Warburg likely to invest Rs 300 cr in Casino Group

Boby Kurian & Lijee Philip BANGALORE / MUMBAI
The Economic Times dt.16/7/08

PRIVATE equity giant Warburg Pincus is seen in discussions with Kerala’s leading luxury resort operator Casino Group to invest Rs 300-325 crore, sources said. The Kochi-based Casino Group of Hotels (CGH), a five decade-old family-run business operating 12 environment-friendly resorts, is looking at raising capital for its expansion plans, both domestic as well as overseas.
The fund interest has been growing in Kerala’s top-draw leisure sector, but this is the first time a bulge-bracket global PE is seen in talks to cut a deal. Arguably the best known name in Kerala’s hospitality sector, Casino Group, operating under CGH Earth brand, is believed to have attracted robust private equity interests as it plans to hit the market with fundraising plans. While multiple sources confirmed discussions with Warburg, they said most of the private equity biggies would show up to buy into top-dollar leisure assets in Kerala. The Dominic family, which entered the hospitality sector in 1954, owns 100% of the company at present.
It is believed that the family may divest up to 20% for raising the funds valuing the business closer to Rs 1600 crore ($400 million). “They are talking to A-lister like Warburg as it may further their overseas ambitions. But there could be others, at least two more, flashing their interest,” a source said.

Casino Group may take debt route


“WE BELIEVE they may go in for a formal process with an investment bank. We reckon most of the top names will be taking a look at the proposal for certain,” a fund manager, focused on hospitality vertical, added.
When contacted, Jose Dominic, MD of CGH, said: “We have not yet firmed up plans on funding for expansion purposes as yet. It could be the PE or debt route.” With the markets slowing down and valuations getting affected, CGH may for the interim, raise debt from IFCI and fund its ongoing expansion.
Earlier this year, Kumarakom Lake Resort, another leading but smaller player, postponed equity placement plans for its expansion drive.
As part of the five-year expansion plan, the CGH group is eyeing a network of 30 properties. At present, all the expansion plans are focused on India, Mr Dominic said. “Our global strategy will follow the model, where our partners will bring the capital and we bring the expertise,” he added. A predominantly Kerala player till now, CGH has kicked off forays into neighbouring markets with SwaSwara, a beach resort in the Konkan belt, and Visalam, which offers a typical Chettinad experience in Tamil Nadu.
Some of the other brands in the portfolio include the Coconut Lagoon (Kumarakom), Spice Village (Thekkady), Brunton Boatyard and Marari Beach Resort (near Alleppy).
Most of CGH properties are owned and some of it leased. It is planning to go the management contract route for international properties, sources said.