FMCG giant ITC announces Jan 1 as the effective date for hotel business demerger

ITC Ltd. has officially announced that January 1, 2025, will be the appointed and effective date for the demerger of its hotels business. The company informed the exchanges of this update on Tuesday, December 17, as part of its strategic restructuring plan.

NCLT and shareholder approval secured

The Kolkata Bench of the National Company Law Tribunal (NCLT) sanctioned the scheme of arrangement between ITC Ltd., ITC Hotels Ltd., and their respective shareholders in October 2024. Earlier, in June 2024, shareholders overwhelmingly approved the demerger, with 99.6 per cent of public institutions and 98.4 per cent of public non-institutions voting in favour of the proposal.

Structure of the demerger

Post-demerger, ITC Ltd. will retain a 40 per cent stake in the newly formed ITC Hotels entity, while the remaining 60 per cent will be directly held by ITC’s shareholders. The company emphasized that retaining a significant 40 per cent holding, rather than opting for a complete vertical split, will enable ITC to provide strategic support and operational synergies to its hospitality business.

Additionally, ITC will charge a nominal royalty fee to ITC Hotels Ltd. for the usage of its brand name.

Consolidation of stakes in hospitality chains

In a strategic move earlier this year, ITC consolidated its holdings in prominent rival hospitality chains, Oberoi Hotels (EIH) and Leela Hotels (HLV). ITC holds 13.69 per cent in EIH and 7.58 per cent in HLV, while its wholly-owned subsidiary, Russell Credit Ltd. (RCL), owns 2.44 per cent and 0.53 per cent, respectively. These shares will now be transferred to ITC as part of the consolidation process.

Market reaction and outlook

Following the announcement, shares of ITC recovered from the session's lows and traded 0.6 per cent higher at Rs 473. The stock remains 10 per cent shy of its recent peak of Rs 528, indicating investor optimism surrounding the restructuring initiative.

Strategic focus on growth

ITC’s decision to demerge its hotels business is aimed at unlocking value for shareholders while allowing ITC Hotels Ltd. to pursue independent growth opportunities. With this demerger, ITC intends to strengthen its position across core verticals while supporting its hospitality arm with strategic oversight and synergies.