Leelaventure to raise Rs 600 cr through preferential issue

Hotel Leelaventure will issue preferential shares to raise Rs 600 crore by June-July.

The hotel company will also raise another Rs 950 crore through the sale of one property in Chennai, besides three other land sites, to partly reduce its debt of Rs 3,800 crore.

“We plan to make a preferential allotment of 14.5 per cent to one or two investors who have a long-term view of the hotel industry. We would be looking at sovereign wealth funds who can be with us, and also invest in new projects that can be managed by us either in India or abroad,” Hotel Leelaventure's Vice-Chairman and Managing Director, Mr Vivek Nair, told

Business Line , adding that the proposal had been cleared by the company's board and shareholders. In the process, the promoter holding in the company will come down to 51 per cent from the present 55 per cent, said Mr Nair. However, the company plans to bring it back to 55 per cent in due course through a creeping acquisition, he added.

FCCBs discontinued

He said the decision to float preferential shares was taken as two series of the company's FCCBs (foreign currency convertible bonds) did not get converted into equity. “We have two series of FCCBs, one is for €60 million and the other is for $100 million. We had bought back substantial portion of both FCCBs. The whole idea was that both will convert into equity, and our equity will go up, and we could leverage that to raise loans for the new projects,” said Mr Nair.

However, now, Leela will be discontinuing both the FCCBs in the next two months assuming that they will not be converted. “We cannot keep going to the market seeing that it would not be converted, so [for] whatever amount [is] required to have the proper debt-equity ratio, we thought we will have a preferential allotment of shares,” he said.

Mr Nair said the investors were not willing to look at the company till now, as it did not have enough bandwidth in terms of properties. But with Udaipur and Delhi commencing operations and Chennai opening by next year, the investors are willing to look at the profitability beyond 2012-2013.

Also, the company will be selling its Leela IT Park in Chennai for close to Rs 250 crore, which will go towards debt repayment, said Mr Nair.

The company also plans to utilise its land banks in Hyderabad, Pune and Bangalore to set up luxury residences along with real estate players, he said.

The company decided on this move as it will now be looking at having hotels on management contracts rather than investing on its own. The company expects to get another about Rs 700 crore from these deals, he added.