EIH to come out with rights issue

EIH Ltd that runs the Oberoi and Trident chain of hotels will come out with a rights issue. In an intimation to the stock exchanges, the company has said that a board meeting will be held on September 23, to consider a rights issue.

The EIH stock today closed at Rs 136.70 on the Bombay Stock Exchange. the company had earlier toyed with a rights issue, but it never took off. The move comes three weeks after Reliance Industries (RIL) picked up a 14.8 per cent stake in EIH through its investment arm, Reliance Industries Investment and Holding Private Ltd, in an off-market purchase.

RIL bought the stake from EIH’s promoter P R S Oberoi and two other promoter entities Oberoi Hotels Pvt Ltd and Aravali Polymers LLP. RIL’s holding in the company is close to ITC’s. The tobacco-to-hotels major ITC holds a strategic 14.9 per cent stake in EIH, just a shade below the threshold limit of attracting an open offer according to the Sebi regulations.

However, if ITC doesn’t subscribe to the rights issue then its holding will be diluted. An ITC spokesperson declined to comment. For ITC, EIH made investment sense. ITC has gained more than Rs 550 crore in 10 years. ITC’s presence – always a cause for discomfort – has long been perceived as hostile by the EIH management, even though the company at the last annual general meeting said it had no intentions of making a hostile bid.