Government on verge of losing its stake in Hyatt Hotel

September 20, 2017 12:01 PM Rudra Pangeni/Mani Dahal

KATHMANDU, Sept 20: It has been 16 years since the five star Taragaon Regency Hotel Limited (TRHL) opened its doors but it has never earned a profit and never distributed any dividend to its shareholders.
Worse still, the government is on the verge of losing all its stake in Hyatt Hotel, as it is popularly known. The government had a 39 percent stake (or total of 4.275 million shares) in 1992 but now its stake is only about 9 percent. 

Private partners Radeshyam Saraf and his family, who are Indian, and local entrepreneur Ram Lal Shrestha and family, as well as the companies in which they have stakes, now own most shares in the loss-making company. 

The Shresthas are promoters of ICTC Private Limited and ICTC Holdings. 

The government had invested Rs 170 million (including 150 ropani of land calculated at Rs 1 million per ropani). The land located in the capital city may now be worth billions. 
The Saraf and Shrestha families own about 76 percent of the total 18.8 million shares, according to analysis of the company’s annual reports and the records at Nepal Stock Exchange. 

Hyatt is a listed public limited company and the latest share price per unit is Rs 276.  The general public and unidentified others own a 32.5 percent stake in the company, according to the TRHL annual reports. 

Data shows that over half the public shares are also owned by these two families. 
Officials of Taragaon Bikas Samiti, a government entity which has a stake in the hotel, say that the majority of shares have already been transferred to the two families. 

Acquiring shares of a loss making company by these private partners is a riddle for many. They have been continuously acquiring the shares and their intention is mainly to capture the 150 ropani of land, said Samiti chairman Narad Luintel, who assumed the post in 2015. 

All hotels in the country have posted lucrative profits except during the  Maoist insurgency of1996 to 2006. What is surprising to many is that the hotel which is part of an international chain has accumulated losses totaling Rs 140 million, as per the annual report of 2015/16. 

“The company’s loss figures are artificial, showing excessive expenditures,” said Luintel. 
“The company had taken loans from financial institutions including the Asian Development Bank and did not repay the loans. Instead, rights shares have been issued to pay off the loans and the banks and financial institutions accepted them,” explained Luintel adding that these BFI shares have been transferred to the two families. 

Three directors from the government were on the nine-member TRHL board in 1992 but now the government has only one representative among the 11 members. This shows that the two families already own and control the company. 

The Samiti submitted its study report on the dramatic share transactions to the Ministry of Tourism, Culture and Civil Aviation a year ago. The ministry remains silent on the matter while the hotel management has repeatedly declined to provide any financial details. 

These two families and their companies have manipulated or misguided the government representatives on the company board and the government ended up not buying those BFI shares. But the two families went on buying up the shares. The latest such shares they purchased were at less than face value, and they were purchased from the Asian Development Bank in 2014. 

The two families have been acquiring the shares at a set ratio of 60 percent for the Sarafs and 40 percent for the Shresthas, officials at TRHL said.

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