Mumbai: The luxury hotel chain controlled by Tata Group is looking to sell some assets and avoid owning new properties in an effort to further pare debt, as it braces for a slump in consumer spending.
Indian Hotels Co, Tata's listed firm that operates the Taj brand, plans to dispose of certain budget inns in the nation's non-metro areas and lease them back for a fee, Puneet Chhatwal, Managing Director and Chief Executive Officer said in an interview.
"We are moving our focus to more management contracts rather than constructing hotels of our own," Chhatwal said. "We have no plans to put our legacy and flagship properties under sale and lease back."
The Mumbai-based company's measures to cut costs and liabilities come at a time growth in Asia's third-biggest economy has cooled to a five-year low, while a lingering shadow-bank crisis damps discretionary spending. The nation's biggest carmaker, Maruti Suzuki India, reported the worst sales drop since 2012 in July. Besides the slowdown, the grounding of Jet Airways India has also hit Indian Hotels, forcing it to write-off some dues.
The chain, which operates New York's The Pierre and St. James Court in the UK, has been reducing debt in the past few years by selling assets including apartments purchased for Tata Group's executives. Consolidated net debt stood at Rs 2,000 crore ($282 million) at the end of March, down from as high as Rs 3,100 crore two years earlier, according to the hospitality firm.
Indian Hotels is focusing on an "asset light model" besides keeping costs under check and shedding non-core assets, Amit Agarwal, Analyst at Nirmal Bang Securities said over phone. All 12 brokerages, whose data Bloomberg compiles for this firm, have a buy rating on the stock.
The efforts to pare borrowings at the hotel chain are also part of a wider drive at the conglomerate. Tata Motors, the owner of Jaguar Land Rover, has said it is looking at options for the struggling British luxury brands. Tata Steel is in the midst of a revamp of its Euro-pean operations.
Taj aims to reduce ownership of properties to 50 per cent by 2022, from 70 per cent now, Chhatwal said. The sale and lease-back plans include six hotels at the Ginger budget brand and a similar number held by joint ventures and associate firms.
Indian Hotels, currently operates 151 hotels.
