ITC board gives in-principle nod to demerger of hotel business: 10 things to know

ITC said on Monday that its board gave in-principle approval to a proposal to demerge its hotel business. The cigarettes-to-hotels conglomerate said it will hold a 40 per cent stake in the newly formed entity, to be named ITC Hotels, with the remaining 60 per cent held by shareholders of ITC. 

Here are 10 things to know: 

1. The company said its hotels business has emerged stronger and delivered robust growth and margin expansion in the financial year 2022-23, and is well poised to sustain the growth momentum.

2. “The proposed demerger of the Hotels Business is testament to the Company’s commitment to creating sustained value for stakeholders. Creation of a hospitality focused entity will engender the next horizon of growth and value creation by harnessing the exciting opportunities in the Indian hospitality industry," said Sanjiv Puri, Chairman, ITC.

3. The scheme is subject to final approval by the board during its meeting on August 14.

4. In the proposed reorganisation, both ITC and the new entity will continue to benefit from institutional synergies, he added.  

5. ITC said its hotels business has matured over the years and is well poised to chart its own growth path as a separate entity in the fastgrowing hospitality industry with a sharper focus on the business and an optimal capital structure, whilst continuing to leverage its institutional strengths, brand equity and goodwill. 

6. Over the last two decades or so, ITC’s hotels business has scaled up significantly in terms of room inventory, revenue and profits, and has established itself as a  pioneer in green hoteliering anchored on its ‘responsible luxury’ ethos. Today, with over 120 hotels and 11,600 keys across 70+ locations, the ITC Hotels group is renowned for its world-class properties, iconic cuisine brands and unparalleled service standards," it said. 

7. After two years of pandemic-led disruptions, the Indian hospitality industry has bounced back strongly with significant improvement in room rate and occupancy, ITC added. 

8. "To progress the proposed reorganisation as aforesaid, the Board has also approved incorporation of a wholly owned subsidiary of the Company, to be named ITC Hotels Limited or such other name as may be approved by the Ministry of Corporate Affairs," it added. 

9. ITC shares fell sharply after the announcement, declining by as much as Rs 15.5 or 3.2 per cent to Rs 474.4 apiece on BSE.

10. The ITC stock hit a record high earlier in the day, adding to a series of unprecedented levels over the past few months. As of July 23, ITC shares have grown 43.4 per cent so far in 2023, a period in which the benchmark Nifty index has risen 8.4 per cent. 

(With inputs from agencies)

Catch latest stock market updates here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.