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The rights issue of EIH seems to have sailed through with the majority of shareholders subscribing to the issue, as expected.
Major shareholders such as Reliance Investments and Holding Pvt Ltd and Mr Analjit Singh, Chairman of Max India, appeared to have picked up their share of the rights issue. “It is obvious that we have subscribed to the issue,” a Reliance Industries official told Business Line without elaborating.
ITC, another majority shareholder, declined to comment on this issue.
The share price of the company went up 7.5 per cent to Rs 81.80 on the NSE.
The rights issue of 17.86 croreequity shares (of face value Rs 2) closed on March 15. The issue was offered at a price of Rs 66 an equity share in the ratio of five shares for every 11 shares held by existing shareholders.
LIC, GIC, New India Assurance, Gaylord Impex, Pivet Finances and HSBC Mauritius are other important shareholders in the company. ITC holds 14.98 per cent in EIH while Reliance and LIC hold 14.8 per cent and 6.36 per cent respectively.
The rights issue will not result in change in shareholding pattern, if all the shareholders subscribe. If any one renounces, then the promoters holding would go as indicated in the offer document.“The corporate promoters of the company, being Oberoi Plaza Private Ltd, Bombay Plaza Private Ltd, Oberoi Leasing and Finance Company Private Ltd, Oberoi Properties Private Ltd, Aravali Polymers LLP, Oberoi Buildings and Investments Private Ltd, Oberoi Holdings Private Ltd, Oberoi Investments Private Ltd and Oberoi Hotels Private Ltd have provided an undertaking dated 27 September 2010 to the company to apply for additional equity shares in the issue, to the extent of the unsubscribed portion of the Issue,” the promoters had said in the offer document.
“EIH being a luxury hotel chain requires lot of cash to set up and maintain luxury hotels of global standards. This was the most important factor that prompted them to get Reliance as a strategic investor into their business,” said a market expert.
With real estate costs in prime locations getting prohibitive, most players in this business are using the management contract route to set up new hotels and expand business. Under this, a real estate developer is roped in to develop a property at a prime location. The hotel chain is just involved in running the day to day operations of this hotel and the spoils are shared.
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