ITC, the Indian conglomerate, has announced plans to demerge its hotel business into a separate company. The demerger is expected to be completed by the end of the financial year 2023-24.
The demerger will create a standalone entity for ITC’s hotel business, which currently comprises over 120 hotels and 11,600 rooms across India. The new entity will be called ITC Hotels Ltd.
ITC will retain a 40% stake in ITC Hotels Ltd, while the remaining 60% will be distributed to ITC’s shareholders on a pro-rata basis.
The demerger is expected to unlock value for ITC’s shareholders and allow the hotel business to focus on its own growth trajectory. The Indian hospitality industry is expected to grow rapidly in the coming years, and the demerger will allow ITC Hotels Ltd to take full advantage of this growth.
The demerger has been met with mixed reactions from investors. Some investors have welcomed the move, as they believe it will allow the hotel business to grow more independently. However, other investors have expressed disappointment that ITC will retain a 40% stake in the new entity.
It remains to be seen how the demerger will impact ITC’s share price in the long term. However, the demerger is a significant move for ITC, and it will be interesting to see how the new entity performs in the years to come.
Here are some of the key reasons why ITC decided to demerge its hotel business:
- To unlock value for shareholders. The demerger will allow ITC’s shareholders to own a stake in a pure-play hotel company, which is expected to be more valuable than a stake in a conglomerate with a diverse range of businesses.
- To allow the hotel business to focus on its own growth trajectory. The demerger will allow the hotel business to operate independently from ITC’s other businesses, which will give it more flexibility and agility to grow.
- To attract strategic investors. The demerger will make it easier for ITC Hotels Ltd to attract strategic investors, who can provide the company with capital and expertise to help it grow.