In a significant move aimed at unlocking greater value for its shareholders, the board of FMCG on Monday approved the demerger of its hotel business into a distinct and separate entity named ‘ITC Hotels’. This strategic decision is expected to pave the way for new opportunities and enhanced growth prospects for both, ITC and its shareholders.
Under the approved demerger plan, ITC will reportedly retain a 40% stake in the newly-formed company, ITC Hotels, while the remaining 60% will be distributed among the existing shareholders of the company. The distribution of shares will be done proportionately, based on the shareholders’ existing shareholding in the company. The company said that this will unveil the value of the hotel’s business for its shareholders, by ensuring that the current investors continue to have a significant interest in the hotel business, while also having the potential to benefit from any future growth and profitability of ITC Hotels. Post this decision, the ITC shares fell and closed at Rs. 461.35 on Monday.
After the demerger was approved on Monday, Sanjiv Puri, Chairman ITC, said, “In the proposed reorganisation, both ITC and the new entity will continue to benefit from institutional synergies”.
Although the shareholders are disappointed as they won’t be getting one share against each share that they hold, the move is expected to unlock hidden value and bring forth the potential of ITC’s hotel business, benefiting its 30 lakh shareholders, futuristically. The proposed plan is be reviewed later on August 14, 2023, in a board meeting.
In conclusion, the approved demerger of the hotel business into a separate entity, ITC Hotels, marks a strategic move by the FMCG company to create more opportunities for its shareholders. As the process unfolds, investors and industry experts will keenly await the upcoming meeting and observe the developments to see the impact and potential benefits this separation will bring to both ITC and its valued shareholders.
