Hospitality Finance and Funding in India
In 2016, the tourism and hospitality sector’s direct contribution to GDP was US$ 71.53
billion. These sectors have emerged as one of the key drivers of growth among the services
sector inIndia. The tourism and hospitality sector is among the top 10 sectors in India to attract
the highest Foreign Direct Investment (FDI). Recovering from cyclical downturns over the past few
years, the hospitality industry in India is poised for growth. It is currently at the beginning of the
growth trajectory cycle owing to the increased tourist demand both from domestic and
INVESTMENTS IN INDIA
According to Department of Industrial Policy and Promotion (DIPP), Indian hospitality and
tourism sector has attracted around US$ 10.14 billion of FDI, from the period April 2000-March 2017. Some recent investments in these sectors have given a huge boost towards the
growth, such as (the followings as per IBEF report) :
-- Chaudhary Group (CG) Hotels & Resorts aims to have 200 hotels operational by 2020.
-- DineEquity Incorporation has signed a franchisee partnership deal with food services
firm Kwal’s Group, in order to enter the Indian markets with their breakfast chain IHOP.
-- Hyatt Hotels Corporation has outlined plans of bringing its Hyatt Centric brand to India
soon along with three new hotels in Kochi, Rameswaram and Hyderabad by 2017.
-- Vatika Hotels Pvt Ltd has raised Rs 495 crore (US$ 74.25 million) in debt from Axis Bank
Ltd to expand its hotels and quick-service restaurant chain besides its business centers.
-- Accor Hotels, a French multinational hotel group, plans to expand its footprint in
Guwahati and Kolkata by adding more 550 rooms to its portfolio of hotels in the next
The financing of hospitality projects is a specialized lending. This process includes various
components such as:
-- Cost components for the project such as land cost, construction cost, finance costs,
furniture, plant and machinery etc
-- Types of lenders such as Public & Private sector Banks, Private Equity / Venture Funds,
Non Banking Finance Companies etc
-- Different ways to attract the funds such as Equity model, Convertible Debenture model,
crowd funding etc
-- Types of Financial Facilities such as Term loan, Buyers credit, letter of credit, External
commercial borrowings, Bank Guarantee, Working Capital Facilities etc
-- Lenders Requirements and Considerations such as Due Diligence, Project Study,
Promoters Track record, ERA, Valuation, Security, Project report etc
-- Borrowers Precaution Measures such as Debt-Equity, ROE, Cost Estimates, Cost
estimates, Project implementation, Tenor of the Loan, Repayment Schedule of the Loan
-- Other components such as Refinancing of existing debt, Restructuring of existing debt.
In the Union Budget 2017-18, the Government of India announced some initiatives to give a
boost to the hospitality and tourism sector.
Some of the major initiatives taken by the Government of India are:
-- The Central Government has taken a number of steps for smooth transitioning to
cashless mode of payment to ensure that no hardship is faced by the tourists and the
tourism industry remains unaffected from government's demonetisation move.
-- Maharashtra Tourism Development Corporation (MTDC) has come up with a unique
tourism experience of visiting the open cast coal mine of Gondegaon and underground
coal mine of Saoner, which are near Nagpur and part of Western Coalfields Limited.
-- A Tripartite Memorandum of Understanding (MoU) was signed among the Indian
Ministry of Tourism, National Projects Construction Corporation (NPCC), National
Buildings Construction Corporation (NBCC) and Government of Jammu and Kashmir for
the implementation of tourism projects in Jammu and Kashmir.
India’s Hospitality industry has huge growth potential.
References: Media Reports, Press releases, IBEF report.