ITC board approves demerger for hotel business

ITC on Monday said that its board has approved the demerger of its hotels business. During its meeting, the Board of Directors thoroughly assessed and deliberated on different potential arrangements for the Hotels Business.

After careful consideration, the Board granted its preliminary approval for the demerger of the Hotels Business through a scheme of arrangement.

The Board acknowledged that the Company’s Hotels Business has reached a state of maturity over time. As a result, it is now in an advantageous position to pursue its independent growth trajectory as a separate entity within the rapidly expanding hospitality industry.

It will enable the Hotels Business to have a more concentrated focus on its operations and adopt an optimal capital structure. Despite this independence, the Hotels Business will still be able to capitalize on ITC’s institutional strengths, brand reputation, and goodwill to further enhance its prospects.

As per the approved plan, the Company will retain a 40% stake in the new entity, while the remaining 60% will be directly held by the Company’s shareholders in proportion to their current shareholding. The scheme of arrangement will be presented for approval at the next Board meeting scheduled for 14th August 2023

The demerger will help the new entity in attracting appropriate investors and strategic partners/ collaborations whose investment strategies and risk profiles are aligned more sharply with the hospitality industry.

In addition, it will unlock the value of the Hotels Business for the company’s shareholders by providing them with a direct stake in the new entity along with an independent market-driven valuation thereof. This move by the Company also reinforces the sharper capital allocation strategy put in place in recent years, manifest in the pivot to an ‘asset-right’ strategy in the Hotels Business, the company said in its latest filing.

Furthermore, the Board has also approved the incorporation of a wholly-owned subsidiary of the company, to be named ITC Hotels Ltd or such other name as may be approved by the Ministry of Corporate Affairs.

Today, the company holds a portfolio of more than 120 hotels and 11,600 rooms spread across over 70 locations, the ITC Hotels group has earned a distinguished reputation for its exceptional properties, renowned cuisine brands, and unmatched service standards.

In FY23, the company’s total revenue reported Rs 77,168 Crore, with the Hotel business contributing Rs 2,585 Crore, representing approximately 3.35% of the total revenue.

At the time of writing this article, shares of ITC Ltd were trading at Rs 477.45, reflecting a decrease of 2.53% compared to the previous day’s closing price of Rs 489.85.

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