INVESTOR PRESENTATION

INVESTOR PRESENTATION
New York, NY
June 2008
Cautionary Note Regarding Forward-Looking Statements
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of
the Company and certain plans and objectives of the board of directors of the Company. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as
"anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other words of
similar meaning. These statements are based on assumptions and assessments made by the board of directors of the Company in light
of their experience and their perception of historical trends, current conditions, expected future developments and other factors they
believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, and the factors described in the context of
such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed
in or implied by such forward-looking statements.
Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary
materially from those described in this document. The Company assumes no obligation to update or correct the information contained in
this document, whether as a result of new information, future events or otherwise, except to the extent legally required.
The statements contained in this document are made as at the date of this document, unless some other time is specified in relation to
them, and service of this document shall not give rise to any implication that there has been no change in the facts set out in this
document since such date. Nothing contained in this document shall be deemed to be a forecast, projection or estimate of the future
financial performance of the Company except where expressly stated.
2
INDIA HOSPITALITY CORP.
Featured Speakers
Jason Ader
Ravi Deol
Vivek Narain
Arnoud de Villegas
•
Founder, President and CEO, Hayground Cove Asset Management, and Chairman of the Board of IHC
•
Former Senior Managing Director, Bear Stearns lodging and hospitality industry research
•
Chairman & CEO of Mars
•
Former Managing Director & CEO of Bharti Retail and Barista Coffee
•
Managing Director, Hayground Cove India Advisors
•
Member of IHC’s Executive Committee
•
Managing Director, Hayground Cove India Advisors
•
Member of IHC’s Executive Committee
INDIA HOSPITALITY CORP.
India’s Attractive Macroeconomic Outlook
•
India is increasingly showing signs of the early “take-off” phases of other large Asian economies, namely China and South Korea;
e.g. both GDP and GDP per Capita have grown in the last 4 years. This suggests a huge, and as yet untapped, potential for India
•
India is expected to continue to show robust GDP growth in the range of 9% in the coming decade. In the event of a US recession,
however, the IMF estimates that a one percentage point (pp) fall in US GDP growth would reduce India’s growth by a modest 0.10.2pp
Real GDP per Capita During “Take-offs”
Real GDP per Capita During “Take-offs”
Source: World Bank, CEIC and Lehman Brothers
Source: CEIC and Lehman Brothers
4
INDIA HOSPITALITY CORP.
The Great Indian Traveller And The Aviation Boom
Airplane Passengers (mm)
Penetration Levels vs. Real GDP Per Capita
450
400
350
International
300
Domestic
250
200
150
100
50
0
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 201606
07
08
09
10
11
12
13
14
15
16
17
Source: Ernst & Young Indian Aviation Sector Report, March 2008
Penetration Levels vs. Real GDP Per Capita
Source: Airport Authority of India
•
Centre for Asia Pacific Aviation has forecasted domestic traffic
to grow by 25-30% per year until 2010 and international traffic
to grow by 15%
•
As a share of GDP, the size of India’s tourist and travel
industry is estimated at only 2%, well below the world average
of 3.6%
•
The World Travel & Tourism Council believes India is the 2nd
fastest growing travel and tourism economy in the world,
expected to grow by 8.8% annually over the next 10 years
Source: World Travel & Tourism Council
5
INDIA HOSPITALITY CORP.
Existing Excess Of Lodging Demand Over Supply Likely To Increase
Lodging Supply and Demand
•
India
=
120,000 rooms and population 1.1 billion
•
China
=
1 million rooms and population 1.2 billion
•
US
=
4.4 million rooms and population 300 million
Source: HVS International; Knight-Frank Consulting
6
INDIA HOSPITALITY CORP.
Economic Trends to Drive Restaurant Industry Growth
Retail Mall Growth
Indian Food Service Transactions
120
120
100.5
80
60
40
28.2
Square Ft. (mm)
Transactions (mm)
100
13.6% CAGR
100
100
60
40
20
20
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
35% CAGR
80
30
2006
2010
Will overlay the demographic trends that encourage the `eating-out’ habits like;
- Rising numbers in Young Professionals’ crowd.
- Nuclear as well as DINC (Double Income No Children) families.
Source: Euromonitor, Knight Frank Consulting.
INDIA HOSPITALITY CORP.
