube Sdn Bhd forRs 725 crore in September last year.

Leelaventure is operating the hotel under Leela brand for a management fee. In 2011, Leelaventure sold its Kovalam hotel to non-resident Indian businessman B Ravi Pillai’s Travancore Enterprises for Rs 500 crore.