ITC Hotels shares debut at ₹188; down 30% over last discovered price

After spending three weeks as a dummy stock following demerger from the parent, ITC Ltd, ITC Hotels finally started trading on the domestic stock exchanges today. Shares of ITC Hotels, the demerged hotels division of FMCG heavyweight ITC, listed at ₹188 apiece on the Bombay Stock Exchange (BSE), down 30.3% against the last discovered price of ₹270 determined at the special pre-open session conducted by the exchange on January 6, 2025. On the NSE, the hotel stock opened at ₹180 compared with the last discovered price of ₹260 apiece, with a market capitalisation of ₹39,126 crore.  

Meanwhile, ITC shares were trading 0.45% lower at ₹433.30 with a market cap of ₹5.4 lakh crore, while the equity benchmarks Sensex and Nifty were up by 0.3%. 

On January 6, 2025, the BSE and NSE conducted a special pre-open session for one hour from 9 am to 10 am, to discover the stock price of ITC Hotels. The discovered price was ₹260 per share on the NSE and ₹270 per share on the BSE. The new share price of ITC ex-ITC Hotels was adjusted by ₹26 or 5.4% at ₹455.60 on NSE and by ₹27 or 5.6% at ₹455 on BSE. The ITC Hotels share price was derived based on the difference between the ITC's last closing price of ₹482 on January 3 and the price discovered during the SPOS (special pre-open session) on January 6. 

Listing broadly in line with Street estimates

The listing was in line with market expectations. Last week, foreign brokerage house Nomura had predicted ITC Hotels’ listing price in the ₹200-300 range, with a market capitalisation of around ₹42,500-62,000 crore. Nuvama anticipated that the initial market price for ITC Hotels shares to be around ₹200 per share, while SBI Securities pegged price range of ₹113-170 per share.

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.

The listing of the hotels arm of the cigarette-to-soap conglomerate happened ahead of ITC’s third quarter earnings report slated to be released on February 6, 2025. This will be the first quarterly results since the demerger of its hotels business, effective from January 1, 2025. The board of the FMCG heavyweight will also consider declaration of an interim dividend for the fiscal year ending March 31, 2025. 

Key things to know about ITC Hotels

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.

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. 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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