India watch issue 5 - Insight into India Hospitality Corp

Monday, July 13, 2009 | Posted by: Grant Thornton
Categories: | Tags: India, LSE, South Asia Group, AIM, Anuj Chande, Fiona Owen, Capital Markets, Indian Economy, India Hospitality Corp, Nomad, Client Case Study

India Hospitality Corp. (“IHC”), the only Indian hospitality company on AIM, is a diversified pan-Indian hospitality and leisure company. Promoted by Hayground Cove Asset Management, a US investment house, IHC listed as a SPAC on AIM in August 2006 raising $103 million at the time of listing. In July 2007, IHC completed its acquisition of the Indian-based Mars Restaurants Private Limited (“Mars”) and SkyGourmet Catering Private Limited (“SkyGourmet”) from Navis Capital Partners, Asia based private equity house.

Sandeep Vyas, Executive Director & Chief Operating Officer of IHC talks about the experience and benefits of listing on AIM.

What are your experiences so far of the London market

We opted for AIM because most of our customers are sophisticated companies and we wanted the credibility that AIM’s reputation and London financial market would give us. Additionally, having a listed company continues to allow us to attract high quality employees and key talent from the industries. It will also provide us with a platform to raise further capital at the appropriate time.

AIM offered us a more efficient and straightforward listing process. It is our belief that the AIM investor has a developing understanding of the Indian operating environment and AIM itself as a growth market provides a healthy environment for a new company to list on. However, liquidity appears to be a challenge and we have highlighted this issue to the LSE.

What do you see the benefits to IHC of being listed on the London market

The benefit being listed on the London market versus other markets is that the listing process was relatively straight forward. Additionally a London listing provides the Company with an international level of credibility which has enhanced our negotiation position when entering into discussions with potential clients in our various hospitality sectors. We note that other companies have returned to the AIM market time and again to raise further capital and we hope to utilise this attractive benefit at a time that is appropriate for the Company and its stage of development. There have been some misguided reports in the past as regards AIM being less regulated but in our interaction with our advisers and with regard to the various AIM rules, it is clear that is not the case and in fact the ongoing obligations have allowed us to portray a higher level of transparency to our investors and the market at large which all aids in terms of building on reputation.

There has been considerable turmoil both in India and throughout the major world markets - are you concerned about the potential future economic developments and if so why

At IHC, we are not unduly worried about the economic slow down and we view this as a short term blip. The current trends of growth in consumer numbers and improving demographics support the continuing growth opportunities for our business

The recent elections in India, resulting in a new majority national government will further help bring stability and growth to the Indian economy and indeed we are already seeing the green shoots of this positive sentiment.

This financial crisis has impacted India less severely than other areas worldwide due mainly to the fact that the Indian banking system has managed to stay relatively robust. This has helped strengthen the image of India and we believe that investors are continuing to look to invest in India as a whole.

How did Grant Thornton UK LLP become involved with IHC and what do you see as the benefits that this will bring

Earlier this year we were exploring the possibility of appointing a new Nomad and Broker and indeed separating these roles. The partner on our audit team in India introduced us to Anuj Chande and Fiona Owen of Grant Thornton UK’s South Asia Group on one of their regular trips to India. The IHC management was impressed with the knowledge and experience of both Grant Thornton’s Capital Markets team in London and also their deep understanding of the South Asian market. We were keen to work with the team presented by Grant Thornton UK as they demonstrated both passion and clear understanding of the Company’s future objectives We understand as a result of going through this process that it is key that whichever Nomad a company aligns itself to must have both a deep understanding of the needs and aspirations of companies seeking a listing on AIM, the way in which the AIM market itself works, and of each companies own particular operating jurisdictions and business objectives.

Since we engaged with Grant Thornton UK’s Nomad team, they have been proactive and have provided us with relevant advice at a very short notice and even at odd times of the day! They have helped the IHC management at every step and aided us in terms of comprehending the various issues in discussion at any particular time.

We are confident that the appointment of Grant Thornton UK as Nomad will be valuable for both our AIM compliance requirements and also a guide for a management team based and operating in India, thus allowing us to progress and achieve our objectives. We are confident that the Grant Thornton UK Nomad team has the potential to help IHC grow by helping at every stage of its future plans.

What does the future hold for the Company and how will the AIM listing help in achieving the Company’s targets

We plan to develop the Company to become the preferred India vehicle for investment into our various business streams in the hospitality and food sectors. The listing on AIM in London provides us international visibility and a market for ongoing capital raising activities. In addition to appointing Grant Thornton UK’s Nomad team, we have recently also appointed Noble & Company Limited as our broker and will work with both our new Nomad and broker to maximise the ongoing development of our business.