Restaurant Franchise Opportunities

business strategy Jul, 23 2013

Leela to Follow Asset-Light Strategy

Leela waiting for role changes from Reserve bank of India.

By Franchise India Bureau
Leela to Follow Asset-Light Strategy

Hotel Leelaventure is counting on rule changes by the Reserve Bank of India to enable it to access long-term loans at low rates of interest to finance its ongoing projects and partly retire its outstanding debt.

Mr. Vivek Nair, Chairman and Managing Director, Hotel Leelaventure, said, “The company was making progress in managing debt through its asset-light strategy and would also benefit from an access to long-term credit with relatively lower interest rates. The asset-light strategy involves the divestment of stake in a few properties, entering into management contracts and the monetisation of non-core assets such as land holdings.”

The Federation of Hotels and Restaurant Association (FHRAI) is lobbying with the authorities to give infrastructure status to all hotels of three-star grade and above category.

“We are already discussing with the government and we expect that all three-star hotels and those above that are likely to be included in the infrastructure lending list by September,” added Mr. Nair, who is also the president FHRAI.

 Mr. Nair also mentioned that “The current provision is only applicable to 4 per cent of the properties in India adding that the expanded list will benefit all hospitality firms irrespective of the location of their properties.”

Hotel Leelaventure’s total outstanding debt as of March 31 is Rs 4,602 crore, which is mostly on account of the capital expenditure incurred by the firm on developing its properties (in Delhi, Chennai, Udaipur and Goa) and its land holdings. It had funded the expenditure through foreign currency convertible bonds, which did not convert into equity because of the depressed market and appeared as debt on the books.

The company had also restructured its corporate debt, which was approved last year. It is looking to retire debts of around Rs 3,000 crore and significantly reduce its debt burden by 2014-15.

Related: Burger King, Tim Hortons parent reports increase in quarterly sales

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