Reliance Industries checks into EIH, picks up 14% stake | business | Hindustan Times
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Reliance Industries checks into EIH, picks up 14% stake

business Updated: Aug 31, 2010 00:48 IST
HT Correspondent

Mukesh Ambani's Reliance Industries Ltd (RIL) made a surprise entry into the hospitality sector on Monday with the announcement that it had bought 14 per cent stake for R1,021 crore in EIH Ltd, which runs the Oberoi and Trident groups of hotels, from firms controlled by the founding family.

The entry into the firm known earlier as East India Hotels at a hefty premium pitted RIL against tobacco-to-garments major ITC Ltd that holds 14.98 per cent stake in EIH in a potential takeover battle, but the Ambani firm described its 14.21 per cent stake only as a financial investment.

"Reliance Industries today announced that it had acquired, through its wholly owned subsidiary Reliance Industries Investment and Holding Private Limited, from Oberoi Hotels Private limited and certain other promoters of EIH Limited shares in EIH representing 14.12 per cent of EIH Limited at a total cost of R1,021 crore approximately," RIL told stock exchanges in a statement.

The 55.4 milion shares were bought at R184 per share — a premium of 36 per cent over Friday's closing price of R135.2.

"RIL has full faith in and would support the management of EIH Limited and there is no change of management, operation or control of EIH Limited," RIL said.

Ahead of the announcement that came after trading closed, the EIH stock — catching the buzz on the purchase — rose 11.5 per cent on Monday at R150.7, while Reliance shares closed little changed at R 947.80.

Analjit Singh of Max India Group also holds a 4 per cent stake in EIH and there were reports that Singh was in talks to purchase more stakes in the hospitality major. However, Singh said he was planning to shed his stakes.

"I have been in the process of exiting the EIH stake through a dialogue with the Oberois," Analjit Singh told HT.

Mukesh Ambani's investment into the multinational hotel group marks the second significant investment this year outside of his traditional hold in oil, energy and petrochemicals.

Last June, RIL acquired a 95 per cent controlling stake in Infotel Broadband that won a nationwide licence in the country's broadband wireless spectrum auctions for R4,800 crore.

The investments in non-traditional areas coincide with the end of a non-compete agreement Mukesh Ambani had with his brother Anil Ambani, who controls the Anil Dhirubhai Ambani Group.