ITC Limited shares declined over 1 per cent on Monday following a special pre-open trading session held by stock exchanges for its price discovery in the wake of the demerger of ITC Hotels from the fast-moving consumer goods to technology conglomerate.
Today is the record date for the demerger, and both BSE and NSE organised a special session to discover the price post-demerger. The price was discovered at Rs 455 a share, down over 5 per cent from the previous close, and the stock was trading down 1.3 per cent at around Rs 449 on the BSE at noon.
ITC will issue 1 share of ITC Hotels for every 10 held in ITC to shareholders whose names appear in its record books as of Monday, January 6. Eventually, ITC will hold a 40 per cent stake in ITC Hotels, while 60 per cent will be held by shareholders.
The date for the listing of ITC Hotels is yet to be announced. The company has said that as per market regulator SEBI's master circular, the shares have to be listed within 60 days from the date of receipt of the NCLT (National Company Law Tribunal) order dated December 16, 2024. If similar company demergers in the past were to be compared, Jio Financial, which was demerged from Reliance Industries, took around 33 days to list, post its record date. Piramal Pharma, which was demerged from Piramal Enterprises, was listed around 45 days post the record date, pointed analysts at Nuvama Institutional Equities.
Until the official listing, ITC Hotels will be listed on the BSE and NSE Indices at a constant price. Investors won't be able to trade in this dummy version of the stock.
The analysts at Nuvama anticipate that the initial market price for ITC Hotels could range between Rs 150-175 a share.
ITC Hotels has a portfolio of more than 140 hotels and resorts, with 13,000 rooms across over 90 destinations, and is among the fastest-growing hospitality chains in the country, according to Anil Chadha, the managing director of ITC Hotels.
"We strive to drive the next horizon of growth as a pure-play hospitality company that will continuously expand its footprint with iconic destinations and delightful experiences," he said in an email sent to Club ITC members.
As per pro forma financials of ITC Hotels, it had a revenue of Rs 3,003 crore in the financial year ended March 2024, on EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 1,004 crore.
According to a report by SBI Securities, ITC Hotels targets to grow its portfolio to over 200 hotels and more than 18,000 keys by 2030.
"Given the attractive growth potential for the domestic tourism industry and strong company financials, ITC Hotels has a long runway to capture the growth opportunities in the tourism industry," the analysts at SBI Securities said.
Looking at the robust addition pipeline for ITC Hotels and strong industry tailwinds, the analysts believe ITC Hotels has the potential to outperform ITC over a medium to long-term period.
Shares of ITC Hotel's rival Indian Hotels, which operates the Taj Group of Hotels, were down 2.4 per cent at Rs 850.80 in a weak market on Monday. Buoyed by the strong travel demand, Indian Hotels shares have surged more than 90 per cent over the past 12 months, significantly outperforming the broader market.
ITC and ITC Hotels will execute a trademark license agreement under which ITC Hotels would be given a license to use the ITC trademark as well as the Bukhara, Dum Pukht and Dakshin trademarks. Identified assets like offices and staff housing pertaining to the hotels business will also be transferred to ITC Hotels.
As a part of the demerger, ITC Hotels will also get Rs 1,500 crore in cash and cash equivalents to cater to planned growth and contingency requirements, according to ITC.
