Sea Rock hotel caught in the middle of the boardroom battle

It was supposed to be the most iconic property once completed for Indian Hotels in Mumbai, but the Sea Rock hotel is currently in the eye of the storm following the issues raised by ousted Tata Sons chairman Cyrus Mistry in his letter to the board.

In his letter, Mistry alleged that IHCL acquired the property at a highly inflated price and housed in an off-balance sheet structure. “In the process of unravelling this legacy, IHCL has had to write down nearly its entire networth over the past three years,” Mistry said.

The Sea Rock Hotel was a fivestar property next to Taj’s own Lands End hotel along the sea in Bandra. It was acquired by Delhibased Claridges Hotel in 2005.

IHCL acquired 85% stake in ELEL, a subsidiary of Claridges, for ₹680 crore in June 2009.

The plan was to demolish the existing structure and redevelop it into luxury hotel/convention centre with retail facilities.

ELEL held a long-term lease for the land on which the 400room Sea Rock Hotel was located. IHCL had said it would fund the acquisition via a rights issue done in the previous year.

In January 2010, IHCL restructured the ownership structure in ELEL and transferred its shareholding to a special purpose vehicle, where its exposure would stand reduced to just 20%. Then in April 2015, IHCL got board nod to buy the remaining 80% stake in Lands End Properties Pvt Ltd (LEPPL, the special purpose vehicle) for ₹17 crore, making LEPPL its 100% subsidiary. But the project is yet to take off. The Sea Rock acquisition has been a drain on IHCL’s balance sheets.

According to its annual report for 2015-16, LEPPL had a debt of ₹1,403 crore, above Sea Rock’s acquisition (₹680 crore). The group has repaid around ₹693 crore during 2015-16