British American Tobacco (BAT), the biggest shareholder of India’s top cigarettes maker ITC Ltd, is likely to exit the stake it will receive in ITC’s hotels business post the latter’s demerger from the parent company, the UK-based company's CEO Tadeu Marroco told analysts in a post-earnings call on February 8.
Marroco’s comments came after BAT, earlier in the day, had announced its intentions to monetize part of its 29 percent shareholding in ITC Ltd.
The board of ITC on August 14, 2023, approved the demerger of the hotels business, with an indicative timeline of listing of the new entity in about 15 months. ITC shareholders are to hold about 60 percent direct stake in ITC Hotels (proportionate to their stake in ITC) and the remaining 40 percent stake will continue to be with ITC.
In the analyst call, Marroco indicated that BAT will most likely monetize this hotels business stake.
“There is no strategic intent from BAT to be a minority shareholder of a hotel company in the Indian market. The decision on this (monetization of hotel biz stake) will be taken by the board when the time comes,” he said.
While explaining the rationale behind the demerger of the hotels business, ITC Chairman and Managing Director Sanjiv Puri highlighted that the move will allow the hotels business to accelerate its growth, while for ITC the returns ratios will improve significantly.
“From an ITC perspective, the returns ratio improve immensely. It reinforces our stated position on a sharper capital allocation. It is directed towards value unlock of existing shareholders. So, all stakeholders are positioned to benefit from this proposal that we have,” Puri said in an investor call last year.
ITC’s hotels business posted a revenue of Rs 842 crore in Q3 FY24, up 18 percent from the same period last year, while profit grew 57 percent year-over-year to Rs230 crore.
The company said that the hotels business witnessed strong growth in ARRs (average room rates) and occupancy across properties driven by retail and conferences segments and marquee events like the ICC Cricket World Cup.
The hotels business added 22 new managed properties in the last two years and the company plans to add 25 new hotels in the next two years.
Some of the upcoming properties include ITC Ratanadipa in Colombo; Mementos in Jaipur; Welcomhotel in Belagavi, Karnataka and STORII in Sirmour, Himachal Pradesh.
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