Meanwhile, JM Financial in a recent report says, “ITC’s proposal to demerge its hotels business is not exactly a game-changer, in our view, but definitely points towards a sharper capital allocation strategy. The principle, we believe, is that the Hotels business should not be starved of capital simply because ITC’s shareholders at large are unhappy with the cash and ROCE drag from its presence in the sector.”

The brokerage house has given a ‘Buy’ rating to ITC shares with a target price of ₹555 after the FMCG major released its June quarter earnings. The agency said that the June quarter earnings did not carry the same kind of excitement that was visible in the past few quarters’ results. “The stock could take a breather in the near-term on the back of this result, though a potential re-rating is likely on the cards given a sharper capital-allocation strategy,” it said.

Another domestic brokerage, Prabhudas Lilladher has retained ‘Accumulate’ rating on ITC shares with a price target of ₹478, citing that the company reported another quarter of strong growth across segments, led by cigarette and FMCG businesses. On separation of the hotel business, the agency said that the demerger, which is likely to be completed over the next 15 months, will improve return on capital employed (ROCE), a financial ratio used to assess a company's profitability and capital efficiency, and cash flows.

Meanwhile, ICICI Securities said that the hotel business will continue to leverage ITC’s institutional strengths, strong brand equity and goodwill. It has maintained ‘Add’ rating on ITC shares with a DCF-based revised target price of ₹500.

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Analysts view on ITC shares

Will ITC Hotels' demerger unlock value for shareholders?