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India's Taj hotel chain to sell assets as economy weakens

Mumbai

THE luxury hotel chain controlled by India's Tata Group is looking to sell some assets and avoid owning new properties in an effort to further pare debt, as it braces for a slump in consumer spending.

Indian Hotels Co, Tata's listed firm that operates the Taj brand, plans to dispose of certain budget inns in the nation's non-metro areas and lease them back for a fee, said managing director and CEO Puneet Chhatwal.

"We are moving our focus to more management contracts rather than constructing hotels of our own," he said. "We have no plans to put our legacy and flagship properties under sale and lease back."

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The Mumbai-based company's measures to cut costs and liabilities come at a time growth in Asia's third-biggest economy has cooled to a five-year low, while a lingering shadow-bank crisis damps discretionary spending.

The nation's biggest carmaker, Maruti Suzuki India, reported the worst sales drop since 2012 in July. Besides the slowdown, the grounding of Jet Airways India has also hit Indian Hotels, forcing it to write-off some dues.

The chain, which operates New York's The Pierre and St James Court in the UK, has been reducing debt in the past few years by selling assets including apartments purchased for Tata Group's executives.

Consolidated net debt stood at 20 billion rupees (S$390 million) at the end of March, down from as high as 31 billion rupees two years earlier, according to the hospitality firm.

Indian Hotels is focusing on an "asset light model" besides keeping costs under check and shedding non-core assets, said Amit Agarwal, an analyst at Nirmal Bang Securities. All 12 brokerages, whose data Bloomberg compiles for this firm, have a "buy" rating on the stock.

The efforts to pare borrowings at the hotel chain are also part of a wider drive at India's biggest conglomerate.

Tata Motors, the owner of Jaguar Land Rover, has said it is looking at options for the struggling British luxury brands. Tata Steel is in the midst of a revamp of its European operations.

The hotel operator aims to reduce ownership of properties to 50 per cent by 2022, from 70 per cent at present, Mr Chhatwal said. The sale and lease-back plans include as many as six hotels at the group's Ginger budget brand and a similar number held by joint ventures and associate companies, he said. BLOOMBERG