Kolkata-based ITC Limited has officially announced that the demerger of its Hotels business will take effect on January 1, 2025. This decision comes after receiving all necessary approvals, including the endorsement from the Kolkata bench of the National Company Law Tribunal (NCLT) in October 2024.
Details of the Demerger
The approved demerger scheme aims to create a fully independent entity, ITC Hotels Limited. This move is intended to foster growth and value creation by allowing the specialized management of the Hotels business. The Hon’ble NCLT approved the Scheme of Arrangement in an order dated October 4, 2024, and the certified copy of this order was received by ITC Limited on December 16, 2024.
Under the demerger plan, ITC Limited will continue to retain a 40% ownership stake in ITC Hotels, while the remaining 60% of shares will be allocated to ITC Limited’s shareholders. Following the demerger, ITC Hotels will begin independent operations.
Record Date and Demerger Ratio
ITC Limited is expected to announce the record date soon, which will determine the shareholders eligible to receive shares of the newly formed ITC Hotels Limited. The demotion ratio has already been outlined: for every 10 shares of ITC held, shareholders will receive 1 share of ITC Hotels.
Rationale Behind the Demerger
The rationale for this strategic move is to unlock value for stakeholders by focusing on the specific growth opportunities within the hospitality sector. This step aligns with global industry trends where conglomerates are increasingly opting to separate their core and non-core businesses. ITC Hotels, which encompasses renowned brands like ITC Hotels, WelcomHotel, Fortune Hotels, and WelcomHeritage, has made significant strides in India’s hospitality sector.
ITC Limited’s Diverse Portfolio
Headquartered in Virginia House, Kolkata, ITC Limited operates across several sectors, including Fast-Moving Consumer Goods (FMCG), Paperboards and Packaging, Agri-Business, Information Technology services, and, notably, hospitality. The company is well known for its popular FMCG brands like Aashirvaad and Sunfeast, and it has established a strong presence in the agribusiness sector, contributing to India’s agricultural economy.
Conclusion
As the hospitality industry in India is poised for growth due to increasing domestic tourism and disposable incomes, the establishment of ITC Hotels as an independent entity is aimed at enhancing its market share and operational efficiency. The formal listing of ITC Hotels on stock exchanges, such as NSE and BSE, will follow the demerger in January 2025.
Disclaimer: This article serves informational purposes and does not constitute investment advice. Readers should consult their financial advisors before making monetary decisions.
