EIH lines up Rs1,300 crore rights; panel to decide ratio

The board of East India Hotels Ltd (EIH), the PRS ‘Biky’ Oberoi-promoted luxury hotels company, has cleared a plan to raise Rs1,300 crore through a rights issue.

At Thursday’s closing price of Rs139.85 for the EIH share, this would mean a 19% expansion of equity base.

The company board has constituted a rights issue committee to finalise the rights ratio, issue price and all other procedural modalities relating to the proposed rights issue.

On August 30, Reliance Industries acquired 14.12% in EIH for Rs1,021 crore through an off-market deal. It then increased it to 14.8%.

Unless RIL gets to subscribe to forfeited shares, its overall shareholding will not increase.

RIL sources told DNA the company will indeed subscribe to the rights issue.

“Keeping in mind the timeframe of the RIL-Oberoi deal, there is no reason to think otherwise. RIL, while announcing the deal earlier, had emphasised its interest in the luxury hotelier and this is a good opportunity to further its involvement in the firm,” a company source said.

RIL’s stake in EIH is held through subsidiary Reliance Industries Investment and Holding Pvt Ltd.

EIH’s other major shareholder, ITC Ltd, which is also a hospitality business rival, is yet to confirm interest in subscribing to the rights.

Through its investment arm Russell Credit, ITc has been buying into the Oberoi chain since 2000 and at present holds 14.98% stake.

Its current holding is a whisker short of the Securities and Exchange Board of India (Sebi) mandatory open-offer threshold of 15%.

In fact, the primary reason behind Ambani buying into the Oberoi chain was to keep ITC at bay from any possibilities of a hostile take over, say many sources.
Ever since the RIL-EIH deal, ITC officials have refrained from commenting on the issue.

In an SMS message to DNA, an ITC spokesperson reiterated on Thursday: “We have no comments to offer.”
Sector analysts believe both RIL and ITC will participate in the issue.

“I don’t see any reason for them not to,” said Himani Singh, research analyst, Elara Capital.

However, another shareholder, Analjit Singh, chairman of Max India Ltd (MIL), is unlikely to paricipate. “So Analjit will either give up the participation right to someone else or the shares will get forfeited,” Himani Singh said.

Having already reduced his holding in EIH from 7% to 4%, Analjit Singh has said he’s in discussions with the Oberois to exit.

“The finer details of the rights issue haven’t been made public yet, so we will have to see it before making any further analysis,” said Himani Singh.