Indian Hotels Company Ltd, the Tata group-owned hospitality flagship, has pulled out from managing Taj Palace Marrakech in Morocco in just over a year of taking over the mandate.
"Taj Hotels Resorts and Palaces will cease to manage Taj Palace Marrakech, owned by the private Moroccan company, JK Hotels, with effect from September 10, 2014," IHCL said in a statement, adding, "We continue to pursue our individual goals and vision. We wish JK Hotels all the very best for the future." The company has not given any specific reason behind the decision. Taj Palace Marrakech was launched in July 2013 under a management contract with JK Hotels.
The company, last year, dropped its plan to acquire Bermuda-based Orient-Express Hotels, after pursuing the offer for over a year. The decision offered relief to company's debt situation. In July this year, Samsara Properties, an offshore wholly owned subsidiary of IHCL, sold off its BLUE Sydney hotel to the Hong Kong based Hind Hotels & Properties Group for Australian $32 million.
In a statement release at that time, IHCL had said, "The divestment has been undertaken as part of the Taj group's strategy to focus on markets which are core to the group's operations, and to create liquidity to fund the company's ongoing expansion in such markets. Asia Pacific, and particularly China, have been identified as targets for expansion."
The company's overseas properties is showing signs of recovery. In the annual report 2013-14, IHCL said, "During the year, the company continued to face a challenging environment not just in the domestic market, but also across the key international markets wherein the company owns/operates hotels and/or markets that are a source of business for us. The company's hotels in the US have shown an improvement in their turnover and margins despite the continued challenges faced by the US economy. The company is continuing on its focus to improve the profitability of its US operations on priority and selectively has invested money to renovate and upgrade its hotels in Sri Lanka and Maldives in recent years."
Shejal Ajmera, research head of market research firm Crispidea, "IHCL had signed the contract with a private Moroccan company to manage the luxury hotel in Marrakech. This was a part of plan to widen the group's overseas footprint. But they had exited from a Moroccan five star hotel under its management due to some financial problems."
The company has plans to add 30 hotels with 3,700 rooms and has committed Rs 440 crore for the next three years.
"We have also seen that the hospitality sector is still facing a challenging environment and due to significant increase in supply in the coming years the pressure will increase further," she said.
In a report released by ICICI Direct about IHCL's first quarter result of the current fiscal, it said the company's debt position eroded sharply from Rs 2,055 crore in fiscal 2007 to Rs 4,647 crore in fiscal 2009 due to major expansion in the US. Indian Hotels has since then taken steps to reduce its debt by raising money through rights issue and preferential allotment of shares.
"Currently, the company's debt stands at Rs 3,323 crore for fiscal 2014, of which debt worth Rs 553 crore is maturing in fiscal 2015. IHCL has once again come out with a rights issue amounting to Rs 1000 crore to repay the debt and for room expansion," the report said.
The report also said that apart from fund raising, the company is also planning to hive off assets in strategically unimportant geographies to reduce its debt.
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