Financial Daily from THE HINDU group of publications
Wednesday, Mar 13, 2002
Corporate - Mergers & Acquisitions
Industry & Economy - Disinvestment
Tulip pays up for Juhu Centaur -- Management control later
NEW DELHI, March 12
HONOURING the deadline set by the Union Government, Tulip Hospitality Services, promoted by Mr Ajit Kerkar, paid the bid price of Rs 153 crore into an escrow account for acquiring the Juhu Centaur property of Hotel Corporation of India (HCI).
The payment was made at a function held in Mumbai on Monday. However, the Government will transfer management control of Juhu Centaur to Tulip only after both the sides fulfilled certain conditions precedent required under the escrow agreement, Government sources said.
In the meanwhile, Tulip will be allowed to appoint six of its officials to oversee the running of Juhu Centaur as per the agreement.
Out of the total bid amount, Tulip contributed Rs 46 crore as its share, while the remaining Rs 107 crore came from a consortium of banks led by Bank of India and comprising LIC and UTI among others.
This marks the end to the longest wait by the Government for receiving the bid amount after concluding a disinvestment transaction.
The lone price bid submitted by Tulip for acquiring Juhu Centaur was approved by the Cabinet Committee on Disinvestment (CCD) at its meeting on November 10 last year as it exceeded the reserve price of Rs 101.6 crore set by the Government.
Since then, the Government and Tulip have been setting and re-setting the dates for paying the bid amount.
Out of the bid amount of Rs 153 crore, an amount of Rs 15.3 crore will accrue to HCI while the balance Rs 137.7 crore will flow into the disinvestment proceeds of the Government.
HCI will utilise its share of the transaction price to retire an amount of Rs 15 crore arising out of a loan taken from the United Bank of India on the mortgage of Juhu Centaur property.
"By extinguishing the residual loan amount, HCI will be able to release the Juhu property which was mortgaged with the United Bank of India for taking the loan,'' the sources said.
HCI and Tulip will also have to seek clearance from income-tax authorities under Section 37 (I) before signing various documents relating to the deal.
"Once both these conditions precedent are fulfilled, the Government will transfer control to Tulip by signing the escrow agreement and the agreement to sell,'' the sources said.
The Government had last month asked Tulip to pay up the bid amount by March 9 or run the risk of encashing its bank guarantee worth Rs 5 crore.
Sources said that Tulip had finalised a deal worth Rs 176 crore with banks and financial institutions for funding the acquisition of the Juhu Centaur property, including the expansion plans worked out by it.
Juhu Centaur is a prime property owned by HCI, a wholly-owned subsidiary of Air India.
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