Along with foreign companies venturing into the Indian market, Indian companies are too becoming more forceful globally and extending their footprints outside the country. And thus, private equity firms are showing keen interest in the hospitality sector. Sourav Goswami cited, “Any deal in emerging market is based on strategy. The private equity firms should proceed cautiously.”
Explaining about the returns, Tuhin Parikh deemed, “Everyone has to be comfortable with risk in India. Capital gain will start once the scenario will become more matured.”
In the changing scenario, owners are not the same as a few years ago. Firstly, they have become more confident about their position. They are benchmarking themselves against global standards now. Earlier, due to the high interest rates, they had the cost of capital on their minds and, hence, did not think too aggressively about their spending plans. Private equity as a class of capital has become socially more acceptable. There is a positive mutual relationship.
Tony South explained that the interest in India is increasing like never before. But, is private equity chasing the 5-star category only? Goswami said, ” We are always evaluating the opportunities and are open to various options. There's a strong consumer demand story that's happening in this industry. There's a shortage in the quality of supply, particularly in the lower and mid-market hotel segments in both tier I and tier II cities. So there's lots of room for investments in hotels and travel and tourism.”
Talking about the acquisition process, Parikh described, “Acquisition is easy elsewhere but in our country it becomes a bit time-consuming.” He asserts that based on underlined economics, for every investor the market for assets will improve.
Traditionally, availability of finance for funding hotel projects has been an area of concern because of the capital-intensive nature of the sector. But promising demand conditions and the strong growth potential has changed the way most financial institutions, banks and foreign investment funds are viewing this sector in India at present.
Source : Express Hospitality