Mukesh to Drive the EIH Wagon Home

The Star has struck again. The Commander of the Reliance Industries brigade is soon to become the hospitality leader as well, the reason being that he will now be the majority shareholder in EIH, at par with the Oberoi Group.
Reliance Industries Ltd (RIL) and the Oberoi family will increase their shareholding in East India Hotels by buying the unsubscribed portion of the Rs 1,300-crore rights issue, which was cleared by the hotel major’s board today. EIH has decided to form a committee to decide on the rights issue price, ratio and other procedural formalities.
It has been confirmed by dependable sources that RIL will be making an open offer after the rights issue, as its stake will go beyond the 15 per cent threshold mandated by the market regulator. And hence, RIL and the Oberois will eventually have an equal stake in EIH.
The impact of the Mukesh Ambani’s acquisition of a 14.8 per cent stake in EIH has had the share of the Oberoi’s drop down to 32 per cent from 46.43 per cent in August. Also, ITC, which holds 14.8 per cent, may not be interested in raising its stake. Similarly, Analjit Singh, who controls 4 per cent, will also prefer to exit EIH.
It has also been in news that EIH is planning to float two new companies. One would operate the hotel chain and would be controlled by EIH, while the other would hold the hotel chain’s assets and be controlled by RIL, with Nita Ambani, wife of RIL chairman Mukesh Ambani, drafted as vice-chairperson.
This is the icing on the cake for Mukesh Ambani as RIL will be in the driver’s seat as far as ownership of EIH is concerned, while the Oberois will operate the hotel chain. “It’s a deal between two friends – P R S Oberoi, who needs funds to expand his chain’s footprint abroad, and Ambani, who has the funds, and is happy to let the Oberoi family manage operations,” said a source.
The Oberoi’s, who are the pioneers of luxury hospitality in India, also manage the EIH Associated Hotels. This is another hotel company which is an equal-stake joint venture between them and the Raheja family, which has interests in real estate, the media and industrial batteries.
Now, with this rise in stake in the hospitality sector by RIL, Mukesh Ambani has made it pretty clear that his plans in the sector are long term and only time will tell how Reliance will be makes the best out of this venture as well.

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