The Hotel Corporation of India Story

HCI, a wholly owned subsidiary of the state owned international airline AI, operated the Centaur range of hotels and the Chefair flight kitchens in India. The government's decision to separate HCI's sale from AI's disinvestment was primarily due the fact that HCI's sale was taking much longer than anticipated. If HCI were considered a part of AI, then disinvestment of the airline would be delayed further.

Since AI's disinvestment was reportedly proceeding at a much faster pace at this point in time, the government did not want to delay it. According to the original plans for AI's disinvestment, the revenue realized from the sale of HCI was to be given back to the airline.

Though many hospitality majors had shown interest in acquiring the other Centaur properties, the Srinagar hotel had no takers. The Jammu & Kashmir state government was willing to buy the hotel, but the terms and conditions laid down by the government were not acceptable to HCI. The disinvestment hurdles were only indications of major problems. The company was mired in a host of internal and external problems. HCI was in deep financial trouble, with its paid up capital of Rs 406 million completely eroded by accumulated losses of Rs 790 million by March 1995. For the financial year 2000-01, HCI posted losses of Rs 15 million on total revenues of Rs 888 million. Media reports attributed HCI's dismal performance over the years largely to the way the company was mismanaged by the government, and, more importantly, by its parent company, AI.