ITC Hotels, a subsidiary of ITC Limited, has announced its demerger plan, which is expected to unlock significant value for investors. The demerger will separate the hotel business from the parent company and create a new entity that will be listed on the stock exchange. This move is expected to provide a boost to ITC Hotels’ growth prospects and create new opportunities for investors.

• The demerger of ITC Hotels is scheduled to take place on August 14, 2023.
• The scheme of arrangement for the demerger has received in-principle approval from the ITC board.
• The demerger will result in the formation of a new entity called ‘ITC Hotels‘.
• The board meeting on August 14 will finalize the approval of the scheme.
• This demerger is part of ITC’s strategic plan to unlock value and enhance the growth prospects of its hotel business.
• Analysts estimate ITC Hotels’ share price to be between Rs 15 to Rs 23.
• Meanwhile, the street is pegging the stock to be around Rs 21, going by the correction seen in July 24 trade.
• ITC Limited shares closed 4.3 percent down at Rs 469.35 on the National Stock Exchange.

According to data by Jefferies, ITC’s hotel business contributes 4 percent to the company’s total revenues. However, 21 percent of the capex is spent on its hotel business only.

Let’s dig into the details of the ITC Hotels demerger plan.

1. Demerger Plan:

• The demerger plan involves the separation of ITC Hotels from the parent company, ITC Limited.
• The hotel business will be transferred to a new entity, which will be listed on the stock exchange.
• The demerger is expected to unlock significant value for investors and provide a boost to ITC Hotels’ growth prospects.

2. Benefits for Investors:

• The demerger is expected to create new opportunities for investors and unlock significant value.
• The new entity will be listed on the stock exchange, providing investors with an opportunity to invest in a pure-play hotel business.
• The demerger is expected to enhance ITC Hotels’ growth prospects and create new avenues for expansion.

3. ITC Hotels’ Growth Prospects:

• ITC Hotels is one of the leading hotel chains in India, with a portfolio of over 100 hotels across the country.
• The demerger is expected to provide a boost to the company’s growth prospects and enable it to focus on its core business.
• ITC Hotels is well-positioned to capitalize on the growing demand for high-quality hospitality services in India.

4. Impact on the Industry:

• The ITC Hotels demerger plan is expected to have a significant impact on the hospitality industry in India.
• The move is expected to create new opportunities for investors and provide a boost to the growth prospects of the hotel business.
• The demerger is also expected to encourage other companies in the industry to consider similar moves to unlock value and enhance growth prospects.

How has ITC’s hotel business been performing in recent years

ITC’s hotel business has been performing well in recent years, despite the impact of the COVID-19 pandemic.

Here are some key points based on Our Research:

1. Revenue:

• In financial year 2022, the revenue of ITC India Limited’s hotel segment was approximately 13 billion Indian rupees, compared to over six billion Indian rupees in financial year 2021.
• The drastic decrease in revenue in 2021 could be attributed to the impact of the coronavirus pandemic and consequent lockdowns and restrictions.

2. Demerger Plan:

• ITC Hotels’ demerger plan is underway, which is expected to unlock significant value for investors and provide a boost to the hotel business’s growth prospects.
• The new entity will be listed on the stock exchange, providing investors with an opportunity to invest in a pure-play hotel business.

3. Awards and Recognition:

• ITC Hotels is one of the fastest-growing hospitality chains in India, known for offering world-class hospitality, amenities, and services.
• The chain has developed four brands of accommodation to differentiate between the needs of various travelers and provide the highest levels of service.
• ITC Hotels has set standards for excellence in the hotel industry by pioneering the concept of branded accommodation.
• The chain has earned a reputation for culinary excellence thanks to their authentic delicacies and signature dining experiences.

4. Analysts’ Estimates:

• Analysts estimate that the share price of ITC Hotels will be between Rs 15 to Rs 23, while the street is pegging the stock to be around Rs 21, based on the correction seen in July 24 trade.
• Jefferies has raised its target price for ITC to Rs 530 from Rs 520, indicating a 19 percent upside from current levels.
• The average rating of ITC is buy, and price targets range from 400 Indian rupees to 530 rupees, according to analysts polled by Capital IQ.

ITC’s hotel business has been performing well in recent years, despite the impact of the COVID-19 pandemic. The demerger plan is expected to unlock significant value for investors and provide a boost to the hotel business’s growth prospects. The chain has earned a reputation for excellence in the hotel industry and has set standards for culinary excellence. Analysts estimate that the share price of ITC Hotels will be between Rs 15 to Rs 23, while Jefferies has raised its target price for ITC to Rs 530 from Rs 520, indicating a 19 percent upside from current levels.

Citations:
[2] https://www.itcportal.com/businesses/hotels.aspx
[3] https://www.itchotels.com/in/en

Conclusion:
The ITC Hotels demerger plan is a significant development that is expected to unlock significant value for investors and provide a boost to the growth prospects of the hotel business. The move is expected to create new opportunities for investors and encourage other companies in the industry to consider similar moves. With its strong growth prospects and well-established position in the Indian hospitality industry, ITC Hotels is poised for success in the years to come.