IHCL books Rs 365 cr loss on Orient-Express investment

Indian Hotels Co Ltd (IHCL), the Tata Group's hospitality flagship, has taken a second write-off, of Rs 365 crore, on its investment in Orient-Express Hotels (OEH), taking the total loss on its investments in the New York Stock Exchange-listed luxury hospitality brand to Rs 670 crore.

In the last fiscal, the company had booked losses of Rs 373 crore on investments -- OEH (Rs 305 crore) and BJets Pte Ltd (Rs 68 crore).

IHCL said long-term strategic investments made over a period of time have witnessed a decline in the fair value and consequent erosion in net worth on account of global recessionary conditions.

In November last year, the IHCL board decided not to bid for OEH's 93.1% class A shares.

With the full acquisition not going through, IHCL is left with no other option but to book the losses, analysts said. "Fortunately they withdrew from bidding for the balance stake, which was a sensible decision. If IHCL would have acquired OEH fully they would have had to suffer much bigger losses," said an analyst with a domestic brokerage.

During the peak of 2007, IHCL had picked up 10% stake in OEH investing $261 million through a wholly owned entity. While the company continues to hold a minority stake in OEH, it had proposed to finance the second bid through a combination of debt and equity.

In October 2012, IHCL with Charme II Funds founded by the family of Ferrari chairman Luca Montezemolo, offered $2.63 per share in cash to acquire the outstanding 93.1% OEH stake. Subsequently, the US company wrote to IHCL communicating its inability to consider the offer.