NCLT Gives Approval for ITC Hotels Demerger

ITC is one of India’s foremost private sector companies and a diversified conglomerate with businesses spanning Fast Moving Consumer Goods, Hotels, Paperboards and Packaging, Agri Business, and Information Technology. The company is acknowledged as one of India’s most valuable business corporations with a gross revenue of Rs. 69,446 crores and a net profit of Rs. 20,422 crores (as of 31.03.2024). Over the last decade, ITC’s new consumer goods businesses have established a vibrant portfolio of 25+ world-class Indian brands that create and retain value in India. ITC’s world-class FMCG brands, including Aashirvaad, Sunfeast, Yippee!, Bingo!, B Natural, ITC Master Chef, Fabelle, Sunbean, Fiama, Engage, Vivel, Savlon, Classmate, Paperkraft, Mangaldeep, Aim and others, have garnered encouraging consumer franchises within a short period. While several of these brands are market leaders in their segments, others are making appreciable progress. ITC’s Well-being Out of Waste program (WOW), which comprehensively addresses the problem of solid waste management, of which plastic waste is a significant component, provides an end-to-end sustainable and scalable solution that has reached out to over 2.5 crores of citizens in the country.

Finally, NCLT has approved the demerger of ITC hotels:

The National Company Law Tribunal (NCLT) has approved ITC Limited’s division of the hotel industry. In August 2023, ITC announced the division of the hotel business. The ITC shareholders will also receive shares of the hotel business company following the demerger. This autonomous business will be able to make decisions faster. As stated in an exchange filing by ITC Limited, the hotel business’s separation was approved by the NCLT Kolkata Bench on Friday. The company stated that this demerger plan would go into effect following the delivery of a copy of the NCLT order to the West Bengal Registrar of Companies. That date will be communicated to the stock exchange at a later time.

Shares of ITC Hotels will be distributed to ITC shareholders:

ITC, a business that makes a lot of products out of cigarettes, will own 40% of ITC hotels under this demerger plan. ITC shareholders will receive a 60% ownership stake in ITC Hotels. Their present shareholding will be taken into consideration when making this decision. ITC shareholders will thereby own stock in ITC Hotels as well.

The CCI has already approved:

In June, the shareholders of ITC approved this demerger. The government, along with most creditors and shareholders, approved this proposal. Institutional Investor Advisory Services objected to the demerger proposal, so a vote was required. The Indian Competition Commission has already given its approval to this ITC proposal. ITC stated that over the past few years, our hotel business has grown stronger.

Today, ITC Ltd.’s stock is up 2%:

The demerger of ITC Limited’s hotel business is the reason for the recent upside move in the intraday segment, where the ITC stock is currently trading at Rs. 511 per share, nearly 2% higher than the high traded price of 514.95 per share.

Conclusion: The decision to approve the demerger of ITC hotels by NCLT is a wise one for ITC hotels as it will expedite and streamline the process.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.