ITC's Annual General Meet: Demerger of Hotel Business to Enhance Capital Allocation, Says CMD Sanjiv Puri
During ITC's Annual General Meeting, CMD Sanjiv Puri announced that the demerger of the hotel business is set to optimize capital allocation.
During the 112th Annual General Meeting, ITC's Chairman and Managing Director, Sanjiv Puri, stated that the demerger of the hotel business aims to enhance capital allocation, optimize asset efficiency ratios, unlock shareholder value, and capitalize on institutional synergies. Puri emphasized that ITC's sustained involvement in the demerged entity will ensure enduring stability and foster confidence among partners, investors, and employees.
ITC Aims for Future Growth as Hotels Specialist Following Demerger: CMD Sanjiv Puri
In a recent announcement, ITC's Chairman and Managing Director, Sanjiv Puri, revealed that the proposed reorganization involving the demerger of the hotel business is strategically designed to position ITC as a dedicated hotels entity, poised for substantial growth. Puri emphasized that the forthcoming entity will boast a robust balance sheet and a promising pipeline of opportunities, particularly as the hospitality industry anticipates a period of strong expansion.
During the 112th Annual General Meeting, Puri emphasized that ITC's ongoing commitment to the demerged entity will not only ensure long-term stability but will also instill confidence among partners, investors, and employees. This synergy will enable the newly formed entity to harness ITC's institutional strengths, encompassing its esteemed reputation, world-class brands, and effective governance processes.
Last month, ITC Limited's Board granted preliminary approval for the demerger of the hotels business, as part of a carefully structured scheme of arrangement. The company underlined that it would maintain approximately a 40 percent stake in the new entity, while the remaining ownership would be distributed directly to ITC's shareholders, proportionate to their existing holdings.
ITC Hotels currently boasts an impressive portfolio of over 120 hotels spanning 70 locations, featuring six distinct brands including ITC Hotels, Mementos, Welcomhotel, Storii, Fortune, and WelcomHeritage. The hotel business accounted for about 4 percent of ITC's total revenue and 2 percent of EBIT in the fiscal year 2023.
CMD Puri further elaborated that the demerged entity will have an arrangement akin to royalties for the use of other ITC brands and assets, thus ensuring the cohesion of the wider ITC ecosystem. He highlighted that ITC will not only maintain its investment in the hotels business but will also leverage synergies for its foods vertical from the newly formed entity. The strengthened balance sheet of the hotel entity, coupled with its debt-free status, will empower it to explore various avenues for capital generation, including debt, equity, or strategic investment.
ITC's hotel business has demonstrated robust growth, with a 12 percent compound annual growth rate (CAGR) in revenue over the fiscal years 2020 to 2023. Notably, the segment achieved an all-time high EBITDA margin of 32.2 percent in FY23, supported by healthy occupancy rates of 70 percent and peak average room rates. The company highlighted that the revenue in this segment doubled over FY22, reaching 1.4 times the pre-pandemic levels.
As of the current trading status, ITC's share price is at Rs 446.00, experiencing a 1.10 percent decline today. The shares closed at Rs 451.75 on the previous day, reflecting a 3-month return of 7.46 percent. The average trading volume over the past 7 days stood at 8,552,852 shares. ITC remains committed to its strategic vision and anticipates the demerger to pave the way for a promising era of growth and value creation within its hotels business.