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Reliance's 14.8% stake in EIH, just shy of the 15% level that triggers a mandatory open offer to buy an additional 20%, could mean the company is not keen to take management control of the hotel chain.

ITC, which holds 14.98% stake in EIH, reiterated that it would not make a hostile bid for EIH.

Analajit Singh, Chairman of Max India, who also holds under 5% stake in EIH, was also interested in hiking his stake in the company. However, talks failed over differences in valuations.

What expert says

Analysts said the deal was likely to thwart designs of EIH's larger rival ITC, which holds a 14.98% stake in EIH, to raise its stake in the hotel chain. ITC has reportedly been looking to raise its stake in EIH, but chairman YC Deveshwar in July had ruled out plans to make an open offer.

Jagannadham Thunuguntla, Equity Head of brokerage SMC Capitals said Reliance is a perfect white knight for EIH. "By bringing in Reliance as a stake owner, it may become difficult for ITC to make any takeover attempts for EIH," he said.

"Before SEBI recommendations on takeover norms become guidelines, probably the Oberoi family wants to continue its control on EIH hotels, and they have brought in Reliance as a Poison Pill or a White knight so that with Reliance's stake, they can be used as a safeguard against ITC's interest to takeover Oberoi hotels," he said.

He expects EIH's share price to shoot up quite a bit ahead. "If SEBI's recommendations on the takeover code become guidelines wherein any acquirer can reach 24.99% without doing an open offer, then it will really be fascinating because it is almost guaranteed that ITC and Reliance both would love to reach 24.99%. Even if they cross the 25% benchmark in the new guidelines, either of them can come out with an open offer of entire 100%. In that scenario there is a very high chance that the share prices of Oberoi's EIH hotels can shoot up quite a bit. With Oberoi being such a quality brand, I don't think either of the parties will leave the show early. Also the promoter has so much critical attachment to the emotional value to the game. So all three leading parties and none of them having controlling stake right now is real fun for minority shareholders for good share price appreciation."

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