Prithvi Raj Singh Oberoi and Mukesh Ambani are set to join hands for development of hotel properties, and even luxury apartments, both within and outside the country.
The move, which would mark Ambani-led Reliance Industries’ foray into hospitality and real estate, has been in the realm of speculation since it picked up a strategic 14.8% stake in Oberoi-led EIH for an estimated Rs.1,060 crore.
For Oberoi, on the other hand, the foray into developing luxury apartments works out to a move to derisk the hotel business at a time of global uncertainties and looming economic slowdown.
“We may invest in strategic projects,” Oberoi said after the Annual General Meeting of EIH on Tuesday, August 9.
“We have two valuable pieces of land: in Bangalore and Goa, which we plan to develop, in all probability, with Reliance. We plan to develop projects jointly within and outside the country also,” he said.
Reliance’s entry into the EIH board is also a probability, Oberoi indicated. “I can’t say anything at the moment. We have been discussing this.”
Ambani’s entry has cleared the cloud of a possible hostile bid for EIH by ITC, which also holds around 15% stake in the hospitality firm.
“We own 34.5% in EIH; our friendly shareholder (Reliance) owns about 14.98%. You do your own arithmetic,” Oberoi replied tartly when asked if he is still afraid of any takeover attempt from rival ITC Ltd.
Oberoi didn’t rule out Reliance raising its stake further. “They are friendly shareholders, and if they raise their holdings, we wouldn’t be unhappy,” he said. “Wherever he (Ambani) wants to invest we would welcome it. The whole idea is to get our vision and Reliance’s vision similar. We want to develop properties in India and abroad but we would first be concentrating on India. We would be forming separate companies,” Oberoi said.
The joint development would be under the Oberoi brand though. “There is no question of Reliance putting their brand into the hotel business,” said Vice Chairman S S Mukherjee.
The partnership could be in the form of either joint ventures or in any corporate form decided by Ambani, as he is the one investing while the Oberois manage the money, said Mukherjee.
EIH owns about 8.2 acre in Bangalore overlooking Hebbal Lake and 55 acres in Goa. In Bangalore, EIH and Reliance would be building a 250-room hotel and 60 luxury apartments, while in Goa they would be building a 100-room luxury hotel. Some villas would also be built there, to be sold off after development.
For the apartments, there would be a separate identity, ‘The Oberoi Residencies’, a brand conceived in 2006 for premium real estate. Five years on, spiralling land and real estate costs have made this business opportunity all the more compelling, said Mukherjee.
“Land price is so high in every city that it is impractical that we build only hotels. It is much better if you build the hotel and build residences, apartments or bungalows, there. That’s what we plan to do in future.”
