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Regent mulls joint venture

Reeba Zachariah & S Ravindran

Lokhandwala Hotels, owners of Bombay's first 7-star hotel, The Regent, is weighing the viability of roping in a joint venture partner. The partner, if a final decision is taken, will only be given a minority stake.

"We are open to the idea of a strategic partner, but we want only to take on board a sleeping partner. A number of companies have approached us through investment bankers, but we found none of the offers attractive," Yogesh Dhawan, vice-president, The Regent, said.

Dhawan, however, said the company has not yet actively begun to scout for a partner. He made it clear that the partner will be offered less than the strategic 26 per cent stake.

The Lokhandwalas had last year received an offer from the Indian Hotels Company, the flagship of the Tatas-owned Taj group, to buy out their entire stake in the Bombay hotel. Senior Taj group officials confirmed that an offer had been made but discussions turned futile.

Dhawan said, "Some time back, Indian Hotels had approached us to buy the property, but we were in two minds whether to sell it or retain it." This was because, at that point, they were not sure as to whether the venture would generate adequate revenues, according to Dhawan.

Unlike other hotels managed by international hotel chains, The Regent is owned and managed by the promoters themselves but pays a royalty fee of 3 per cent on its gross revenues to the US-based Carlson Companies, which owns the Regent brand. It is the only Regent hotel in the country.

The total investment in the hotel has been pegged at Rs 5 billion, of which Rs 3.50 billion has already been invested. Dhawan said the project has achieved financial closure. The balance Rs 1.50 billion will be used to increase the number of rooms to 508 from the present 270.

As part of its expansion, the Lokhandwalas are planning to built a 14 floor service apartment and a shopping-cum-entertainment complex adjacent to the hotel. The company will invest around Rs 700 million for the mall and the details of investment for the service apartment is yet to be finalised.

The company may tie up with other international chains for branding the mall and service apartments.

The company's income from operations stood at around Rs 360 million for fiscal 2000-01 and has targeted revenues of Rs 900 million for the current fiscal. The Regent was opened in June 1999 and is expected to break-even by 2005.

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