ITC hotel business demerger is underway, alternate structures being considered: Report

Tobacco-to-hospitality conglomerate ITC is looking at finalising the long-standing proposal for demerging its hotels business, which it had shelved during the pandemic. "Process for demerger of hotel business is underway. ITC to explore alternate structures for hotel business in line with the industry dynamics," a report on CNBC-TV18 stated on Wednesday. 

It further said that a separate listing of the hotel section is being considered. 

Earlier, ITC Chairman and Managing Director Sanjiv Puri told The Hindu that the demerger of the conglomerate's hotel business is “very much on the table” after the sector recovered after Covid-19.

Puri said that the company is thinking of an “alternative business structure” for its hotel business after a strong recovery in the hotel industry. He said the proposal to demerger is “back on the table”.

“In the 2019-20 annual report, we had said that we would be creating an alternative structure for our hotels business. But we had to put the decision on hold due to the pandemic as the industry was not doing well. We will be taking the plan forward in line with the industry recovery dynamic,” Puri said.

He added that “in the last 12 months we have opened almost a hotel a month”. In line with its strategy of going “asset right”,  the company has an optimal mix of owned and managed hotels.

In the past few years, ITC had built many own hotels, which “impacted capital productivity”; as such the company decided that it had the “market standing” to have hotels on management contracts. 

Shares of ITC surged to Rs 475, up by 1.85 per cent, which is a record high for the stock.

The company’s hotel business recorded a 101 per cent increase in its revenues (Rs 782 crore) in the fourth quarter of 2022-23. The business’ EBIDTA stood at Rs 272 crore compared with Rs 32 crore in the corresponding quarter of the previous year. 

In the fourth quarter, the hotel business of the conglomerate recorded bumper revenue growth of 99 per cent to Rs 809 crore and posted a profit (before tax) of Rs 205 crore against a loss of 29 crore in the previous-year quarter.

On May 30, ITC declared a final dividend of Rs 6.75 per share and a special dividend of Rs 2.75 per share of Re 1 each for the quarter ended March 2023.

ITC is the largest cigarette manufacturer and seller in India and was established in 1910. ITC operates in various business segments at present including FMCG business, hotels, paperboards, paper and packaging, and agribusiness.

On Tuesday, shares of ITC touched a new record high. The company delivered significant returns on the back of its strong and steady performance and price movement, coupled with heavy volumes. ITC's stock gained about one per cent to hit Rs 466.05 on Tuesday, its 52-week high.

The total market capitalisation of ITC was hovering around Rs 5.8 lakh crore, which made it the sixth largest listed entity on Dalal Street.

Shares of the FMCG giant have surged about 65 per cent from its 52-week low at Rs 284.85, while it has delivered a return of more than 210 per cent from its Covid-19 lows. The stock has more than doubled in the last one and a half years.

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