NEW DELHI: FMCG & cigarette major ITC is hiving off its hotel business. The Board of the Kolkata-based conglomerate has given in-principle approval for the demerger of its hotels business in its latest meeting. Post demerger, ITC would hold a stake of around 40 per cent in the new entity and the balance of 60 per cent will be held by the company’s shareholders proportionate to their shareholding in the company.
“After due consideration, the Board accorded its in-principle approval to the demerger of Hotels Business under a scheme of arrangement, with the Company holding a stake of about 40 per cent in the new entity and the balance shareholding of about 60 per cent to be held directly by the company’s shareholders proportionate to their shareholding in the Company,” ITC said in a regulatory filing.
The scheme of arrangement will be placed before ITC Board on August 14, 2023. Currently, ITC has over 120 hotels and 11,600 keys across over 70 locations. While the hotel business contributed less than 5 per cent of ITC revenues and Ebit over the last decade, it was more than 20 per cent of the company’s capex in the past. As the travel & tourism sector has seen a sharp surge post covid, the Ebit margin for the hotel business of ITC was at a decade-high of 21 per cent in FY23.
“The proposed demerger of the Hotels Business is a testament to the Company’s commitment to creating sustained value for stakeholders. The creation of a hospitality-focused entity will engender the next horizon of growth and value creation by harnessing exciting opportunities in the Indian hospitality industry. In the proposed reorganisation, both ITC and the new entity will continue to benefit from institutional synergies,” said ITC Chairman and Managing Director Sanjiv Puri.
ITC, which competes with Taj, Leela and Oberoi hotels, also said that the demerger will also reinforce the sharper capital allocation strategy put in place in recent years, manifest in the pivot to the ‘asset-right’ strategy in the hotels business. ITC shares have been in high demand and recently it became the seventh Indian listed company to cross the `6 lakh crore market cap.
The reorganisation of ITC