Leela Venture may foray into boutique hotel space

Luxury hospitality chain Hotel Leela Venture Ltd is understood to be exploring options of carving out a hotel venture in a strategic niche space straddling the business hotel model and the luxury segment, according to sources familiar with the development.

The ‘boutique hotel’ chain is said to be the brain child of Amruda Nair, the 30-year-old scion of The Leela hotel chain, and granddaughter of Leela Venture founder Capt C P Krishnan Nair.

Sources reaffirmed that Amruda Nair, who heads the corporate assets management arm of Leela Venture, has been drawing up plans for the boutique hotel chain through a tie-up with a Qatari investor who will hold 51 per cent in the new hospitality venture.

“The Qatari investor will hold 51 per cent in the venture with Amruda Nair owing the remaining 49 per cent in the new venture which will target the business leisure traveller in non-metro destinations. The first boutique hotel is planned in Goa by the middle of 2015,” sources said.

Earlier, Leela Venture is also understood to have been in strategic talks with a few private equity players as part of exploring various investment options for the venture, sources said, adding, “They are looking at positioning the new venture to attract the high-volume business traveller as well as high-end luxury customer which will offer the best of both worlds in terms of service. It will be a boutique hotel chain in the true sense.”

“They should be targeting an ARR (Average Room Revenue) of Rs 7,000-8,000 through this venture,” they said.

Leela Hotels, in which ITC Hotels holds 12 per cent stake, has seen its fortunes tottering in the last nine quarters, with the group coming under heavy debt burden, following business volumes falling and rising operational costs.

SBI, the lead banker for Leela Venture, has an exposure of almost Rs 900 crore. From just under Rs 1,000 crore in March 2007, the group’s total debt had risen to nearly ₹5,000 crore as of June this year. Of this, Rs 4,000 crore was from the Corporate Debt Restructuring (CDR) lenders.

The debt position of the company has deteriorated since 2008 as Leela Ventures sought to balance its debt-to-equity ratio by borrowing extensively to build new hotels by purchasing land.

The company’s Q2 net loss for fiscal 2015 widened to Rs 160.18 crore compared to Rs 135.18 crore in the same period last year.