RIL ups stake in EIH, may go for open offer

KOLKATA/MUMBAI: Is Reliance Industries preparing for an open offer in EIH? Well, it's still in the realm of speculation but given that Mukesh Ambani-led firm has raised its stake in the Oberoi Group flagship, not an improbable proposition. According to a disclosure filed by EIH on the bourses, Reliance Industries Investment and Holding, the investment arm of Reliance Industries, has picked up an additional 0.68% in the company on August 31 through a single offmarket deal.

Now, Reliance's investment arm has a 14.80% stake in EIH. It has bought 26.86 lakh shares, taking the total shares acquired in EIH to 5.81 crore. There is speculation that the actual holding of Reliance in EIH may be even more at around 14.90%, just below the trigger for the open offer.

Sources close to the development said that group companies of Reliance might have bought these shares prior to the Ambani-Oberoi deal. These shares got transferred to Reliance's investment arm on August 31. Reliance Industries declined to comment.

It may be noted that on Monday (August 30), Reliance Industries (RIL) acquired a strategic stake of 14.12% in EIH for Rs 1,021 crore from Oberois, staving-off a potential takeover threat that EIH faces from ITC. The tobacco-to-hotels major holds a 14.98% stake in EIH. After Wednesday's disclosure, Reliance's stake is now almost equal to that of ITC's. When contacted, ITC spokesperson offered no comments. Post the RIL deal, Oberoi group holds 32.31% in the company.

The scenario becomes even more interesting as Analjit Singh who has a 4% stake in EIH has reportedly lost interest in the company following failed talks with Oberoi's last year and Reliance's entry. Meanwhile, agency reports quoted Max India chairman as saying that he was considering selling his stake through a dialogue with Oberoi. Singh had reduced his stake in EIH from 7% to 4% early this year. Max Group chief holds his stake in EIH through two of his investment firms Pivet Finance (2.18%) and Gaylord Impex (1.54%).

The EIH scrip continued its upward march to jump 2.68% (Rs 3.75) to close at Rs 143.70 on Wednesday, RIL's shares closed 1.92% up (Rs 17.60) at Rs 936.45.

EIH has been under a takeover threat from rival ITC this whole decade. ITC raised its holding in the company from 5.93% in March 2001 to the current level, of just below 15%, the trigger for making an open offer to shareholders under Sebi's takeover code to acquire management control. In recent years, ITC chairman Y C Deveshwar has maintained that its holding in EIH is merely "a good strategic investment." As his investment has appreciated by over Rs 600 crore, its proved to be a good addition to its portfolio of investments in peer companies.

Industry sources said that RIL's entry as a strategic investor could enable the Oberoi group promoters to step up their shareholding in the company so that the combined shareholding (along with RIL) goes up to over 51%.