Viceroy to divest 49-per cent stake to JP Morgan to finance new Bangalore hotel

Hyderabad-based Viceroy Hotels Ltd, is raising Rs70 crore in private equity funding for its 300-room hotel project in Bangalore.

The project, to be hived off into a subsidiary, Viceroy Bangalore Hotels Pvt Ltd, is selling a 49-per cent stake to JP Morgan India Property Mauritius Company. In another move the company will also launch a qualified institutional placement (QIP) to raise an additional Rs70 crore or $15 million. The proposals were approved by the company's board at its meeting on 7 January.

In an interview with CNBC-TV18, Prabhakar Reddy, managing director of the hotel, said Viceroy would be using the QIP money for completion of its JW Marriott Chennai project and the high end apartment block which is part of JW Marriott development. He added that this would be managed and maintained by JW Marriott and the additional equity was being raised to complete the project.

He added that the company needed additional funds to complete bigger size project in Bangalore and it was thought prudent not to raise further debt or dilute the shareholding of the existing company. It was therefore decided to choose the route of spinning off the asset into an SPV and then raising the funds to complete the project.

Viceroy posted a net profit of Rs 6.7 crore on revenues of Rs103 crore for FY09. Bilionaire investor, Rakesh Jhunjhunwala and Anil Ambani's Sonata Investments are among the prominent shareholders of the company with 11 per cent and 5.9 per cent stakes respectively.

To part finance its Rs311 crore project, the company has also raised a debt of Rs113 crore from Canara Bank, IDBI Bank, Allahabad Bank, Syndicate Bank and Lakshmivilas Bank.

The board has appointed KPMG as advisors and L V V Iyer Associates for restructuring the project into a new unit.

Viceroy is constructing a 21 storey hotel overlooking the famous Bangalore Racecourse and property which will be branded Renaissance would be managed by Marriott International. Commercial operations at the hotel are expected to commence in FY2011.