ITC Hotels Demerger: 125.11 Crore ITC Hotels Shares allotted to Shareholders

For decades, ITC Hotels has been a leading luxury player in the Indian hospitality market with an extensive portfolio of premium hotels under corporate brands across luxury collections. The recent announcement of ITC demerger has garnered much interest from investors and market participants to explore the potential of driving new growth for ITC and ITC Hotels. The demerger proposal is anticipated to unlock customer value, optimize capital and let ITC Hotels grow rapidly as an independent organization.

As part of this strategic agenda, ITC Hotels’ share price is now a part of polite conversation, with market focus on how the ITC split stock and ITC demerger ratio will pan out. Check out Paisa Invest for more updates. 

What is ITC Hotels?

ITC Hotels is a hospitality brand known for their luxury and business hotels across India. As a collection of hotels, their hotels offer various experiences for leisure or business travel. The hotel brand is known for providing world-class suitable hospitality services, premium accommodations and enhanced guest experiences. Below are some of ITC Hotels’ iconic properties:

• ITC Maurya (New Delhi): The luxury hotel is known for its sophisticated interiors and impeccable service. 
• ITC Grand Chola (Chennai): The grand hotel incorporates an experience of both luxury and heritage.
• ITC Gardenia (Bengaluru): The iconic luxury hotel prides itself on sustainability and eco-friendliness.
• WelcomHotels: business and leisure hotels in major cities. 
• Fortune Hotels: mid-segment hotels for business and leisure travel. 
• WelcomHeritage Hotels: palatial and heritage hotels if you are looking for something more culturally oriented. 
• Momentos by ITC Hotels: premium hotels for boutique experiences, ie. Momentos Udaipur, and Momentos Goa. 
• Storii by ITC Hotels: boutique properties for unique experiences, ie. Stori Coorg, and Storii Goa.

About ITC Limited

ITC Limited, established in 1910, is one of the most diversified and successful private-sector companies. Its businesses encompass multiple industries including Fast-Moving Consumer Goods (FMCG), Cigarettes, Paperboards & Packaging, Agri Business & Information Technology. It has made its presence felt in a variety of industries.

However, this article will talk about the demerger of ITC hotel division. The hotel division, which is now a separate company, was strategically spun off from ITC Hotels and a separate company formed. The hotel division was spun off into its own separate entity in which ITC limited aims to build a well-run hotel division while keeping the other divisions working on growth in the other spaces. The goal of having a stand-alone hotel division will increase market share and investment in the growing hospitality industry.

The ITC Hotels Demerger: Breaking Down the Process

The demerger of ITC is meant to create a more separated and sharper hospitality company. ITC is separating its hotel division from the other three core divisions (FMCG and Paper) to create value and increased growth for its hotel division.

What is the ITC Demerger Ratios?

• The ITC demerger ratios means how current shareholders of ITC will receive shares in the new hotel company.
• Shareholders will be entitled to receive shares in the hotel company based on the number of ITC shares they own, and are entitled to an equivalent value of equity in the new hotel company.

How Will the ITC Stock Split Work?

• The ITC stock split, shareholders will be sent shares in ITC and just like the ITC demerger, shareholders will receive shares in the new hotel company.
• The ITC split will give the investor the opportunity to get exposure to a very core value company ITC, and then a very independent new hotel division.

Why Is ITC Demerging Its Hotel Business?

Mature Hotels Business Ready for Growth

• ITC already has a strong luxury position in the hotel segment, with properties at scale across its luxury portfolio in the country. 
• As part of the demerger ITC’s hotel business will now be a standalone entity and be unencumbered by ITC’s corporate structure and permitted to focus exclusively on the hospitality market. 
• With the additional focus solely on hotels, ITC Hotels will be able to pursue growth projects, grow its property portfolio, and innovate in ways it has not considered previously in the hospitality space.
  

Focused Hotel Entity for Future Growth

• Making ITC Hotels a separate hotel company allows ITC Hotels to plan more clearly and it will help them grow at a quicker and more effective pace.
• The new company would mean establishing market share, capitalizing on key cities, and planning a growth strategy across multiple vertical opportunities.

Optimized Capital for Expansion

• An independent hotel company allows for access to target investors who are committed to the hospitality sector.
• The demerger provides ITC Hotels with the flexibility to raise money more efficiently and invest in future growth plans.
  

What Does This Mean for ITC Shareholders?

• Enhanced Value: Shareholders will benefit from receiving shares in both ITC and the new hotel company and will be able to share in the growth of both businesses.
• ITC Hotels Share Price Impact: The ITC Hotels share price is likely to move according to how the market views the hotel division as a standalone entity. Investors will be looking for movement in this price to value ITC’s long-term value post-demerger.

