ITC to demerge Rs 2,600 crore hotels business after 19 years

Sanjiv Puri-led ITC, which was established 19 years ago, has finally proposed to demerge its hotel business into a separate company. The conglomerate’s board approved the demerger, with ITC holding 40% of the hotel company and the remaining 60% with shareholders of ITC in proportion.

ITC Hotels was originally established as a separate company in the 1980s, and later merged with the mother company ITC in August 2004. During the company’s AGM in 2021, Puri first mentioned the possibility of restructuring the hotel business. The details of the proposed reorganization, including the scheme of arrangement, will be presented for approval by the board at a meeting scheduled for August 14, 2023.

In addition, the board approved the creation of a wholly owned subsidiary of the company called ITC Hotels. The hotels division experienced a significant turnaround in 2022-23, with segment revenue reaching Rs 2,585 crore compared to Rs 1,285 crore in the previous year, reflecting a growth of 101%. The segment’s profit in 2022-23 was Rs 542 crore, one of the highest in its history, compared to a loss of Rs 183 crore in the previous year. The hotels division currently operates over 120 hotels with 11,600 keys.

ITC stated that the board of directors evaluated and discussed various alternative structures for the hotels business in order to achieve future growth and create value for all stakeholders.

During Monday’s trading session, ITC briefly became the most valued FMCG company in India, surpassing HUL. However, after the announcement of the demerger of its hotel business, ITC’s stock fell by almost 4%. Market observers attributed this decline to a “buy on rumour, sell on news” strategy. At the end of Monday’s session, HUL had a market capitalization of Rs 6.11 lakh crore, making it the fifth most valued company in India, followed by ITC with Rs 6.10 lakh crore, according to BSE data.