Motilal Oswal
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Motilal Oswal

10-15% of Indian Hotels properties are leased, says CFO Giridhar Sanjeevi

Updated : June 18, 2019 01:01 PM IST

10-15 percent of Indian Hotels properties are leased, said Giridhar Sanjeevi, executive vice president and chief financial officer, Indian Hotels, while discussing the new accounting norms under which, all leases have to be treated as financial leases.

The changes in the accounting norms, which transfer the ownership and risk to the lessee, would impact businesses like airlines, hotels, restaurants, multiplexes and retailers.

"In layman terms, it means all the leases will be treated as financial leases. All the leases will have to be capitalised on to the balance sheet on the asset side as a leased asset and as a leased liability on the liability side. Therefore companies would see an increase on the asset side and liability side," said Sanjeevi in an interview with CNBC-TV18.

"However, from a P&L perspective, it works in a different way because leased rentals are a line typically which comes above EBITDA. Now because the leases have been classified as assets, the lease rentals get translated into depreciation and interest and hence you see the depreciation and impact below EBITDA. So, for companies, the EBITDA will go up and depreciation and interests going down," he added.

“For us, it is 25-30 percent what we have seen in terms of what gets capitalised as opposed to the entire ease getting capitalised,” said Sanjeevi,  adding they would come up with clarification at the end of the quarter.
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