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Indian Hotels in talks with SIA arm for joint venture

Our Bureau

MUMBAI, July 18

INDIAN Hotels Company Ltd (IHCL) today informed that it is in negotiations with Singapore Airport Terminal Services Ltd (SATS) to form a new joint venture company that will handle IHCL's air catering business.

IHCL will hold 51 per cent equity with SATS having the balance 49 per cent.

SATS, a company listed on the Singapore stock exchange, is a subsidiary of Singapore Airlines which is currently partnering the Tatas in their bid for Air India.

``There is no connection between this joint venture and the bid for Air India,'' Mr Ravi Dubey, Sr. Vice-President (Corporate Affairs/Projects), IHCL, said when asked if the formalisation of the air catering joint venture depended on the success of the A I bid.

Taj Air Caterers, the air catering unit of IHCL, is yet to be spun off into a separate company, which is the usual first step to hosting a joint venture. Senior officials explained that the required due diligence is still incomplete and what the IHCL boa rd did at its meeting today was to ``approve a non-binding term sheet'' to explore the joint venture.

``Negotiations are on-going and the terms governing the transaction have not yet been finalised,'' an official statement said. The financials of the proposed joint venture, including its projected investment, equity base and whether, in line with the lis ted nature of its parents, the joint venture too would eventually be listed, could not be had.

``This is too early a stage,'' Mr Dubey said.

In 2000-2001, IHCL's air catering SBU earned Rs 110.96 crore, up from the previous Rs 88.39 crore. Over 90 per cent of the company's air catering revenue comes from IHCL. There are small operations specific to a few hotels. All these would have to be con solidated before going ahead with the joint venture, officials said.

Further, in Chennai, IHCL has an existing air catering joint venture with SATS in which IHCL owns 50 per cent equity, SATS has 30 per cent and Malaysian Airline System (MAS) has 20 per cent. While the officials were clear of the 80 per cent cumulative eq uity share of IHCL and SATS in this venture, moving to the prospective larger joint venture, there is no clarity as yet on what MAS will do with its equity share.

SATS is a major provider of inflight catering and ground-handling services in Asia, having presence at eight Asian airports. Its inflight meal catering facility at Singapore has a daily output of over 60,000 inflight meals.

The Taj Group's air catering business, on the other hand, handles 38,000 meals per day and has a domestic market share of 55 per cent. Air catering along with food and beverages (F&B) were cited as significant contributors to IHCL's Rs 687.5 crore turnov er in 2000-2001.