PE in­vest­ments on a rise in the hos­pi­tal­ity in­dus­try

HT Estates - - FRONT PAGE - Bidya Sa­pam bidya.s@livemint.com

The­icon­icHi­ranan­daniEs­tateis very close to ma­jor com­mer­cial of­fice des­ti­na­tions within the Powai precinct. Nes­tled amidst high-en­dres­i­den­tial apart­ments and land­marks like the Powai Lake, it at­tracts foot­falls from up­per-mid­dle-class to HNI res­i­dents. F&B is a dom­i­nant cat­e­gory in this high street with multi-cui­sine restau­rants, ice cream par­lours and a few pubs.

Me­har Chand Mar­ket, Delhi

This mar­ket is sit­u­ated near Lodhi Colony in heart of New Delhi and is more or less a ‘bou­tique’ shop­ping des­ti­na­tion for res­i­dents liv­ing around it. It in­cludes an eclec­tic mix of re­tail cat­e­gories such as de­signer stores, or­ganic gro­cery stores, quirkyap­par­el­stores, trendy­bistros and­sta­tioneryshops, among oth­ers. Me­har Chand Mar­ket at­tracts steady foot­falls as it is sur­round­ed­bythe­up­mar­ke­tres­i­den­tial neigh­bour­hood of Jor Bagh, De­fenseColony, GolfLinks and Sun­der Na­gar.

Breach Candy, Mum­bai

MUM­BAI: Pri­vate eq­uity in­vest­mentsinthe­hos­pi­tal­ity in­dus­try jumped three-fold in 2017, with trans­ac­tions worth around $119 mil­lion clos­ing dur­ing the year, in­di­cat­ing re­newed in­ter­est in the sec­tor.

Ac­cord­ing­to­dat­a­com­piledby VCCEdge, the fi­nan­cial re­search ar­mofNewsCorp.’s VC­Cir­cle, 17 pri­vate eq­uity deals were signed in the hos­pi­tal­ity sec­tor dur­ing the year, in­clud­ing ho­tels and restau­rants.

While the num­ber of deals re­mained the same, the size of trans­ac­tions jumped sig­nif­i­cantly from the pre­vi­ous year. Deals worth around $43.58 mil­lion were signed in 2016, the data shows. Ho­tel con­sul­tants and own­ers­saidthatwhilethep­aceof in­vest­ment has been slow, there has been a grad­ual in­crease in in­ter­est frompri­va­tee­quity­firms as the sec­tor has been show­ing signs of re­cov­ery in the last two years. Ho­tel deals, in­clud­ing merg­ers and ac­qui­si­tions, are likely to pick up­fur­therin2018as sev­er­al­premi­umhotel­prop­er­ties are up­for­sale andafewdeal­sare likely to close in the com­ing months. For in­stance, while the Le­monTree­hotelchain­will­soon launch a$700 mil­lion ini­tial pub­lic of­fer­ing, other mar­queep­rop­er­ties such as Delhi’s Taj Mans­ingh, AsianHo­tel andHotelCon­naught have been put up for auc­tion. Be­sides, four prop­er­ties of Aloft Ho­tels in In­dia, com­pris­ing638­rooms, are­up­for­sale. One of the big­gest deals was closed in Septem­ber, when Gold­man Sachs-backed Samhi Ho­tels bought out Premier Inn’s In­dia port­fo­lio for aroundRs250crore. Other pri­vate eq­uity deals in the sec­tor in­clude Gold­man Sachs GroupInc.’s in­vest­mentinDelhi- basedAzureHospi­tal­i­tyPvt. Ltd, which runs a restau­rant chain un­der the Ma­m­ago­to­brand, and Ga­jaCap­i­tal FundIIpick­ing upa stake in Mas­sive Restau­rants Pvt. Ltd. “In terms of pri­vate eq­uity in­vest­ments, 2017 was markedly­bet­terthan2016. While thereisan­im­men­sein­ter­est­from PE­firms, the chal­lenge is find­ing the right kind of port­fo­lio. PE firms donot­want­toin­vestinsin­gu­lar as­sets,” said Sau­rabh Gupta, man­ag­ing­part­ner(in­vest­men­tad­vi­so­ryan­das­set­man­age­ment) at Hote­liv­ate, a ho­tel con­sul­tancy firm.

Thep­ri­va­tee­quity­in­ter­esthas been­driven­bythe­growingoc­cu­pancy and also a grad­ual im­prove­mentin­room­ratesover the last two years. “Ho­tels have changed from be­ing seen as a high­lyriskyand­non-de­pend­able in­vest­ment (plat­form) to a very sta­ble cash flow-based busi­ness andthis hashap­penedinthep­ast two years,” Gupta said.

Man­deep Lamba, manag­ing direc­tor (ho­tels and hos­pi­tal­ity) at real es­tate con­sult­ing fir­mJLL In­dia, agreed that there has­been grow­ing in­ter­est from pri­vate eq­uity in­vestors in the last few years. Ac­cord­ing to him, ho­tel deals val­ued at al­most $1 bil­lion are likely to take place in 2018. “It could be one of the sig­nif­i­cant years for ho­tel trans­ac­tions,” he said. Ac­cord­ing to a De­cem­ber re­port byrat­ing agency Icra Ltd, pri­vate eq­uity and ven­ture cap­i­tal in­vestors’ in­ter­est in ho­tels has re­vived in the last past 15-19 months and is likely to pick up fur­ther. “Another­areawhich­has at­tracted high PE in­ter­est is the bud­get ho­tel ag­gre­ga­tor space, with play­ers like Oyo, ZoRooms, Stayzilla, Rooms On Call and Treebo,” PavethraPon­niah, vicepres­i­dent, cor­po­rate sec­tor rat­ings, Icra, wrote in the re­port.

Ben­galuru-based Brigade En­ter­prises Ltd, which hived off its hos­pi­tal­ity busi­ness­in­toasep­a­rate divi­sion, is also look­ing to part­ner with pri­vate eq­uity in­vest­ments to ex­pand its busi­ness, said Vi­neet Verma, ex­ec­u­tive direc­tor, Bri­gadeHospi­tal­ity Ser­vices Ltd.

MINT/PHOTO

Ho­tel deals are likely to pick up fur­ther in 2018

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