Indian Hotels Corporation Limited (IHCL) and Singapore’s sovereign wealth fund GIC will soon activate a ₹4,000 crore platform set up in 2019 to acquire stressed assets in the hospitality space.
The fund has been dormant since its launch two years ago due to the Covid-19 pandemic, according to a source close to the project.
We have resumed the due diligence process again. Over the past year and a half, the situation has changed rapidly. While it appears that IHCL will have a chance to acquire the stressed assets, the ECGLS plan and moratorium on loans came as a respite for many stressed companies,” the source said.
The Ministry of Finance has included the hospitality sector under the Emergency Credit Line Guarantee Scheme (ECLGS) 3.0. It has given an extension of the said plan until June 30. This plan was introduced to help the troubled sectors in obtaining a fully protected credit line. On the other hand, there was a ban on recognizing non-performing assets, loans and defaults.
“Because of the pandemic, asset valuations have fallen, leaving owners with no choice but to hold on to the assets. Even if an asset is stressed, and not properly valued, a person will end up incurring more losses,” said an industry expert.
Sector most affected
The hospitality industry has been one of the worst affected sectors by the pandemic. While many companies have managed to weather the pandemic, others are still struggling to stay afloat. IHCL itself has focused on ensuring its business emerges from shutdown with minimal damage before acquiring other assets. On the other hand, market sentiment is also rebounding due to the decline in the number of Covid-19 cases and the rise in vaccination rates.
Another source said IHCL was finding it difficult to get quality assets at the right price. The person added that with the recall, IHCL and GIC would consider quality assets at the pre-NCLT level.
No change in features
Speaking about the features of the investment platform, the first source said that they have not changed. The capital contribution from IHCL will be 30 percent and Gulf Investments will contribute the rest, and there will be “no change whatsoever in the features of the joint venture”.
IHCL has a portfolio of 225 hotels, including 55 hotels in development globally across 4 continents, 12 countries and in more than 100 locations.