ITC Board Greenlights Demerger of Hotels Business

ITC Board Greenlights Demerger of Hotels Business

ITC Ltd.’s board has granted in-principle approval for the demerger of its hotels business. As part of this arrangement, the company will incorporate a wholly-owned subsidiary called ITC Hotels. According to a regulatory filing by ITC, the board has agreed to the demerger, where the company will retain a stake of approximately 40% in the new entity, and the remaining shareholding of about 60% will be held directly by the company’s shareholders in proportion to their existing shareholding in ITC Ltd.

This decision is expected to facilitate the separation of ITC’s hotels business from the rest of the company’s operations, allowing for greater focus and flexibility in managing the hotels segment. By creating a separate subsidiary for the hotels business, ITC aims to unlock value and optimize operations in this specific sector.

It is important to note that the in-principle approval marks the initial step in the demerger process. Further approvals and regulatory requirements will need to be met before the demerger can be fully executed. The demerger will be subject to the approval of shareholders and relevant authorities, and detailed plans and arrangements will be developed to ensure a smooth and effective transition for both the main company and the newly formed Hotels subsidiary.

As part of the process for the demerger of hotels business and the incorporation of a wholly owned subsidiary called ITC Hotels, the scheme of arrangement will be presented for approval at the next meeting of the ITC Board. The board meeting is scheduled to be convened on August 14, 2023.

During this meeting, the board will review and discuss the proposed scheme of arrangement in detail and decide on its approval. If the board gives its final approval, the demerger process will move forward, subject to further regulatory approvals and the consent of shareholders.

The August 14 board meeting will be a significant step in the implementation of the demerger plan, and it will be crucial in determining the future structure and operations of ITC Ltd.’s hotels business and the newly formed subsidiary, ITC Hotels. Following the board’s approval, the demerger scheme will proceed to the next stages of the process, to complete the demerger by the agreed-upon terms and timelines.

ITC Hotels group boasts an extensive portfolio comprising over 120 hotels and 11,600 keys across more than 70 locations. Over the years, the company’s Hotels Business has evolved and achieved maturity, positioning itself to pursue an independent growth trajectory as a separate entity within the fast-growing hospitality industry. The board of ITC Ltd. recognized the potential of the hotels business to thrive with a sharper focus and an optimal capital structure.

By demerging the hotels business into a separate subsidiary, ITC Hotels can have greater autonomy in its strategic decisions and operations. This move is expected to allow the hotels business to capitalize on its strengths and tap into the dynamic opportunities in the hospitality sector.

Despite becoming an independent entity, ITC Hotels will continue to leverage the institutional strengths, brand equity, and goodwill of ITC Ltd., its parent company. This association will provide the newly formed subsidiary with a strong foundation and access to established resources, supporting its growth and continued success.

ITC Ltd. believes that the demerger of its Hotels Business will be a significant step in unlocking value for its shareholders. By creating a separate entity in the form of Hotels, shareholders will be able to directly hold a stake in the new company. This direct ownership will provide shareholders with a distinct and independent market-driven valuation of the Hotels Business.

Through the demerger, shareholders will have the opportunity to participate more directly in the growth and performance of Hotels as a standalone entity within the hospitality industry. This move is expected to enhance transparency and create a clearer investment proposition for shareholders, enabling them to make more informed decisions based on the specific dynamics of the hotels business.

The demerger is aimed at ensuring that the true value of the Hotels Business is recognized and reflected in the market, enabling shareholders to benefit from the growth potential and market opportunities of this segment. By unlocking value and providing an individual valuation for the hotels business, the demerger seeks to maximize the overall shareholder value and create a clearer pathway for the future growth and success of ITC Hotels.

Sanjiv Puri, the Chairman of ITC Ltd., expressed that the creation of a dedicated hospitality-focused entity, ITC Hotels, will pave the way for the next phase of growth and value creation. By establishing this new entity, the company aims to tap into the promising opportunities within the Indian hospitality industry.

Under the proposed reorganization, both ITC Ltd. and the new subsidiary, ITC Hotels, will continue to benefit from institutional synergies. This means that while the hotels business gains autonomy and a sharper focus as a separate entity, it will still be able to leverage the strengths, brand equity, and goodwill of its parent company, ITC Ltd. This symbiotic relationship is expected to be mutually advantageous, allowing both entities to capitalize on their strengths and complement each other’s growth strategies.

The move to create a dedicated hospitality-focused entity aligns with vision to foster growth and value creation in the hospitality sector. By capitalizing on the opportunities in this industry and optimizing operational strategies, the demerger is seen as a strategic decision that will propel Hotels towards achieving new heights of success and delivering value to its stakeholders.

The ITC stock price has shown significant upward momentum during the current year. As of now, in 2023, the ITC share price has witnessed a remarkable surge of over 42%. Additionally, over the past one-year period, the stock has seen impressive growth, with a jump of more than 57%.

However, at the time of reporting, around 2:35 pm, the ITC share price experienced a decline and was trading 3.04% lower at ₹474.95 per share on the BSE (Bombay Stock Exchange).

The stock market can be subject to fluctuations due to various factors, including market sentiments, economic conditions, company-specific news, and other external influences. While it has observed significant growth over the past year and in 2023, its current intraday price movement reflects the volatility that can occur in the financial markets.

Investors and traders closely monitor such price movements and consider them while making their investment decisions. Stock prices can change rapidly based on market dynamics, and the performance of the share price will continue to be a subject of interest to market participants.