ITC sets Jan 1 as effective date for hotel biz demerger; stk up 3% from low

ITC share price: The Hotels Business of ITC has matured over the years and is well poised to chart its own growth path and operate as a separate listed entity

ITC share price moved higher by 1 per cent to Rs 475.85 on the BSE in Tuesday's intraday trade, in an otherwise weak market, after the company set January 1, 2025 as the appointed date and the effective date for the demerger of the hotel business of the company.

 

The stock of the fast moving consumer goods (FMCG) company bounced back nearly 3 per cent from its intraday low of Rs 463.15.

 

At 01:25 PM, ITC was quoting nearly 1 per cent higher at Rs 474 as compared to a 1.2-per cent decline in the BSE Sensex.

 

ITC, in an exchange filing, said the National Company Law Tribunal (NCLT), Kolkata Bench, sanctioned the scheme of arrangement amongst ITC and ITC Hotels and their respective shareholders; copy of which was received by the company on Monday, December 16, 2024.

 

"All the conditions specified in Clause 28 of the Scheme have been fulfilled and satisfied. Accordingly, the Appointed Date and the Effective Date of the Scheme shall be the first day of the following month i.e. January 1, 2025," ITC said in its stock exchange filing.

 

Notably, the board of directors of ITC, at its meeting held on August 14, 2023, had approved a scheme of arrangement amongst ITC and ITC Hotels and their respective shareholders and creditors. The shareholders of ITC will receive 1 equity share of ITC Hotels for every 10 equity shares of ITC held by them.

 

ITC is a diversified company, engaged in various businesses including hotels. The Hotels Business of ITC includes ownership/ licensing/ management of several hotel properties and providing services including accommodation, dining, banqueting, etc.

 

The Hotels Business of ITC has matured over the years and is well poised to chart its own growth path and operate as a separate listed entity in the fast-growing hospitality industry whilst continuing to leverage ITC’s institutional strengths, strong brand equity and goodwill. Therefore, the Scheme is being proposed to segregate Hotels Business from remaining business of ITC and demerge it into the resulting company, ITC had stated as a rationale behind the demerger.

 

The confluence of favourable factors such as rising societal aspirations, strong macro-economic fundamentals of the country, the Government of India's thrust on the Travel & Tourism industry, and infrastructure creation along with rapid digitalisation present immense opportunities for the Hotels Business going forward, though distinct from the other businesses of the demerged company, ITC said.

 

In light of the distinctive profile of the hospitality industry, housing the Hotels Business in a separate listed entity would enable crafting of the next horizon of growth and sustained value creation for shareholders through sharper focus on the business anchored on a differentiated strategy aligned with industry specific market dynamics, the company said.

 

Financially, ITC's Hotels division delivered a strong performance in the September quarter (Q2) of the current financial year, with the segment revenue growing 12.1 per cent year-on-year (Y-o-Y), driven by robust growth in the food and beverage (F&B), retail, and wedding segments. Earnings before interest and tax (Ebit) increased by 20.2 per cent, with margins improving by 140 bps Y-o-Y to 20.8 per cent, despite a higher base.

 

Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins also expanded by 70 bps Y-o-Y, supported by increased revenue per available room (RevPAR), operating leverage, and effective cost management strategies.