Chennai, Feb 2: EIH Ltd is close to picking up a 30 per cent stake in Balaji Hotels and Enterprises Ltd which is building a five-star deluxe hotel in Chennai. According to well-placed industry sources, senior officials of EIH including vice-chairman and managing director PRS Oberoi, and deputy managing director SS Mukherji, were in Chennai last week to finalise the deal.
EIH which has already been contracted to manage the day-to-day operations of the hotel `Magunta Oberoi' will also have a say in the policy decisions of the board consequent to the equity stake.
The price at which the shares will be offered to EIH is not clear but is likely to be at a premium. The company in its last annual general meeting had renewed the resolution pertaining to public issue, private placement of shares or debenture to the tune of Rs 750 crore. Its current equity is Rs 32.37 crore. A senior Balaji group official when contacted by The Financial Express maintained that they were still talking to many prospective investors including EIH and a final decision would be taken later this month. The decision of EIH to go for the equity stake is viewed by many as a step to thwart competition. Though EIH has been involved in this project from the beginning as a manager, it was not inclined to take a stake in the project despite the financial turmoil witnessed by the company.
Industry experts attribute this move by EIH to the aggression shown of late by international hotel chains for Indian hotel properties. Many hotel majors such as Accor, Marriotte are constantly on the lookout for a presence in India and there was a possibility that they could have found their way into Balaji Hotels. This factor could have forced EIH to go for a stake to pre-empt these from happening. Magunta Oberoi is a 405 room hotel situated on the arterial Anna Salai is being constructed at a cost of Rs 290 crore.
The debt component is Rs 197 crore while the balance is made up of equity and internal accruals. The project has been plagued by time and cost overrun mainly on account of financial difficulties.
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