Pierre Hotel Owner Sees Profit in Two Years as It Pares Debt

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Indian Hotels Co., the owner of New York’s Pierre hotel, expects to turn profitable in two years as it sells assets and pares $675 million of debt.

The company, which operates the Taj group of hotels, may be two years away from reporting net income, said Rakesh Sarna, who was hired as chief executive officer last year by parent Tata Sons Ltd.

“We need to make sure that we have taken account of all liabilities -- defined and undefined,” he told reporters in Mumbai on Monday.

The luxury hotel owner, which has posted annual losses for four out of the past five financial years, owns too much property and is now looking at an “asset right” mix, Sarna said. Shares of the Mumbai-based company have dropped 13 percent since the end of January after more than doubling in the previous 12 months on optimism the economy will rebound under a new Indian government that came to office last May.

The company plans to sell its 6.85 percent stake in Orient-Express Hotels, now known as Belmond Ltd., if the price is right, he said without elaborating.

“The share sale, whenever it happens, will be a positive trigger that will help in reducing debt and bring in cash,” said Sumant Kumar, Mumbai-based assistant vice president for research at Elara Securities India Pvt Ltd. “The asset is anyway not adding value and the acquisition strategy didn’t pan out as intended.”

Orient-Express

Indian Hotels, which has held a stake in Orient-Express since 2007, made two attempts to acquire the Bermuda-based hotelier with the most recent one in 2012.

The owner of New York’s 21 Club restaurant and Hotel Cipriani in Venice had in November 2012 rejected the takeover offer by the Indian hotelier saying the bid undervalued the company.

Indian Hotels told exchanges in a November 2013 filing that it won’t pursue its offer to buy the remaining 93.1 percent in Orient-Express Hotels.

It pared down the value of its overseas assets twice. In May 2013, it took on impairment charges of 3.73 billion rupees on investment in Orient Express and Bjets Pte. In November of that year, it pared down its assets by another 2.87 billion rupees due to “global recessionary conditions.”

“We want to build our financial foundation slowly,” Sarna said. ‘We don’t want to make any reckless decisions which will make one year look good and then put us back on the wrong side of the line.’’

Total debt climbed to 42.5 billion rupees ($675 million), a level not seen since 2011, according to data compiled by Bloomberg. It had cash and equivalents of nearly 3 billion rupees, the data show.

Shares of Indian Hotels fell 0.2 percent as of 11:15 a.m. in Mumbai, compared with a similar drop in the benchmark S&P BSE Sensex. Six out of 10 analysts recommend buying the stock, according to ratings compiled by Bloomberg.

“Indian Hotels will not be facing the kind of pain it faced in the past,” Kumar said. “The worst seems over for them.”

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