The move comes after Indian diversified conglomerate ITC Ltd, alleged oppression and mismanagement by HLVL management in its Rs 3,950 crore slump sale transaction with the Canadian private equity firm
Debt-ridden Indian luxury hospitality chain Hotel Leelaventure Ltd's (HLVL) troubles do not seem to be ending anytime soon. Securities and Exchange Board of India (Sebi) has directed HLVL not to proceed with the sale of its hotel and other assets to Brookfield and its affiliates. The move comes after Indian diversified conglomerate ITC Ltd, alleged oppression and mismanagement by HLVL management in its Rs 3,950 crore slump sale transaction with the Canadian private equity firm.
In a letter to the hotel company, Sebi said it has received two representations about allegations against HLVL from minority shareholders – ITC Ltd and LIC of India.
"...Representations/allegations against HLVL, as received by Sebi in relation to the issue, concerns the interest of the investors in the securities market...While these representations are being examined by Sebi, in view of the paucity of time involved and in the interest of investors in securities, you are advised to ensure that none of the transactions proposed in the postal ballot notice (PBN) dated March 18 are acted upon till further directions from Sebi," said the market regulator in its letter (as per regulatory filing) to Hotel Leelaventure.
HLVL had, on March 18, 2019, announced the sale of its hotel assets in Bengaluru, Chennai, Delhi, Udaipur and a land parcel in Agra to Canadian investment fund Brookfield for Rs 3,950 crore. The deal also included intellectual property, brand 'Leela' and a few other services. HLVL had sought shareholders' approval for this special resolution the voting for which ended on April 24, 2019.
The new developments now mean that the asset sale transaction will get delayed until Sebi gives it a go-ahead after it has examined the details. In fact, ITC had also approached the National Company Law Tribunal (NCLT) on this deal and it is learnt from sources that NCLT has also sought clarifications from HLVL and JM Financial/ ARC pertaining to this acquisition. And based on the details/ clarifications the case is likely to be heard sometime in June or July this year.
Commenting on the entire turn of events, Mandeep Lamba, president (South Asia) - HVS Anarock, said, the hospitality sector is never bereft of excitement.
"The new development in the Leela Hotels transaction status is likely to delay the relief for Leela just when the much-aggravated pain was about to settle. While the sale process must essentially be free and fair, in the best interest of the industry and all concerned parties, we hope that the transaction is consummated quickly and does not get into a long drawn legal tangle which will serve no one's purpose," he said.
Industry experts who spoke to DNA Money requesting anonymity said that ITC is miffed because JM Financial acquired 26% shareholding. "This diluted ITC below 10% and this was done without their knowledge," said one of the experts.
Questions are also being raised about ITC's rationale behind moving to Sebi and NCLT against the HLVL's slump sale to Brookfield and its affiliates. In fact, a section of the Indian hospitality fraternity is of the view that the Sebi and NCLT move by ITC could be its attempt to get hold of HLVL, in which the cigarette-to-hotels major owns a 7.92% stake.
ITC has, however, continuously maintained in the past that it never had any such takeover intentions and that the investment in HLVL is purely a part of its treasury operations akin to its 14.98% shareholding in The Oberoi Group's luxury hotel chain East India Hotels (EIH) Ltd. In fact, ITC arm Russell Credit Ltd also owns about 1.15% stake in EIH Ltd.
But with its recent takeover of the Park Hyatt Resort and Spa in Goa, has there been a change in ITC's treasury operations' stance? "We'll have to keep a close watch on how things unfold from here," said a top hotel industry executive.
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- Rs 3,950 crore – Hotel Leela was to be sold for, to Brookfield
- 26% – Shareholding acquired by JM Financial in Hotel Leela
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