ITC Demerger: ITC Hotels will become an independent entity after January 1, 2025, giving shareholders the opportunity to retain full ownership. The demerger ratio has been kept at 1:10, and the shares are expected to be listed within the next 60 days. Analysts see the move as a strategic restructuring step that will unlock shareholder value in the hospitality sector.
ITC Demerger Details
Shares of Indian conglomerate ITC traded ex-demerger on Monday, January 6, after the separation of the hotel business.
1. Effective Date of Demerger: 1 January 2025
2. Record Date: 6 January 2025
3. Ownership Structure: ITC shareholders will get 100% ownership in ITC Hotels – 60% directly and 40% indirectly through ITC.
4. Shares Listing: Listing is likely to happen within the next 60 days after the NCLT order of December 16, 2024.
Demerger Ratio
The ratio of demerger is 1:10, in which one share of ITC Hotels will be given for every 10 shares of ITC. Shares of ITC Hotels will be listed separately, but the listing date has not been announced yet.
Index Impact
ITC Hotels will become the 51st constituent of Nifty 50 and 31st constituent of Sensex. After listing, live market capitalization will decide its index weight in the first 3 trading days.
Stock Price Adjustments
The price of ITC Hotels shares was decided on January 6 in a special price discovery session.
• ITC shares adjusted to ₹455.60 on NSE, down ₹26 or 5.4%.
• Shares closed at ₹455 on BSE, down ₹27 or 5.6%.
Pre-open session ran from 9:00 AM to 9:45 AM, and normal trading started at 10:00 AM.
Financial Strength of ITC Hotels
ITC Hotels will start operations with ₹1,500 crore in cash and cash equivalents. Zero-debt balance sheet and strong cash generation capabilities will support growth initiatives and contingencies.
Strategic Growth Plans
1. Owned Hotels:
• 20% inventory is less than 5 years old.
• Occupancy is at 75%, there is significant scope for RevPAR growth.
• Greenfield projects are underway in Bhubaneswar and Puri with expansion plans.
2. Managed Hotels Portfolio:
• 45 managed hotels in pipeline (4,000 keys).
• Plans to open one new hotel every month in the next 2 years.
• Target: 200+ hotels, 18,000+ keys in next 5 years, focusing on asset-light managed properties.
3. Growth Projections:
Target to increase management fees by 2.5x by FY30.
Insights of Analysts
B&K Securities
• Strategic focus is on asset-light model.
• ITC Hotels fair listing value is projected to be ₹145, based on 25x EV/EBITDA multiple on FY26E EBITDA.
• ITC cigarette revenues are expected to grow by 7.5% in Q3FY25.
Centrum Broking
• ITC Hotels valuation is estimated to be ₹36/share.
• Centrum’s target price for ITC is ₹583, which indicates a 28% upside.
Systematics
• ITC Hotels is ranked as India’s second-largest hospitality player.
• Valuation is around ₹150/share, based on 25x EV/EBITDA on FY26E.
Conclusion
The demerger of ITC Hotels is a significant strategic move that will unlock value for shareholders. With a zero-debt balance sheet and strong expansion plans, ITC Hotels is well positioned to capitalise on the growing demand in the hospitality sector.