Government Of India Initiatives Benefiting Hospitality
Direct
Initiatives
Other
Initiatives
•
100% FDI permitted in hospitality sector via the automatic route
•
Increased budgetary allocations to the hospitality sector
•
Reduction of sector-specific taxes and extension of infrastructure status to the hospitality industry
•
State government tax exemptions for entertainment businesses (i.e. multiplexes)
•
Govt estimate of the number of jobs created per Rs 1 million invested:
− Tourism:
47.5 jobs
− Agriculture:
44.7 jobs
− Manufacturing industry:
12.6 jobs
− An increase in tourism to 10% of GDP, as against current 4.8% would result in the creation of nearly
26 million jobs
•
Removal of domestic and foreign air travel tax and a reduction in excise duty on aviation turbine fuel
•
Open-skies policy, improved air connectivity and development of national highway infrastructure
•
Promotion of Special Economic Zones (SEZs)
•
Commonwealth Games in 2010
•
Development of 15 tourist destinations and circuits following an integrated area development approach
•
Extensive development of new convention centres
•
Easing of FSI restrictions in certain areas
Excellent opportunity to enter the hospitality, leisure, tourism and travel sector
through selective real estate acquisitions
8
INDIA HOSPITALITY CORP.
Infrastructure Development Creating Opportunities
Focus
Focus
Focus
Focus
9
Source: E&Y / FICCI Indian Real Estate Report (2008)
9
INDIA HOSPITALITY CORP.
IHC Business Formation
August 2006
July 2007
December 2007
•
IHC raises $103 million in a blank check IPO listed on the AIM of the LSE.
•
IHC acquires SkyGourmet, Gordon House Hotels, and Mars Restaurants for $110 million
in both cash and stock.
•
Hayground Cove and Navis invest an additional $28 million of equity.
Navis
16%
Hayground Cove
37%
Public Float
47%
As of March 2008
INDIA HOSPITALITY CORP.
Strengthening IHC’s Organization
IHC Board
Executive
Committee
CEO
CFO / COO
Senior VP
Finance & Accts
BU Director
Airline Catering
BU Director
Hotels
BU Director
Restaurants
…supported by over 1700 employees.
Director
HRD
Director
Supply Chain
Director
System / Audits
Director
Projects
Key Future Hires
INDIA HOSPITALITY CORP.
Introducing Ravi Deol – Chairman & CEO of Mars
Career Profile:
Apr 2006-Oct 2007: Managing Director & CEO, BHARTI RETAIL LTD. (Bharti – Wal-Mart JV)
Jul 2004-Mar 2006: Managing Director & CEO, FIELDFRESH FOODS INC. (Bharti – Rothschild JV)
Aug 2000-Sep 2003: Managing Director, BARISTA COFFEE COMPANY LTD.
1996-2000: Director – Distribution & Retail Marketing, COCA-COLA INDIA INC.
1990-1996: General Manager – Sales & Marketing, WIPRO LIMITED
1984–1989: CIBA-GEIGY LIMITED (Since COLGATE-PALMOLIVE INC.)
Education:
2003: Senior Executive Program, London Business School
1987: Master in Business Administration, FMS, Delhi
1983: Bachelor of Science, St. Stephens College, Delhi
Certain Awards & Recognitions:
Winner of the Ernst & Young Entrepreneur of the year 2002
Selected by World Economic Forum as Global Young Leader
Asian Wall Street Journal’s 15 Young managers shaping consumers in Asia
INDIA HOSPITALITY CORP.
Experienced Board of Directors
Jason Ader
•
Founder, President and CEO, Hayground Cove Asset Management
Chairman
•
Former Senior Managing Director, Bear Stearns lodging and hospitality industry research
Richard Foyston
•
Founder Partner and Managing Director of Navis Capital Partners
Deputy Chairman
•
Worked in industries with focus on consumer goods, agribusiness, and financial services
•
Chairman & CEO of Mars
•
Former Managing Director & CEO of Bharti Retail and Barista Coffee
•
CEO, Global Consumer Acquisition Corp.; Managing Director, Hayground Cove Asset Management
•
Former Levi Strauss North American Brand President, CFO of Park Place Entertainment, and Treasurer of Hilton and Host Marriott
•
Founder Partner and Managing Director of Navis Capital Partners
•
Former Head of BCG’s main Southeast Asian office in Kuala Lumpur
•
Managing Director, South Asia, Airbus S.A.S.
