The much-awaited split-off of ITC Hotels from the parent ITC is set to take place today as the ex-date of the demerger is January 6, 2025. Under the scheme of demerger, shareholders will get one ITC Hotels share for every 10 ITC shares they own, with the cigarettes-to-FMCG-to-hotels conglomerate retaining a 40% stake in the newly demerged listed entity. British American Tobacco (BAT), which owns 25% stake in ITC, is expected to get 15% stake in the hotel business, while the balance shareholding will be distributed among existing shareholders in proportion to their holdings in the company.

ITC Hotels shares will be included in the benchmark indices Sensex and Nifty pack as an additional constituent, but it will not be traded live and its market capitalisation and price will remain constant until it gets listed on the domestic bourses. It will be the 51st constituent in Nifty50 and 31st constituent in Sensex and daily will be considered in weight calculations of Index.

As of now, ITC has not announced the date of listing of ITC Hotels and it may take a few weeks time to get all the listing approvals. “ITC Hotels is being carved out from one of the biggest giants, so we expect the listing process should be fast tracked and quite likely ITC Hotels may be listed in a month’s time (or even earlier),” Nuvama says in a recent report.

Among the prominent recent demergers, Jio Financial was a spin-off from parent Reliance Industries and post record date it took almost 33 days for the listing. While Piramal Pharma took almost 45 days for the listing after it got demerged from Piramal Enterprises, NMDC Steel took nearly 4 months for the listing after it was demerged from NMDC Ltd.

How will the price of ITC Hotels be determined?

The price of ITC Hotels will be calculated based on the difference between the closing prices of ITC on January 3, 2025, and open price of ITC discovered during the SPOS (special pre-open session) on January 6, 2025. On January 3, shares of ITC closed 1.48% lower at ₹482 apiece on the BSE, with a market capitalisation of ₹6.03 lakh crore.

According to foreign brokerage Nomura, ITC Hotels’ shares may list in the ₹200-300 range, with a market capitalisation of around ₹42,500-62,000 crore.

Domestic brokerage house Nuvama expects the initial market price for ITC Hotels shares to be range between ₹150-175 per share. “On January 6, 2025, the ex-date for the demerger, ITC's share price is expected to be adjusted by ₹22-25, reflecting its 40% stake in the hotel business and incorporating a 20% holding discount. The adjustment is expected to be ₹18 per share,” it explained.

SBI Securities has pegged price range of ₹113-170 per share, citing an EV/EBITDA multiple of 20.0x-30.0x. “Though some short-term pressure on ITC Hotels’ stock price is possible due to forced exits by some shareholders (such as ETFs), we believe that any such pressure will present a good opportunity for retail and HNI shareholders to accumulate a quality business for long-term growth," it adds.

ITC launched its hotels business way back in 1975 with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola' (now Welcomhotel) to earn high levels of foreign exchange, create tourism infrastructure and generate employment. Over the years, it has emerged as second biggest player in the hotel space after Tata group-owned Indian Hotels.

The group today operates a bouquet of 6 brands – ITC Hotels, Storii, Mementos, Welcomhotel, Fortune, and WelcomHeritage - distributed across segments. ITC Hotels and Storii cater to luxury segment, WelcomeHotel in upper upscale, and Fortune in mid to upscale space. Storii is a boutique hotel and WelcomHeritage is a heritage property. Its current portfolio includes 140 properties with 13,000 rooms, out of which 45% are owned, and 55% are under management contracts. Around 80% of the owned room inventory is in metros (distributed evenly in top 6 cities).

Going ahead, the group aims to increase inventory to 18,000 rooms in the next 4-5 years, and 200 hotels from 140 currently. In the past 2 years, the company has managed to achieve its target of opening 1 hotel per month and expects similar trajectory in next 24 months.

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