Oberois may up stake in EIH to counter hostile bid

The Oberoi family, promoters of hotel chain operator EIH Ltd, is likely to increase its stake in the company to ring-fence it against a possible takeover bid. EIH operates the Oberoi and Trident hotel chains.

The Oberois currently hold 46.43 per cent in the company, 24 per cent of which is with Oberoi Hotels Pvt Ltd, data sourced from the Bombay Stock Exchange show.

The promoters are expected to open talks soon with financial investors to see if any are willing to sell their holding, a senior executive at the Kolkata-based EIH, earlier known as East India Hotels, said on condition of anonymity. “We would be interested in buying, as that’s the only way out if we want to hike our stake in a short period.”

The executive said though the promoters’ current stake is “almost comfortable”, it would be better if it can go up to 51 per cent.

The move is significant as ITC, the cigarettes-to-hotels major, has kept the Oberois on tenterhooks by increasing its stake in EIH to 14.98 per cent. ITC runs its own brand of premium and mid-segment hotels.

Though ITC has repeatedly said it was willing to join forces with EIH and was not interested in making a hostile bid, EIH promoters have been uncomfortable with the level that is just shy of an open offer trigger.

The draft takeover code, formulated by a panel appointed by the Securities and Exchange Board of India (Sebi) and tabled this week for public comments, has suggested raising the trigger point for open offers to 25 per cent from the present 15 per cent.

Financial investors currently hold 15.75 per cent stake in EIH, with Life Insurance Corporation of India leading the chart with 6.36 per cent. Incidentally, some of these financial investors, including foreign institutional investors, have been selling their stake in the company since June last year.

Sebi rules restrict open market buying to five per cent per year.

The Oberoi family had last year held preliminary discussions with Analjit Singh, who controls healthcare services and insurance firm Max India, for selling a substantial stake. The plan was to also bring Singh in as a co-promoter. The talks, however, fell through.

Another option considered was a merger between EIH and EIH Associated Hotels, a joint venture between the Oberoi family and the Rajan Raheja Group. EIH owns 36.1 per cent in EIH Associated Hotels and the Oberoi family three per cent more, through investment arms. The Rajan Raheja Group holds 36 per cent stake. These talks did not go through.

The Oberoi move to increase stake in EIH comes in the backdrop of the Nair family doing the same in Leelaventure. The promoters have increased their stake to 53.32 per cent over the past year, after ITC and its fully-owned investment arm, Russel Credit Ltd, began purchasing shares from the market. ITC owns 10.02 per cent in the company.

EIH has readied an elaborate plan to double capacity to a little over 6,000 rooms across the world in the next five years.