India's largest private sector company Reliance Industries on Monday said it has acquired 14.12 per cent stake in hospitality major East India Hotels (EIH), which runs the Oberoi group of hotels.
"Reliance Industries has acquired from Oberoi Hotels Private Limited and certain other promoters shares in EIH Limited representing 14.12 per cent of EIH at a total cost of Rs.1,021 crore approximately," the oil-to-retail conglomerate led by Mukesh Ambani said in a statement.
The company made the acquisition through its wholly owned subsidiary, Reliance Industries Investment and Holding Private Limited.
The announcement came after the closing of stock markets.
The EIH scrip closed 11.46 per cent higher at Rs.150.70 on the Bombay Stock Exchange, as traders anticipated a stake sale, while Reliance Industries moved down 0.21 per cent at Rs.947.75.
"RIL's investment in EIH has been made as the Oberoi family had developed the 'Oberoi Hotels' brand into a premier international brand in the luxury hospitality sector and as a result EIH Limited has excellent future prospects," said the RIL statement.
RIL also said it would continue to support the current management of EIH and would not seek any operational control.
The deal came a week after the founders of EIH said they were planning to raise their stake in the company. "We have 46.4 percent stake now. We plan to raise stake gradually," Chairman PRS Oberoi had said at the annual general meeting of the company.
At present, EIH has 32 properties gloablly. Of these, 22 are in India. Of the 22, 11 are under the Oberoi brand, nine are under the Trident brand and two are unbranded.
The market has been rife with rumours about a proposed strategic sale by EIH to Max India Chairman Analjit Singh, who holds 9 percent in the company. Another major equity holder is FMCG-to-hospitality conglomerate ITC, which has 14.98 per cent stake in EIH.
ITC chairman YC Deveshwar had said earlier his company would not hike its stake further, as it would have to go for a mandatory 20 per cent open offer, once its total holding touched the 15-per cent level.