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Mr R. Krishnakumar

Our Bureau

Mumbai, June 12 Indian Hotels Company Ltd (IHCL), which runs the Taj Group of hotels, will acquire Sea Rock Hotel in Mumbai for Rs 680 crore.

IHCL will pick up an 85 per cent stake in ELEL, the company which holds a long-term sub-lease of the land on which Sea Rock is built.

IHCL will demolish Sea Rock and develop a hospitality structure, which would also house a convention centre, besides commercial and retail outlets.

IHCL also plans to integrate the site with Taj Lands End in Bandra.

The funds for the project would come from the Rs 1,400-crore rights issue made last year and also from the liquidity in the system, said Mr Anil Goel, Chief Financial Officer, Indian Hotels.

The acquisition is with an option to further raise the stake to 100 per cent, said Mr R. K. Krishna Kumar, Vice-Chairman, adding the hotel was not fully functional after the 1993 bomb blasts. He said the cost of acquisition was significantly below transactions done in other areas. The project would be up in three years.

On picking up additional stake in Orient Express Hotels, Mr Krishna Kumar said that it was done to average the cost. “We had meetings with the management in the last couple of months and we continue to stay invested as there is much to gain for both sides going forward.”

On a standalone basis, Indian Hotels’ net profit dropped 37 per cent to Rs 234 crore for the year ended March 31, 2009, against the Rs 377 crore logged during the year ago period. Total income decreased eight per cent to Rs 1,619 crore (Rs 1,764 crore).

Pursuant to the terror attacks in Mumbai, the performance of the industry was severely impacted because of slowdown in business in all key markets during the latter part of the year, which is traditionally the peak period, Mr Goel said.

The board has recommended a dividend of Rs 1.20 per share. On Friday, the IHCL stock on the BSE closed 3.4 per cent lower at Rs 75.40.

More Stories on : Hotels | Mergers & Acquisitions | Financial Performance

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