The Taj Hotel chain of Tata Group to sell assets as the economy weakens.

By Abhay Shah, Realty Quarter

The Indian Tata Group controlled luxury hotel chain seeks to sell some assets and avoid owning new properties in order to keep debt as it slumps consumer expenditure.

In an interview, Puneet Chhatwal, Managing Director and Chief Executive Officer, said Indian Hotels Co. Ltd, Tata’s listed company operating the Taj brand, intends to dispose of certain budget inns in the nation’s non-metro regions and rent them back for a charge.

“We’re focusing on more management contracts instead of building our own hotels,” Chhatwal said. “We have no plans to sell and lease back our heritage and flagship properties.”

The steps taken by the Mumbai-based company to cut expenses and liabilities arrive at a moment when development has slowed to a five-year low in Asia’s third-biggest economy, while a persistent shadow-bank crisis damps discretionary spending. Maruti Suzuki India, the nation’s largest carmaker, recorded the worst revenue fall since July 2012. The grounding of Jet Airways India Ltd. also struck Indian Hotels in addition to the slowdown, causing it to write-off some dues.

Over the previous few years, the chain, which runs New York’s The Pierre and St. James Court in the UK, has reduced debt by selling assets including flats bought for executives of Tata Group. According to the hospitality firm, consolidated net debt stood at Rs 2,000 crore ($282 million) at the end of March, down from as high as 31 billion rupees two years ago.

At the hotel chain, efforts to stabilize borrowings are also part of a larger drive at India’s largest conglomerate. Tata Motors Ltd., Jaguar Land Rover’s owner, said they are looking at options for the British luxury brands that are struggling. Tata Steel Ltd. is in the midst of European operations revamp.

The hotel operator aims to reduce property ownership by 2022 to 50%, from 70% at the moment, Chhatwal said. Sales and lease-back plans include as many as six hotels in the Ginger budget brand of the group as well as a comparable number retained by joint ventures and partner firms, he said.

Indian Hotels presently operates 151 hotels, including the Taj Mahal Palace, which was targeted by terrorists during the 2008 Mumbai siege.