Vivek Nair, vice chairman & MD, Hotel Leela , says that the company has plans to reduce debt by Rs 2,750 crore in near future and transaction of Leela Business Park in Chennai will be completed soon.
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Below is the edited transcript of his interview to CNBC-TV18.
Q: Will you use the facility of replacing expensive rupee loan with forex loans that is now available?
A: Yes, we have been clamoring for this for last several years. We have been asking RBI to include infrastructure lending in the list. It was to a certain degree passed in the March 1 meeting of the Cabinet Committee on Infrastructure but only hotels in the rural areas outside city limits of 10 lakh are benefitted. So they are still working on that to extend it throughout the country because right now only 95 percent of the hotel projects are in infrastructure.
The benefit of being under infrastructure lending list is that one could replace existing rupee debt by ECBs.
Hotels earn foreign exchange between 20-50 percent depending on the location because the food and beverages and other banquet income is normally in rupees. So we put forth that argument and even though the infrastructure lending list has not been extended throughout the country, thanks to the initiative that we have taken through our federation, the government has agreed to have the rupee debt replaced by foreign currency loans, which are at the lower level because we have a natural hedge. We earn dollars and therefore we can repay in dollars.
Q: How will you react to it for Hotel Leela itself? You have Rs 3,000 crore debt, immediately what are the plans?
A: They put a qualifier that we can only avail ECBs to the extent of 50 percent of the last three years earnings, which is disappointing. All along we told them that do not apply to us because only 15-20 percent of the total debt exposure on books of an average hotel company whether it is Leela or any other would be covered under this and that does not make it meaningful. We are in talks with them to enhance the limit because the current ceiling only affects 20 percent and 80 percent continues in rupee debt.
Same applies to our company too, only 20 percent of our debt would be eligible under this present qualifier. However, I am sure we can convince them to make it meaningful to increase the criterion. So in our case, it will be around Rs 400-500 crore. I am sure we can convince the ministry of finance and RBI to change the criteria to make it more meaningful.
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