More than a year after deciding to scrap their joint venture (JV) for a five-star airport hotel project in Bangalore, hospitality major East India Hotels (EIH) and construction behemoth L&T are yet to divest their stakes.
The Oberoi-led EIH and L&T have failed to find a buyer for their much-delayed L&T Bangalore Airport Hotel Ltd (L&T-BAHL), a special purpose vehicle (SPV) that was floated to build the 321-room five-star airport hotel with conference facilities.
The plight of L&T-BAHL is linked to the prospect of excess hotel room capacity in Bangalore.
More than 4,000 hotel rooms were earlier slated to go on stream in Karnataka’s capital this year. But, with economic slowdown pinching business travel, several other developers, too, are starting to go slow on their hospitality projects.
Hotel majors such as Hilton, Ritz-Carlton, Hyatt and JW Marriott have all deferred their Bangalore projects. EIH’s own planned project in the city is believed to have been delayed.
The value of the assets of the SPV (L&T-BAHL), which owns lease-hold of four acres and 19 guntas of land of which it had taken possession, has been pegged at `382 crore, as per EIH’s disclosure.
EIH and L&T won the bid in 2006 for development and operations of the business hotel near the Bengaluru International Airport at Devanahalli (which commenced operations way back in 2008), beating competitors such as the Accor group and Emaar-MGF.
The L&T arm picked up the majority stake. The Oberois got 26% and were to manage the property.
Till March, EIH Ltd had invested about Rs18.72 crore in the equity of the SPV, consisting of 1.87 crore shares of Rs10 each.
Over the past six years, L&T UIL, the real estate arm of L&T in the JV, has created a portfolio of projects for
the IT, IteS, hospitality and residential sectors.
Although the ground work, including possession of land, has been completed already, the L&T-BAHL project, requiring a capex of Rs250 crore, has not seen much progress over the years.
The first phase of the project, comprising 158 rooms spread over the SPV’s existing land holding, was supposed to get commissioned a year back.
But, in early 2011-12, the Oberois and the L&T board had “decided to terminate the joint venture, by transfer of the shareholding to a prospective buyer. The negotiation with the buyer is still continuing”, EIH has said in its just released annual report for fiscal 2012.