Buzz over KKR's role in deal with Oberoi gets louder.
Max Chairman Analjit Singh will become the biggest shareholder in East India Hotels (EIH), which operates the Oberoi and Trident chain of hotels.
Singh and EIH Chairman P R S Oberoi have signed a non-disclosure pact for a deal that will see the Oberoi family, which owns 43 per cent stake in EIH, selling over 17 per cent to Singh for around Rs 1,250 crore.
Singh, who already holds around 5 per cent in the hospitality major, will make a mandatory open offer for an additional 20 per cent stake. This means Singh’s stake will be more than the Oberoi family’s 26 per cent.
Singh’s efforts to raise funds to buy 17 per cent in East India Hotels (EIH) have, however, suffered a setback. He had proposed to raise a part of the money by selling 49 per cent in Scorpios Beverages Pvt Ltd, an investment company owned by his wife and himself, to Mauritius-based CGP India Investments, a part of Vodafone International. But the Foreign Investment Promotion Board (FIPB) deferred a decision on this deal in its October 9 meeting.
Sources familiar with the developments said this has opened the doors for private equity major Kohlberg Kravis & Roberts (KKR) to play a role in the deal. Other sources, however, said KKR will assist Analjit Singh in other hospitality projects. A final call on this is expected in the next 10 days.
Singh’s other proposal, to raise Rs 576 crore by selling 49 per cent in Capricorn Hospitality Services, a company his wife and he also own, to Mauritius-based NSE Direct (an affiliate of New Silk Route Partners, a leading private equity fund), has already been cleared by the FIPB.
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On the Scorpios deal, the department of industrial promotion had given its no-objection subject on whether it complies with Press note 3 and 4 (which means the company has to be controlled by resident Indian citizens and Indian companies). The department of revenue, however, did not support the deal, on the grounds that it was based on treaty shopping.
Since India’s double tax avoidance treaty with Mauritius is under review, the department of revenue argued that such deals should be kept in abeyance.
The department of economic affairs has also requested deferment, saying all the documents need to be analysed. It has also requested the DIPP and the department of telecommunications to examine all the relevant documents and arrive at a “seasoned recommendation” for the FIPB.
Analjit Singh, through Scorpios, holds 38.78 per cent in Telcom Investments India Pvt Ltd which also holds equity in Vodafone Essar through a complex structure.
Sources said Singh’s role in EIH will be mainly that of an investor and he will not be involved in the company’s day-to-day affairs.
After the proposed deal became public, the EIH stock jumped 7.24 per cent on Thursday.