Under the deal, IHCL will buy 85 per cent in ELEL, a subsidiary of Claridges, for Rs 680 crore. It will buy the entire shareholding at a later date.
ELEL holds a long-term sub-lease for the land on which the hotel is situated.
IHCL already had an arrangement with Claridges to provide technical and management expertise for the restoration and operations of the hotel.
IHCL said it would finance the acquisition of the hotel, which has been non-functional since the Mumbai bomb blasts in 1993 that damaged the property extensively, with the Rs 1,400 crore it raised in May last year through a rights issue.
Sea Rock's landmark silhouette as well as its history will, however, be consigned to the past, with the new owners planning to demolish the structure and redevelop the area as an integrated property consisting of hotel rooms, a large convention centre, retail and commercial operations.
In a statement on Friday, IHCL said it would integrate the newly-acquired site with its existing property at the Taj Lands End, which is located just across the road.
R K Krishna Kumar, vice-chairman, IHCL, said, "The Lands End and this new property can become a landmark in the north of this city, which will be equivalent to the Taj Palace and Tower in Colaba. We will not be able to make a full disclosure of the branding of the hotel at the moment, but it will be decided later."
The company intends to appoint international architects for the construction of the property, which will begin soon after the multi-storeyed tower is demolished.
The company also said it would take at least three years for the new hotel to be operational, but did not disclose the cost estimate for constructing the new property.
Although company officials declined to discuss the price advantage IHCL gained from the deal thanks to the slump in property market, they confirmed that the deal was attractively priced.
"If you want a comparator, it might be significantly below the usual per square foot rate one might have to pay in that area. All we can say at the moment is that we have successfully acquired the property at a very competitive rate," Krishna Kumar said.
Meanwhile, as an update on the company's strategy on the Orient Express Hotels (OEH), US, in which the Tata group had acquired 10 per cent, the management at IHCL reiterated that its stand on the company has not changed.
Krishna Kumar said: "The Tata group is not interested in a hostile takeover of Orient Express. It is true that they are selling some of their properties, one of which was in Lisbon. We would have looked at only those hotels that are not a part of their core assets."
Asked whether IHCL would increase its stake in OEH, Krishna Kumar replied, "We would, but only on a mutually agreed basis and not through a hostile bid. We are ready to wait for them as long as it takes and we will stay invested in OEH."