•
More than 15 years in global aviation industry
•
Director of Navis and brings more than 20 years of finance and investment management experience
•
Executive Director, Dubai Investment Group, Global Real Estate and Hospitality
•
Oversees $2 billion US real estate portfolio, including a $700 million hospitality portfolio
•
Developing $500 million non-gaming hotel, part of MGM Mirage’s $7 billion “Project City Center”
•
Owns and operates The Light Group, a $100 million hospitality company in Las Vegas
Ravi Deol
Scott LaPorta
Nicholas Bloy
Ajay Mehra
Bruno Seghin
Anthony Juliano
Andrew Sasson
INDIA HOSPITALITY CORP.
High Level View of IHC
1
Airline
Airline
Catering
Catering
2
Hotels
Hotels
3
Restaurants
Restaurants
•
Grown from single client to multi-client business.
•
Two largest clients are the industry consolidators.
•
Focus on expanding international business segment.
•
Significant capacity expansion underway.
•
Aims to become industry leader in FY09
•
‘A charming little hotel with lots of style’.
•
One owned in South Mumbai and one managed in Pune.
•
Strong pipeline of growth.
•
Niche market with fewer participants.
•
Opportunistic roll-out strategy
•
Capitalizes on brand creating abilities of management.
•
Replicates growth strategy of Birdy’s in other brands.
•
Leverages on Sky’s kitchens to provide low capex scalable model.
•
Opening new commissary in Borivali, Mumbai in FY09 to support
Birdy’s and Café Coffee Day operations.
INDIA HOSPITALITY CORP.
Strategy: Leverage Clear Synergies Between 3 Divisions
Strategic Objectives
SkyGourmet:
ƒ High Barriers to Entry.
ƒ Build highly scalable ACU portfolio.
ƒ Fastest growing flight catering
company in terms of capacity.
ƒ Margin structures in both segments
are complementary.
ƒ Leverage growth in volumes in Delhi,
Mumbai, Chennai, Hyderabad,
Bangalore as well as `B’ cities by
2012.
ƒ Centralize production, inventory and
standardize systems to provide
benefits to restaurants business.
Goal:
Hotels:
ƒ Boutique hotel model highly scalable.
ƒ Development of hotel properties in
short gestation periods.
ƒ Drive growth through shorter
development time period.
ƒ Achieve maximum leverage of
services capabilities; owned as well
as management contracts /
franchisee models.
ƒ Strong in-house project design and
execution teams.
ƒ Can be opportunistic as the hotel
market is nascent.
Mars Restaurants:
ƒ Build restaurant units in multiple
market segments.
ƒ Build brands for specialty restaurants
as well as volume driven businesses
in food courts.
ƒ F&B value addition for the hotel
division.
ƒ Leverage capacity of Sky’s pan-India
ACU network to cut down on cycle
times.
ƒ Significant cost saving advantages in
centralized procurement.
Build an unparalleled platform of pan-hospitality businesses that generate multiple income streams
INDIA HOSPITALITY CORP.
SkyGourmet Catering
INDIA HOSPITALITY CORP.
Soaring Service Capacity
Meals Per Day
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
154,000
45.3% CAGR
119,000
169,000
131,500
53,000
26,000
2007
2008
2009
2010
2011
2012
•
Capacity increase 108% in FY 08-09 with new facilities in four key cities.
•
Target to become largest airline caterer in India by capacity in FY 2009; presence in 10 cities by FY2012.
•
Planned 116% air capacity increase from key customers drives demand.
Source: Company Reports
INDIA HOSPITALITY CORP.
Geographic Expansion Opportunities
Building A Nationwide Footprint
Amritsar
First 6 cities of SkyGourmet’s expansion captures
approx. 83% of the passenger market in India.
Delhi
Jaipur
Ahmedabad
Kolkata
Mumbai
9.5mn meals per year capacity in 2007
Hyderabad
Goa
58mn meals per year capacity in 2012
Bangalore
Calicut
Cochin
Chennai
Existing
Under Construction
Potential Expansion
Trivandrum
Source: Company Reports
INDIA HOSPITALITY CORP.
Gordon House Hotels (“GHH”)
“Small hotel that’s big on style” fills niche
for discerning travellers who want the
comforts of home with a focus on warm,
friendly service in a private setting
Current Properties
•
Three city-centre properties:
− Colaba, South Mumbai (owned)
− ESquare Mall, Pune (management contract)
− Bangalore (management contract – Apr 09)
INDIA HOSPITALITY CORP.
