If ITC raids, Mukesh Ambani will help me, says Leela chairman

Hospitality veteran and Leela Group chairman CP Krishnan Nair, who is set to retire from active management in June, on Monday said he will consider partnering Mukesh Ambani if ITC mounted a hostile takeover bid.

“If at all there is a threat from ITC, Mukesh is available... If at any point of time I want (a partner), Mukesh will be my ideal partner,” Nair said, speaking to reporters after opening the doors of his 260-room Leela Palace Kempinski in Delhi to guests.

ITC has been slowly increasing its stake in Hotel Leelaventure Ltd. As on December 31, 2010, ITC and its investment arm Russell Credit together held 11.7% stake in Hotel Leelaventure.
Nair said that while the Leela Group did not expect ITC to make a hostile bid, “You never know in the corporate relationships.... In such a scenario, friends will come to help.”

Interestingly, Mukesh’s Reliance Industries had last year picked up 14.8% in another rival, EIH, which operates Trident and Oberoi properties across the country.

Leela Group clarified later in the day that Nair’s statement was made in response to a hypothetical question. “It was a casual remark based on the relationship he has enjoyed with the Ambani family for over four decades and therefore, should not be construed as any definitive measure being planned or undertaken by the management,” it said.

For a man who ventured into the hospitality business at the age of 65, takeover threats are par for course.

Now 90, Nair has declared his intention to retire from active management by June this year and let sons Vivek and Dinesh take over. At present, Vivek Nair is the vice-chairman and managing director, while Dinesh Nair is the joint managing director of the company.

“I have already put my will in place. The family will continue to run the business together. My sons will have equal stake in the company and if at all, any one of them wants to exit, then the first right to buy the stake will be with the other,” Nair said.

He also said that his grandchildren were already involved in the business and would be elevated to the level of executive directors when the change of guard takes place in June this year.

Granddaughter Samyukta Nair, for one, is spearheading ‘The Leela Garden’ project where 30 budget hotels with 30-40 rooms each will be built across the country.

However, several challenges remain, the first being to make the Delhi property viable. All estimates point to Delhi’s Leela Palace Kempinski as the most expensive hotel ever built in India. Nair has spent Rs1,700 crore on the 260 rooms and suites in Delhi, taking the cost of each room to a whopping Rs6.53 crore.

A night’s stay at the Leela doesn’t come cheap — peak season room rates are around Rs25,000, more than those of rivals The Oberoi and ITC Maurya — though Nair dismissed any talk of overpricing, saying people who want his kind of hospitality are almost always ready to pay for it.

Then, the Leela Palace Delhi has been funded primarily through debt and the promoters are already talking of raising funds through multiple routes, including stake sale to private equity firms.