ITC Limited, one of India’s leading conglomerates, recently announced the demerger of its hotels division into a separate entity, ITC Hotels. This move, aimed at enhancing operational focus, led to a noticeable decline in ITC’s share price as investors reassessed the company’s valuation.
Under the demerger structure, ITC Limited will retain a 40% stake in ITC Hotels, while the remaining 60% will be distributed among existing shareholders. Shareholders will receive one share of ITC Hotels for every ten shares of ITC Limited held, with the record date set for January 6, 2025. ITC Hotels will start with a zero-debt balance sheet and rupees 1,500 crore in capital transferred from ITC to support growth and expansion.
The market reacted cautiously, with ITC’s share price dipping by an estimated rupees 15-17 per share. Analysts attribute this short-term volatility to concerns over the revenue impact from the demerger. However, financial experts suggest the move could unlock long-term value by allowing both companies to focus on their core strengths. ITC can now strengthen its FMCG and agribusiness sectors, while ITC Hotels can independently expand in the hospitality market.
While the immediate impact reflects investor skepticism, the long-term strategic benefits, including enhanced operational efficiency and financial clarity, could drive shareholder value in the future.