ITC Hotels and Its Impact on the Indian Hospitality Industry

The ITC Hotels demerger will change the landscape of the Indian hospitality sector by allowing ITC Hotels to sharply concentrate its focus on the hospitality sector and grow its competitive advantage accordingly. Through both the tourism sector and the fortune of hotel chains in the sector, domestic and international overnight trips will continue to grow, which would continue to allow ITC Hotels to capture a greater market share in the growing sector.

Branded Hotel Chains and Their Market Share in India

Indians are looking for trusted and quality branded hotels at an increasing rate. ITC Hotels is well positioned with WelcomHeritage and Fortune Hotels for different segments to meet this demand.

As a standalone company, ITC Hotels can focus on gaining competitiveness and growth in the luxury and mid-scale hotel segments.

Key Performance Metrics Comparison

Metric	Indian Hotels	ITC Hotels
Revenue	₹6,769 Cr	₹3,103 Cr
Occupancy Rate	78%	69%
Revenue per Available Room	₹11,163	₹8,200

• Revenue: Indian Hotels reported ₹6,769 Cr, ITC Hotels reported ₹3,103 Cr. After demerging , ITC Hotels will grow at a faster rate and be sharper in its focus on the hotel category. 
• Occupancy: Indian Hotels reported occupancy of 78% compared to ITC Hotels’ 69%. However, ITC Hotels should do better occupancy after the demerger. 
• Revenue per Available Room: Indian Hotels generates ₹11,163 per room, whilst, Indian Hotels earns ₹8,200. The demerger would permit ITC Hotels to better consolidate its operations which would improve performance.

Branded Hotel Chains in India:

With the demerger, ITC Hotels will position itself as the second largest hotel chain in India, behind Indian Hotels. Other major hotel brands present in India are:

• Marriott International
• Accor Hotels
• Hilton
• Radisson Hotel Group

ITC Hotels has a mixture of luxury hotels like ITC Maurya, ITC Grand Chola and ITC Gardenia, in addition to mid-scale through WelcomHeritage and boutique hotel brands like Fortune Hotels.

What It Means for ITC Shareholders

• New Investment Opportunities: Shareholders will receive shares in both ITC and the new hotel organization, thus creating investment choices as the hotel operations expands independently. 
• Increased Transparency:  As an independent entity, ITC Hotels will have a standalone balance sheet that makes it easier for investors to follow their performance. 
• Boosted Stock Value: The demerger of ITC  is expected to have a sharpening of confidence by investors that could lead to a higher stock prices for both ITC and the new hotel company.

ITC Hotels Demerger Ratio and Split

The demerger of ITC hotel  ratio will determine how many shares in the hotel company shareholders will receive for each share held in ITC, therefore ensuring that shareholders will have a stake in both entities. The ITC stock split will also further facilitate performance tracking and relative valuation of the hotel division.

What to Expect Post-Demerger

• Increased Market Share: ITC Hotels expects to capture a greater amount of market share and gain a solidified foothold in the Indian hospitality market.
• Independent Operation: The hotel division will operate independently, meaning ITC Hotels can focus on the business of hospitality.
• Improved Performance: With focused resources and direction, ITC Hotels should improve on important performance metrics including occupancy rates and revenue per room.

Conclusion: ITC Hotels’ Strategic Move Toward Independent Growth

The upcoming demerger of ITC is an important milestone for the organization where its hotel division can become a standalone company and focus on the growth plans in the commercial hospitality market. As an independent entity, ITC Hotels strategy is aimed at short- and longer-term growth as the share price will be determined by market sentiment towards future prospects. ITC Hotels have a solid mix of luxury hotels and potential for growth. As a result, we believe ITC Hotels business can create more value for investors and guests.

To read the latest news about the ITC Hotels demerger and the allocation of 125.11 Crore ITC Hotels shares to shareholders, please visit Paisa Invest. 

FAQs: Key Questions About ITC’s Demerger

1. How was the ITC Hotels share price set?

The ITC Hotels share price is based on the hotel business’s market value at the time of the demerger. For example, the demerger ratio determines how shares in the new hotel company are allocated to ITC shareholders.

2. Why is ITC demerging its hotel business?

 The demerger enables ITC Hotels to focus on the hospitality business and give it the ability to grow in a more flexible way, allowing it to capitalize on market opportunities.

3. How does the ITC split benefit shareholders?

Shareholders will have shares in both the ITC and the new hotel company, giving them further investment choices and potential earnings growth.

4. What are the benefits of ITC concentrating on hotels?

The demerger will allow ITC Hotels to have better focus, enhance its core competencies, implement a more comprehensive growth strategy and allow for profit maximization.

5. What is the ITC demerger ratio?

The ITC demerger ratio establishes the number of shares shareholders will get in the new hotel company relative to their shareholding in ITC, so as to provide them with proportional ownership in both companies.