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Rediff.com  » Business » ITC set to merge hotel arm with self

ITC set to merge hotel arm with self

August 14, 2004 11:21 IST
ITC on Friday said it would consider merging ITC Hotels with itself. The company will take up the merger plans at its board meeting on August 25.

The company will also consider the amalgamation of its other subsidiaries in the hospitality sector like Ansal Hotels and Bay Islands Hotels, both wholly owned subsidiary of ITC Hotels, with itself. ITC holds 72.06 per cent in ITC Hotels.

If the merger comes through, ITC will be able to bring under one roof the four hotel segments that it owns or manages.

ITC has branded its super-premium category hotels as ITC Hotels, premium hotels as WelcomGroup, mid-market hotels as Fortune Park and historical properties as WelcomHeritage.

WelcomHeritage is the most profitable in the companies' hospitality business, with profit after tax of Rs 20 crore (Rs 200 million) on sales of Rs 160 crore (Rs 1.6 billion) in 2003-04. Its paid-up capital is Rs 30 crore (Rs 300 million), while it has Rs 194 crore (Rs 1.94 billion) in reserves. Its total assets are Rs 248 crore (Rs 2.48 billion). In comparison, the hotels segment of ITC reported revenues of Rs 257 crore and profit before tax of Rs 32 crore (Rs 320 million) for the full year ended March 2004.

ITC focusses on building and owning properties, while ITC Hotels runs and manages them. ITC owns only the Sonar Bangla at Kolkata, Mughal Sheraton at Agra, Grand Maratha in Mumbai, Maurya Sheraton in Delhi and Chola Sheraton in Chennai. ITC is also building the chain's second new Mumbai hotel, the Grand Central.

ITC Hotels manages more properties, but owns only Windsor Sheraton in Bangalore and Rajputana Palace Sheraton in Jaipur. However, it has 3,065 rooms under management, through licences that cover ITC properties as well as the Kakatiya Sheraton in Hyderabad, Marriott WelcomHotel in Delhi, the Park Sheraton in Chennai and the chain's Aurangabad and Vizag hotels. ITC Hotels owns or manages 58 properties at more than 25 locations.

ITC Hotels is the platform through which ITC owns and operates the Fortune Resort Bay Island in Port Blair, and 13 hotels under the Fortune Park flag.

ITC Hotels also runs a 50:50 joint venture with Marudhar Hotels called Maharaja Heritage Resorts, which manages 31 heritage properties under the WelcomHeritage brand.

ITC Hotels' net profit stood at Rs 7 crore (Rs 70 million) for the quarter ended June 2004, against Rs 59 lakh (Rs 5.9 million) in the corresponding period of the previous year. Total first-quarter income rose 37 per cent from Rs 31 crore (Rs 310 million) to Rs 42 crore (Rs 420 million).

ITC Chairman YC Deveshwar told the media recently that the company was implementing its strategic investment plans to complete the ITC Welcomgroup chain.

The total capital employed in the business was Rs 983 crore (Rs 9.83 billion), including Rs 850 crore (Rs 8.5 billion) relating to new hotels in Mumbai and Kolkata as well as capital work in progress in respect of the second hotel under construction in Mumbai.

ITC, however, had to book a holding cost in respect of Hotel Searock, which was the subject matter of a legal dispute.

The Mumbai Grand Central is expected to open by the end of the year. A renovation and product upgradation programme is under way at the ITC Maurya Sheraton, New Delhi.

Currently, nine of the ITC-Welcomgroup hotels are marketed globally by the Sheraton Corporation, a part of Starwood Hotels & Resorts, the well-known global hospitality chain.

BS Bureau in Kolkata