Shrikant BhasiChairman, Carnival Group
Making headlines for the largest deal in the real estate sector in recent times, the Bhasi-promoted Carnival Group in 2015 completed the acquisition of a commercial real estate project, which included Elante Mall, Hyatt luxury hotel and the office premises with a central courtyard in Chandigarh from L&T Group at a deal value of Rs 1,785 crore (read more on Top Property Deals 2015 on page 104). This is the company´s third real estate acquisition after Leela Infopark (Kochi) and Leela Technopark (Thiruvananthapuram). He speaks on the company´s unique and profitable model.
Why these deals: As far as the quality of the asset for the Elante Mall is concerned, this is the best. Also, with a lot of untapped potential areas, what we looked at is the value versus the return. We expect another roughly about 10-15 per cent additional lease rental in three to four months. As for the luxury hotel, it has one of the largest banquet halls and a huge courtyard, and the location is good because Chandigarh is the place where everyone is looking for something new. As far as the offices are concerned, we have some space to lease out right now.
The Leela deals: The model of these deals is similar to that of Elante. We are looking for something that is secured and where lease rental can be the revenue. The business model: We are a conservative company in terms of risks. So all the assets we have acquired are already leased out 100 per cent for at least six to nine years, with some for 15 years.
And, every asset has got an escalation clause of 5 per cent every year. So, we are trying to reduce the gap between the cost of funds and the revenue; that is going to be our profit.
Plans for 2016: Based on our model, if we get a good deal that offers us good returns, we will certainly look into it. Apart from the strategic investment, we have also acquired three companies in multiplexes - Big Cinema from Reliance, Glitz from Viacom and Broadway from HDIL. Now we are entering into Tier-II and Tier-III markets; this is where our focus will remain.