Lemon with a new punch
FOR SOMEONE who has constantly changed the paradigm of the industry, Patu Keswani recently ended up surprising himself when he swung a deal with rather conservative pension fund managers APG to build 35 hotels.
The ` 650 – crore deal, announced at a time when big – ticket transactions are drying up, will make his company, Lemon Tree Hotels ( LTH), one of largest hotel chains in the country. It will co-own and operate more than 8,000 rooms by 2017.
Known for establishing mid-budget hotels, Keswani is now looking at expanding his foothold in the segment.
Not just underpenetration, he says, the existing room supply is also irrationally distributed across the price spectrum.
Of the total room inventory of 1.5 lakh, some 50 per cent are organised with roughly 65 per cent in upscale or luxury category.
? We are just building capacities. The demand will ensure over the period of four to five years,? he says.
Under the APG deal, the pension fund will buy six per cent stake in LTH and form a joint venture with the hotel chain to build new hotels over the next four years at a total cost of ` 2,250 crore. ? Unlike private equity money, which comes for duration of five to six years, APG has a long – term investment horizon,? says Keswani, who started with a single hotel in Gurgaon 10 years ago and currently runs 16 hotels.
An IIM- Calcutta alumnus, Keswani began his career with Tata Group and worked in Taj Hotels for 10 years. Keswani, along with USbased PE firm Warburg Pincus, owns a majority stake in LTH. Since the beginning, Keswani has differentiated LTH from other chains by owning hotels rather than managing them or giving out the brand franchise to a third party. The reason, he cites, is to have consistency in services and fulfilment of brand promises, which is not possible to attain if the property is owned by developers.
Keswani signs a deal with pension fund managers APG to build 35 hotels