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EIH – the promoters of Oberoi Group of Hotels and Resorts - proposes to issue 17.8 crore equity shares on a rights basis to its existing shareholders aggregating about Rs 1,161 crore, the company informed the stock exchanges on Friday.
Record date
The Rights entitlement will be five equity shares for every 11 equity shares held by the shareholders as on the record date which has been set as February 22. The issue price for an equity share will be Rs 65 including a premium of Rs 63 for an equity share, said the company.
EIH's share price closed 2.63 per cent up at Rs 93.50 on Bombay Stock Exchange on Friday.
In September 2010, EIH announced that it will come out with a rights issue not exceeding Rs 1,300 crore. This was around three weeks after Reliance Industries (RIL) through one of its subsidiaries picked up 14.12 per cent stake in the hospitality major for an estimated Rs 1,021 crore and later hiked it to 14.80 per cent through off-market transaction, taking it just a tad away from the open offer threshold of 15 per cent.
This was at a time when hospitality-to-tobacco major — ITC already held 14.98 per cent stake in EIH. The takeover code of SEBI (Securities Exchange Board of India) mandates that any entity owning more than 15 per cent in a company has to make a mandatory open offer for at least additional 20 per cent stake.
“From the investor perspective, it will be a good investment at this valuation. The pricing is coming at a discount of 30-32 per cent from the market price. After rights issue subscription, the average cost per share will go down to Rs 85-86,” ICICI Direct.com's Research Analyst, Mr Rashesh Shah, told Business Line .
Analysts views
Apart from general corporate purpose and retiring debt, analysts believe rights issue is also an opportunity to EIH promoters to raise their stake in the company. “If either RIL or ITC do not subscribe to its rights, the unsubscribed portion will be taken by the promoters taking their current stake from 32.3 per cent to 36.9 per cent. If both of them (ITC and RIL) do not subscribe, then promoter's stake can go up to 41.6 per cent. In that case RIL and EIH promoters together will hold 51.7 per cent stake in the company from the 47 per cent that they hold now,” said Mr Shah.
EIH promoters hold 12.7 crore shares with 32.3 per cent stake, RIL holds 5.8 crore share with 14.80 per cent stake and ITC holds 5.88 crore shares with its 14.98 per cent stake.
The issue will open on March 1 and close on March 15.
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