Vikram Oberoi takes charge of EIH amid challenges

Vikram, Executive Chairman PRS Oberoi's son, will succeed SS Mukherji, who will continue as executive vice-chairman

The board of EIH Limited, which owns and manages the Oberoi and Trident brands of hotels, has decided to elevate Vikram Oberoi to managing director and chief executive officer from April.

Vikram Oberoi, Executive Chairman PRS Oberoi's son, will succeed SS Mukherji, who will continue as executive vice-chairman. The change, a part of succession planning in the company, means Vikram Oberoi will have responsibility for day-to-day management. Vikram Oberoi is chief operating officer and joint managing director of EIH now.

Vikram Oberoi's cousin, Arjun Oberoi, will continue as an executive director and his designation will change from chief planning officer and joint managing director to managing director-development from April 1, 2015. He will work under the direction of PRS Oberoi.

Mukherji will slip into an advisory role and provide guidance and assistance to the executive chairman, managing director, chief executive officer and other senior management of EIH.

In 2011, when speculation over Vikram Oberoi succeeding PRS Oberoi surfaced, it was set aside promptly. PRS Oberoi had said he had no plans to step down. The latest statement from the company underscores the point. "PRS Oberoi will continue in his present position as executive chairman and there will be no change to his designation or terms of appointment," the company announcement read.

Those who have worked with the Oberois claim that PRS Oberoi is extremely hands-on. "No important decision is ever made without his approval. Very often, he will chart out the execution of decisions also," a former employee of EIH said.

The recent changes could be part of a grooming process. Vikram Oberoi, who will be entrusted with managing the operations of the company, has quite a few challenges on hand.

The elevation of Vikram Oberoi comes at a time when the Indian hospitality sector is going through a transition. A glut of rooms in the luxury segment has led to a substantial decline in occupancy, forcing major hotel companies to think differently, analysts said.

“Competitors like the Taj group and ITC have forayed into the budget segment but Oberoi has not done so to keep the brand intact. It would be interesting to see the policy of the Oberois,” Abhinav Chandak, head of research at Ratnabali Capital Markets Limited, said.

The company landed into debt by building expensive hotels. In 2012, PRS Oberoi had said the company owned too much real estate. "The group over the last few years has significantly reduced its debt burden, adopting the asset light strategy," an ICICI Securities report said.

Since then it has concentrated on managing properties rather than owning them. The company’s debt-to-equity ratio fell to 0.2 in 2013-14 from 0.4 in 2011.

“This strategy has paid off, the balance sheet looks healthy now and in future it will further improve the operating margin,” Chandak said. The company owns around 60 per cent of its inventory of 4,752 rooms.

Analysts have been bullish about EIH since Reliance Industries picked up a strategic stake in 2010, which many saw as a move to counter a possible threat from ITC. Reliance Industries has an 18.5 per cent stake in the company while ITC has a 14.98 per cent stake.

EIH is India’s third largest hospitality company, though it ranked second at one point. But that is not PRS Oberoi's concern as he has always said, "We wish to be the best, not the biggest."