Bull of the week: Stock that rallied 62% in 5 days

EIH Associated Hotels gained 9.98% or Rs 20.95 to close at Rs 230.85. It touched a 52-week high of Rs 230.85. There were pending buy orders of 43,187 shares, with no sellers available.

Why the run up?

On August 30, 2010, Energy major Reliance Industries controlled by billionaire Mukesh Ambani, announced its foray into the hospitality sector by acquiring a 14.12% in EIH for a total cost of Rs 1021 crore. The stake buy worked out to Rs 184 per share. The acquisition at Rs 184 per share represented almost a 20% premium to its price of Rs 151 on the day. EIH holds 75% controlling stake in EIH Associated Hotels.

On September 01, 2010 , Reliance, bought an additional 0.68% in EIH Ltd, raising its holding to 14.8% in the hotel chain.

Reliance's 14.8% stake in EIH, just shy of the 15% level that triggers a mandatory open offer to buy an additional 20%, could mean the company is not keen to take management control of the hotel chain.

ITC, which holds 14.98% stake in EIH, reiterated that it would not make a hostile bid for EIH.

Analajit Singh, Chairman of Max India, who also holds under 5% stake in EIH, was also interested in hiking his stake in the company. However, talks failed over differences in valuations.

RIL acquires 14.12% in EIH for Rs 1021 crore

Reliance Industries has forayed into hospitality sector today. Through its wholly owned subsidiary Reliance Industries Investment and Holding Private Limited, it has acquired 14.12% in EIH for a total cost of Rs 1021 crore, reports CNBC-TV18.

“RIL’s subsidiary bought shares from Oberoi Hotels Private Limited and certain other promoters of EIH Limited,” says an official statement. It further says, "RIL has full faith in and would support the management of EIH and there is no change of management, operation or control of EIH.”

However, post-stake sale, there will be no change of management, operation or control of EIH Limited as per the RIL statement.

The stake buy works out to Rs 184 per share while the stock ended today at Rs 150 per share on the BSE.

Earlier, Analajit Singh of Max India, who also holds under 5% stake in EIH, was interested in hiking stake his share. However, talks failed over differences in valuations.

When contacted, ITC, which holds 14.98% stake in EIH, declined to comment on the deal. However, it reiterated that it will not make a hostile bid for EIH.