ITC digs in its heels, will subscribe to EIH issue

ITC, which has a 14.98 per cent stake in EIH Ltd -- the company that runs the Oberoi chain of hotels -- is planning to subscribe to the upcoming EIH rights issue. This ends speculation that it might pull out after Reliance Industries Ltd picked up a stake in EIH. 

Top sources close to the development said the group would seek board clearance for the purpose very soon. ITC executives, however, declined to comment on the issue. 

Last month, RIL acquired a 14.1 per cent stake in the hotel chain for $217.5 million from its promoters, marking its entry into the hospitality sector for the first time. Chairman Mukesh Ambani was seen by many as a white knight, who had come to support the embattled promoters led by P R S 'Bikki' Oberoi and family and ward off any possible threat from ITC.

Earlier, Oberoi had roped in Max India Chairman Analjit Singh to buy 17 per cent stake in the hotel chain from the promoters for around Rs 1,250 crore, but the deal did not fructify.  

The stake of the Oberoi family has fallen from 46.43 per cent to 32 per cent after the RIL deal. But ITC Chairman Y C Deveshwar has repeatedly pointed out that the group was not interested in taking over the company and that it was only an investment. 

On September 23, EIH announced that its board had given approval to raise up to Rs  1,300 crore through the issue of shares on a rights basis. The date of the rights issue, the ratio and issue price have yet to be finalised.

Analysts say RIL is keen to buy the unsubscribed portion of the proposed rights issue and go beyond the 15 per cent trigger, after which it has to make a mandatory open offer for another 20 per cent. However, the ITC move could make it that much more difficult.

An ITC Ltd senior executive also ruled out reports that it was planning to demerge ITC Hotels and then form a partnership with EIH to create the country's largest hotel chain. "There is no basis to this speculation at all," he said.

A few days ago, Analjit Singh, who has a 4 per cent stake in the hotel chain, also announced that he would subscribe to the rights issue of the company.