ITC had offered to let EIH manage its own hotels

In its effort to wrestle control of the Oberoi Hotels (Owned by EIH), ITC had offered EIH chairman PRS Oberoi a sweetened deal whereby EIH could continue to manage its current portfolio under the Oberoi and Trident brands.

This was to be in exchange for ITC taking over controlling stake of EIH’s assets. “ITC only wants to manage the assets and so offered PRS Oberoi a sweet, face saving deal of allowing him to manage its current portfolio under his own brands,” said a senior ITC executive with first-hand knowledge of the proposal.

The Oberoi family nonetheless wary of ITC’s intentions, finally sold 17% of its 43% promoter’s holding to serial entrepreneur Analjit Singh, chairman of Max India. The sale has given Singh 26% of EIH stock, making him co-promoter and vice-chairman. This in effect has the Oberoi family effective control of 52% of EIH stock, thereby thwarting an unwanted ITC bid.

ITC Hotels has little under 15% of EIH stock which it has been acquiring in small portions over the years.

Its EIH ambitions are in line with its strategy for inorganic growth, especially in the luxury hotel segment. At the parent company ITC Ltd’s 98th AGM this year, chairman YC Deveshwar said that though he was not interested in hostile takeovers, he was looking for opportunities to acquire properties at reasonable prices in the downturn. “We are hungry… we are willing, able and ready to make investments in two of our businesses, paper and hotels,” he said.

Deveshwar added that ITC could spend close to Rs8,000 crore over the next 8-10 years to expand its hotel business.