Sarovar Hotels is exploring the option of going in for an initial public offer (IPO) or a second round of private equity funding to raise Rs 250-300 crore for funding its domestic expansion plans.
The hospitality company, in expansion mode, is setting up 23 new properties at an investment of over Rs 500 crore. Sarovar's own commitment has been to the tune of Rs 150 crore.
Anil Madhok, managing director, Sarovar Hotels, told DNA Money, “At the moment, we have Rs 200 crore of investible funds. But, we are weighing the option of an IPO or private equity placement to raise Rs 250-300 crore.”
More than a year-and-a-half ago, the company had raised $8.5 million from US-based Bessemer Venture Partners and New Vernon through an equity dilution of about 24 per cent.
A hospitality industry analyst said it would be the right time for the company to explore IPO options because its valuation has increased dramatically, thanks to a hospitality industry that is on an upswing, helped by a travel boom and a corresponding shortage of rooms.
Of the 23 new projects, some would be company-owned while the rest would be managed.
About five of the new properties would be upper-end four-star Park Plazas, two will be three-star full service Park Inns, four Sarovar Premiers and 3-4 Porticos, while the rest would be the budget brand, Hometel.
Sarovar has also been approached for managing hotels in the Middle East and Tanzania and Kenya in Africa. But, because of its high rate of expansion in India, the company would have to be careful in not stretching its management bandwidth through overseas ventures, Madhok said.
Though Sarovar could also be looking to own properties in the Gulf, the larger part of its portfolio would be management contracts, it is learnt.
Sarovar is affiliated to Carlson Hospitality Worldwide. This association makes the company the master franchisee for Park Plaza and Park Inn hotel brands in India.
Source: Sify