ITC demerger: ITC Hotels set for listing on January 29, 2025

ITC Ltd. has announced that its demerged hotel business, ITC Hotels Ltd., will be listed on the stock exchanges on January 29, 2025. This marks a significant move for the company after the approval from the National Stock Exchange (NSE) and BSE.

Share distribution and apportionment details

As per ITC’s notice, ITC Hotels has allotted 1,25,11,71,040 equity shares to ITC’s shareholders, recorded as of January 6, 2025, the record date. The distribution follows a ratio of 1 fully paid-up equity share of Re 1 each for every 10 shares of ITC. For example, if a shareholder held 1,000 ITC shares, they would receive 100 shares of ITC Hotels in return.

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The cost of acquisition for ITC shareholders is apportioned between ITC and ITC Hotels shares, with approximately 86.49 per cent of the cost being associated with ITC shares and the remaining 13.51 per cent with ITC Hotels shares.

Market expectations for ITC Hotels

According to Nuvama, the market capitalization of ITC Hotels post-demerger could be around Rs 42,000 crore. Based on this valuation, the likely price of ITC Hotels shares is estimated to be Rs 200. Nuvama has assigned a 20 per cent holdco discount to the hotel business, suggesting a revised target of Rs 571 for ITC’s stock (earlier Rs 585). The target incorporates the shareholding split, with ITC holding 39.88 per cent of ITC Hotels, and the remaining 60.12 per cent owned by the public.

Demerger implications on ITC's outlook

The demerger has caused some fluctuations in ITC’s stock price. Despite the correction, analysts maintain a positive outlook on the company, with most experts projecting stable performance ahead. Nuvama also remains optimistic about ITC’s growth prospects, with a reduced likelihood of a sharp increase in cigarette taxes during the upcoming budget.

ITC Hotels’ listing is a pivotal moment for the company, and with positive market sentiment, it could offer fresh growth opportunities. ITC's strategic move to split the business will allow investors to closely track the performance of each segment, with both the FMCG and hospitality sectors gaining increased focus.