ITC approves demerger of hotels business, shares slide

Last week, ITC Ltd became the seventh Indian listed company to cross the Rs 6 lakh crore market cap mark for the first time

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

The Board of ITC Limited has granted in-principle approval for the demerger of the hotels business under a scheme of arrangement, the company said in a regulatory filing on July 24.

The proposed restructuring would pave the way for the hotel business to operate as a separate entity in the rapidly expanding hospitality industry, focusing on its growth path with an optimal capital structure.

Under the approved plan, the new entity would be majority-owned directly by the company's shareholders, holding approximately 60 percent of the stake, while ITC Limited would retain about 40 percent.

This strategic move aims to ensure the company's continued interest in the hospitality sector, providing long-term stability and support to the new entity for accelerated growth and sustained value creation.

“Creation of a hospitality-focused entity will engender the next horizon of growth and value creation by harnessing the exciting opportunities in the Indian hospitality industry. In the proposed reorganization, both ITC and the new entity will continue to benefit from institutional synergies,” said Sanjiv Puri, Chairman of ITC.

Last week, ITC Ltd became the seventh Indian listed company to cross the Rs 6 lakh crore market cap mark for the first time after its shares rallied over 48 percent so far this year.

ITC's impressive performance across all its business segments, including cigarette, FMCG, paper, and hotels made it an attractive choice for investors.

Last month, foreign broking firm Jefferies has raised its target price for ITC to Rs 530 from Rs 520, indicating a 19 percent upside from current levels. The upgrade comes on the back of ITC considering an alternate structure for the hotel business.

However, market participants were hoping for split mirroring the shareholding pattern. The decision to withhold 40 percent with the parent and distribute only 60 percent to shareholders has dampened sentiment. Yet, some fund managers maintained that today’s stock price correction was unwarranted because the most bullish estimate of the hotel business was not more than Rs 20 per share.

At 3 pm, ITC stock was quoting at Rs 472.45 on the NSE, lower by 3.7 percent from previous close. The stock is still up over 40 percent year-to-date.