The Hindu Business Line : Asian Hotels board proposes split into 3 independent units

Time to split
`Promoters have acquired independent interests'
New entities will be equal in earning power
Preferential issue to one promoter and IDFC

Mumbai June 15 The board of directors of Asian Hotels, the owners of the Hyatt Regency properties in Mumbai, New Delhi and Kolkata, is proposing restructuring of the company into three independent undertakings.

It has said that the restructuring has become necessary as the three promoter groups have, since starting the hotel project, acquired "independent" interests in the hospitality industry.

In its explanatory statement to the shareholders recommending the adoption of the restructuring proposal, the board said that the development may create potential conflicts of interest, which could affect the company and shareholders.

Accordingly, one unit will own the Delhi property. The second unit will control the Kolkata property together with the investments and development options in Bhubaneswar, appropriate cash liquidity, besides Regency Convention Centre and Hotels Ltd.

The third unit will own the Mumbai undertaking together with investments and developments options in Bangalore.

The board has said that a firm of chartered accountants appointed by it considers the three undertakings resulting from restructuring to be broadly equal in economic earning power.

The draft scheme which is being put up to the shareholders for their approval envisages the following: appropriation of a portion of general reserves to increase the paid-up capital by Rs 11.40 crore; post enhanced paid-up capital, shareholders to get one share in each of the three undertakings to be formed as part of the restructuring; Yans Enterprises, a promoter, to subscribe to fully convertible preference shares of the total value of Rs 311 crore on a preferential basis; and an independent private equity investor to subscribe to similar instruments to the tune of Rs 30 crore.

In addition, the board is proposing that the shareholders approve the issue of redeemable non-convertible preference shares to one of the promoters and IDFC to the tune of Rs 90 crore each.

These shares will be redeemed in three annual instalments at a premium of Rs 16.90 crore.

The meeting of the shareholders for consideration of the proposal is to be held on June 25. It was to have been held on May 28.

But the entire proposal had to be reworked as the Department of Economic Affairs of the Ministry of Finance had declared that optionally convertible instruments would be treated as debt instruments; hence, warranting compliance with the Government's external commercial borrowings guidelines.

On the BSE the Asian Hotels scrip closed on Friday at Rs 755, up Rs 4 from the previous close.

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