ITC Hotels demerger effective January 1: What shareholders should know
What's the story
The much-awaited demerger of ITC Hotels will come into effect from tomorrow, January 1.
The move will benefit nearly 36 lakh shareholders of the diversified Kolkata-based conglomerate.
The record date for ITC shareholders has been fixed for January 6.
Under the demerger scheme, every shareholder will get one share of ITC Hotels for every 10 shares held in the parent company.
Share allocation
Equity shares and stake distribution post-demerger
ITC Hotels has announced plans to directly issue equity shares to ITC shareholders.
The distribution will be such that about 60% of the stake is held directly by ITC shareholders in proportion to their shareholding in ITC, while the remaining approximately 40% stake will continue with ITC.
This strategy ensures a balanced distribution of stakes between existing shareholders and the parent company post-demerger.
Market debut
Special trading session and share price projection
On the demerger record date, January 6, BSE and NSE will conduct a special trading session to establish ITC Hotels's fair price.
Assuming an EV/EBITDA multiple of 20x-30x, SBI Securities has estimated that ITC Hotels' share price could be between ₹113 and ₹170 apiece.
The estimate is in line with the average EV/EBITDA multiple of its peers Indian Hotels and EIH Ltd at 25x.
ITC Hotels is one of the largest hotel companies with 140 hotels and 13,000 operating keys.
Investment opportunities
ITC Hotels' growth potential and investor participation
SBI Securities emphasized the attractive growth potential of ITC Hotels in light of a booming domestic tourism industry and robust company financials.
It said, "Investors can participate in the growth story of ITC's hotel business by purchasing a minimum of 10 ITC shares on or before January 3, 2025."
This allows investors to directly tap into the growing hotel business after the demerger.
Post-demerger, ITC intends to transfer ₹1,500 crore to ITC Hotels for growth and contingency needs.
Market impact
Post-demerger impact on ITC share price
Post the demerger and listing of ITC Hotels, there won't be much value addition since the ITC share price will adjust factoring in the holding company discount.
However, SBI Securities recommended that any short-term pressure on the stock price of ITC Hotels Ltd could provide a good opportunity for retail/HNI shareholders to accumulate quality business in their long-term portfolio.
"We believe, post demerger, ITC Ltd's medium term fair value to be ₹525-550," SBI Securities said.