Indian Hotels to raise Rs 3,000 crore through rights issue

 Indian Hotels Company (IHCL), one of the country’s largest hotel players, will come out with a Rs 3,000 crore rights issue, making it the biggest fund-raising activity by the Tata Group company in the recent past.

The issue will meet the company’s financing needs for capital expenditure, growth plans and debt repayment. A meeting of the board of directors was held on August 23. The last rights issue that IHCL did was in 2017 for Rs 1,500 crore.

“We would like to inform that the Board of Directors of the company at its meeting held today has, considered and approved, subject to receipt of relevant approvals from regulatory authorities, issue of equity shares by way of a rights issue to the existing shareholders of the company on a record date for an amount not exceeding Rs 3,000 crores,” IHCL said.

IHCL’s net debt ballooned 67 percent to Rs 3,110 crore by the end of FY21 as against Rs 1,857 crore reported in FY20, as per the company’s presentation.

Earlier in August IHCL disclosed plans of raising of long-term funds not exceeding Rs 250 crore by way of secured or unsecured long-term financing.

“The objective of the rights issue is to meet the company's financing needs for capital expenditure, growth plans and debt repayment and will be finalised in consultation with the merchant bankers. The board also approved the formation of a Committee of Directors for the said rights issue to decide on the terms and conditions of the rights issue including the rights entitlement ratio, the issue price, record date, timing of the rights issue and other related matters,” IHCL added.

Taj Hotels and Resorts, the premier brand of IHCL, is aiming to expand its portfolio of properties by 36 percent to 300 in the next 3-5 years, a major chunk of which will come up under its asset-light strategy where it will not invest its own funds but take readymade hotels under its fold for operation.

This expansion will add about 80 properties for IHCL that currently has an inventory of 221 properties including 150 operational ones in India, 21 abroad and 50 in the pipeline.

By the end of the next 3-5 years IHCL will have 46 percent of its properties under the management contract, 36 percent held by group companies and 18 percent under holding company, according to a recent presentation made by IHCL.