Shares of hospitality chain EIH Ltd rose as much as 5.7 per cent on Tuesday on expectations that energy major Reliance Industries will raise its stake through EIH’s proposed rights issue.
EIH, owner of the Oberoi and Trident hotel chains, said late on Monday it plans to consider a rights share issue on September 23.
“The promoters of EIH are likely to renounce the rights they are entitled to in favour of Reliance,” said Arun Kejriwal, director at research firm KRIS.
Another analyst, who declined to be named, said both Reliance as well as EIH promoters have an opportunity to raise their holding through the rights offering to counter a move by ITC which also holds under 15 per cent.
EIH promoters hold around 32 per cent in the firm after the Reliance deal.
Earlier this month, Reliance Industries, controlled by billionaire Mukesh Ambani, bought a 14.8 per cent stake in the hotel chain.
Diversified ITC Ltd also holds just under 15 percent in EIH and analysts have said Reliance’s stake purchase in the latter was likely to thwart ITC’s designs of raising its stake in the hotel chain.
“The rights issue will counter ITC even more,” said the analyst, who declined to be named.
Both Reliance and ITC are just shy of the 15 per cent level that triggers a mandatory open offer to buy an additional 20 percent. EIH Chairman P.R.S. Oberoi was not immediately available for comment.