Hotel Talk

Real estate IPOs to trigger landmark hotel investments

Investment allocations pegged at Rs 10,000 crore

Savio Rodrigues -Mumbai

Real estate companies that are poised to raise mammoth funds through Initial Public Offerings (IPO) in coming weeks have set aside Rs 10,000 crore in the least for hotel development. The companies aim to raise, in all, Rs 25,000 crore, of which 40 per cent will go towards funding new hotel projects. Delhi's leading realty giant DLF Group fronts this capital intensive brigade with a Rs 10,000 crore IPO of which Rs 4,000 crore is dedicated for 100 new hotel projects, while another Delhi-based developer, Ansals, will invest Rs 500 crore of its Rs 2,000 crore IPO in hospitality projects in north India.

Omaxe Construction in its IPO mandate has allotted 35 per cent of its Rs 3,000 crore for its maiden hospitality foray wherein the group is looking at developing over 20 hotel properties across metro cities within the next five years. With real estate companies such as Parsvnath Group, Prestige, Adarsh Group, Ahluwalia Contracts, Oberoi Constructions and Emerald Group (Rs 2,000 crore apiece) already knee-deep in hotel development, they have, on an average, estimated their project costs at 40 per cent of the IPO size.

According to DLF spokesperson Dr Vijay Vancheswar, "DLF is certain about registering a presence in Indian hospitality. Talks are underway with a leading hotel company for a long term tie-up and the monies garnered from the current IPO issue will be used to further the group's hospitality interest amongst other real estate endeavours." Rothas Goel, CMD, Omaxe Group commented, "The growing Indian economy and the rapidly burgeoning hospitality industry is giving the real estate sector a big boost. Various states are also liberalising policies to attract large developers to build new hotels. As these projects are extremely capital intensive, a major portion of IPO funds will go towards meeting these needs."

Pradeep Jain, chairman, Parsvnath Group, adds, "This is a big step towards a new avenue and we are looking forward to complying with all the regulatory requirements to seek listing of our shares on the bourses and unlock the inherent value derived from the booming real estate development and hospitality industry." To add to the Rs 10,000 crore investment into hotels fuelled by these IPOs, a further Rs 4,000 crore is being lined up by Indian and international funds for hotel development.