Calcutta, July 15: The Oberois plan to raise their stake in EIH to over 50 per cent.
The promoters plan to use the creeping acquisition route to step up their holding from the present 47 per cent.
With a 50 per cent stake, a hostile take-over of the country’s oldest hotel chain will be next to impossible.
The presence of three private corporate bodies linked to tobacco major ITC, with a combined stake of 14.61 per cent in EIH, has led to speculation about a control tussle. If ITC’s holding tops 15 per cent, it would trigger an open offer. However, it had sought to play down the stake purchase as financial investments.
The Oberois have picked up a 3.66 per cent stake from UTI-1 on July 13 to strengthen their holding.
The Securities and Exchange Board of India (Sebi) guideline specifies that a promoter can buy up to 5 per cent in a year.
S.S. Mukherjee, vice-chairman and managing director of EIH, said the promoters have a 47 per cent voting right in the company.
“The Oberois wanted to take their holding above 50 per cent at least. UTI, too, was keen to exit. The promoters have bought its shares,” he told The Telegraph.
The EIH stock closed at Rs 383 today, up 6.76 per cent over its close on Thursday.
Some have raised eyebrows about the timing of the purchase, but Mukherjee feels that the stock is undervalued.
“The fresh investment reinforces promoters’ faith in the company. They have no intention to exit from EIH,” Mukherjee added.
He declined to comment on ITC’s holding in EIH.
The hospitality industry is now going through a boom after surviving the lean patch following the 9/11 attack and SARS outbreak.
Hotel chains like EIH are expecting 35-40 per cent growth during the current financial year.
“The outlook for the industry is very good and it should continue for the next few years. Even in the price-earning (PE) method, EIH looks undervalued,” an analyst said.
Mukherjee said the EIH stock could be valued higher as it has some of the best properties in the country.
Asked if the company was planning to turn hotels into real estate projects, he said it was not being contemplated now.
“Nothing could give a better return than the hospitality business now. However, in future, one could consider venturing into other streams of business to maximise shareholder wealth,” he added.
Companies like Bombay Dyeing and Bata have been re-rated in the market as they own prime land. EIH has not carried out a valuation of its properties, but it could have free-hold assets.
At present, the company is busy developing its Bandra-Kurla property. The five-star deluxe hotel with 450 rooms at investment of Rs 600 crore will be opened by late 2007.