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Goldman Sachs bets on hotels; invests Rs 441 crore in Samhi

Hotel development co to use proceeds for acquiring hospitality assets across India

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Leading global investment bank Goldman Sachs has picked up undisclosed stake in a four-year-old hotel investment and development company Samhi Hotels investing Rs 441 crore ($70 million). The new funding raised by Samhi, which bought a hotel in Ahmedabad last week for Rs 135 crore, will be used for acquiring hotel assets in India in the next 15-18 months.

According to Sonjoy Chatterjee, chairman, Goldman Sachs India, India is witnessing a steady recovery in economic activity driven by domestic demand on the back of reform momentum. "We anticipate this to lead to an upturn in the hotel sector. This investment is consistent with our strategy to invest in sectors and infrastructure that assist in the continued growth and development of India," Chatterjee said in a statement. Goldman Sachs has been an active investor in India and has deployed more than $2.5 billion since 2006.

Ashish Jakhanwala, founder and chief executive officer, Samhi Hotels, said, "Investing capital always depends on opportunities available in the market. We are not a fund and hence not constrained on the deployment of money being raised. We will invest when there is a right deal. However seeing the pipeline, we should be able to commit this capital (raised from Goldman Sachs) over the next 15 to 18 months."

In December 2014, Goldman Sachs had made an equity investment of Rs 255 crore ($40 million) in India's Vatika Hotels, part of Delhi-based real estate developer Vatika Group. The investment was made from an affiliate of the New York-based investment bank.

Samhi has thus far invested in 26 properties across various category of hotels in the country. "In fact, with the recent transaction (Rs 135 crore) we concluded for a hotel in Ahmedabad last week, we have pretty much utilised majority of the funds being raised in the past. The residual Rs 20-30 crore will get utilised in general / administrative purpose and corporate expenses.

Elaborating on the company's business model, Jakhanwala said that the focus continues to be on development, acquisition and ownership of branded hotels located in prime markets throughout India. In fact, that's one reason why Samhi also had partnered financially with global hotel groups, such as Marriott and Accor, and operators, such as Starwood Hotels and Hyatt International.

"In this regard, the funding from Goldman will accelerate our firm's platform across the country and catalyse further acquisition-led growth," said Jakhanwala.

Samhi Hotels was founded in October 2011 by Steve Rushmore (founder of hotel consulting group HVS), Ashish Jakhanwala (head of development in India for Accor India / InterGlobe Hotels) and Manav Thadani, chairman - HVS Asia Pacific. It launched operations after raising $75 million from global funds like Equity International and GTI Capital Group while also partnering (joint venture company SAMHI JV Business Hotels Pvt Ltd) with Marriott International to develop Fairfield by Marriott branded hotels in India.

The company also acquired 60% stake from French hospitality major Accor in its wholly owned subsidiary Barque Hotels that is developing a budget hotel chain (15 hotels) under the Formule 1 banner in India. Over the years, SAMHI has also raised $21 million from World Bank arm International Finance Corporation (IFC) for setting up hotels (greenfield projects) as well as acquiring hotel assets (inorganic expansion) in the country.

The company currently owns 16 hotels operating under brands that include Courtyard by Marriott, Hyatt Place, Fairfield by Marriott, Four Points by Sheraton and Formule 1. This apart, 10 hotels are under advance stages of development and due to open in the next 12 to 18 months, which will equal a collective nationwide footprint of 26 hotels with 3,900 rooms under five brands across 12 cities.

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