Hotel Leelaventure board will meet to discuss fundraising

Captain CP Krishnan Nair’s Hotel Leelaventure board is slated to meet next Monday to consider plans to raise funds, as the hotel chain manoeuvres to pare debt and keep at bay its significant stakeholder ITC Ltd.

This meeting is significant in the backdrop of captain Nair’s recent statement that Mukesh Ambani, chairman and managing director of Reliance Industries, will come to his rescue if ever ITC made a hostile takeover bid. He was reacting to a query posed by a media person at the time of the launch of his brand new five star luxury hotel in Chanakyapuri, New Delhi.

Mukesh Ambani is yet to react to this, however, Captain Nair is confident that the old ties he enjoyed with late Dhirubhai Ambani will help.

In a recent interview to DNA, Captain Nair has alluded to “two white knights.” Hotel Leelaventure is currently scouting for private equity investors to ensure necessary capital infusion in the company.

In fact, the company senior management in the past had announced their plans to raise money through private equity by way of issuing fresh equity to the tune of 14.5%. With the said exercise, Hotel Leelaventure is likely to raise in excess of Rs600 crore. The money thus raised will be used largely to retire a portion of debt on the hotel chain’s books, which is about Rs3,800 crore. The hotel chain has also decided to liquidate some of its non-core assets and use strategic land banks in Bangalore, Hyderabad and Pune for luxury residential projects. This approach, the management feels, will help them raise another Rs950-odd crore, taking the overall fund raising to over Rs1,500 crore.

On 19 April, Hotel Leelaventure increased its borrowing limits from Rs4,000 crore to Rs5,000 crore.

The promoters are also looking to shore up their stake to 60% from 54.61%. Of the overall promoter holding, approximately 24% (9.2 crore equity shares) has been pledged as of March 31, 2011.

Recently Leela Lace Software Solution, one of the promoter group companies, has mopped up Hotel Leelaventure’s 13.23 lakh equity shares from the open market for Rs5.5 crore, increasing its stake to 4.72% (addition of 0.34% stake) at an average price of Rs41.70 per share.

The company has been tightlipped about their fund raising plans. But industry sources said the management is likely to take the qualified institutional placement route for fund infusion.