The Oberoi family has kick-started the much-awaited rights issue of
EIH Ltd to put an end to the prolonged hostile takeover fears from rival ITC, the tobacco to hospitality behemoth.
EIH that owns and runs the Oberoi and Trident group of hotels has launched the rights issue of 178.6 million shares at Rs 66 a share to mop up Rs 1,178.86 crore from existing shareholders. The EIH share on Tuesday closed at Rs 79.80 on the Bombay Stock Exchange.
This has put ITC in direct confrontation with Mukesh Ambani's Reliance Industries Ltd (RIL) that recently picked up nearly 15 per cent stake in EIH. The rights issue is in the ratio of five shares for each 11 shares held. The issue ends on March 15.
The Oberoi family holds 32.31 per cent stake in EIH in the company, while ITC and RIL hold 14.98 per cent and 14.80 per cent stakes, respectively, making them close competitors to take control of this luxury hotel chain.
Other shareholders include Max India's Analjit Singh with 4 per cent stake, FIIs 2.04 per cent and domestic institutions 13.30 per cent stake. According to industry circles, Mukesh Ambani has come in as a white knight to enable the Oberois thwart any takeover attempt by ITC that has acquired 14.98 per cent shares in EIH, a tad lower than the mandatory 15 per cent stake that could trigger the Securities and Exchange Board of India's (Sebi) open offer clause.
ITC has on several occasions denied any hostile bid and has been maintaining that the stake in EIH was purely an investment. However, the Oberois never trusted ITC and preferred to align with Mukesh Ambani who has deep pockets to take on ITC.
In August last year, the Oberois in a surprise move sold off 14.12 per cent stake to RIL for Rs 1,021 crore and exactly two days after RIL mopped up an additional 0.68 per cent stake in EIH through market purchases, taking its total holding in EIH to 14.80 per cent at an estimated total investment of Rs 1,060 crore.
Nita Ambani is looking after RIL's investments in the hospitality foray and RIL has given the Oberois a free hand to run the chain as they know the business well. According to market analysts, if ITC participates in the rights issue, its intentions would be clear.
"If it (ITC) subscribes to the rights, it would stay on by maintaining its holding and there could be a takeover battle ahead. If ITC stays away, the Oberois will increase their stake for more comfort," said a hospitality analyst asking not to be identified.
The Oberois will have to pay Rs 380 crore to participate in the issue and they have decided to subscribe to all other shares that would remain unsubscribed.
Sources in RIL said they would subscribe to their portion and declined to comment on any possible takeover battle.
However, it would be interesting to watch whether ITC commits Rs 175 crore more to stay invested in EIH with a Damocles sword hanging over the latter.
For now, the battle rages on.
Courtesy: Mail Today 
Reliance Industries Chairman Mukesh Ambani 
Special 
