EIH to float new brand for luxury residential projects; plans to expand into Chinese market.
It would also mark a foray into the luxury residential apartment segment by the hospitality major. A new brand, Oberoi Residences, is to be floated, to develop such residences. “Land prices are high in all cities, so it is impractical to develop hotels in all. It would be under Oberoi Residences,” said EIH chairman and chief executive officer, P R S Oberoi.
The "friendly shareholder" as Oberoi dubbed RIL on Tuesday, would be the roped in for the projects in Bangalore and Goa “in all probability”. A joint venture may be floated for the projects, given that the land is already with EIH. It owns 8.2 acres in Bangalore and 55 acres in Goa.
The plan is for a hotel each in Bangalore and Goa, and a set of luxury apartments in Bangalore. These would all be under the Oberoi brand; the hotels will have 250 rooms each, with the combined cost at Rs 700 crore, Oberoi said at a press conference, following the company’s 61st annual general meeting. The apartments, of about 6,000 sq ft each, would number around 60 in all; the cost wasn’t given. It would be outright sale, though EIH would provide services.
EIH already owns a lot of real estate vis-a-vis peers. RIL could invest in real estate and EIH manage the property. However, Oberoi ruled out creating a separate brand for the joint properties.
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"Our (RIL and EIH) visions match. If they wanted to create a hotel brand, it would be a mismatch," EIH vice chairman S S Mukherji clarified. The comfort level with the other major shareholder, ITC, was missing when shareholders raised concerns about a possible hostile takeover by the latter.
“I have no idea what his (ITC chairman Y C Deveshwar's) plans are. But I can assure you, ITC will not take over our company,” said Oberoi.
The promoters hold 35.4 per cent in the company and RIL has 14.8 per cent. "It's not possible to take over EIH, as the Oberoi group has 34.5 per cent and a friendly stakeholder (RIL) has 14.8 per cent," Oberoi explained later. ITC, which has been buying into EIH since 2000, has 14.98 per cent.
Once the new Takeover Code is effective, both RIL and ITC will have the option of increasing their holding to 25 per cent without triggering a compulsory open offer. The EIH stock on Tuesday closed at Rs 86.65, up 2.4 per cent from the previous day at the Bombay Stock Exchange, on a day when the BSE Sensex dipped 0.8 per cent.
Last year, in a surprise move, EIH brought in RIL as a ‘white knight’ to thwart a possible takeover. RIL’s wholly-owned subsidiary, Reliance Industries Investment and Holding, had acquired stakes from Oberoi Hotels and certain other promoters of EIH. With the joint property development, that partnership is being taken to the next level.
GLOBAL JITTERS
EIH appeared doubtful over the global economic situation after the recent turmoil in America. “We want to concentrate more on India now, as the overseas markets look uncertain,” said Oberoi. Because of the financial climate, the firm is reconsidering its capital expenditure plans.
“We were looking at a capex of Rs 40 crore this year. We will invest Rs 25 crore to renovate five floors in the Mumbai hotel,” Oberoi said, while hinting the rest would be reconsidered, depending on the global situation.
However, EIH has expressed keenness on China. “We have been trying to enter the market. Plans are there for management contracts in that country. I am going to China this year. There are many proposals and the most favourable destinations are Beijing and Shanghai,” he added.
RAJARHAT SIGHT
The Kolkata-based company is also looking for three-four acres at the suburb of Rajarhat to set up two new hotels. “We are planning to set up Trident and Oberoi hotels on private land in Rajarhat. The Oberoi hotel would have about 250 rooms, while Trident would host 350 rooms,” he said.
It is in search of suitable partners to invest in the property for the project, while it would manage the hotels. For Oberoi, the investments without land would be about Rs 2 crore per room; for Trident, Rs 1.3 crore per room.