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Nepal billionaire plans Rs 1,000 crore India fund

Chaudhary Group to invest the corpus in buying distressed hotel properties in India, rope in investors; has identified 5-6 hotels.

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Binod K Chaudhary
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Nepal's multinational conglomerate Chaudhary Group (CG) is looking to launch a Rs 1,000 crore fund that will invest in distressed hotel assets in India. According to Binod K Chaudhary, chairman of the $1.16 billion business house, plans of the investment vehicle are at an initial stage. Rahul Chaudhary, executive director, CG Corp Global and CG Hotels & Resorts, told DNA Money, “We will be the seed investors putting in 20% of the equity corpus, and rest money will be raised from other investors into the fund. We will follow a 50:50 ratio between equity and debt for this fund that will invest in distressed and brownfield hotel assets across India.” The group's hospitality business in India - CG Hotels & Resorts - will invest Rs 100 crore as 20% contribution to the fund that will have a total equity of Rs 500 crore. Another Rs 500 crore will be raised through debt, taking the total fund size to Rs 1,000 crore. The capital will be raised in the next six months and deployment will happen over 12 months thereafter, he said.

The fund will look at a combination of assets that will be fully owned by the fund or through an equal joint venture structure. While the sweet spot (investment per transaction) will be around Rs 100 crore, there could be deals where the fund would pick up 50%. “I think we should be able to acquire between 10 and 15 hotels in the three- and four-star category. So a hotel with 100 rooms at an average of Rs 90 lakh a key available at an attractive valuation will be the kind of projects that we will look at. We believe most money in the hospitality business can be made when you sell. So our objective is to get into these assets, create cash flows, build some revenues and then sell,” said Chaudhary, adding that five-six properties have been identified already and talks will begin once the fund is active.

CG Hotels & Resorts is also in the final stages of picking up a majority stake in Mumbai-based hotel management company Concept Hospitality that is promoted by industry veteran Param Kannampilly. Among eight brands being offered include Glow by Zinc, Zinc Journey, Zinc Living, Zinc City, The Fern, The Fern Residency, Beacon Hotels and Resorts. The timeframe, Chaudhary said, for buying out Lighthouse Fund was set as March 2017. “It's pretty much in the process of closing as the agreement has been done already. The transaction is linked to year-end numbers being clocked in by Concept Hospitality hence the payout is yet to happen. Once the deal is concluded, we will have 51% majority in the company. Param and his son Suhail will continue to work with us in this venture,” said Chaudhary.

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