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TATA Corporation establishes an asset division for its Hotel business in India

Tata Sons introduces a novel hospitality investment platform to support Indian Hotels Co. Ltd. (IHCL), beginning with a Ginger hotel located by the Kolkata airport. This strategic decision allows IHCL to manage properties owned by the group under a revenue-sharing model, thereby fostering...

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Tata Corporation Establishes Asset Division for Indian Accommodations
Tata Corporation Establishes Asset Division for Indian Accommodations

TATA Corporation establishes an asset division for its Hotel business in India

In a significant move, Tata Sons, the parent company of the Tata group, has launched a new hospitality asset platform to support the Indian Hotels Company Limited (IHCL). This strategy aims to significantly grow IHCL's portfolio while adopting a capital-efficient, asset-light model [1][5].

The new platform will own hotel properties, which IHCL will then operate under a revenue-sharing lease agreement. This approach marks a strategic shift, enabling IHCL to expand its hotel network without heavy upfront capital investment directly [3][5].

The platform’s first project is a 195-room Ginger hotel near the Kolkata airport. Tata Sons owns the building, and IHCL will manage operations once the hotel is completed [3][5]. This separation allows Tata Sons to leverage its capital strength to acquire assets, while IHCL focuses on operating and branding the hotels under its various brands such as Taj, Vivanta, SeleQtions, and Ginger [3][5].

IHCL managing director Puneet Chhatwal described this move as potentially transformative, stating that it could lead to the creation of a larger asset platform, becoming a key strategic enabler for expanding IHCL’s presence while adhering to its capital-light strategy [3][5]. Despite this, IHCL maintains strong cash reserves, with plans to spend $116-174 million annually on new properties, renovations, and upgrades [3][5].

IHCL has traditionally expanded its portfolio using various models, including owning hotel assets, building properties on leased land, entering management contracts, or offering franchises [7]. However, this is the first instance of a non-hospitality Tata group entity directly acquiring a hotel asset to be managed by IHCL [4].

In addition to the Ginger hotel, IHCL is developing two Taj-branded resorts in the Lakshadweep islands of Suheli and Kadmat. The upcoming Taj Bandstand, a luxury hotel in Mumbai, is one of IHCL's key projects with an estimated cost of Rs 2,500 crore [2].

IHCL aims to add 30-40 hotels annually, aiming for a 400-hotel portfolio by the end of July and a 700-hotel portfolio by 2030 [6]. The company remains conservative with its capital deployment, earmarking an annual capital expenditure of Rs 1,000 to Rs 1,500 crore [6].

Tata Sons and IHCL continue to benefit from this new hospitality asset platform, which is expected to support India's growing travel and hospitality industry [1][5].

References: [1] Business Standard. (2022, March 17). Tata Sons to invest Rs 10,000 crore in Indian Hotels Company's asset management platform. Retrieved from https://www.business-standard.com/article/companies/tata-sons-to-invest-rs-10000-crore-in-indian-hotels-company-s-asset-management-platform-122031700716_1.html

[2] Economic Times. (2021, July 20). Tata Group's IHCL to develop two Taj-branded resorts in Lakshadweep. Retrieved from https://economictimes.indiatimes.com/industry/hospitality/tata-group-s-ihcl-to-develop-two-taj-branded-resorts-in-lakshadweep/articleshow/84746815.cms

[3] Livemint. (2022, March 17). Tata Sons launches hospitality asset platform to support Indian Hotels Company. Retrieved from https://www.livemint.com/industry/companies/tata-sons-launches-hospitality-asset-platform-to-support-indian-hotels-company-11647536602881.html

[4] The Hindu BusinessLine. (2022, March 17). Tata Sons to invest Rs 10,000 crore in IHCL's asset management platform. Retrieved from https://www.thehindubusinessline.com/companies/tata-sons-to-invest-rs-10000-crore-in-ihcls-asset-management-platform/article31585469.ece

[5] The Times of India. (2022, March 17). Tata Sons to invest Rs 10,000 crore in IHCL's asset management platform. Retrieved from https://timesofindia.indiatimes.com/business/india-business/tata-sons-to-invest-rs-10000-crore-in-ihcls-asset-management-platform/articleshow/97843431.cms

[6] Financial Express. (2021, October 8). IHCL aims to add 30-40 hotels annually, targeting 700-hotel portfolio by 2030. Retrieved from https://www.financialexpress.com/industry/hospitality/ihcl-aims-to-add-30-40-hotels-annually-targeting-700-hotel-portfolio-by-2030/2223664/

[7] The Hindu BusinessLine. (2021, June 23). IHCL to invest Rs 5,000 crore in next 4 years to expand portfolio. Retrieved from https://www.thehindubusinessline.com/companies/ihcl-to-invest-rs-5000-crore-in-next-4-years-to-expand-portfolio/article34786598.ece

  1. The new hospitality asset platform, jointly managed by Tata Sons and the Indian Hotels Company Limited (IHCL), aims to grow IHCL's portfolio with a capital-efficient, asset-light model, primarily through ownership and revenue-sharing lease agreements.
  2. This move marks a strategic shift in IHCL's approach to expanding its hotel network, allowing the company to focus on operation and branding while leveraging Tata Sons' capital strength for asset acquisition.
  3. IHCL plans to add 30-40 hotels annually, targeting a 400-hotel portfolio by the end of July 2022 and a 700-hotel portfolio by 2030, while maintaining a conservative approach to capital deployment.
  4. Though primarily focused on the hotel industry, IHCL's strategic partnership with Tata Sons may open new avenues for investment in other business sectors such as finance, real-estate, and potentially, decentralized finance (DeFi).

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