NEW DELHI: Amid the severe economic downturn,
Oberoi Hotels
have raised funds to tide over the pandemic effect. The Rs 350-crore rights issues of EIH Ltd, a member of the Oberoi Group, has been over subscribed 1.6 times as it received applications for shares worth Rs 561 crore. These funds will be used for debt repayment and general corporate purposes.
According to the rights issue document, EIH had almost Rs 540 crore debt as of August 31, 2020. From the rights issue proceeds, the company plans to use Rs 280 crore for debt reduction and the remaining for corporate purposes. Consequently, the DE ratio of the hospitality major will reduce from 0.22 to 0.1.
“The rights issue received strong institutional support and good participation from retail investors. Coming at a time while we are still in the middle of the pandemic, and the fact that the hospitality industry is among the worst hit sectors, the success of this issue reinforces the confidence that the market has reposed on the company's management and its ability to deliver long term performance and growth,” said sources.
“The repayment/prepayment of loans by utilising the net proceeds will help reduce our outstanding indebtedness, debt-servicing costs and improve our debt to equity ratio. In addition, we believe that the improved debt to equity ratio will enable us to raise further resources in the future to fund potential business development opportunities and plans to grow and expand our business… The current pandemic environment has thrown up severe challenges for the entire hotel industry. However, EIH, with its strong balance sheet and strategic property locations is poised to benefit from a favourable demand-supply matrix in the long run due to likely postponement or reduction in new room supplies in the industry,” the offer document said.
EIH had reported a profit of Rs 165.1 crore on a revenue of Rs 1,674.69 crore in Fy 2019-20.
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