ITC Chairman Puri says company's hotels business to provide stability to overall business

economictimes.indiatimes.com:

ITC Ltd chairman Sanjiv Puri said the company’s continued shareholding in the proposed demerged hotel business entity is to provide stability to the business, assure stakeholders and to allow ITC to leverage the institutional strengths to build its other businesses. Addressing shareholders in the company’s 112th annual general meeting virtually on Friday, Puri said the continued interest of ITC in the new entity (demerged hotel business) will provide “long term stability and instill a sense of assurance among partners, investors and employees, while enabling the new entity to leverage ITC’s institutional strengths including the timeless goodwill, world-class brands and governance processes.” Puri said for ITC, “the reorganisation will sharpen capital allocation, improve asset efficiency ratios, unlock value for its shareholders as well as enable leveraging of institutional synergies.

Thus, the proposed reorganisation will enable the business to architect the next horizon of growth as a pure play hotels entity with a strong balance sheet and healthy pipeline, especially when the industry is poised for robust growth.” Last month, ITC announced that the company’s board of directors has given its in-principle approval for the demerger of the hotels business. As per the proposed scheme of arrangement, ITC Ltd will hold a 40% stake in the new entity and the balance 60% will be owned directly by the company’s shareholders proportionate to their shareholding in ITC Ltd.

The proposed structure has been criticized by a section of shareholders and analysts. ITC’s hotels business last fiscal doubled segment revenue, while EBITDA (earnings before interest, taxes, depreciation and amortization) margins expanded by 930 basis points