Roots Corporation, the wholly-owned subsidiary of Indian Hotels, is looking to offload around 20% of promoters equity to private equity players. Carlyle, 3i, Warburg are said to be in the race for the funding, which would be used to fund its growth options, according to sources.
Roots is planning to raise $75-100 million through the private equity route to part finance expansion plans of its budget ‘smart basics’ hotel chain, the Ginger, while parent Indian Hotels is busy raising funds for its own requirements. “We are in discussions with PE players and will make the announcement at an appropriate time,” company sources said.
Recently, unviable real estate prices forced Ginger to rework its business strategy for the Indian market. Ginger Hotels which started 4 years ago, is now looking at mall-based hotels, entering into management/lease contracts, sprucing up existing hotel properties and talking to public utility services as against earlier strategy of greenfield units.
Ginger has started increasing its focus on metros and Tier II cities which include the refurbished Rail Yatri Niwas in Delhi, a hotel in Ahmedabad and a second hotel in Pune. The first mall-based hotel is in Ludhiana, Vadodara followed by Pantnagar and Panaji. Ginger Hotels is expected to create a pan-India footprint in over 30 Tier I and II cities. The group is talking to state governments, railways, tourism departments for possible alliances which can increase the pace of expansion plans. Ginger plans to have around 70 properties across the country by 2011.
The chain is also looking and positioning the ‘smart basics’ concept as a replacement for guest houses and service apartments. While Ginger provides a simple and informal experience at its hotels, it has done away with room service, multi-cuisine restaurants, swimming pool to keep costs down. “At an occupancy level of less than 50%, the Ginger brand is profitable,” said an analyst of a Mumbai-based brokerage firm.
Ginger was incorporated in December 2003 and the first Ginger hotel was launched in Bangalore in May 2004. Indian Hotels on Thursday said it plans to transfer 16 of its existing properties to its Gateway upscale brand for the contemporary traveller. A total of 10 new hotels have already been signed up and the management is in active negotiations for another 10 hotels across India.
With 26 Gateway hotels already under its fold, the management is targeting 50 operating and signed hotels in the near future. While Indian Hotels did not share investment details, MD Raymond Bickson said that the Gateway will be an important growth vehicle for the group and is looking at quickly scaling up the brand to a large number of hotels across India under owned and management contracts.
This brand will be present in business districts and leisure locations and will explore new formats under business, leisure and extended stay categories, he added.
Source: Economic Times