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ITC Demerger: A Close Look at Hotel Business

Updated on: Dec 20, 2024, 3:05 PM IST
ITC set the record date for demerger as January 6 and the eligible ITC shareholders will receive 1 share of ITC Hotels for 10 shares of ITC Ltd.
ITC Demerger: A Close Look at Hotel Business
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ITC, a prominent multi-sector conglomerate, has generated considerable buzz with its announcement to demerge its hotel business, effective January 1, 2025. The decision, revealed on December 17, 2024, has sparked market interest, particularly after receiving robust shareholder support earlier this year.

ITC Demerger Overview 

The demerger of ITC Limited and ITC Hotels Limited (ITCHL) was approved by the Kolkata bench of the National Company Law Tribunal (NCLT) in October 2024. The company has set the effective date as January 1, 2025, with shareholders set to receive shares in ITC Hotels based on their existing holdings. For every 10 shares of ITC, shareholders will be allotted 1 share of ITC Hotels.

Post-demerger, ITC will retain a 40% stake in ITC Hotels, while the remaining 60% will be distributed to shareholders. A record date of January 6, 2025, has been set to determine which shareholders will be eligible for the equity distribution. Furthermore, ITC Hotels will pay a nominal royalty fee to ITC for continuing to use its brand name.

ITC Hotel: A Close Look at Business and Financials

Founded in 1975, ITC Hotels is India’s premier luxury hotel chain, renowned for its contribution to Indian hospitality. The company operates over 140 hotels across 90+ locations under 6 distinct brands: ‘ITC Hotels’ in the luxury segment, ‘Mementos’ in the luxury lifestyle segment, ‘Welcomhotel’ in the upscale segment, ‘Storii’ in the boutique premium segment, ‘Fortune’ in the mid-market to upscale segment, and ‘WelcomHeritage’ in the leisure & heritage segment.

In Q2 FY25, ITC Hotels delivered a strong performance, building on a high base from the previous year, which included G20-related business.

  • Segment revenue rose 12.1% YoY (2-year CAGR +16.5%)
  • Segment PBIT increased by 20.2% YoY
  • Growth was driven by the F&B, retail, and wedding segments
  • EBITDA margin expanded by 70 bps YoY, supported by higher RevPAR, operational efficiency, and strategic cost management
  • ITC’s first international property, ITC Ratnadipa in Colombo, Sri Lanka, opened in April 2024 and continues to receive exceptional feedback.

For FY24, ITC Hotels achieved record performance, with segment revenue reaching ₹2,989.50 crore. The segment EBITDA surpassed ₹1,000 crore for the first time, totalling ₹1,049.88 crore. Segment PBIT for the year was ₹753.77 crore, reflecting a growth of approximately 39% compared to the previous year.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

Published on: Dec 20, 2024, 1:33 PM IST

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