ITC keeps options open in race for EIH stake

YC Deveshwar, Chairman, ITC, said the company was open to raising the firm's stake in East India Hotels but added he wasn't in favour of a hostile takeover. ITC holds 14.98% stake in East India Hotels.

According to sources, the ITC board was considering several options for the EIH stake. It may consider a counter-offer for EIH if Analjit Singh made an open offer. The promoters of EIH were in talks with Singh, who is the Founder and Chairman Max India, to sell stake.

Sources said that ITC may hike its stake in EIH to a maximum of 25%, which does not amount to a hostile takeover or imply control. It may also consider diluting stake or exit EIH completely. The board of ITC will take a call after considering all options, sources added.

Here is a verbatim transcript of Shereen Bhan's comments on CNBC-TV18. Also watch the accompanying video.

It has been a long standing story that we have been tracking and what I understand now from my sources is that ITC board is considering a whole host of proposals on what to do with its stake in East India Hotels, EIH, which owns the Oberoi Hotels.

It has been publicly disclosed that Analjit Singh through his private investment arm holds about under 5% stake in EIH and Analjit Singh and Oberoi Hotels or EIH are actually in discussions or in deliberations on hiking that stake further. They have not come out with where they would like to see that stake go up to. But both parties have admitted publicly that they are in conversation, they are in dialogue to hike stake and arrive at a potential deal.

Now what I understand from my sources is that ITC is exploring the possibility of making a counter offer if Analjit Singh were actually to make an open offer of two EIH shareholders. ITC has stopped short of that 15% mark, which triggers the open offer. It stake stands at about 14.98%. YC Deveshwar was on record to us and has several times said that he will not do a hostile takeover as far as ITC is concerned. But the ball game could change if Analjit Singh does go ahead and make that open offer. So they could look at a counter open offer.

One of the other options being explored is also to hike their stake to about 25%. They do not see 25% as a hostile takeover because that does not imply control of the company. So they could look at hiking their stake to about 25%.

One of the other options could also be exiting their stake of selling off completely that 14.98% stake that they have in EIH, or partially exiting that stake. So, that is another option that is being considered. They could continue to stay with 14.98% and not do anything at all. So these are some of the options that the board is likely to consider and a final decision will be taken by the ITC Board on what to do with their EIH stake.

Even in the past, several out of the box options have been presented by YC Deveshwar. In fact he has also spoken about how management control should be separated from ownership. He is okay if the Oberois continue to own EIH but give the management control in that sense,  the running of the properties to ITC. This has been something that YC Deveshwar has publicly offered to the Oberois. So several options at this point in time that are being considered by the ITC board.

Deveshwar said, "There is nothing on offer as you know and we are averse to a hostile (takeover). But if somebody else is entering a fray I do not discount. We can do our rethinking. But I cannot say anything just now."