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Oyo buys Las Vegas Hooters Hotel in its first US purchase

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In what is its first property purchase in U.S., Soft Bank-backed Oyo Hotels and Homes, has bought the Hooters Casino Hotel Las Vegas.

While, Oyo did not divulge the financial terms of the transaction, a person close to the development said Oyo and Highgate, an American real estate investment and hospitality management company, are together putting in $135 million for the asset.

Hooters Casino Hotel will now be rebranded and designed as Oyo Hotel & Casino Las Vegas, the company said in a statement. It provides 657 rooms across 19 floors and a 35,000 square-foot casino.

Highgate will assume management of the hotel, and Paragon Gaming will continue to operate the casino, Oyo said.

“We believe Las Vegas is an exciting city in which to invest as the market continues to evolve with projects such as the new Las Vegas Raiders NFL stadium and the $1 billion expansion of the Las Vegas Convention Center. As we continue to focus on bringing to life our popular concept of ‘comfort design’ and delivering chic hospitality experiences, we are increasingly exploring new ways to connect with our customers, from millennials, to young executives and families, in every city we enter,” said Abhinav Sinha, chief operating officer and OYO Hotels and Homes USA.

Earlier in June, Oyo had announced its plan to invest $300 million in the U.S. Currently, there it has over 112 Oyo Hotels in more than 60 cities and 21 states in the U.S.

“With our newest hotel in Las Vegas, we are excited to cater to a completely different audience segment,” said Ritesh Agarwal, founder and chief executive, OYO Hotels and Homes.

Founded in 2013, OYO Hotels & Homes is the world’s third-largest chain of hotels, homes, managed living and workspaces. The portfolio combines fully operated real estate comprising of more than 23,000 hotels and 125,000 vacation homes. Over the years, it has attracted an array of investors including the likes of Airbnb, SoftBank Vision Fund, Lightspeed Venture Partners, Greenoaks Capital, Sequoia Capital India, and Hero Enterprise.

Oyo has been on an acquisition spree. In July, it confirmed its acquisition of Innov8, a co-working spaces provider, highlighting the company’s increasing focus on the fast-growing segment. While Oyo did not disclose financial details of the Innov8 acquisition, it is pegged to be around $30 million, according to a TechCrunch report.

In May, Oyo said it has agreed to acquire Amsterdam-based @Leisure Group, from Axel Springer, a media and technology company, for an undisclosed amount. @Leisure is a vacation rental company in Europe, which manages holiday homes, holiday parks, and holiday apartments. The transaction was pegged around $416 million, according to several media reports.

Last year, it acquired Mumbai-based Weddingz.in, an online marketplace for wedding venues, and AblePlus Solutions Pvt. Ltd, an Internet of Things (IoT) technology company.

It claims to have a balance sheet of about $1.5 billion. OYO has raised nearly $1.7 billion in funding over 12 rounds.

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Inflation concerns resurface in India as oil drags assets lower

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India’s rupee halted a seven-day rally and bonds declined after a drone attack on Saudi Arabia’s oil facilities sent global crude prices soaring by the most on record.

The currency fell 0.8% to 71.48 per dollar and the benchmark 2029 bond yields rose six basis points to 6.70%. The S&P BSE Sensex gauge of equities declined 0.7%.

India buys more than two-thirds of its oil, mostly from the Middle East, making it one of the most vulnerable in the region to a surge in oil prices. The spike come even as benign inflation and a slowing economy has led traders to bet the central bank will add to four rate cuts this year at its meeting in October.

“If crude prices stay up, the Reserve Bank of India may not be able to deliver more than 25 basis points of cuts,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership Ltd. in Mumbai.

The increased geopolitical risk concerns overshadowed the measures Finance Minister Nirmala Sitharaman announced over the weekend to revive economic growth from a six-year low. The government’s third set of steps in four week include a tax refund program for exporters and a funding window for affordable housing to revive stalled projects.

Brent soared 10% and crude traded in New York added 9% after the world’s largest oil exporter lost about 5.7 million barrels a day of output following the attack. It is the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbor.

Fund Flows

The shock comes when sentiment remains fragile in India’s $1.9 trillion stock market. While equities appear to have found a floor after suffering the worst three-month period since 2016, as foreigners turned net buyers last week, a series of steps by authorities to revive the economy have failed to spur a sustainable rally.

Global funds have pulled $4.5 billion from shares in the current quarter, and a weak rupee typically leads to a vicious cycle of capital outflows.

“Current-account deficit economies, which are oil importers, will fare worst,” said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group. “In this regard, INR, IDR and PHP are likely to underperform. USD/INR, after having fallen below 71 last week, is likely to test 72 again if oil prices stay elevated.”

–With assistance from Kartik Goyal.

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India’s growth ‘much weaker’ than expected, still much ahead of China: IMF

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India’s economic growth is “much weaker” than expected, the IMF said on Thursday, attributing the reasons to corporate and environmental regulatory uncertainty and lingering weaknesses in some non-bank financial companies. The International Monetary Fund (IMF) in July projected a slower growth rate for India in 2019 and 2020, a downward revision of 0.3 per cent for both the years, saying its GDP will now grow respectively at the rate of 7 and 7.2 per cent reflecting a weaker-than expected outlook for domestic demand.

