Leela Group
Themed after the Mysore Palace, the Leela Palace Bengaluru is a luxury destination for the tourist and the businessman. The Leela Group's deal with Brookfield includes the four luxury properties in the metros. Courtesy: theleela.com

Shareholders of the luxury hotels and resorts chain Leela Hotels have approved the management's bid to sell a majority stake to Canadian asset management firm Brookfield. The decision, however, cannot be implemented until the company law tribunal and securities regulator Securities and Exchange Board of India (Sebi) disposes of petitions from ITC and LIC objecting to the share transfer.

Hotel Leelaventure's shareholders have overwhelmingly backed the proposal to sell key hotel assets to Brookfield Asset Management although the transaction cannot go ahead until the capital markets watchdog completes its investigation into complaints made by key Leela shareholders.

About 86 percent of all shareholders voted in favor of the resolution with institutional and non-institutional shareholders supporting it by over 70 percent, a notice of the Leela group management to the shareholders indicated. Hotel Leelaventure Limited released the results to the public with the concurrence of Sebi. The market regulator had asked the firm and Brookfield to suspend the proceedings on the transaction after two key shareholders ITC and Life Insurance Corporation of India (LIC) complained of irregularities.

While all the promoters favored the deal, 74.87 percent of public institutional investors and 74.9 percent of non-institutional public investors backed the move, a report in Business Standard said. There were no reports on the voting preference of ITC and LIC. Meanwhile, ITC, which moved the National Company Law Tribunal (NCLT) challenging the deal, had abstained from voting in 2017 when JM Financial Asset Reconstruction Company (JMFARC) moved a resolution seeking to convert its debt into equity, reports say. People close to the development said the cigarettes-to-hotels major also did not respond to lenders' request to take over the assets.

ITC Ltd has objected to the sale of The Leela Hotels stake to Brookfield and JMFARC.Reuters

"This is not a new deal. Lenders are interested in recovering their money as much as possible and as fast as possible. They approached all the big players in the industry but at that time, they (ITC) were either not serious or probably ignored it," a report said quoting an unidentified banking source. "They are trying to scuttle this deal because either they want the assets at throw-away prices or they want to ward off a big international competitor."

ITC, which holds a 7.92 percent stake in Leelaventure and another minority investor, Life Insurance Corporation of India, have also approached Sebi, alleging that the deal violated related-party transaction rules. They also alleged "oppression" of minority shareholder interest and "mismanagement" by the promoters and JMFARC that holds a 26 percent stake in the company after the conversion of debt into equity. ITC has also sought the appointment of an administrator to take over the affairs of the group and the removal of the promoter group from the board. ITC says that the conversion of JMFARC debt into equity diluted its stake to 7.92 percent from 11.78 percent.