ITC’s hotel business demerger plan gets in-principle approval from board

By India Today Business Desk: FMCG giant ITC said its board has given in-principle approval for the demerger of its hotels business after a meeting on Monday.

As part of the demerger, the company will retain a stake of approximately 40 per cent, while the remaining shares will be held by the company’s shareholders in proportion to their existing shareholding.

In a stock exchange filing, the company said: “After due consideration, the board accorded its in-principle approval to the demerger of Hotels Business under a scheme of arrangement, with the company holding a stake of about 40 per cent in the new entity and the balance shareholding of about 60 per cent to be held directly by the company’s shareholders proportionate to their shareholding in the company.”

“The scheme of arrangement shall be placed for approval of the Board at its next meeting to be convened on August 14, 2023. Appropriate announcements and public disclosures in accordance with the SEBI Listing Regulations and other applicable laws will be made as necessary,” it said.

Industry analysts anticipate that the demerger could trigger a fresh rally for ITC’s stock, which has already witnessed a substantial surge in value this year.

The move comes as a strategic measure to address concerns over the hotels business’s high capital expenditure and comparatively lower returns, aiming to create an alternate structure for growth.

Over the last decade, the hotel business has accounted for less than 5 per cent of ITC’s total revenues and EBIT (earnings before interest and taxes) while contributing over 20 per cent of the company’s capital expenditure.

The demerger of ITC’s hotels business is expected to further streamline the company’s operations and enable it to focus on core business segments, creating the potential for enhanced value creation and growth prospects in the future.

Shares of ITC were down over 3 per cent at around 2:30 pm.