The Leela Group is set to sell its marquee property in Kovalam, a famous beach on the outskirts of the capital of Kerala, as part of an ongoing exercise to ease its debt burden. The property, Leela Resorts Kovalam, is being sold for Rs.500 crore to NRI Ravi Pillai, said Leela Chairman CP Krishnan Nair.
The deal, however, will not result in Leela exiting the property completely. It will enter into a management contract with Pillai to manage the property for 30 years.
Pillai confirmed the deal with the Leela Group will be finalised soon but declined to provide details.
The trigger for the sale of the property, which was originally developed by state-run ITDC and has a commanding view of Arabian Sea, was the need to reduce debt. Leela Venture, a listed company, had accumulated debt of Rs.3,830 crore at the end of FY11 owing to capital expenditure of over Rs.4,000 crore, which is currently underway. This includes Rs.3,200 crore on new hotels in Udaipur and Delhi. The company also expects to spend Rs.1,200 crore on building a hotel in Chennai, which is scheduled to open in December.
The company has been looking to sell properties across the country to cut its debt which, at close to Rs.4,000 crore, is more than double its market cap of Rs.1,782 crore at Wednesday’s closing price. In March, the company announced plans to sell an IT park in Chennai for Rs.950 crore.
Hotel Leela Ventures’ debt is the highest compared to peers such as Indian Hotels Company, part of the Tata Group, which had debt of Rs.2,500 crore as on March 31, 2011.
