SBI picks up 20% in Mayfair

The State Bank of India (SBI), the largest bank in the country, has picked up 19.7 per cent equity in Orissa-based Mayfair Hotels and Resorts (MHRL) through a private equity (PE) deal. The deal was for 37,33,333 shares with a face value of Rs 10 each. However, the total value of the deal is not known. The shares acquired by SBI are from the fresh shares issued by the company. As a result, the subscribed equity base of the company has increased to 1,89,33,333 shares from 1,52,00,000 shares previously. Post-deal, the promoters' share will be 80 per cent. The decision of SBI to acquire the stake in the leading hospitality player in eastern India in the current difficult market scenario is considered significant. “SBI picking up the equity is an indicator of their confidence in our enterprise and management,” Dilip Ray, chairman and the managing director of MHRL, said. He said, the company plans to hit the capital market with an initial public offer (IPO) in about 24 to 36 months after utilisation of the proceeds of the 19.7 percent equity issued to SBI. The timing of the IPO will depend on the market condition. The group is in the process of executing a Rs 260-crore expansion plan. While the company intends to raise about Rs 124-150 crore from the proposed IPO, the borrowing component is likely to be about Rs 65 to 75 crore. The remaining funds will be mobilised in the form of internal accruals. The new 5-star deluxe property of Mayfair Gangtok, developed by a subsidiary, is expected to be commissioned by March 2009. Meanwhile, the company has forayed into western India tourist circuit through acquisition of of an existing 32-room hotel at Betul Beach in Goa. This unit will be operational by September 2009 after refurbishment and upgradation to a 5-star boutique at an investment of about Rs 25 crore. MHRL has been achieving an annual growth of 22 per cent for the past four years and has completed the expansion of its four operative properties at Bhubaneswar, Puri, Rourkela and Darjeeling by adding 52 rooms with additional facilities. Post-expansion, MHRL will have an inventory of 600 rooms spread over 12 properties in ten locations, sources said. It intends to add three properties at Puri (second unit), Cuttack and Chilika, which will add 134 rooms to the inventory. Since land for these projects are available, Cuttack and Puri properties are expected to be operational by June 2010. Similarly, Chilika property is expected to be operational by September 2010. The land acquisition for the Paradeep and Jharsuguda property will be taken up in 2011 and the entire process of expansion will be completed by June 2011, sources added. The company achieved a turnover of Rs 48.5 crore in 2007-08 with a net profit of Rs 9.27 crore. Despite the slowdown, it hopes to achieve a turnover of Rs 60 crore in 2008-09 with expected net profit of Rs13 crore. “Nowhere the slowdown has impacted our business. We have 100 per cent occupancy in our Bhubaneswar, Puri and Rourkela property,” Ray added.