EIH plans rights issue; ITC unlikely to buy
21 September 2010
East India Hotels (EIH), owner of the Oberoi and the Trident hotel chains, said it would issue rights shares. The company board will meet on Thursday to consider the proposal, EIH said in a regulatory filing after the markets were closed.
The proposed offer, according to analysts, assumes significance given that it comes just three weeks after Reliance Industries Ltd (RIL) acquired a 14.1-per cent stake in the company from its promoters, the Oberoi family, for 1,021 crore. RIL bought the stake on 30 August, which was later scaled up to 14.8 per cent.
The analysts said it would give an opportunity to the Oberois and the new shareholder to strengthen their holdings in the company by picking up the unsubscribed portion if the issue is not fully subscribed. This will help in minimising the possible risk of any hostile takeover bid by ITC, which currently owns a 14.8-per cent stake in the company.
While RIL refused to comment, a Mint report was quick to squash such rumours, saying that cigarette and consumer goods maker ITC Ltd is unlikely to subscribe to the rights issue of EIH Ltd.
''It looks very doubtful,'' an unnamed key ITC official told the paper when asked if his company would invest in EIH's rights issue. The company refused to comment officially.
ITC, which always wanted to control EIH, could be withdrawing because it doesn't have any hope of cornering a controlling stake in the firm, and it may not want to invest further in the company, according to analysts.
''ITC's investment in EIH has appreciated manifold since it began investing in the company's shares 10 years ago,'' said the ITC official.
The 23 September board meeting in Bangalore is the first since the Oberoi family sold the stake to RIL, and EIH chairman P R S Oberoi is expected to officially explain to the board his family's decision to sell the holding and indicate future plans, according to EIH vice-chairman S S Mukherji.