TMS Ep485: ITC hotel demerger, Russian crude oil, textile stocks, demerger

Cigarettes-to-hotels conglomerate ITC has decided to hive off its hotels business into a separate entity. ITC management has kept 40% ownership with itself, and 60% will go to existing shareholders. So what does the demerger of the hotels business mean for the new entity? And what does it mean for the diversified conglomerate? Also, how will the move affect investors? 

FMCG majors like ITC had a tough time last year when Russian tanks rolled into Ukraine. Prices of commodities like crude, sunflower oil and palm oil had soared. But there was a blessing in disguise too. Post western sanctions, India latched on to discounted Russian crude. But, off late, the discount has shrunk. And with Russian crude breaching the G7 price cap of $60 per barrel, there is a risk of Moscow’s oil losing its sheen for Indian refiners. So, are the days of discounted Russian crude over for India? 

While on one hand, India opened its door for discounted Russian crude, it imposed an 11% import duty on cotton. Domestic prices of cotton have surged over 70%. Domestic exports have crashed to a 19-year-low as several mills faced cash crunch. And stocks of textile companies have displayed a mixed trend so far this year. So, will the situation improve going ahead? Or should investors stay wary of the textile sector? 

Staying with the markets theme, stocks of tobacco giant ITC rebounded about 2 per cent on Wednesday after three days of losing streak. Investors, it seems, have finally seen some positives in the company’s decision to demerge the hospitality business. Reliance too did something similar a few days ago when it demerged its financial arm. But what is a demerger? And why do companies do it? Listen to this episode of the podcast for answers.