Rashesh Shah, analyst at ICICI Securities, says EIH’s fundraising will help the firm pare debt. At the end of 2019-20, EIH
had a debt of Rs 533 crore. “The recent fundraising of Rs 350 crore via rights issue will improve the debt/equity mix to 0.1x, from 0.2x,” says Shah.
While Indian Hotels
has a strong promoter backing, its debt/equity is 0.7x, which, combined with capital expenditure (capex) requirements, could lead to rise in debt/equity further to 0.9x if the current Covid issue persists. Lemon Tree Hotels, being in capex mode, is highly leveraged versus peers, but has strong institutional backing for liquidity support, states Shah.
EIH, which runs hotels and resorts under the Oberoi brand, saw its issue oversubscribed, with Rs 561 crore being offered, against the issue size of Rs 350 crore. EIH
offered 53.7 million shares for subscription to existing shareholders at a price of Rs 65. The rights issue opened on September 29 and closed on October 13.
The firm received applications for 83.9 million shares or 160 per cent of the issue size at the close, according to exchange filings. EIH plans to use Rs 280 crore out of the net proceeds of the rights issue to repay/prepay some of its existing borrowings, according to the offer letter for the rights issue. EIH had reported a profit of Rs 165.14 crore on revenue of Rs 1,674.69 crore in 2019-20.