ITC shares gain nearly 1% after demerger of its hotels business into ITC Hotels effective today

Shares of the hotels-to-cigarette conglomerate ITC in Wednesday's trade (January 1) went higher by nearly 1 per cent to the day's high price of Rs 487.9. The company's shares are in focus after the demerger of the company's hotels business into ITC Hotels (ITCHL) comes into effect from today.. Last ahead of the demerger, the company's scrip settled over 1 per cent higher at Rs 483.65 apiece on the BSE.

Further in its exchange filing post market hours, ITC said that te entire shares held by it in companies including Fortune Park Hotels, Bay Islands Hotels Limited, Landbase India Limited, WelcomHotels (Lanka) Private Limited, Srinivasa Resorts Limited, International Travel House Limited, Gujarat Hotels Limited Associate and Maharaja Heritage Resorts Limited stand transferred to ITCHL effective from the said date: 

Fortune Park Hotels, Bay Islands Hotels Limited, Landbase India Limited, WelcomHotels (Lanka) Private Limited are the wholly owned subsidiaries of ITC.

Earlier before the company confirmed that after the National Company Law Tribunal (NCLT), Kolkata, has sanctioned the demerger of the company's hotels business effective December 16, it will get its shares listed within  60 days from date of receipt of NCLT Order.

Further, the stock of ITC shall trade ex-date in respect of the spin-off on January 6. 

Additionally as per the demerger scheme, ITC shareholders whose names will appear in the list of shareholders on January 6 i.e. the record date for detemining shareholders eligibility for being entitiled to the shares of ITC Hotels- will receive "one share of ITC Hotels for every 10 shares of ITC".

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 will continue with ITC.

"Overall, existing ITC shareholders will hold 100 per cent of ITC Hotels, i.e. about 60 per cent directly and a balance of about 40 per cent through their shareholding in ITC," it said.

Moreover, ITC will transfer "cash & cash equivalents of Rs 1,500 crore" to the demerged entity "to cater to planned growth & contingency requirements," said ITC in an investor presentation shared on Monday to bourses.

All conditions specified for the Scheme have been satisfied and ITC Hotels will file an application with Stock Exchanges/ SEBI for listing its shares, post allotment.

ITC and ITC Hotels will also execute a 'Trademarks License Agreement' under which ITC Hotels would be given a license to use the ITC trademark along with any copyrights as ‘Bukhara', ‘Dum Pukht' & ‘Dakshin' trademarks.

Moreover, an operating Service Agreement will be executed between ITC and ITC Hotels to operate and manage 'ITC Grand Central, Mumbai'.

Besides identified assets such as offices, managerial/ staff housing, etc pertaining to hotel business being transferred to ITC Hotels, it added.

The new entity will be with 'Zero Debt Balance Sheet" and generate cash to accelerate growth. It is also well positioned to execute "selective Inorganic Opportunities", it added.

ITC Hotels is a leading chain with over 140 hotels in 90 destinations with six distinct brands.

Analyst view on ITC

G. Chokkalingam- Founder - Equinomics is highly optimistic on ITC. The company's cigarettes segment would continue to do well as demand is highly price inelastic, he noted. 

Also another few days investors would be eligible for hotel stock and we believe that ITC Hotel would create a significant return in the short to medium term as outlook for hotel business looks robust, added the expert.

(With Inputs from Agencies)