ITC retains its holding in East India Hotels, subscribes to rights issue

An ITC spokesperson says EIH issue was attractively priced, and that ITC holding in EIH was part of its treasury investment portfolio

Diversified conglomerate, ITC, has maintained its two-decade hold in EIH Ltd by subscribing to the rights issue of the hospitality major concluded in October, documents filed with the bourses revealed.

ITC’s holding in EIH is through ITC Limited and its subsidiary, Russell Credit Limited (RCL). An ITC spokesperson confirmed that its rights entitlement was exercised through RCL. “Strategic investments by the company are normally made through RCL, a 100 per cent subsidiary of the company. Between ITC and RCL, the percentage of shareholding in EIH, pre and post rights issue remains unchanged,” he said.

According to the shareholding pattern filed by EIH for the quarter ending December 2020, RCL’s holding increased from 1.15 per cent in the September quarter to 2.44 per cent at the end of December; the number of shares increased from 6,556,551 shares to 15,232,129. ITC Ltd’s holding, on the other hand, fell from 14.98 per cent to 13.69 per cent, the number of shares remaining same at 85,621,473 shares. Overall, ITC’s holding remained unchanged at 16.13 per cent.

Explaining the rationale behind exercising its rights, the ITC spokesperson said, the EIH rights issue was attractively priced from a long-term perspective. The spokesperson, however, added that the shareholding in EIH was part of the treasury investment portfolio of ITC.

EIH’s Rs 350 crore rights issue priced at Rs 65 a share closed on October 13. On Friday, the stock closed at Rs 96.65 on the Bombay Stock Exchange (BSE).

ITC started buying into EIH from 2000, when the stock was at Rs 35 and stopped short of breaching the threshold limit of 15 per cent for triggering an open offer as per the Securities and Exchange Board of India (Sebi) regulations then; it was changed to 25 per cent in 2011.

The stock over the years has resulted in significant mark-to-market gains for ITC. The value of ITC’s investment in EIH at the end of March 2019, had stood at Rs 1,898.42 crore, according to the company's annual report. However, it dropped to Rs 606.54 crore at the end of March 2020, as hospitality stocks crashed with the Covid-19 pandemic and subsequent travel restrictions. In March 2018, the value of investment was at Rs 1,466.55 crore.

The quarter filing by EIH showed the holding of Reliance Strategic Business Ventures at the end of December was 18.83 per cent and at the end of September,at 18.53 per cent; number shares rose from 105,907,273 to 117,760,869.

In 2010, when Reliance Industries (RIL) through an investment arm, bought a 14.12 per cent stake in EIH, the industry had read it as a move to ward off any possible hostile takeover by ITC.

ITC had, however, maintained that it had no intentions for a hostile takeover. RIL had bought the stake from EIH promoter, P R S Oberoi, and two other promoter entities, Oberoi Hotels and Aravali Polymers, in a deal that valued EIH at Rs 7,200 crore.

However, since then, ITC beefed up its own presence in the sector. According to its annual report, ITC has 109 properties with over 10,250 rooms under its brands, 'ITC Hotels', in the luxury segment, 'Welcomhotel' in the upper-upscale segment, 'Fortune' in the mid-market to upscale segment and 'WelcomHeritage' in the leisure and heritage segment.

The company has adopted an asset-right strategy for its hotels business operations. 

Table: ITC holding in EIH

Company	% holding for quarter ended September 2020	Quarter ended Sept 2020-No of shares held	% holding for quarter ended Dec 2020	Quarter ended Dec 2020-No of shares held
ITC Ltd	14.98	85,621,473	13.69	85,621,473
Russell Credit	1.15	6,556,551	2.44	15,232,129

Source: BSE