Indian Hotels – An interesting rights issue

Aug 14, 2007 Stock Market

Indian Hotels Company Ltd. plans to come out with an interesting rights offer in order to raise almost Rs.1,900 crore. The company manages the Taj group of hotels.

In the first plan, the company plans to offer 1 share for every 5 held, at Rs.70 per share, through which they hope to collect around Rs.844 crore.

The second plan offers unsecured convertible debentures to existing debenture holders in the ratio 1:10, and will carry a coupon rate of 4 % for five years. The debentures can be converted after two years at a price of Rs 150-180 each. This is likely to bring in around Rs.1080 crore.

They last had a rights issue in 1993 (1:3), other than bonus issues in 1989 (1:2) and 1994 (1:1). They also split the stock this year (10:1).

I guess the offer to shareholders seems good, considering the scrip is now around the Rs.135-140 mark, though only time will tell whether the same holds true for the debenture holders as well.