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Goldman Sachs acquires minority stake in SAMHI hotels for ₹ 441 Crore

Global investment banking major Goldman Sachs has picked up a significant 'minority stake' in hotel development and investment start-up SAMHI Hotels for 441 crore to help fund its growth plans. SAMHI Hotels had raised $170 million (over Rs 900 crore ) over the past four years.

Ashish Jakhanwala, founder and CEO of SAMHI Hotels, did not disclose the details of the exact stake sold to Goldman Sachs or the company's valuations. However, according to its filing with the Registrar of Companies, it has raised the funds by selling fresh equity shares to Goldman Sachs.

Founded in 2011 by Jakhanwala and HVS Asia Pacific chairman Manav Thadani, SAMHI Hotels currently owns 16 operational hotels. It has expanded its portfolio through acquisition of hotels across key cities in India and rebranded them by partnering with global operators such as Marriott, Starwood Hotels, AccorHotels and Hyatt.

SAMHI Hotels also has joint venture partnerships with Marriott and AccorHotels to develop their budget brands Fairfield and Formule1, respectively, in the country.

"This year, we want to expand our portfolio through acquisitions and the investment will be entirely used for growing the business. Our existing projects -- operational and under development -- are fully funded and this money will be deployed for fresh acquisitions," said Jakhanwala, adding that the funds would be deployed over the next 15-18 months.

He said the focus will largely be on acquiring operating or under construction hotels in midscale and upscale segment apart from inorganic opportunities to grow its budget hotel business.

With this investment, Goldman will get three board seats in SAMHI, which already counts Equity International, World Bank arm IFC and GTI Capital among its investors.

Goldman Sachs is among the largest real estate investors in the world, with investments across retail, office, mixed use, residential, golf and hospitality assets. Since 2006, Goldman Sachs has invested over $2.5 billion in India, cutting across sectors such as renewable energy, healthcare, logistics, food and beverages.

Last year, the company invested $40 million (about Rs 255 crore) in the hospitality arm of Gurgaon-based Vatika Group and sold its stake in Four Seasons hotel and luxury homes project in Bengaluru.

"On the back of reform momentum, India is witnessing a steady recovery in economic activity driven by domestic demand. We anticipate this to lead to an upturn in the hotel sector," said Sonjoy Chatterjee, chairman of Goldman Sachs India. "This investment is consistent with our strategy to invest in sectors and infrastructure that assist in the continued growth and development of India."

SAMHI Hotels has 10 properties in the pipeline, expected to open in the next 12 to 18 months, taking its nationwide footprint to 26 hotels with 3,900 rooms under five brands. By the end of 2016, SAMHI Hotels would have deployed Rs 1,900 crore in operational and under-construction projects in the country.

After six years of downward pressure and constant supply increase, the Indian hotel industry has seen green shoots in 2015. According to hotel consultancy firm HVS, hotel occupancy in India crossed 60% for the first time in four years in 2014-15.

The Indian hotel industry has received Rs 2,500 crores worth investment from PE in the past five years, said data compiled by the hotels and hospitality group of property consultancy JLL.

"This deal is a further reinforcement of our belief that the hospitality industry is once again being favourably looked upon by strategic investors who believe that the operating performance and the valuation of hotel assets have bottomed out and will see a surge over the next few years as the cycle reverses and the economy grows as projected," said Mandeep S Lamba, managing director India, Hotels & Hospitality Group at JLL.

This article was published in the Economic Times, to read please click here.