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Brigade Enterprises, Bengaluru-based real estate developer, is planning to hive-off its hotel business and bring hotel, clubs and convention centre businesses under Brigade Hotel Ventures Ltd.
The company’s board recently took a decision to approve scheme of arrangement to shift three business undertakings of the company on a going concern basis to the new entity Brigade Hotel Ventures Ltd.
All the three transferee companies – Brigade Hospitality Services and Augusta Club, respectively, are wholly-owned subsidiaries of Brigade Enterprises.
“The company took a call to separate hotel and real estate business to enhance the shareholder value and also to attract investors to the hotel business. In the present structure, it is not possible to bring in new or fresh investors,” Suresh Kris, Executive Director and CFO, Brigade Enterprises, told BusinessLine .
“After the separation or transfer of assets to the Brigade Hotel Ventures, investors can be brought in to scale the business and to increase number of properties,” he added.
The appointed date for transfer is October 1, 2016. Consequent to the transfer of the undertakings, the company is expected to issue and allot optionally convertible redeemable preference shares (OCRPS) or by payment of cash or cash equivalent consideration or both.
According to Kris, the entire process of hiving-off is expected to take six months which include receiving court permission and orders.
Talking about the current hotels in the company portfolio, Kris said: “At present, we have three hotels in operation – Grand Mercure in Bangalore, Mysuru and Sheraton Grand Bengaluru Hotel. In a month’s time, Holiday Inn Chennai will be operational and later Holiday Inn Express in Bengaluru.”
The company’s two hotels have good occupancy rate — around 75 per cent during the first six months of financial year 2016-17 for Grand Mercure Bangalore and 82 per cent for Sheraton Grand Bengaluru. The third hotel - Grand Mercure Mysuru is in operation and the asset is yet to get stabilised.
As for the hotel business revenues, Kris said: “Currently the company with two operative hotels had clocked ₹130 crore in the financial year 2015-16 and for the financial year 2016-17, we are expecting revenues in the range of ₹150-160 crore from three properties.”
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