ITC Hotels demerger will sharpen capital allocation for ITC: CMD Sanjiv Puri

Days ahead of the board meeting that will decide the fate of its hotels business, ITC Chairman and MD Sanjiv Puri spoke to shareholders about the company’s commitment towards growing the business. With India emerging as a major destination for global investments and ITC’s steady investments in its hotels division, the business has “substantial headroom for growth” in coming years, he says.

“The hospitality industry is poised for strong growth due to the confluence of favourable factors such as rising societal aspirations, the growing stature of India as an attractive investment destination, increasing connectivity, strong macros, policy interventions as well as digital explosion. Given that India’s share in global tourism is just one per cent there is substantial headroom for growth. It is estimated that the tourism GDP in India can grow from US$ 143 billion to US$ 250 billion by 2030 with employment growing from 88 million to 137 million,” Puri told ITC stakeholders in its AGM.

While the board of directors of ITC has accorded its in-principle approval to the proposed demerger of the Hotels Business, under a scheme of arrangement, it will meet on 14 August to chalk out a comprehensive plan for executing the demerger of the division into a separate entity ITC Hotels Ltd. 

“The continued interest of ITC in the new entity will provide long term stability and instil a sense of assurance among partners, investors and employees, while enabling the new entity to leverage ITC’s institutional strengths including timeless goodwill, world-class brands and governance processes. For ITC, the reorganisation will sharpen capital allocation, improve asset efficiency ratios, unlock value for its shareholders as well as enable leveraging of institutional synergies,” said Puri, adding that the proposed reorganisation “will enable the business to architect the next horizon of growth as a pure play hotels entity with a strong balance sheet and healthy pipeline, especially when the industry is poised for robust growth”.

In FY23, revenue from the hotels division doubled to Rs 2,689 crore, while its EBITDA (earnings before interest, tax, depreciation and amortisation) margin improved by 930 basis points over the pre-COVID levels in FY2020. The company currently has over 120 properties in 70 locations comprising of nearly 11,600 rooms.

 “The business is well poised to capitalise on the significant growth opportunity given its distinctive position in India’s tourism landscape. The business’ unique value proposition has been built on the strength of its iconic properties, signature cuisines, best-in-class service and ethos of responsible luxury,” he said.