ITC Demerger: A New Chapter for ITC Hotels


ITC Limited, one of India's largest conglomerates, has announced the demerger of its hotel business into a separate entity, ITC Hotels. This strategic move, effective from January 1, 2025, marks a significant shift in the company’s structure and operational focus.

Shareholding and Financial Details

  • Share Allocation: Post-demerger, ITC Limited shareholders will directly hold a 60% stake in ITC Hotels. The remaining 40% will be retained by ITC Limited.
  • Capital Transfer: To support ITC Hotels’ growth initiatives, ITC Limited will transfer ₹1,500 crore to the new entity, ensuring smooth operations and funding for future expansions.

Key Dates for Investors

  • Record Date: January 6, 2025, has been set as the date to determine shareholders eligible for receiving ITC Hotels shares.
  • Listing Timeline: ITC Hotels’ shares are expected to be listed on the stock exchanges within 60 days of receiving approval from the National Company Law Tribunal (NCLT) on December 16, 2024.

Strategic Benefits of the Demerger

The separation of the hotel business is aimed at:

  • Enhancing ITC Limited’s Return on Capital Employed (ROCE) to approximately 18-20%.
  • Improving Return on Invested Capital (ROIC) beyond 10%, as the company shifts focus to high-yielding sectors.

Market Response

Following the NCLT's green light, ITC Limited’s stock witnessed a 2.2% rise, closing at ₹514.8. This increase reflects positive investor sentiment and confidence in the strategic decision.

Future Plans for ITC Hotels

The newly formed ITC Hotels will invest 8-10% of its annual revenue into ongoing projects and renovations, ensuring competitiveness and enhanced customer experiences. This focus on growth signals a strong commitment to capturing market share in the hospitality sector.

Conclusion

The demerger of ITC’s hotel business into a standalone entity is a pivotal step that allows both ITC Limited and ITC Hotels to pursue distinct growth paths. While ITC Limited will concentrate on optimizing its core business areas, ITC Hotels is poised to establish itself as a leader in the hospitality industry.

As the market closely monitors these developments, the success of the demerger will depend on how well each entity capitalizes on its new opportunities and challenges.

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