Leela plans subsidiary for expansion abroad

Hotel Leela Venture, Rs 400 crore (Rs 4 billion) Indian hotel group, is planning to set up an overseas subsidiary to explore the luxury markets abroad.

Towards this, the company will set up a special purpose vehicle (SPV) with a leading international fund which has investments in hospitality projects in the US, Europe and selected Asian countries.

The hotel group is currently in talks with global funds and will decide soon on the investment model of the SPV. "It could be a joint venture with existing large players in these markets or acquisition of properties," sources said.

In the overseas subsidiary, Leela may have direct investment up to 50 per cent or less depending on the modalities worked out between the group and the private equity fund.

The sources said the company was planning to have an overseas subsidiary to line up strategic investments in the international hospitality market. But the deal is not finalised yet.

The synergy of the SPV will be the market expertise of Leela group as a major hotel management company and the huge fund with the international private equity players. The company will be eventually looking at owning five-star properties in the overseas market to make its presence strong.

The Leela group is also in the process of entering into management contracts for managing hotels in Dubai, Abu Dhabi, Colombo and Jaipur.

Under these agreements, the group will be managing large five-star hotels with a room capacity of 400 to 500 rooms in these locations. This is the first time the group is entering into management contracts in international market. Leela Venture has one such arrangement with Ambience group's property in New Delhi.

The group will announce its new overseas ventures after the forthcoming board meeting on September 2. Apart from the overseas plans, the company is also planning to have five more five-star hotels in the country along with developing international golf courses, golf academy, driving range and club houses at Goa. The company is also planning to acquire about 250 acres of land for these projects in Goa.