Leela to issue 10 million shares to promoters

The board of Hotel Leelaventure, a city-based premium hotel brand, has approved the allotment of 10 million equity shares on a preferential basis to a promoter group entity to keep any hostile takeover bids of rival companies at bay.

The said shares will be issued to Leela Lace Software Solutions at Rs 48.5 per share, a discount of 3.38 per cent compared to today’s closing of the stock at Rs 50.20 on the Bombay Stock Exchange (BSE).

“An approval of the members will be sought in the ensuing Annual General Meeting to be held on August 10 by way of a special resolution,” the company stated in a release sent to the BSE.

This share purchase will raise the promoter group’s holding to 54.57 per cent from 53.37 per cent presently. The promoter group has been buying shares from the open market since the start of the year, when its holding stood at 53.32 per cent.

The company wishes to raise the promoter stake to a minimum of 55 per cent, said Vivek Nair, vice-chairman and managing director, Hotel Leelaventure in an earlier interview to Business Standard.

The preferential issue of equity shares is to counter the expected dip in promoter holding following the expected conversion of foreign currency convertible bonds to equity shares in the company. Promoter holding could fall to 46 per cent after conversion if bond holders convert $66 million (Rs 309.73 crore) into equity in April 2011. The company also has a eurobond of ¤39.2 million (Rs 230.9 crore) due in September, which it hopes to buy back from the holder.

Concern at ITC
The move by the promoters of Leela is majorly triggered by the creeping acquisition of shares by the Rs 28,000-crore ITC conglomerate ITC from the open market. ITC presently holds 10.02 per cent through its investment arm, Russell Credit (RCR), up from a mere 4.17 per cent at the end of the first quarter of last year.