On January 6, 2025, ITC, the Kolkata-headquartered diversified conglomerate, grabbed the attention of investors as the demerger of its hotel business officially came into effect. The demerger, which was set in motion on January 1, has made waves in the stock market, particularly for those looking to invest in stocks. The record date for the demerger was marked today, and the shares of ITC were actively traded to determine the adjusted price of its hotel business.
What happened during the special session?
ITC held a special pre-open session today, from 9:00 AM to 9:45 AM, for price discovery. This session aimed to determine the opening price of ITC Hotels, which will become a separate entity on the stock exchange. The actual trading commenced at 10:00 AM, and the opening price of the demerged entity was established during the Special Pre-Open Session (SPOS).
As a result of the SPOS, ITC’s discovered price stood at ₹455.60 per share. This price marks a difference of ₹26 from ITC’s closing price of ₹481.60 per share on January 3, 2025. However, it’s important to note that this figure does not reflect the true stock price of ITC Hotels. The final price of ITC Hotels will be revealed once the hotel business lists its shares on the stock exchanges, which is expected to happen in February.
Demerger scheme: How it works
Under the demerger scheme, ITC shareholders whose names appeared on the list on January 6, 2025, will receive one share of ITC Hotels for every 10 shares of ITC they hold. This means that ITC shareholders will hold about 60% of ITC Hotels directly, while the remaining 40% will continue to be held by ITC.
It is expected that the total stake in ITC Hotels will remain with ITC shareholders, with the proportion of their holding in ITC dictating the amount they own in the newly created entity. In addition, ITC has committed to transferring ₹1,500 crore in cash and cash equivalents to ITC Hotels to support its growth and contingency requirements.
The future of ITC Hotels
While analysts predict that ITC Hotels' stock could be priced anywhere between ₹150-₹200 per share when it is listed, the future of the business looks promising. The new entity is expected to operate with a “zero debt balance sheet,” ensuring strong financial health. ITC Hotels also plans to leverage its position to explore selective inorganic growth opportunities in the future.
ITC and ITC Hotels will enter into a 'Trademarks License Agreement,’ allowing ITC Hotels to use the ITC trademark, as well as the copyrights for trademarks such as 'Bukhara,’ 'Dum Pukht,’ and 'Dakshin.’ The demerger also includes various hospitality entities, such as Bay Islands Hotels and Fortune Park Hotels, all of which will be part of ITC Hotels.
What’s next for ITC Hotels?
As part of the demerger process, ITC Hotels will be filing an application with the stock exchanges and SEBI to list its shares. The listing is expected within 60 days of receiving the NCLT (National Company Law Tribunal) order, as per the SEBI Master Circular dated June 20, 2023. Following approval from the Kolkata bench of the NCLT on December 16, 2024, ITC Hotels is set to operate as an independent entity, which may attract more investors looking to invest in stocks within the hospitality sector.
This demerger allows ITC to streamline its operations and create more value for its shareholders. With a strategic plan in place and a strong balance sheet, ITC Hotels is expected to expand its footprint and continue contributing to ITC’s growth.