ITC Board Greenlights Demerger of Hotels Business into New Entity

25 Jul 2023 , 12:22 PM

ITC’s shares declined by 4% to Rs 469.60 on the BSE after the board’s in-principle approval to demerge the Hotels business into a new entity.

The new entity will be listed through a scheme of arrangement, and ITC will retain about 40% stake, with the remaining 60% held by the new entity’s shareholders proportionate to their current shareholding in ITC.

A wholly-owned subsidiary named ITC Hotels Limited or another name approved by the Ministry of Corporate Affairs will be incorporated.

The detailed plan, including the scheme of arrangement, will be presented for approval in a board meeting scheduled for 14th August 2023.

Despite the recent dip, ITC has performed impressively, surging 42% in 2023, outperforming the S&P BSE Sensex, which grew by nearly 9% during the same period.

The Hotels Business of ITC has matured over the years and is expected to chart its independent growth path in the hospitality industry, leveraging ITC’s institutional strengths, brand equity, and goodwill.

The demerger is aimed at attracting suitable investors and strategic partners aligned with the hospitality industry’s growth prospects.

The move is expected to unlock value for ITC’s shareholders by providing them a direct stake in the new entity along with an independent market-driven valuation. The strategic decision reinforces ITC’s focus on capital allocation, exemplified by its pivot to an ‘asset-right’ strategy in the Hotels Business in recent years.

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