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Oberoi Realty’s deal to buy Centaur off; Cox & Kings gains

Oberoi Realty’s deal to buy Centaur off; Cox & Kings gains
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First Published: Tue, Jul 19 2011. 04 53 PM IST
Updated: Tue, Jul 19 2011. 04 53 PM IST
Mumbai: The termination of an agreement between Oberoi Realty’s joint venture partner to buy a Mumbai hotel property from V Hotels, lifted shares of tour operator Cox & Kings Ltd , an indirect stake holder in the latter, up over 14%.
In 2005, Siddhivinayak Realties Pvt Ltd, or SRPL, a joint venture partner of Oberoi Realty, had agreed to purchase Juhu Centaur Hotel from V Hotels for about Rs 3 crore.
The deal was, however, under arbitration following a dispute between the parties.
Oberoi Realty said on Tuesday the arbitrator has terminated the agreement and V Hotels is liable to make a refund of about Rs 730 million to SRPL within 90 days.
The reaction of Cox & Kings is on hopes the property may now be sold at a premium, analysts said.
Cox & Kings owns 30.4% in Tulip Star Hotels Ltd that in turn owns 50% in V Hotels.
The company also holds in V Hotels outstanding foreign currency convertible bonds worth Rs 180 million which can be converted into shares, a Cox & Kings official said who didn’t want to be identified.
“We believe it is a positive news for Cox & Kings considering that the concerned property’s appreciation in valuation,” said Kakul Modani, an analyst at IndiaNivesh Research.
“If V Hotels puts up the concerned property on sale, Cox & Kings consolidated cash flow would see an increase to the extent of 15% of the purchase price,” said Modani, who has a “buy” on the stock.
On Tuesday, shares of Cox and Kings closed up 6.66% at Rs 206.5, while Oberoi Realty shares were up 0.15% at Rs 234.5 in a Mumbai market that closed up 0.79%.
Cox & Kings may get a cash inflow of Rs 2 crore if V Hotles eventually wins the arbitration, Wall Street bank Morgan Stanley said in a research report.
Cox & Kings declined to comment.
“In our view, if the sale proceeds of Juhu Centaur are eventually paid down to C&K, the stock would likely be re-rated,” the Morgan Stanley report said.
Morgan Stanley has an “overweight” rating on the stock.
Oberoi Realty’s unit Oberoi Constructions Ltd holds a 50% stake in SRPL.
SRPL has filed a petition seeking an injunction against V Hotels, and will pursue other legal recourse or remedies, it added.
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First Published: Tue, Jul 19 2011. 04 53 PM IST