ITC Hotels shares fall up to 6% as British American Tobacco looks to exit; down 12% from listing price

Shares of ITC Hotels, the demerged entity of FMCG conglomerate ITC, witnessed sharp selling on Friday, with the stock price falling up to 6% intraday amid report that British American Tobacco Plc (BAT) is looking to exit India's second largest hotel chain operator. BAT, the biggest shareholder after ITC, currently holds a 15.29% stake in the hotels entity.

Extending losses for the third straight session, ITC Hotels share price tumbled 5.6% to hit an intraday low of ₹160.30 on the BSE. Early today, the ITC group stock opened marginally higher at ₹170.10 against the previous closing price of ₹169.90 but soon lost momentum. Paring half of early losses, the hotel stock finally settled the day’s trade at ₹165, down 2.9% with a market capitalisation of ₹34,339 crore.

Shares of ITC Hotels, which officially made its debut on January 29, 2025, are down over 12% from its listing price of ₹188 apiece on the BSE. The counter touched its highest level of ₹189 on its listing day, while it slipped to lowest mark of ₹160.30 today.

BAT to exit ITC Hotels by 2026

ITC Hotels shares got hammered today after BAT CEO Tadeu Marroco, in the company’s earnings call, said that it has no interest in becoming a long-term shareholder of a hotel chain in India. He added that the company looks to divest its stake in two and a half and two by 2026.

"We will be divesting, and we will be using proceeds to make sure that we get to the leverage corridor of two and a half and two by 2026," said BAT CEO during its FY24 earnings call.

The demerger of ITC Hotels came into effect on January 1, 2025, with ITC shareholders receiving one ITC Hotels share for every 10 shares they own in the company. Post split-off, the cigarettes-to-FMCG-to-hotels conglomerate retained a 40% stake in the hotel business, while BAT, which owned 25% stake in ITC, got 15% stake in the hotel business, while the balance shareholding were distributed among existing shareholders in proportion to their holdings in the company.

Jefferies initiates 'Buy' call on ITC Hotels

 Global brokerage has initiated coverage on ITC Hotel with a ‘Buy’ rating and target price of ₹240 per share, implying an upside potential of 31% from current levels in their base case scenario. The agency expects ITC Hotels to report steady growth over the next few year, citing increased demand for travel and tourism coupled with ramp-up of recent greenfield projects.

“ITC Hotels is the second biggest hotels chain in the India Hospitality space, fairly diversified across metrics, and is slated to benefit from cyclical recovery in the hotel sector. Near-term growth drivers include scale up of recent greenfields and increase in share of Asset Light. With the demerger from parent behind, the delivery of performance in its independent existence, will re-rate the stock,” the brokerage said in a report.

With a strong debt-free balance sheet and ₹11,000 crore of total assets (including ₹1,000-1,500 crore of cash and cash equivalents), ITC Group today operates a bouquet of 6 brands – ITC Hotels, Storii, Mementos, Welcomhotel, Fortune, and WelcomHeritage - distributed across segments. Going ahead, the group aims to increase inventory to 18,000 rooms in the next 4-5 years, and 200 hotels from 140 currently.

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