Omega TC Holdings Pte Ltd, a Singapore-based company, plans to acquire a minority stake in Roots Corporation, a 100% subsidiary of Indian Hotels Company. Indian Hotels is India’s most well known hotel brand, with its flagship Taj group of hotels and also runs hotel chains under other brands –Gateway and Vivanta- to name a few. About 7 years ago, it had started a budget hotel chain under the Ginger brand, which is run by Roots Corporation.
Roots Corporation’s sales rose by 53% to Rs 58 crore in 2009-10, and its profit before tax and exceptional items was Rs 10.4 crore, compared to a loss of Rs 74 lakh in the previous year. However, it incurred a loss of Rs 2.4 crore, after including profit from sale of a hotel, and considering the impact of depreciation and interest costs. In 2008-09, it had incurred a much higher loss of Rs 22 crore.
In the current transaction, Omega will invest Rs 150 crore in various tranches as equity capital. It will also buy out existing holders of convertible preference shares, worth Rs 70 crore, which will convert into equity shares in 2011-12, at a conversion price of Rs 100 a share. It will also acquire the option to invest Rs 100 crore by March 2014, subject to satisfaction of certain conditions. These conditions or who has to satisfy them have not been disclosed.
The price at which Omega will buy an equity stake has not been disclosed. It will own a minority stake in the company, which will mean that Roots Corporation is likely to continue to be a subsidiary of Indian Hotels. The funds are likely to be used to repay part of its debt, and fund further expansion. Its total loans were about Rs 130 crore as of 2009-10, and may have risen further in the current fiscal. It had 21 operational hotels as of March 2010, with about 2000 rooms, and work was on for opening hotels in 6 new locations.
Read the announcement made to the BSE here.