Exclusive: BanyanTree backs budget hotel chain operator

Private equity firm BanyanTree Growth Capital has invested in a Mumbai-based budget hotel chain operator, a person privy to the development told VCCircle.

The investment marked the investment firm’s 12th investment from its second fund, christened as BanyanTree Growth Capital II. It is a $150 million PE fund which provides structured investments to small and medium enterprises (SMEs) in India.

The fund's investments in the recent past include O2 Spa Pvt. Ltd, a Hyderabad-based company that runs a spa chain in India and the Middle East and Power Mech Projects Ltd, a Hyderabad-based power infrastructure service provider that went public in 2015.

The PE firm has invested an undisclosed amount in Mint Stay Solutions, an asset-light budget hotel operator focused on corporate and retail travellers, said the person cited above.

The Mumbai-based firm currently manages six properties – three in Delhi-NCR, two in Mumbai and one in Bangalore. A property is coming up in Pune, as per its website.

The company, led Shirish Arya, Shantanu Chatterjee and Sanjay Coutinho, will use the capital to expand to more cities across the country.

Pi Capital Advisors acted as the financial advisor to Mint Stay Solutions for the transaction.

Only a few budget hotel aggregators managed to raise funding in the recent past. Bengaluru-based Ruptub Solutions Pvt. Ltd, which operates online budget hotels aggregator Treebo Hotels, raised Rs 112 crore ($16.7 million) in its Series B funding round that was led by Bertelsmann India Investments. Last June, Gurgaon-based Casa2 Stays Pvt. Ltd that operates budget hotel aggregator FabHotels raised $8 million (Rs 54.3 crore) in a Series A round of funding from a group of investors including existing investors Accel Partners and Qualcomm Ventures.

Matrix Partners and Nexus Ventures invested an additional $13.5 million in Chennai-based budget hotels and homestays aggregator Stayzilla. In March this year, budget hotel aggregator Room On Call raised $2 million (around Rs 13.3 crore) in funding led by on-vehicle advertising company CASHurDRIVE Marketing Pvt. Ltd.

Given that too many players have emerged, the sector has started seeing consolidation. Most recently, MakeMyTrip and Ibibo Group merged. Besides operating in the other categories, both companies also operated in the budget hotel aggregation space with Goibibo’s GoStays and MakeMyTrip’s Value+.

Also, last year SoftBank-funded largest branded network of budget hotels in India OYO acquired smaller rival Zo Rooms in an all-stock deal. Besides, Wudstay Travels Pvt. Ltd, which started off as a rival to OYO Rooms, shut down operations last year.

BanyanTree’s investments

BanyanTree’s other portfolio companies include agro chemical firm Safex Chemicals India, packaged food firm Nilon’s, coaching services provider MT Educare and electric motor manufacturer Rotomag Motors

The PE firm completed its first full exit from its portfolio in a year in October 2016. It exited from infrastructure firm Dilip Buildcon Ltd, which went public last year.

It also recorded its first exit from its second fund when it sold its entire stake in renewable power generation company Atria Brindavan Power Pvt. Ltd.