ITC's hotel business demerger: CCI allows company to demerge its hotel business into a separate entity

Once ITC completes the demerger, shares of the new entity ITC Hotels Ltd will be listed on the stock exchanges.

The demerger was proposed by ITC’s board of directors on August 14, 2023. According to the proposal, shareholders of ITC would get one share in the new hotel entity for every 10 shares they hold in ITC.

ITC shareholders would hold around 60% direct stake in ITC Hotels, while the remaining 40% stake would stay with ITC. Notably, no cash consideration is payable under the demerger scheme.

The diversified conglomerate would now convene a meeting of shareholders on June 6, 2024, as directed by the National Company Law Tribunal (NCLT), to consider and approve the proposed demerger of its hotel business.

Proxy advisory firms have mixed opinions on ITC’s demerger decision. A few say that minority shareholders are expected to benefit from the demerger as it may unlock value for them and improve the company’s return ratios. However, some firms are advising investors to vote against the proposed scheme of arrangement on June 6 as it only partially unlocks value for shareholders.

Last week, ITC Ltd reported a 1.3% year-on-year decline in its standalone net profit at ₹ 5,020 crore for the March quarter. Revenue rose 1.4% to ₹17,753 crore in Q4FY24 compared with the year-ago period.

ITC also recommended a final dividend of ₹7.5 per ordinary share for FY24. Combined with the interim dividend of ₹6.25 apiece declared on January 29, 2024, the total dividend turned out to be ₹13.75 per share for FY24.

Shares of ITC closed 0.47% higher at ₹431 apiece on the NSE.

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