IHCL-GIC’s ₹4,000-cr stressed assets fund may make its first buy soon

Forum Gandhi Mumbai | Updated on October 26, 2021

The fund, set up in 2019, was lying dormant because of the pandemic

Indian Hotels Company Limited (IHCL) and the Singapore sovereign wealth fund GIC will soon activate the ₹4,000-crore platform set up in 2019 to acquire stressed assets in the hospitality space.

The fund has been lying dormant since it was launched two years back because of the Covid-19 pandemic, according to a source close to the venture.

Changing situation

“We have restarted the due diligence process again. Over the past year-and-half, the situation had changed rapidly. While it did look like IHCL would get an opportunity to acquire stressed assets, the ECGLS scheme, and moratoriums on loans came as a respite for many stressed companies,” the source said.

The Finance Ministry had included the hospitality industry under the Emergency Credit Line Guarantee Scheme (ECLGS) 3.0. It had given an extension for the said scheme till June 30. Thes scheme was floated to help the distressed sectors get a fully protected credit line. On the other hand, there were moratoriums on acknowledging non-performing-assets, loans, and defaults.

“Because of the pandemic, the valuations of the assets had dropped, leaving no option for the owners but to hold on to the assets. Even if there was a stressed asset, and it wasn’t valued right, the person would end up making more losses,” said an industry expert.

Worst-hit sector

The hospitality industry was one of the worst impacted due to the pandemic. While several companies were able to tide through the pandemic, others are still struggling to stay afloat. IHCL itself was focused on ensuring that its own business emerges out of the lockdown with minimum damage before acquiring other assets. On the other hand, the market sentiment is also picking up because of the lesser number of Covid-19 cases and high vaccine rates.

Another source said that IHCL was finding it difficult to get quality assets at the right price. With recovery, IHCL and GIC will look at pre-NCLT level quality assets, the person added.

No change in contours

Speaking of the contours of the investment platform, the first source said that they remain “unchanged.” The equity contribution from IHCL will be at 30 per cent and the balance will be contributed by GIC, and there will be “absolutely no change in the joint venture contours.”

IHCL has a portfolio of 225 hotels, including 55 under development globally across 4 continents, 12 countries and in over 100 locations.

Published on October 26, 2021

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