Mumbai: Two nominees of Reliance Industries Ltd (RIL) on Monday joined the board of hotel operator EIH Ltd, as the two companies seek to cement their growing business ties.
Nita Ambani, wife of RIL chairman Mukesh Ambani, and Manoj Modi, a key RIL executive and a close confidant of the chairman, joined the EIH board as additional directors. Renu Sud Karnad, managing director of Housing Development Finance Corp. Ltd, and Robert Henry Burns also joined the EIH board as additional directors, the company said in a statement to the stock exchanges.
Burns is a veteran hotelier and the founder of Regent International Hotels, the first Asian-run global hotel chain, according to EIH vice-chairman S.S. Mukherji. Founded in 1970 in Hong Kong, Regent was taken over by the Four Seasons group in 1992. Last year, Burns was named honorary chairman of Regent after it was acquired by Taiwan’s Formosa International Hotels.
Nita Ambani looks after RIL’s interests in education, healthcare and sports, and oversees the group’s philanthropic activities. She is the founder chairperson of the Dhirubhai Ambani International School in Mumbai and a co-owner of the Mumbai Indians, a cricket team in the Indian Premier League.
“It is an honour for me to be part of EIH,” Nita Ambani told reporters on Monday. “Today was my first meeting as a member of the EIH board.”
The promoters of EIH, which owns and runs hotels under the Oberoi brand, sold a 14.12% stake to RIL a year ago for Rs. 1,021 crore. RIL’s stake in the company has since increased to 14.9% through market purchases.
EIH chairman Prithviraj Singh Oberoi in August said his company and RIL will jointly develop hotels and luxury homes in India and abroad. He called RIL an “important shareholder and a friendly shareholder”.
Himani Singh, an analyst at Elara Securities (India) Pvt. Ltd, the local arm of a foreign brokerage, said the induction of Ambani and Modi on the board was a part of a growing relationship.
“Though there won’t be much impact on operations as they (Ambani and Modi) are coming in as non-executive directors, it is significant in the evolution of EIH’s business dynamics, where RIL may play a greater part,” Singh said.
The stake sale to RIL was widely perceived as a bid by EIH’s promoters to thwart any potential takeover bid from ITC Ltd, which had amassed a 14.98% stake in EIH over 10 years.
EIH had also helped tutor the staff to be employed at Mukesh Ambani’s South Mumbai residence Antilia, billed as the most expensive house in the world.
A rights issue that ensued after the stake sale to RIL, in which EIH raised Rs.1,179 crore, has helped it repay debt and reduce interest costs, helping the company post a profit in the quarter as well as for the half year ended 30 September, versus a loss in the year-ago periods.
Both RIL and ITC subscribed to their portion of the rights issue. The Oberoi family subscribed to the shares renounced by other shareholders as well, thereby raising its holding to 34.5% from 32.31% earlier.
For the six months ended 30 September, interest charges more than halved to Rs. 32.54 crore due to a reduction of debt on the company’s books to the tune of Rs. 1,100 crore, EIH said in a statement.
The company posted a net profit of Rs. 16.59 crore for the quarter ended 30 September, compared with a Rs. 14.97 crore loss in the same period a year ago. Its revenue for the period was Rs. 246.8 crore, 12.07% higher year-on-year.
The profit was significantly aided by one-off exceptional gains on account of sale of property and a tax reversal. In the notes to accounts, EIH said it had sold a property in Orissa for Rs. 7.67 crore and a flat in Mumbai for Rs. 3.48 crore. A tax reversal of Rs. 1.91 crore also was added to the firm’s net profit.
After adjusting for the exceptional items and tax reversal, the company’s net profit was Rs. 3.53 crore.
“If the exceptional gains on account of property sale and tax reversal are discounted, it has been a lacklustre quarter on the operational front,” said Singh.