ITC Hotels Demerger: Record Date Announced : ITC Limited has announced setting January 6, 2025 as the record date for the de-merger of its hotel business, ITC Hotels Limited (ITCHL). This de-merger will be considered effective from January 1, 2025. The objective of this decision is to develop the hotel business of ITC Group as a separate entity. The company hopes that with this decision it will be able to focus better on business and the capital structure will also improve.
Importance and process of de-merger
ITC had announced plans to spin off its hotel business in August 2023. Under the de-merger plan, 40% shareholding in ITC Hotels will remain with ITC Limited, while the remaining 60% stake will be allotted to the existing shareholders of ITC as per their share holding ratio. The company has announced this decision after getting the approval of the National Company Law Tribunal (NCLT), shareholders and Competition Commission of India (CCI). The Kolkata bench of NCLT had approved the de-merger plan in October 2023. The company has completed the necessary formalities after receiving the copy of the NCLT order on December 16.
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Beginning of a new era for ITC Hotels
Announcing this decision, ITC has made it clear that the hotel business is now ready to move forward independently on the path of its development. The objective behind this decision is to allow the hotel business to function as an independent entity, so that it can remain more focused and compete better with the competition. After the implementation of the de-merger, ITC Hotels will be able to formulate new strategies for its growth. This will give the hotel business an opportunity to manage its revenue and operations more efficiently.
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Past Performance of ITC Hotels
ITC Hotels had registered an annual growth of 12.1% in its revenue during the quarter ending September 2023. Additionally, EBITDA margin also increased by 70 basis points, which the company attributes to improved operational leverage and strategic cost management, along with improvement in ‘available room on revenue’ (RevPAR). After the announcement of this de-merger, the performance of ITC in the stock market has also been better. At the end of September, ITC shares had reached Rs 528.55, which was a 52-week high. However, its shares remained stable at Rs 470.60 recently, and its returns in the last one year have been less than 3%.
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What is special for shareholders?
As per the record date fixed for January 6, 2025, the stocks of ITC Hotels will be allotted only to those shareholders who will be the shareholders of ITC till that date. This de-merger could be a big opportunity for value creation for shareholders, as it would allow ITC Hotels to implement its differentiated strategy and perform better in the market. The de-merger of ITC Hotels is being considered an important step for the Indian hotel industry. As an independent entity, ITC Hotels will have a better opportunity to implement its strategies and expand into domestic and international markets. The decision of de-merger is being generally viewed positively in the market.
