ITC Hotels & ITC Co. To Part Ways

EE News Desk Jun 15, 2024

Following approval from the NCLT, the demerger received an overwhelming acceptance rate of 99.6 per cent from the company's shareholders

With a history spanning more than a century, ITC has stood as a prominent figure since its inception on 24 August, 1910. Initially established as a tobacco and cigarette manufacturer, the company has undergone significant evolution. Today, it encompasses a diverse range of sectors, including hotels, paperboards, FMCG, packaging, and agribusiness.

As per media reports, ITC Hotels, renowned for its concept of ‘responsible luxury’, has announced its demerger from its parent company, ITC Co., following approval from the National Company Law Tribunal (NCLT). Subsequently, an extraordinary general meeting of the company's shareholders was convened, where the demerger received an overwhelming acceptance rate of 99.6 per cent.

The ITC hotel business is set to be listed on the stock market within the current fiscal year. As part of the demerger process, shareholders will receive shares in the listed ITC hotel business at a ratio of 10:1, which means they will receive one share of the hotel business for every 10 company shares held. ITC will retain a 40 per cent stake in the hotel business, with the remaining 60 per cent distributed among its shareholders.

The rationale behind the decision

As the company’s managing director, Sanjiv Puri outlined, “An enterprise exists not only for today but for tomorrow.” The company is implementing its ‘Asset Right’ strategy, focused on owning and managing properties. It has delivered on its commitment by opening 25 hotels in the past 24 months, with 24 of them managed directly by their team.

Another 27 hotels are slated to open in the next 24 months, bolstering their existing portfolio of over 130 hotels. The ‘asset-right’ strategy emphasizes significant room additions through management contracts, facilitating expansion without major capital outlay.

In line with this strategy, ITC has introduced two new brands: ‘Mementos’ in the luxury lifestyle segment and ‘Storii’ in the Premium segment. These brands cater to the diverse preferences of modern travellers, offering a range of experiences.

The proposed restructuring will secure ITC's ongoing involvement in the hospitality sector while providing enduring stability and strategic backing to the new entity. Additionally, it will facilitate the utilization of synergies between ITC and the new hotel company, such as integrating brands like ITC MasterChef and Kitchens of India with the hotel business.

Furthermore, products from ITC's Agri Business Division can enhance and complement the offerings of ITC Hotels. Leveraging the strengths of the broader ITC enterprise, the hotel business is poised for sustainable growth in the hospitality industry.

Moreover, the demerger will unlock value for ITC's shareholders, offering them a direct stake in the new entity along with an independent market-driven valuation.