Tata Sons proposes to buy entire stake of Tata Trusts in Indian Hotels

Tata Sons has proposed to buy the entire stake of Tata Trusts in Indian Hotels Company (IHCL), the owner of Taj Group of hotels said in a filing to the stock exchanges on Tuesday. As part of the proposed transaction, Tata Group’s holding company will buy the consolidated 6.64 per cent or about 79 million (78972460) shares held by Sir Dorabji Tata Trust, Lady Memorial Tata Trust and Sir Ratan Tata Trust. The buyout, which is expected to be concluded by or on 31 March, is part of restructuring the investment portfolio and simplifying the group structure.  

The value of the acquisition would be computed on the basis of prevailing price on the date of the proposed acquisition. The weighted average price of the shares is expected to be Rs 136.36 per share. The acquisition price would not be higher than 25 per cent of price computed, the company said in the filing. Tata Sons would need to pay between Rs 10.77 billion (value at the weighted average price) and Rs 13.46 billion if it were to pay 25 per cent premium.  

Indian Hotels on February 17 announced a comprehensive five-year business strategy to improve its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins by eight per cent, PTI reported. The company plans to restructure assets for "balance sheet optimisation" and simplify its holding structure for greater profitability under the plan, IHCL said in a statement. "Our strategy is three-pronged: restructure, re-engineer and re-imagine our portfolio to achieve eight per cent point EBIDTA margin improvement," IHCL’s newly appointed MD and CEO Puneet Chhatwal had said.

The proposed buyout of shares will increase Tata Sons’ stake in the hospitality arm to 36.43 per cent from 29.79 per cent now. In line with N Chandrsakeran’s strategy of disentangling the complex shareholding structure of the group companies, an exercise that has been underway since he took charge last February.  Indian Hotels is one of the few Tata group companies in which Tata Trusts—the principal shareholder of Tata Sons, has a substantial stake, it has nil to negligible presence in most of the other listed operating companies.

Shares of Indian Hotels closed at Rs 133.75, down 0.30 per cent on the BSE on Tuesday. The benchmark Sensex closed 33317.30 points, down 1.27 per cent.