NEW DELHI: Shareholders of ITC will get one share in the soon-to-be-listed hotel entity for every 10 shares they hold in the company, as per the approved demerger plan of the Kolkata-based conglomerate’s hotel business by its board on Monday.
The hotel business, which competes with the likes of Taj, Leela and Oberoi hotels, will be listed as a separate entity in about 15 months. The demerger is subject to necessary approval from shareholders, creditors, stock exchanges, SEBI, NCLT, and other regulatory authorities, as required.
There will be no change in the shareholding pattern of ITC. Post the implementation of the demerger scheme, the shareholders of ITC will directly hold about 60% of the resulting company, proportionate to their shareholding in ITC; the balance stake of about 40% in the resulting company will be held by ITC. The FMCG major which has been trying to separate its hotel business believes that this will lead to value creation for shareholders through a sharper focus on the business anchored on a differentiated strategy aligned with industry-specific market dynamics.
ITC Chairman and MD Sanjiv Puri had last week said hospitality industry is poised for strong growth. “Given that India’s share in global tourism is just 1%, there is substantial headroom for growth and it is estimated that tourism GDP in India can grow from $143 billion to $250 billion by 2030,” said Puri.
ITC shares have fallen about 10% since the company on July 24 said it is hiving off its hotel business. Analysts have given a thumbs-up to the scheme as they believe it will improve the parent company’s capital allocation.
Currently, ITC has over 120 properties in 70 locations comprising nearly 11,600 rooms. Even as the hotel business accounted for 20% of ITC’s capex in FY23, it contributed only 2% of its EBIT. In FY23, revenue from the hotel division doubled to Rs 2,689 crore and in Q1FY24, this segment recorded revenues of Rs 600 crore. As per ITC’s investor’s presentation, ITC Hotels will be given a license to use the ‘ITC ‘ name as part of its corporate name and some of its properties and brand names, subject to customary conditions involving a fee.