The much-anticipated demerger of ITC's hotel business into a separate entity, ITC Hotels, has finally taken effect. This strategic move, effective from January 1, 2025, aims to unlock shareholder value and enhance operational efficiency. Here's a detailed look at the key aspects of this significant development:
Background and Rationale
ITC, a diversified conglomerate, announced the demerger plan in August 2023. The primary objective was to provide the hotel business with independent growth potential while maintaining synergies with the parent company. The demerger was approved by shareholders in June 2024, with an overwhelming 99.6% voting in favor. The National Company Law Tribunal (NCLT) sanctioned the demerger scheme in October 2024.
Demerger Details
Effective Date: January 1, 2025
Demerger Ratio: For every 10 shares held in ITC, shareholders will receive 1 share in ITC Hotels.
Share Distribution: ITC will retain a 40% stake in ITC Hotels, while the remaining 60% will be distributed among existing ITC shareholders.
Listing Timeline: ITC Hotels shares are expected to be listed on the NSE and BSE by mid-February 2025.
Financial Performance and Projections
ITC Hotels has shown robust performance in recent quarters. In Q4FY24, the hotel business recorded a revenue surge of 15.6% YoY to ₹2,989 crore and an EBITDA rise of 26.2% YoY to ₹1,049 crore. The demerger is expected to further enhance the growth trajectory of ITC Hotels.
Strategic Initiatives
Post-demerger, ITC Hotels will focus on expanding its footprint in the luxury hospitality segment. The company plans to grow its portfolio to over 200 hotels with more than 18,000 keys within five years. The expansion strategy includes both greenfield projects and leveraging strategic land banks.
Market Impact
The demerger has implications for ITC's existing Futures and Options (F&O) contracts. The National Stock Exchange (NSE) announced the early expiry of contracts with January 30, February 27, and March 27, 2025 expiration dates. New F&O contracts for ITC will be reintroduced on January 6, 2025, coinciding with the ex-date of the underlying stock.
Analysts' View
Analysts remain optimistic about the demerger, viewing it as a strategic move to unlock shareholder value. The share price of ITC adjusted to ₹455.60 on the NSE and ₹455 on the BSE after a special pre-open session for price discovery. Analysts project a listing price range of ₹200 to ₹300 per share for ITC Hotels, with an overall market valuation of ₹42,500 crore to ₹62,000 crore.
Conclusion
The demerger of ITC Hotels marks a significant milestone in the company's strategic restructuring. By providing the hotel business with independent growth potential, ITC aims to unlock value for its shareholders and enhance operational efficiency. Investors are advised to stay informed and consider the potential opportunities and risks associated with this development.
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