ITC board gives in-principle nod for demerger of hotels business
ITC at Monday's meeting gave in-principle approval for the demerger of its hotels business, the company said in a stock exchange filing. Under the new scheme, the company would hold a stake of around 40% and the balance will be held by the company’s shareholders proportionate to their shareholding in the company, it said in a release.
«The scheme of arrangement shall be placed for approval of the Board at its next meeting to be convened on August 14, 2023. Appropriate announcements and public disclosures in accordance with the SEBI Listing Regulations and other applicable laws will be made as necessary,» it said.
In its release, ITC said that the board feels the hotels business is «well poised to chart its own growth path as a separate entity in the fastgrowing hospitality industry with sharper focus on the business and an optimal capital structure, whilst continuing to leverage ITC’s institutional strengths, brand equity and goodwill.» ITC currently has over 120 hotels and 11,600 keys across over 70 locations. «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.
In the proposed reorganization, both ITC and the new entity will continue to benefit from institutional synergies,» said Sanjiv Puri, Chairman of ITC Limited. Analysts say the demerger could trigger a fresh rally for the stock, which has soared nearly 50% this year.
The high capex on the hotels business and the resultant subpar returns have always been a concern for analysts and investors alike, which the company seeks to overcome by creating an alternate structure. The hotel business contributed less than 5% of ITC revenues and Ebit over
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