The East India Hotels ( EIH) management on Monday brought in Reliance Industries Limited ( RIL) as a key investor, selling out 14.12% for Rs. 1,021 crores in the company that runs the reputed Oberoi and Trident chain of hotels.
The deal brings in RIL as a strategic player and a financial powerhouse in EIH Limited, standing next to if not against the holding of 14.98% in EIH by the rival hospitality company, ITC Limited.
Both holdings are just shy of the 15% mark that would trigger an open offer for another 20% stake in the company under the current takeover guidelines of the Securities & Exchange Board of India.
RIL acquired the stock through its wholly owned subsidiary Reliance Industries Investment and Holding Private Limited from Oberoi Hotels Private Limited and " certain other promotes of EIH," RIL said in a statement.
" RIL's investment in EIH has been made as the Oberoi family had developed the ' Oberoi Hotels' brand into a premier international brand in the luxury hospitality sector and as a result EIH Limited has excellent future prospects," the RIL statement said. " RIL has full faith in and would support the management of EIH Limited and there is no change of management, operation or control of EIH Limited," the statement added.
The announcement of the sale comes barely a week after EIH Chairman and Chief Executive PRS Oberoi was quoted as having said that the promoters would continue to increase their stake in the group to ward off any possible takeover bids.
The promoters have been vulnerable with a holding of some 46.4% in the group and ITC sitting by the side with its key stake. ITC, however, has said its holding was purely an investment and not intended to launch a takeover of EIH. The investment takes RIL, India's largest private sector enterprise with annual revenues in excess of US$ 28 billion, into an entirely new sector.
A PTI report said the deal " also reflects RIL Chairman Mukesh Ambani's wife Neeta's endeavour to expand and consolidate services sector operations like hospitality, wellness and lifestyle." The sudden announcement spurred EIH shares by 11.46 % to Rs 150.70 a share, while ITC fell by 1.24% to close the day at Rs 159.3 per share. RIL acquired the stake at a premium of about 20% to the market, according to one report.
The Oberoi Group operates 28 hotels and three cruisers in five countries under the luxury ' Oberoi' and five- star ' Trident' brands. The group is also engaged in flight catering, airport restaurants, travel and tour services, car rentals, project management and corporate air charters.
The Company had a difficult 2009- 2010, when total revenues fell to Rs. 907.27 crores as compared to Rs. 1,078.47 crores in the previous year. It reported profit after tax of Rs. 57.23 crores, down from Rs. 170.44 crores in the previous year.
The Oberoi family was earlier reported exploring the possibility of bringing in Analjit Singh, founder and chairman of conglomerate Max India Limited as a co- promoter in EIH. These plans were subsequently dropped.
The deal brings in RIL as a strategic player and a financial powerhouse in EIH Limited, standing next to if not against the holding of 14.98% in EIH by the rival hospitality firm, ITC Limited.
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