However, India will still be the fastest growing major economy of the world and much ahead of China, the Washington-based global financial institution had said.

“We will have a fresh set of numbers coming up but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-bank financial companies,” IMF spokesman Gerry Rice told reporters at a news conference here on Thursday.

The risks to the outlook are tilted to the downside, he added. Responding to a question on the recent GDP figures of India, Rice said the IMF will monitor the economic situation in India. “We will update that assessment in the upcoming world economic outlook,” he said.

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With stake sales, Yes Bank is now poised for a makeover

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Yes Bank’s shareholding structure may witness a major churn by the year-end as founder Rana Kapoor has initiated talks to sell a part of his holding to One97 Communications Ltd, the parent of Paytm and Paytm Payments Bank.

Independently, a Reuters story on Tuesday cited Yes Bank CEO Ravneet Gill as saying that the bank is close to selling a minority stake to a global tech company as part of its capital-raising exercise. Although the bank subsequently denied these reports, Mint has independently verified that such talks might have indeed progressed somewhat.

The tech firm’s association is expected to help further the bank’s digital ambitions.

The bank has already been talking to large private equity firms for capital infusion. On 30 August, Yes Bank’s board proposed to increase the bank’s authorized share capital from Rs 800 crore to Rs 1,100 crore to enable an expansion in the paid-up capital.

If Rana Kapoor does manage to sell his stake to One97 Communications, or any other shareholder, it will not make any difference to the bank’s capital structure. Fresh equity issuance, on the other hand, will lead to dilution in promoter shareholding.

According to senior executives at Yes Bank, the promoters are willing to reduce their shareholding following this stake sale and also amend the articles of association, letting new shareholders get a board seat.

“We are open to reducing stake if the bank decides to sell a minority stake to a global tech firm,” Shagun Gogia told Mint. Gogia is co-promoter Madhu Kapur’s daughter and an additional director on the Yes Bank board. Madhu Kapur and her offices hold 9.17% stake in the bank, as of 30 June.

Rana Kapoor and his family offices hold 10.6% stake in the bank. A person close to Yes Bank’s co-promoter Rana Kapoor’s family said the stake sale to One97 would be completed through the stake held by Kapoor and his promoter group entity Morgan Credits Pvt. Ltd (MCPL); the combined holding of these two entities in Yes Bank is around 7.34%.

“There have been discussions between Kapoor, Yes Bank and several fintech firms including One97 Communications Ltd since August,” said the person cited earlier.

A statement issued by the bank to stock exchanges said: “The Bank in its usual and ordinary course of business continues to explore various means of raising capital/funds through issuance of securities to diverse set of investors, in order to meet its business/regulatory requirements, subject to compliance with prescribed procedures and receipt of statutes/regulatory approvals.”

Hindustantimes

A One97 Communications spokesperson declined to comment on the story. Kapoor also declined to comment on this story. An email sent to Yes Bank also did not elicit a response.

If true, the deal will require RBI’s approval, given that One97 holds the licence for a payments bank. Questions are bound to be raised over whether the licence holder of a payments bank should be allowed to acquire a stake in a universal bank as it might be seen as a workaround. In addition, the widening of One97 Communication’s losses, as reported in Mint on Tuesday, is bound to weigh on the approval process.

Kapoor and MCPL also need to obtain consent from Reliance Nippon Life Asset Management Ltd (RNAM) to sell their stake, given that around 7.34% is pledged with RNAM. When contacted, an RNAM spokesperson said, “Reliance Nippon Life Asset Management has not given any consent and is not in discussion with anyone about Yes Bank’s pledged shares.”

Yes Bank co-promoter Rana Kapoor and his family-owned firm MCPL had to pledge their entire 7.34% or 170.25 million shares with RNAM. This was done because RNAM wanted to convert a previously unsecured loan (given to MCPL through non-convertible debentures) into a secured loan as the bank’s stock has lost 80% over the past year.

Last year, MCPL raised Rs 1,160 crore by selling non-convertible debentures to RNAM. A prepayment of ₹200 crore was made by MCPL to Reliance MF in November. The loan pact mandates that the value of Yes Bank shares (held by Kapoor and MCPL) should always be greater than double the loan outstanding.

The value of these 170.25 million shares as on Tuesday is around Rs 1,182.13 crore.

Yes Bank is in desperate need of fresh capital to improve its common equity tier-1 (CET-1) ratio adequately above the statutory requirement of 7.375% to stay afloat. The bank’s CET-1 ratio is marginally above this at around 8.6% after it completed its Rs 1,930 crore stock sale to institutional investors last month.

On 16 August, Mint reported that the bank is looking to raise an additional $600 million after raising $270 million from large investors through a qualified institutional placement.

The Yes Bank stock has been falling steadily since RBI indicated in August 2018 that Kapoor’s term as the bank’s CEO would not be renewed after January 2019. Since 20 August last year, Yes Bank shares have lost over 80% to Rs 63.10 as of Monday on the BSE.

Both MCPL and Yes Capital (India) Pvt. Ltd (which holds 3.26% in the bank) are fully owned by Kapoor’s three daughters.

In September 2018, after Yes Bank co-promoter Madhu Kapur sold a part of her holding, Rana Kapoor had tweeted how he regarded his shares as “diamonds”.

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