Why ITC chose not to demerge hotels in Mukesh Ambani's buy 1 get 1 style

economictimes.indiatimes.com:

RIL shares ahead of the demerger, shares of Street favourite ITC dropped over 7% in just 2 days following the announcement of the spin-off. After Ambani's 'buy 1 get 1 offer' for shareholders of Reliance Industries (demerger ratio of 1:1), investors were expecting ITC also to opt for a 100% vertical split. But ITC management chose to keep 40% ownership with itself and give away the remaining 60% to existing shareholders.

This demerger ratio placed the stock under selling pressure as it restricts 100% value unlocking in the hotels business. ITC is yet to declare the share swap ratio for the hotels subsidiary and has also not declared why it chose to keep 40% stake in it but it did mention that the demerger will help the new entity in attracting appropriate investors and strategic partners whose investment strategies and risk profiles are aligned more sharply with the hospitality industry. This statement has led to speculations in the market that ITC may be on the look for a new strategic investor in the hotels entity.

Calculations show that the British American Tobacco (BAT) would end up owning about 17.4% stake in ITC Hotels. The world's largest tobacco company, which owns 29% stake in ITC, may have little interest in owning a hospitality stock in its portfolio. In case BAT chooses to exit at some point post-listing of ITC Hotels, it could create a supply overhang on the new stock and even throw it open to hostile takeover bids.

Analysts are not ruling out the possibility of ITC buying BAT’s stake in hotels to take its ownership above 51% mark. «40% holding by ITC in the new entity can aid in securing management control in case if any large shareholder intends to exit,» said Nomura analyst Mihir P Shah. The new ownership