The ITC Ltd. board has granted preliminary approval for the demerger of its hotels business, establishing a wholly owned subsidiary named ITC Hotels. The proposed scheme of arrangement will be presented for approval at the next meeting of the ITC Board scheduled for August 14, 2023.
The ITC Hotels group currently boasts an impressive portfolio of over 120 hotels and 11,600 keys spread across 70+ locations. This move allows for a sharper focus on the business and an optimal capital structure, while still capitalizing on ITC’s institutional strengths, brand equity, and goodwill.
The ITC conglomerate believes that the demerger will unlock value for its shareholders by providing them with a direct stake in the new entity, along with an independent market-driven valuation of the same.
It is expected that the creation of a dedicated hospitality-focused entity will create new growth opportunities in the Indian hospitality industry and drive further value creation.
According to Sanjiv Puri, Chairman of ITC Ltd, both ITC and the new entity will continue to benefit from institutional synergies in the proposed reorganization.
This year, the ITC stock price has experienced a significant surge, with a remarkable 42% increase in 2023 alone, and a magnificent rise of 57% during last 12 months.
However, the demerger news made the stock to lower by 3.9% to close at Rs.471.35 on NSE.