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Tatas to get part of ITDC sale proceeds

Mamata Singh

Having decided against buying Tata's 10 per cent stake in the Indian Tourism Development Corporation, the government is considering paying the company part of the proceeds from divestment. The payment will be in proportion to the Tata's holding in the state-run hotel chain.

Tata-owned India Hotels Company Ltd holds a 10 per cent stake in ITDC. The government owns 89.97 per cent, while employees hold the balance.

Other than a few hotels, which will be run on long-term lease cum management basis, the government will sell its entire equity in ITDC hotels.

The government will demerge individual properties before selling them and these demerged units will have mirror holdings. That is, the holding in each of these units will be proportionate to the holdings in ITDC, say officials in the department of divestment.

This means that the Tata group will hold a 10 per cent stake in each of these properties. As any buyer would be unwilling to buy a hotel in which another company is already a partner, the government has decided to offer the Tatas 10 per cent of the proceeds from sale of the hotels.

The hotels would be valued and the bidders will only have to pay the government which will in turn hand over the 10 per cent to IHCL, say officials.

The group has been amenable to this proposal and there should be no problem on this front, they add. The government is also considering using the same route for the employees' stake in these hotels.

The government has invited expressions of interest for 17 of ITDC's 26 hotels. Of the 300 EOIs received, 200 have been shortlisted, say officials.

Divestment of ITDC hotels will be done either through a long-term structured contract or demerger into separate corporate entities and sale of entire government equity in them.

The Bangalore and Delhi hotels of the Ashok group will be handed over to "established hotel chains" through a competitive bidding process on a long-term structured contract on lease-cum-management basis.

The government has also approved divestment by ITDC in two of its hotels-- Ranchi Ashok and Utkal Ashok (Puri). The company's net worth in 1999-2000 was Rs 2.19 billion, down from Rs 2.43 billion in 1998-99. The company made a net loss of Rs 273 million in 1999-00, down from a net profit of Rs 434 million in 1997-98.

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