Mars Restaurants Brands
Casual Dining
Gourmet Dining
Fast Food
Other Formats
INDIA HOSPITALITY CORP.
The Opportunity for Mars Restaurants
•
Attractive portfolio of well-known restaurant brands.
•
Presence in both specialty and value-for-money concepts
•
Operator through management contracts and franchises throughout Western
India
•
Several brands adapted for retail mall food courts; total outlets (across
various concepts) to increase from 27 in FY07 to 81 in FY12
•
Synergies and cost controls by utilizing SkyGourmet kitchens:
− Scalability and procurement
Restaurant industry highly fragmented, only handful
of regional branded competitors
MARS brands positioned to participate in restaurant
growth across categories
Source: KSA Technopak, 2007 Consumer Outlook
SEC A&B, 8Center Study
INDIA HOSPITALITY CORP.
New, Non-Dilutive Source of Growth Capital
•
The “IHC Property Fund” will develop a diversified portfolio of properties suited to the characteristics of IHC’s “Gordon House” brand
and possibly new brand(s)
•
To facilitate this growth and provide attractive returns to property-oriented investors, IHC is launching a US$200 m Limited
Partnership for the development and ownership of hotels and other hospitality related assets in India
•
IHC, through wholly-owned subsidiaries, will manage the Fund and provide relevant management and operational expertise, plus a
proven hotel brand, “Gordon House”
•
Limited Partners will earn returns of ownership of the operating assets and underlying property appreciation
•
IHC's shareholders will directly benefit from the impact that the management contracts will have on the bottom line:
•
Pipeline of acquisition targets is available now to deploy capital quickly and senior management is already in place in India to provide
sourcing, closing, and project and hotel management
•
IHC will retain a majority of the carried interest in the GP
− Large windfall at the end of the Fund’s life
•
The Fund aims to generate annualized returns in excess of 25%
− Historic returns on same structure basis = ~26% per year
INDIA HOSPITALITY CORP.
Current Hotel Acquisition Opportunities
•
New Delhi:
− JV opportunity: 4-acre plot adjacent to the international airport
•
Noida, Uttar Pradesh:
− Redevelopment model: Option to acquire and redevelop an existing hotel in CBD of one of Delhi’s satellite cities
•
Sahar, Mumbai:
− Acquisition of existing asset: Option to acquire newly constructed 110 room hotel near the international airport
Targeting 2,000 hotel rooms across India
through organic and inorganic route
INDIA HOSPITALITY CORP.
Compelling Valuation
# of Shares Outstanding: 27.5mn
India Hospitality Corp. (London: IHC)
Last Price:
52-Week High
52-Week Low
$6.30
$7.07
$5.60
Current Mkt. Price of Common: $6.30
Market Cap: $173mn
Total Debt: $34.7mn
Total Cash: $18.6mn
Sources: ir.indiahospitality.com
Healthy balance sheet and access to capital
Value of Real Estate @ Cost: $15mn
Valuation comparable with global comps
INDIA HOSPITALITY CORP.
Warrants to Fund Future Growth
44 Million Warrants
Strike price $5 / warrant
Call provision @ $8.50
$220 Million Embedded Growth Capital
INDIA HOSPITALITY CORP.
Unique India Investment Opportunity
Experienced
Experienced team
team with
with new
new leadership
leadership aligned
aligned with
with shareholders.
shareholders.
Unique
Unique pan-India
pan-India hospitality
hospitality platform
platform in
in growing
growing consumer
consumer sectors
sectors with
with strong
strong macro
macro tailwinds.
tailwinds.
SkyGourmet
SkyGourmet is
is aa leader
leader in
in flight
flight catering
catering in
in India,
India, one
one of
of the
the fastest
fastest growing
growing aviation
aviation markets
markets globally.
globally.
Current
Current lodging
lodging supply/demand
supply/demand imbalance
imbalance in
in India
India expected
expected to
to remain
remain for
for the
the next
next decade.
decade. GHH
GHH is
is well
well
positioned
positioned to
to capture
capture that
that growth.
growth.
Restaurant
Restaurant portfolio
portfolio at
at Mars
Mars will
will benefit
benefit from
from the
the growing
growing consumerism
consumerism amongst
amongst India’s
India’s growing
growing middle
middle class.
class.
INDIA HOSPITALITY CORP.