ITC expects to demerge hotel business in 15 months

Diversified entity ITC Ltd expects the public listing of its hotel business, proposed to be demerged into a separate arm, to take place in the next 15 months, according to an investor presentation by the company.

ITC's board in its meeting held on Monday approved the demerger of ITC Hotels Ltd from the company.

Under the scheme of demerger, ITC Hotels will issue equity shares directly to the shareholders of ITC in a manner that about 60 per cent stake is held directly by ITC shareholders, proportionate to their shareholding in ITC and the remaining about 40 per cent stake to continue with ITC, it said.

"For every ten ordinary shares of the face and paid-up value of Re 1 each held in the demerged company (ITC Ltd), one equity share of the face and paid-up value of Re 1 in the resulting company (ITC Hotels)" will be issued, it added.

It further said, "100 per cent economic interest will continue to be held by ITC shareholders in the hotel business".

The scheme of demerger is subject to necessary approval from shareholders, creditors, stock exchanges, SEBI, NCLT and other regulatory authorities, as required, ITC said, adding the indicative timeline for listing of ITC Hotels is 15 months, around November 2024.

On the rationale for retaining a 40 per cent stake in ITC Hotels, the company said the new entity will operate as an independent hospitality-focused listed entity, and it will continue to leverage ITC's institutional strengths, strong brand equity and goodwill.

It will create a strong foundation for accelerating growth and sustained value creation by providing long-term stability and strategic support to ITC Hotels, while also instilling a sense of assurance among stakeholders, including partners and employees.

Under the demerger, properties, assets, investments, employees, liabilities and contracts forming part of the hotel business will be transferred along with intellectual property/trademarks exclusively used in the hotel business.

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, it added.

Investments in hospitality entities forming part of the hotels business -- Bay Islands Hotels Ltd, Fortune Park Hotels Ltd, Landbase India Ltd, Srinivasa Resorts Ltd, WelcomHotels Lanka Pvt Ltd, Gujarat Hotels Ltd, International Travel House Ltd and Maharaja Heritage Resorts Ltd -- will be transferred to ITC Hotels.

However, financial investments in EIH Ltd and HLV Ltd and non-operational Logix Developers Pvt Ltd are not proposed to be transferred, it added.

Employees engaged in or related to the hotels business will also be transferred to ITC Hotels, but the employment terms will be "no less favourable than their existing terms of employment with the company", ITC said.

The transferred employees will be deemed to become employees of ITC Hotels without any break or interruption in service, it added. ITC said its hotels business clocked its best-ever Q1 at Rs 600 crore. "Resulting company is proposed to be listed on the BSE and the National Stock Exchange of India," it said.

Earlier on July 24, the Kolkata-headquartered company said its board accorded its "in-principle approval" to the demerger of the hotels business under a scheme of arrangement. This was to be placed for approval by the board at its next meeting to be convened on August 14, 2023.

Launched in 1975, ITC Hotels, India's premier chain of luxury hotels, has 120 hotels and 11,600 keys across 70-plus locations. As per data available on BSE, in the year ended March 31, 2023, ITC's hotel business had clocked a revenue of Rs 2,689.12 crore, up from Rs 1,347.66 crore in FY22.

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