SAMHI Hotels (SAMHI) Status Update summary

Strategic partnership and transaction overview

• Entered a partnership with GIC to create an upscale hotel investment platform in India, with GIC acquiring a 35% stake in three subsidiaries for INR 752 crore, valuing the assets at INR 2,200 crore.

• Upfront INR 303 crore will reduce debt, with INR 149 crore over two years funding new hotel development; remaining funds to be used for further debt reduction and expenses.

• The transaction is structured to be tax-neutral and aligns with a capital recycling strategy, enabling significant deleveraging and future growth.

• Net debt to EBITDA is expected to fall below 3.5x at closing, with a target of less than 3.0x in 12 months, and a long-term goal of 2.5x.

• The platform has a $300 million indicative commitment, with GIC contributing 35% and the rest from the company, providing firepower for future acquisitions.

Financial impact and capital structure

• Debt reduction of INR 580 crore is expected, with immediate interest cost savings and further reductions anticipated as credit ratings improve.

• The transaction includes both primary and secondary investments, with GIC buying 14% of SAMHI JV for INR 115 crore and the rest via capital infusion.

• Asset management fees of 4% of EBITDA will be earned on platform assets, benefiting the listed entity.

• Dividend and cash distribution policies are in place to ensure access to free cash from the platform for both partners.

• The company expects to generate INR 1,000–1,200 crore in free cash over the next 3–4 years, with INR 500 crore earmarked for capex and the rest as investable surplus.

Growth strategy and platform structure

• The platform has the right of first offer on all upscale hotel opportunities, including greenfield, brownfield, and acquisitions, but no exclusivity on mid-scale assets.

• Focus remains on inorganic growth through acquisitions and turnarounds, leveraging the team's expertise in urban business hotels.

• GIC's involvement is limited to upscale assets, with flexibility for the company to pursue other opportunities if the platform declines.

• No put options exist for GIC except in the event of default, and the partnership is designed for long-term value creation.

• Asset recycling in the mid-tier segment continues, with ongoing evaluation for further capital redeployment.