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Singapore-based private limited company Omega TC Holdings Pte Ltd will acquire an undisclosed equity stake in Roots Corporation Ltd — the unlisted wholly-owned subsidiary of Indian Hotels Company.
Omega will invest Rs 150 crore in “various tranches for acquiring equity stake” in Roots, the holding company of Ginger Hotels — the budget hotels brand from IHCL's stable, said a stock exchange announcement on Wednesday.
Omega is a “private limited company incorporated under the laws of Singapore,” IHCL said without giving further details.
Also, Omega will acquire Compulsorily Convertible Preference Shares (CCPS) from some existing holders for an aggregate consideration of Rs 70 crore.
Minority stake
“The CCPS along with the aforementioned equity shares will give the investor a minority stake (on a fully diluted basis) in Roots Corporation Ltd,” said the announcement without disclosing the size of the stake. However, industry sources told Business Line that the deal will fetch Omega a 25 per cent stake in Roots Corporation. Roots Corporation at present is valued at around Rs 800-Rs 1,000 crore, said sources.
Omega will also have an option to invest a further Rs 100 crore in Roots Corporation by March 2014, “subject to satisfaction of certain conditions”. At present, the company operates 25 Ginger Hotels in India with 1,900 rooms.
Market analysts are not reading much into the deal apart from the fact that the funds raised through the deal might be used by IHCL to further reduce its Rs 4,500 crore of debt on books.
“Roots Corporation contributes only 8-10 per cent to IHCL's top line, and has been consistently making losses.
With no details of stake available, it is difficult to say what the deal actually entails for the company. It might result in some interest cost savings for IHCL on its debt,” said a senior analyst from an Indian brokerage firm.
The interest paid by IHCL would be around 7-8 per cent, he said.
Indian Hotels Company's share price closed down 1.21 per cent, on Wednesday, at Rs 77.45.
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