ITC plans major push in hotels biz

In July 2009, when the Indian hotel industry was going through a slump thanks to the economic meltdown, ITC chairman YC Deveshwar surprised shareholders at the 98th annual general meeting with his aggressive stance on the sector. He said the company had earmarked close to Rs 10,000 crore to invest in new properties over the next 7-10 years. “We are hungry for growth,” he told shareholders.


The statement that the company was willing to collaborate with competitors seemed significant. Deveshwar, however, ruled out any “hostile takeovers”. In July, ITC had a 3.8% stake in Hotel Leela Venture but by December 31, 2009, it had upped its stake to 7.37%. Promoters of Hotel Leela Venture also raised their stake from 52.5% to 55% in December.

An analyst with a broking firm said ITC’s decision to hike its stake in Leela was a ‘strategic’ one. At the end of FY09, Leela had a debt of Rs 2,500 crore and with the revival signs in the sector still weak, it could look out for some partner in future. In that case, ITC’s ‘strategic stake’ could come handy.

Importantly, the tobacco major has a 14.98% stake in East India Hotels and in the previous year, Deveshwar had made several overtures to the company. He told reporters on the sidelines of the Hotel Investment Forum India in Mumbai this week that he wanted to meet the promoters of EIH. East India Hotels owns and manages luxury hotels and according to analysts, ITC will not be averse to EIH “taking an interest in managing” its luxury hotels, while ITC, sitting on a huge cash reserve, invests in EIH’s future expansion. “It’s in the realm of possibility, but EIH may not be willing to open its doors to ITC since it doesn’t consider it an equal partner because ITC is present in all the segments, not luxury alone.

ITC has nothing to lose in making such overtures,” said an analyst.

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