ITC’s cash cows: Gains from EIH, Leela touch ~11 billion
Diversified conglomerate ITC's mark-to-market gains from its investment in EIH and Hotel Leelaventure touched ~11 billion.
Much of the gains, however, is from EIH, which manages the Oberoi chain of hotels. ITC's investment in EIH dates back to the 2000. Hotel Leelaventure followed a few years later, said Rajiv Tandon, executive director and chief financial officer of ITC.
Tandon said that of the ~11 billion gains, ~10 billion was on account of EIH. ITC chairman Y C Deveshwar had said on Friday at the annual press conference that the company had bought EIH shares when they were around ~35 apiece. He also said these would remain as investments. The EIH stock closed on Friday at ~160.10 on the BSE.
According to the June shareholding filing with BSE, ITC's holding in EIH stood at 14.98 per cent and its subsidiary, Russell Credit’s, at 1.15 per cent. ITC’s holding in Hotel Leelaventure during the same time stood at 7.92 per cent.
According to ITC’s annual report, the value of ITC’s investment in EIH increased from ~10.31 billion at the end of March 31, 2017, to ~13.62 billion at the end of March 31, 2018. In contrast, Leelaventure increased from ~0.81 billion to ~0.85 billion. Initially, the investments were made by Russell Credit, but in 2010-11, the subsidiary sold the investment at their respective book value to ITC. The industry believed that ITC's investment in EIH had, in a way, paved the entry of Reliance Industries Ltd (RIL), which bought a 14.12 per cent stake in the company for ~10.21 billion through an investment arm, in 2010. The deal valued EIH at ~72 billion.
RIL had bought the stake from EIH promoter, PR SO be roi and two other promoter entities, Oberoi Hotels and Aravali Polymers.
ITC’s investment had always been a source of discomfort for the EIH management and for a long time, was kept at 14.98 per cent, just short of the Sebi threshold limit for triggering a mandatory open offer, even though Deveshwar had made it clear that he would not make a hostile bid.
The threshold limit for triggering an open offer then was 15 per cent, which was changed to 25 per cent in 2011. At the end of June quarter 2018, Reliance Industrial Investments and Holdings held 18.53 per cent in EIH.
After RIL’s investment in EIH in 2011, Leela¸ in response to queries, had also said that if at all there was any threat from ITC, then Mukesh Ambani would be the ideal partner.