Finshots Daily Decoding the ITC – ITC Hotels demerger
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Jan 4, 2025 The long-anticipated demerger of ITC Hotels is finally happening! This transition is driven by strategic financial motives and a shift to an asset-light model, promising significant growth ahead. Listeners will gain insights into how this separation impacts shareholders and the future of ITC Hotels as an independent entity. Key discussions also revolve around the expected independent trading on stock exchanges and what it means for share pricing and future strategies of the larger ITC conglomerate.
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ITC Hotels' Performance
- ITC Hotels generated decent revenues but dragged down ITC's overall returns.
- It consumed 20% of capital but contributed only 3–4% of operating profits, unlike the tobacco business.
Demerger Decision
- ITC's management was initially hesitant to demerge due to its complex structure and lack of promoter intervention.
- However, the board announced the spin-off in July 2023, approved in December 2024, effective January 1, 2025.
Asset-Right Model
- Hotels, being capital-intensive, were a cash drain; ITC shifted to an asset-right model in 2018.
- This involved managing properties owned by others, reducing capital expenditure and growing the portfolio cost-effectively.