MUMBAI: Markets regulator Securities and Exchange Board of India (SEBI) has restrained Hotel Leela Venture from concluding its asset sales to a fund sponsored by Canada’s Brookfield Asset Management in a `3,950 crore deal. SEBI’s letter asking Leela to not take any action in the matter until further orders came just as the e-voting by shareholders on resolutions pertaining to asset sales was to end on Wednesday.
The intervention has come about as ITC, a shareholder with close to 8 per cent stake in Hotel Leela Venture, and another shareholder, complained of oppression and mismanagement against the company. “In view of the representations/ allegations made by the two shareholders against the company to SEBI with respect to the Postal Ballot Notice, SEBI has advised the company to ensure that none of the transactions proposed in the Postal Ballot Notice dated 18th March, 2019 are acted upon till further directions from SEBI,” the company said in a filing.
ITC has also separately moved the National Company Law Tribunal (NLCT) along with two applicants, asking for urgent hearing and also waiver of 10 per cent shareholding as minimum threshold to have a say in the management decisions. ITC has alleged that minority shareholder rights are being suppressed. It had also prayed for restraint on ITC and its lender JM Financial ARC from going ahead with sale of properties to Brookfield. NCLT will hear the matter on June 18.
Leela, which has debts of over `6,000 crore, has for some years been evaluating options for resolution, and JM Financial ARC, which had bought the bad debts from banks, had converted debt into 26 per cent equity holding. This also resulted in ITC’s holding in Leela to fall below 10 per cent.
As part of the deal to cut debt, Leela decided to sell its Bangalore, Chennai, Delhi and Udaipur hotels and the property that it owns in Agra. Simultaneously, the promoters who own the Leela brand also decided to transfer the Leela brand to Brookfield for all hospitality businesses. JM Financial Limited acted as the exclusive financial advisor to HLVL for this transaction. ITC had held stake in EIH and Leela as an investment.
Mired in litigation
This is yet again a case of litigation delaying a debt resolution at the nick of the moment, even as Hotel Leela struggles with mounting losses to the tune of I6,000 crore.