Explainer: What ITC hotels demerger means for investors
Last year, cigarette-to-hotels conglomerate ITC Ltd announced to demerge its hotel business into an independent entity — ITC Hotels. According to the demerger plan, January 6, 2025, was the ‘record date’ to finalise the eligible ITC shareholders who would receive shares of ITC Hotels once it gets listed on the NSE and BSE. This follows the long-awaited demerger of ITC Hotels, which came into effect on Wednesday, January 1.
What is a demerger?
A demerger happens when a company splits its businesses into two or more separate companies of its own. According to experts, this is done to, focus on the core business, streamline operations and unlock more value for new companies incorporated. When a demerger takes place, the shareholders of the original company receive shares in the newly formed companies, proportionately to their holdings in the parent company.
What does ITC demerger mean for investors?
With the demerger, ITC Ltd shareholders will get a direct stake in the new entity. As part of the demerger deal, ITC investors, whose name appeared on the record books today, would get one share of the ITC Hotels for every 10 held of the ITC. Overall, the ITC will retain a 40 per cent stake in the newly demerged entity (ITC Hotels), while the remaining 60 per cent will be proportionately distributed among existing shareholders based on their stake in the ITC. The ITC shareholders will get a direct stake in the new hotels entity.
When ITC Hotels will be listed?
ITC Hotels is expected to be listed on the stock exchange around mid-February, 2025.
Hotel brands under ITC
ITC operates under six distinct brands namely — ITC Hotels, WelcomHotels, Fortune Hotels, WelcomHeritage Hotels, Momentos, Storii — with more than 130 hotels in over 80 plus destinations across the country.
Why is ITC demerging its hotel business?
According to the sources, the demerger will enable sharper focus and tailored hospitality strategies for the brand. Over the years, ITC's hotels segment has grown significantly and is now ready to thrive as an independent company. The move will allow it to grow faster and also, creating a standalone hotel brand would allow the company to have aggressive focus on the hospitality market. This sets the stage for new opportunities and long-term value creation. The new entity can access targeted investors and can get funding more easily.
Branded hotel chains in India
India’s hospitality sector is a competitive space. Leading players include, Marriott International, Indian hotels Company Ltd, Radisson Hotels, ITC Hotels, Accor Group, Hyatt Hotels, Lemon Tree Hotels etc.
About ITC Limited
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was renamed as the India Tobacco Company Limited in 1970 and later to ITC Limited in 1974. In 2001 the company was renamed ITC Limited. Today, ITC is one of India's leading private sector companies with businesses spanning — fast moving consumer goods (FMCG), cigarettes, paperboards and packaging, agri business and information technology. Headquartered in Kolkata, ITC boasts of brands including Aashirvaad, Sunfeast, Yippee!, Bingo!, Sunbean, Fiama, Engage, Vivel, Savlon Classmate and more!
