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ITC, one of India's foremost private sector companies, has announced a plan to demerge its hotel business. This move aims to create a separate 'pure play' hotels entity that will drive the next horizon of growth for the business.
ITC shareholders overwhelmingly approved the demerger with a 99.6% majority. The voting results were announced after the shareholders' meeting convened by the National Company Law Tribunal (NCLT).
The demerger aims to create a separate entity that will have a strong debt-free balance sheet with a net worth of nearly Rs 10,000 crore. This will enable ITC Hotels to raise capital from the debt and/or equity markets, driving sustained value creation for shareholders.
Under the demerger plan, existing ITC shareholders will receive one share of ITC Hotels for every 10 shares of ITC. This means they will directly own 60% of the new company, while ITC will hold the remaining 40%.
The demerger process is expected to take six to eight months. This timeline includes obtaining additional approvals and completing necessary steps before the final nod from the NCLT.
ITC has received approval from the stock exchanges, Securities and Exchange Board of India (SEBI), and the Competition Commission of India (CCI).
ITC adopted an asset-right strategy a few years ago, focusing on a balance between managed properties and calibrated investments. This strategy aims to take ITC Hotels to over 200 properties within five years.
In FY24, ITC's hotels segment generated revenues of Rs 3,103 crore and pre-tax profits of Rs 765 crore. This indicates a significant contribution to ITC's overall financial performance.
After obtaining shareholder approval and NCLT nod, ITC will seek to finalize the demerger process. This will involve transferring assets and liabilities to the new entity, ITC Hotels.