The Hindu : Sale of 4 ITDC hotels to fetch Rs. 85 cr.

Online edition of India's National Newspaper
Saturday, Jun 01, 2002

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Sale of 4 ITDC hotels to fetch Rs. 85 cr.

By Our Special Correspondent

NEW DELHI, MAY 31. The Union Government today accepted bids for sale of four hotels of the India Tourism Development Corporation (ITDC) and also decided to disinvest 51 per cent equity in the loss-making Fertilisers and Chemicals Travancore (FACT) to a strategic partner. The four hotels at Kovalam, Kolkata, Aurangabad and Manali are being sold for over Rs. 85 crores.

Announcing this here today after a meeting of the Cabinet Committee on Disinvestment (CCD), the Disinvestment Minister, Arun Shourie, said no bids had been received for the ITDC hotel at Khajuraho which was also offered for sale at the same time as the other four hotels.

The Kovalam Ashok Beach resort went to M. Far Hotels Limited for Rs. 43.68 crores against the reserve price of Rs. 41.70 crores. The Airport Hotel at Kolkata was bagged by Bright Enterprises which bid for Rs. 20.01 crores as compared to the reserve price of Rs. 14.83 crores. The Hotel Aurangabad Ashok is being sold for Rs. 17.40 crores to Loksangam Hotels and Resorts while the Manali Ashok goes to Auto Impex for Rs. 4 crores. The reserve prices for these two hotels were Rs. 15.05 crores and Rs. 1.91 crores respectively.

Regarding the bidders, Mr. Shourie said M. Far Hotels was also running the Kochi Meridien while Bright Enterprises was involved in setting up a Radisson hotel in Noida.

The four hotels being sold had suffered a combined loss of Rs. 11 crores on a total sales of Rs. 17.30 crores during 2001-02 and none of these hotels had an occupancy rate of more than 25 per cent.

Besides, ITDC was not able to provide funds for gratuity to the employees of these hotels due to their continuing losses. These liabilities would now have to be met from the disinvestment proceeds.

On the decision to sell 51 per cent government shareholding in FACT, he said the company had been in the red since 1998-99 and had suffered losses of Rs.151.95 crores in 2000-01. It had stopped paying any dividend to the government since 1998-99. The existing government equity stake in the company is 97.38 per cent.

The CCD has also decided that two per cent of the equity would be offered to FACT employees at a discounted price of one-third of the market price or strategic sale price whichever was lower. The company's total manpower as on March 31 last year was 7,198 which is high in comparison to other fertilizer plants.

In the backdrop of its losses, the government had to do a financial restructuring in March this year involving waiver of Rs. 226.88 crores on account of interest on outstanding government loans.

In addition to waiver of interest, moratorium on repayment of outstanding loan of Rs. 378.20 crores and waiver of penal interest up to March 31 this year had to be given.

FACT had been referred in 1996 to the Disinvestment Commission which categorised it as "non-core", recommending strategic sale of at least 51 per cent equity.

The Core Group of Secretaries on Disinvestment (CGD) in September 1998 suggested acceptance of the recommendations of the commission and in December 1998 the Cabinet considered the proposal but a decision was deferred. It was again considered by the CCD in May 2000 and a decision was deferred, after which in June last year, the Department of Fertilisers moved a proposal for financial restructuring and fresh financial assistance to FACT.

The proposal, revised and re-formulated on the basis of inputs provided by various ministries and departments, was placed before the Cabinet Commitee on Economic Affairs in March this year, and financial restructuring proposal was then considered and approved by the CCEA.

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