Indian Hotels Co. Ltd (IHCL), the Tata group hospitality company that owns the Taj brand, is set to absorb associate company Oriental Hotels Ltd (OHL) in an all-stock merger, bringing seven hotels and 825 rooms directly onto its books as it simplifies its holding structure and seeks to unlock value from the assets.
The boards of IHCL and OHL approved the scheme of arrangement on Monday, according to filing with stock exchanges, with completion targeted for the second half of fiscal year 2028 (FY28), subject to statutory approvals. The appointed date for financial consolidation will be 1 April 2027.
Under the scheme, OHL shareholders will receive 25 IHCL shares for every 117 OHL shares. IHCL and its subsidiaries currently own 37.1% of OHL. IHCL will issue about 23.2 million shares, implying dilution of around 1.6%.
The deal could also create a near-term arbitrage opportunity in OHL shares. Prashant Biyani, vice-president, institutional equity at Elara Capital, told Mint that the merger implies an arbitrage of around 13% in favour of OHL, based on Friday's closing price of ₹138.67 on the National Stock Exchange (NSE), and the share-swap ratio. He said investors buying OHL shares could use the company as an indirect play on IHCL.
“Oriental Hotels is a very strategic company for it (IHCL) as it holds 20-22% stake in its hotels of UK, Maldives, and Sri Lanka apart from minor stake in few other hotels based out of South India,” Biyani said, adding that it could either be retained as treasury stock or cancelled as part of the merger.
IHCL shares traded around ₹729.70 on the NSE on Monday, marginally lower than Friday’s close of ₹730. OHL shares traded at ₹142.34, up 2.65%.
More hotels, fewer layers
The merger is part of IHCL’s ‘Accelerate 2030’ strategy to simplify its group structure and increase direct ownership across key companies.
“In line with our strategy of creating value, simplifying the group’s holding structure and unlocking the full potential of OHL portfolio including iconic assets like Taj Coromandel, Chennai, Taj Fisherman’s Cove Resort & Spa, Chennai, and Taj Malabar Resort & Spa, Cochin, the Boards of IHCL and OHL have today approved this merger,” Puneet Chhatwal, managing director and chief executive officer, IHCL, said in a statement.
The portfolio also includes Vivanta Coimbatore, Vivanta Mangalore, Gateway Madurai and Gateway Coonoor. Three of the seven properties are freehold—Taj Coromandel, Taj Fisherman’s Cove and Gateway Coonoor—while the other four are held on long-term leases.
The addition will deepen IHCL’s presence in southern India, which currently has 1,279 consolidated full-service hotel rooms across Tamil Nadu, Karnataka and Kerala. OHL’s 825 keys will take the combined operating inventory in the three states to about 2,100 rooms.
OHL also holds strategic investments in several IHCL group hotel companies in India and overseas, including St. James Court, TAL Hotels and Resorts, Lanka Island Resorts, Taj Madurai and Taj Karnataka Hotels and Resorts.
The merger will increase IHCL’s direct ownership across several of these entities and result in two new operating subsidiaries. The company expects the restructuring to streamline governance, optimise overheads and improve operational efficiency.
IHCL portfolio spend
IHCL also plans to use its balance sheet to invest in OHL’s hotels, including through inventory expansion and product upgrades.
Potential opportunities include adding villas and MICE venues at Taj Fisherman’s Cove, renovating and upgrading Gateway Madurai and expanding other properties.
“The merger will drive long-term value creation by leveraging IHCL’s strong balance sheet to support strategic investments, including inventory expansion and product enhancements further strengthening the premium positioning of the portfolio,” Chhatwal said.
OHL’s operating revenue rose to ₹494 crore in FY26 from ₹440 crore in FY25, while earnings before interest, taxes, depreciation, and amortization (Ebitda) increased to ₹132 crore from ₹110 crore. Its average room rate rose from ₹10,200 in FY24 to ₹11,600 in FY26, while occupancy improved from 71% to 75%.
IHCL said the transaction is expected to be earnings-per-share accretive from the first year, with further growth expected from active asset management, upgrades, capacity expansion, cost efficiencies and synergies.
For OHL shareholders, the merger will replace indirect exposure to IHCL with direct ownership in the parent. “The merger of OHL with IHCL will create significant value for OHL shareholders, enabling them to now participate directly in IHCL’s growth journey,” said Pramod Ranjan, managing director and chief executive officer, OHL.
The deal comes as India’s branded hotel market continues to expand. The country’s branded hotel inventory is projected to reach about 300,000 rooms by FY30, from nearly 196,500 rooms in FY25, according to hospitality consultancy Hotelivate-Savills.