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Is Reliance gearing up to turn Oberoi partner?

business Updated: Mar 05, 2012 21:59 IST
Sachin Dave
Sachin Dave
Hindustan Times
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Billionaire Mukesh Ambani, tagged as a white knight who came in to rescue the Oberoi Group's EIH Ltd from a possible hostile takeover, may increase his stake in the company, earlier known as East India Hotels.

There is accompanying speculation that this could also lead to the Ambanis having a say in the running of India's largest hospitality group with properties in India, Nepal, Egypt and Sri Lanka.

While the lid is still on the details, some industry experts and market trackers say Ambani-controlled Reliance Industries Investment and Holding could end up as equal partner with the Oberoi family in the company soon. Others, however, see the Ambanis increasing their stake to at least 24.99— above which they are required by regulations to make an open offer to buy shares from minority shareholders

The promoters, the Oberoi family, currently own 34.9% in EIH while Reliance holds 18.52%.

Reliance's stake went up last week when it bought 3.72% from Gaylord Impex and Pivet Finances controlled by Max group chairman Analjit Singh.

Mukesh's wife Nita Ambani, and his business confidant Manoj Modi are already on the board of EIH.

The elephant in the room continues to be ITC, which holds 14.98% in EIH. While the Oberoi group, headed by Chairman Prithvi Raj Singh Oberoi, publicly maintain that it has no objection to ITC's stake, sources within the company said the Oberois are not comfortable.

"The promoters are concerned that a rival group holds a substantial stake in EIH, mainly because there is a anxiety about ITC's intentions. Ambanis have been very close to Oberoi family and they have the firepower required to counter ITC on this turf," an Oberoi executive told HT recently.

"There is no doubt that Reliance would increase its shareholding in EIH from here on. You could see RIL buying that stake from ITC as the company (Reliance) is capable of paying as much as Rs 200 per share when the current price is below Rs 100 per share," said SP Tulsian, an independent analyst and a keen Reliance watcher. EIH shares closed Rs 6.2 or 6.2% on Monday to close at Rs 93.

Both RIL and the Oberoi group did not immediately respond to HT's emails seeking their comments on the issue.

Tulsian said Ambanis could invest an estimated Rs 3,000 crore in EIH to become an equal partner in a joint venture.

Minority investors in EIH include state-owned Life Insurance Corporation of India and New India Assurance Company but analysts expect them to be passive investors.