Kolkata-based conglomerate ITC Ltd has announced January 6, 2025, as the record date for the much-anticipated demerger of its hotels business into a standalone entity, ITC Hotels Limited (ITCHL). The separation is set to take effect on January 1, 2025, following approvals from the National Company Law Tribunal (NCLT) and other regulatory bodies.
Key Details of the Demerger
- Effective Date: January 1, 2025.
- Record Date: January 6, 2025.
- Shareholder Entitlement: Shareholders will receive 1 share of ITC Hotels for every 10 shares of ITC held.
The decision aims to unlock value for shareholders by enabling the hotel business to operate as an independent entity, focused solely on the hospitality sector. ITC will retain a 40% stake in the new entity, while 60% of ITC Hotels’ equity will be distributed among existing ITC shareholders in proportion to their holdings.
Approvals and Milestones
The demerger process has cleared several key hurdles:
- Shareholder Approval: In June 2024, the proposal was overwhelmingly approved, with 99.6% of public institutions and 98.4% of public non-institutions voting in favor.
- NCLT Clearance: The Kolkata Bench of the NCLT sanctioned the demerger in October 2024, and ITC received a certified copy of the order on December 16, 2024.
- CCI Approval: The Competition Commission of India approved the scheme in May 2024.
Performance of ITC’s Hotels Business
ITC’s hotel segment has demonstrated strong growth in recent quarters, driven by improved operational efficiencies and demand from leisure, retail, and MICE (Meetings, Incentives, Conferences, and Exhibitions) segments.
- Revenue Growth: 12.1% year-on-year (YoY) growth in the September 2024 quarter.
- EBITDA Margin Expansion: Improved by 70 basis points (bps) YoY.
- RevPAR: Higher Revenue Per Available Room has bolstered profitability.
Strategic Rationale Behind Demerger
ITC’s hotels business, which has matured significantly, is now poised to operate independently. The demerger enables ITC Hotels to focus on a dedicated growth strategy and an optimized capital structure, while ITC Ltd can concentrate on its core businesses such as FMCG, tobacco, and agri-products.
Post-Demerger Dynamics:
- ITC Hotels will operate independently but will pay a royalty to ITC for brand usage.
- ITC is consolidating its holdings in hospitality rivals such as EIH (Oberoi Group) and HLV (Leela Group) to strengthen its position in the sector.
The move signifies ITC’s commitment to fostering long-term growth for its businesses while addressing the unique dynamics of the hospitality industry.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice.
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