ITC Limited has already announced the share ratio for the demerger. For 1 share of ITC Hotels, 10 shares of ITC Limited are needed. That means, investors holding 10 shares of ITC Limited will get 1 share of ITC Hotels.
Importance of Demerger for ITC Limited and Shareholders
The demerger of ITC Hotels will unlock value for ITC Limited.
Sum of the parts (SOTP) valuation: ITC Hotels currently accounts for 4% of ITC Limited’s total value. After listing, shareholders will get a direct investment opportunity in the hotel business. ITC Limited is known for its strong dividend record and diverse businesses.
Dividend Yield: 2.90% Market Capitalization: ₹5.93 lakh crores (as of 28 November 2024).
ITC Limited Share Performance
On Thursday, ITC Limited’s shares were trading in the red.
Share Price: ₹474.90 per share (as of 28 November 2024).
Jefferies Outlook for ITC Hotels
Jefferies has given a positive opinion on ITC Hotels’ growth and strategies.
The listing of ITC Hotels after the demerger will reveal its growth potential. The company focuses on the premium segment, meeting industry demand. Expansion through greenfield projects and management contracts is expected to provide better returns for investors.
#BrokerageRadar | Jefferies on ITC Hotels: ITC is going to demerge its Hotel business in Q4FY25@Jefferies pic.twitter.com/2NyI0gQUqz
— ET NOW (@ETNOWlive) November 28, 2024
Financial Status of ITC Hotels
ITC Hotels is expected to achieve revenue of ₹3,381 crores and a profit of ₹537 crores in FY24-25. The company’s market value is approximately ₹25,000 crores, slightly over 4% of ITC’s market cap, making it the second-largest company after Indian Hotels.
Net Cash: ₹1,000-1,500 crores. ITC Hotels has expanded through greenfield commissioning and management contracts in recent years. Jefferies has ranked ITC Hotels as the second leading player in the Indian hotel sector.
| ITC Hotels | FY24 | FY25E |
| Revenue (₹ Crore) | 3103.0 | 3381.0 |
| PBT (₹ Crore) | 765.0 | 716.0 |
| PBT Margin (%) | 24.6 | 21.0 |
| PAT (₹ Crore) | 574.0 | 537.0 |
| Assets (₹ Crore) | 8765.2 | 10908.7 |
| Liabilities (₹ Crore) | 1159.1 | 1322.2 |
| Net Worth (₹ Crore) | 7606.1 | 9586.5 |
| Outstanding Shares (Crore) | 207.8 | 207.8 |
| EPS (₹/share) | 2.8 | 2.6 |
| PE (x) | 45.8 | 45.0 |
Key Balance Sheet Numbers for ITC and ITC Hotels
| Financials | ITC – Pre Scheme | ITC Hotels – Post Scheme | Share of ITC Hotels (%) |
| Assets (₹ Crore) | 82,262 | 10,909 | 13.3 |
| Equity (Crore) | 1,243 | 208 | – |
| Liabilities (₹ Crore) | 14,668 | 1,322 | 9.0 |
| Net Worth (₹ Crore) | 66,686 | 9,586 | 14.4 |
| Reserves (₹ Crore) | 65,443 | 9,379 | 14.3 |
Under its asset-light strategy, the company has added 30 hotels to its portfolio over the past 24 months. It signed 15 new assets in the first half of the current fiscal year and plans to open 28 hotels by September 2026.
Also Read: Tata Group Stock Upside, Partners with Suzuki for EV Development in 2024
ITC Hotels Shares for ITC Shareholders
Under this demerger scheme, the company ITC will hold a 40% stake in ITC Hotels. The remaining 60% stake in ITC Hotels will be given to ITC shareholders. This decision will be made according to their current shareholding ratio, meaning ITC shareholders will also have a stake in ITC Hotels.
The FMCG company ITC, which manufactures products ranging from cigarettes to daily-use items, will soon announce the demerger of its hotel business. Earlier this month, the company informed exchanges that it had received approval from the Kolkata branch of the National Company Law Tribunal (NCLT) for the demerger.
According to the company, all approvals for the demerger have been received, and the company is currently waiting for a certified copy from the NCLT to file with the Registrar of Companies (ROC).
After that, both companies’ boards will set a record date for the demerger. Shareholders will receive one share of ITC Hotels for every ten shares of ITC they hold.
For more Details: Proposed Demerger of Hotels Business on ITC official Portal.
Scheme of Arrangement
According to the scheme of arrangement, the new company ITC Hotels will have equity of 207.84 crore shares with a face value of ₹1 each, amounting to an equity capital of ₹207.84 crores. ITC will hold a 40% stake in the new entity, which includes BAT, holding a 15.32% stake.
As per ITC, the assets of ITC Hotels account for 13.3% of the total assets of ITC, and its net worth is 14.4% of the parent company.
Also Read: Coal India Share Price Target 2025 with 6.26% High Dividend
Conclusion
The demerger and listing of ITC Hotels is a significant opportunity for investors. With strong financial backing, a solid balance sheet, and steps towards the premium market, it stands as a strong player in the Indian hotel industry.
Also Read:
Asian Paints Share Down Reason
Shareholders may see long-term benefits after this demerger. This move by ITC Limited can be a game changer for the company and investors.
Disclaimer: Investing in the stock market is subject to market risks. Please conduct your own research or consult your financial advisor before making any investment decisions. The information in this article is aimed at raising awareness and increasing knowledge among general public, investors, and traders.