Tata Group's Ginger Hotels eyes IPO launch

The Tata Group-promoted Indian Hotels Company (IHCL) is exploring possibilities of launching an initial public offering (IPO) for the Ginger brand and allow the exit of at least one of the investors.

Roots Corporation Ltd. (RCL), which runs the Ginger properties, is 67 percent owned by IHCL. Ginger is one of the single-largest hotel brands in India. Tata Opportunities Fund, a third-party private equity fund, could be looking at exiting RCL, a senior IHCL executive said.

"Tata Opportunities Fund has been a partner for us for 10 years and there are discussions around the timing of exit for them. There are really two options before us," Giridhar Sanjeevi, Executive Vice President and CFO, IHCL, told analysts at a recently held IHCL Investor Day function. Tata Opportunities Fund had bought a 10 percent stake in 2010. Whether the stake it wants to exit now is at the same level or not and data about other investors are not known.

"One option is that given the potential for Ginger, in terms of taking it up to 10,000 rooms and 100 hotels, it could very well be a potential company for an IPO in 3-4 years," Sanjeevi added.

But the preference would be to make RCL a 100 percent subsidiary of IHCL, before taking the company public.

"There are two choices. One is whether we can buy out (the balance) shareholding and make it a 100 percent subsidiary, which we believe is of strategically greater value, going forward. The other option is to get somebody else to buy out the stake. But we have not taken a call on any of these. If you ask me, the preference is more to buy them out. Let's see how the discussion goes forward. No discussions right now but yes, it has to dovetail into what makes the best strategic sense for us," Sanjeevi added.

IHCL's Ginger portfolio comprises 78 hotels across 50 cities, including 24 properties under development. Although Ginger is an entry-segment hotel brand, it recently underwent a massive repositioning exercise to place it as 'Lean Luxe' as against 'Smart Basics' that it started out as.

This is not the first time that IPO plans are being formulated for Ginger. In 2012, the then Tata Group chairman Ratan Tata had evinced interest in listing Ginger at the annual general meeting of IHCL.

While Ginger has been making losses, for IHCL, it has one of the best occupancy levels across the group. IHCL has three other hotel brands -- Taj, Vivanta and SeleQtions.

Since the end of 2018, RCL has added 33 properties at an average of more than one property every month.

As per data shared by IHCL, RCL recorded revenues of Rs 134.86 crore for the year ended March 31, 2021, a drop of 37 percent compared to Rs 212.65 crore in the year that ended March 31, 2020. The company registered a loss of Rs 49.38 crore in FY21 as against Rs 22.77 crore in FY20.