The stake divestment plans, according to people in the know, had to be fast-tracked as IIML's parent IL&FS got embroiled in a major financial crisis
The beleaguered Infrastructure Leasing & Financial Services Ltd (IL&FS) has kick-started the process of exiting its investments in the Indian hospitality industry.
TripBorn Inc, an Indian last-mile commerce and connectivity aggregator, said in a statement that it is acquiring 51% stake in Pravin Rathore and Mahesh Gandhi owned hospitality firm Prama Hotels and Resorts for an undisclosed sum. Post the conclusion of this transaction, TripBorn will increase its shareholding in Prama to 100% by the end of the calendar year 2019. TripBorn did not share any details about how is it going to fund this acquisition.
Prama's primary business is of investing in, owning, managing and operating hotels and related activities like food services, under its subsidiaries viz Apodis Hotels & Resorts Ltd (Apodis) and IntelliStay Hotels Pvt Ltd (IntelliStay).
An IL&FS investment arm, IL&FS Investment Managers Ltd (IIML) holds a majority stake in Apodis, which in turn owns 90% stake in IntelliStay that operates hotels across four budget hotel brands - i-Stay, Mango.Hotels, Mango.Suites and Apodis Collection.
This means IIML will completely exit its investment in the hospitality business by December-end this year.
While TripBorn did not disclose the deal size, it said in the statement that Prama Hotels & Resorts generated approximately $8.5 million in revenues for the year ended March 31, 2019. It added that the hotel company generated positive cash flow from operations in this period.
IntelliStay has been looking to onboard a strategic investor for some time now. On the last count, it had 19 operational hotels, 13 in projects stage and 24 at a letter of intent (LoI) stage. While the business is yet to become profitable, the IntelliStay management was expecting to close the year with Rs 44 crore in net revenue to books and Rs 7 crore in earnings before interest, tax, depreciation and amortisation (Ebitda).
"This basically translates into 15.9% of the revenues. If we apply the same ratio to the Rs 59.50 crore (Rs 70 for a USD) revenue as per TripBorn, the Ebitda comes to around Rs 9.5 crore. Companies generally look at a multiple of 10, 12 or 14, depending on how they want to value the overall business. Taking a multiple of 12 in this case, the total deal value should be Rs 113.52 crore assuming there is no debt on Prama's books. That's revenues of approximately Rs 6 crore per hotel, based on their portfolio of 19 operational hotels," said an industry expert requesting not to be quoted.
The stake divestment plans, according to people in the know, had to be fast-tracked as IIML's parent IL&FS got embroiled in a major financial crisis. Accordingly, talks with potential suitors were initiated with the hope of closing the transaction soon.
DNA Money had first reported this development in its November 28, 2018 edition. This was followed by another report on December 11, 2018, stating that Wyndham and StayWell were in talks to acquire the stake in IntelliStay.
Talks with the two potential suitors haven't progressed well considering TripBorn has already sealed 100% acquisition of Prama eventually buying out all the stakeholders in the company and its subsidiaries viz Apodis and IntelliStay.
Calling it a transformational opportunity, Deepak Sharma, chief executive officer of the Ahmedabad-headquartered company TripBorn, said the addition of the Prama team and their rapidly scaling hotel platform is an incredibly unique opportunity to quickly penetrate a massive and growing market. "Our plan is to leverage the TripBorn technology platform to drive rapid growth in bookings in new emerging user markets and help meet the growing demand of this market. We are optimistic that this acquisition could drive annual revenue growth in excess of 100% each year over the next two-three years alone," he said.
The Prama acquisition, according to TripBorn, will be synergistic with its offline-to-online and online-to-offline (O2O) business model by providing instant access to a large and growing inventory of hotel rooms for online booking. This is complementary to TripBorn's existing rail and bus ticket booking client base, the company said in a statement, adding that the transaction is expected to add immediate scale to the business within India's growing hospitality segment.
Mahesh Gandhi, founder and managing director, Prama Hotels & Resorts, said, "Intellistay will continue to add new hotel properties under its brands, as well as convert both existing and new properties. We believe the timing is ideal given India's substantial and expanding consolidation opportunities, as well as the favourable arbitrage between private and public multiples in the space.
"TripBorn's O2O strategy will help broaden our reach in over 200 markets within India. We also look forward to benefiting from greater access to the US capital markets in order to accelerate both our organic and inorganic growth strategy through highly accretive acquisitions and value-added partnerships," said Gandhi, adding that the company is well positioned at the forefront of the industry and will establish a dominant position in the market going forward.
- 51% – TripBorn will buy in Prama Hotels and Resorts
- 100% – It plans to acquire by 2019-end
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "IL&FS")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}