GIC is in a plan to obtain stakes of GVK promoter group in Indian Hotels joint venture.

By Abhay Shah, Realty Quarter

The Government of Singapore Investment Corp (GIC) is planning to strengthen its position in the Indian real estate and hospitality space by acquiring GVK promoter group stake in Taj-GVK Hotels and Resorts as the sovereign investment vehicle of the South East Asian country.

GIC is expected to mandate the Indian partner to carry out the operations and already has an investment platform with Indian Hotels, Tata Group firm and owner of the Taj. Following GVK’s talks with Fairfax, the Singaporean fund joined the fray to ensure that sales did not reach pace.

“Talks are currently underway and exploratory. To reinforce its balance sheet, and concentrate on its main infrastructure business, GVK is attempting to decrease its debt burden. They are selling their holdings at the airport in Mumbai and did the same in Bangalore a few years ago.”

Taj-GVK has Rs 1,182.76 crore market capitalisation as on Wednesday’s closing price, and the GVK’s stake is worth about Rs 307.5 crore. No comment was received by the GVK and Indian Hotels. A mailed question to GIC was unanswered on Tuesday.

In 2010 GIC invested in the energy resources of GVK, together with Actis. However, the project came wrong and the investors were extended by the Hyderabad-based listed entity shares. As of March 31, GVK having net debt of Rs 11,458 crore is looking into methods of selling its non-core businesses.

Established in 2010, Taj-GVK has now seven countrywide 5-star properties, including four in Hyderabad and one each in Chennai, Chandigarh and Mumbai where Taj-Santacruz is operating near the airport.

Both the promoters hold 25.52% each in the company, with some individuals from GVK Group owning an additional 23.9%.

In May of this year, IHCL announced that a Rs 4,000 investment platform for three years with GIC has been set up to obtain luxury, high-end, and upscale segments in India. These hotels will be owned by special purpose vehicles which are financed equally with debt and equity. The local company would be put in 30% equity, with GIC to be brought by 70%.

In addition to the state capitals, IHCL and GIC schedule for acquisitions in the top ten towns in India. IHCL plans to sell the non-core assets as a part of its Aspiration 2022 strategy to reduce ownership.

“The growth is a significant component of Aspiration 2022. Half such growth is anticipated to arise from fresh resources and contracts for management and the monetization of current hotels. IHCL received a monetizing Rs 200 crore last year,” an executive of the Tata Group said.

One of the main industries in the service sector is the Indian hospitality industry. CARE Rating in January stated, “A room income level of approximately 10-12% CAGR over 5 years should rise in the hotel industry.”

In the last year, the stocks of the Taj – GVK decreased by 12.68%, underperforming the benchmark Sensex, which gained 7.8% in the period.