EIH arm likely to raise Rs 78cr

Lazard India Pvt Ltd is the financial adviser on the restructuring process

EIH Associated Hotels Ltd is likely to raise Rs 78 crore from the market to finance the acquisition of two hotels of EIH Ltd.

EIH Associated is a Oberoi group company where EIH controls around 24 per cent stake with an investment of around Rs 10 crore. Besides, Oberoi Holdings, an investment company of the Oberoi group holds around 2.6 per cent stake in the outfit.

The managing director of EIH Ltd, S S Mukherjee, told Business Standard that the internal restructuring of the group is aimed at optimising the value for shareholders.

According to him, as a part of the restructuring of EIH Ltd and EIH Associated Hotels, two hotels of EIH Ltd, The Oberoi Cecil, Shimla, and Trident Hilton, Bhubaneshwar, would be transferred to the company with effect from April 1, 2006.

The rest of the business and undertaking of EIH Ltd would continue to remain with EIH Ltd.

As a consideration of the transfer, EIHAH would issue and allot to EIH Ltd, 4 per cent redeemable non-cumulative preference shares of Rs 10 crore for the Shimla property and 6 per cent redeemable unsecured debentures of Rs 68 crore for the Bhubaneswar property.

"As a result EIH Ltd will have Rs 78 crore in its books for this two properties. On the other hand, EIHAH will get the desired geographical spread which it does not have currently," he said.

EIHAH currently had only two hotels in Rajasthan and Chennai.

The two new additions would help the company develop its presence in north and east India.

Besides transferring two hotels to EIHAH, Oberoi group is also merging Indus Hotels Corporation Ltd with EIHAH.

Indus Hotels is an associate company of EIH.

EIH had 50 per cent stake in Indus Hotels which would be merged with EIHAH.

Indus Hotels currently had four properties "" in Udaipur, Agra, Cochin and Jaipur.

The shareholders of Indus Corporation would get one share of EIHAH for every nine shares of Indus.

EIH Ltd would also get shares of EIHAH as it holds 50 per cent in Indus, but it will be nullified later on as EIHAH was likely to raise resources from the market to finance the transfer.

"EIHAH will raise fund from the market either through private place or other means," he said. As a result, promoters' stake in EIHAH would remain at the same level but more value would be created for shareholders of EIH as well as EIHAH as it would be getting good properties, he claimed.

"It will also ensure the geographical spread," he added.

Lazard India Pvt Ltd was the financial adviser on the restructuring process.