ITC board gives in-principle approval to demerger of hotels business

• The arrangement shall be placed for approval of the board at its next meeting to be convened on August 14.
• The ITC board has also approved the incorporation of the wholly-owned subsidiary ITC Hotels Ltd.
• The stock has seen an amazing bull run in the past few months and it is up 7% this month

The ITC board has accorded an in-principle approval to the demerger of hotels business, as per a company filing on the exchanges. The leading conglomerate on Monday said it will demerge its hotel business by incorporating wholly-owned subsidiary ITC Hotels Ltd.

"The Board of Directors of ITC Ltd at its meeting held on July 24, 2023, evaluated and discussed various alternative structures for the Hotels Business. After due consideration, the Board accorded its in-principle approval to the demerger of Hotels Business under a scheme of arrangement," the company said in a regulatory filing.

The ITC stock fell from its intraday opening of Rs 490 per share to Rs 470 per share after this news broke and at the time of publishing the copy is trading 2.5% in the red. The stock has seen an amazing bull run in the past few months and it is still up 7% this month and has rallied 40% in the past six.

The ITC board has also approved the incorporation of the wholly-owned subsidiary ITC Hotels Ltd, which will handle its hotels and hospitality business, it added.

"... with the company holding a stake of about 40% in the new entity and the balance shareholding of about 60% to be held directly by the company's shareholders proportionate to their shareholding in the company," it added.

The scheme of arrangement shall be placed for approval of the board at its next meeting to be convened on August 14, 2023.

"The proposed reorganisation would ensure continued interest of the company in the hospitality business, provide long-term stability and strategic support to the new entity in its pursuit of accelerating growth and sustained value creation as also enable leveraging of cross synergies between the company and the new entity," the statement read.

Launched in 1975, ITC Hotels, India's premier chain of luxury hotels, has 120 hotels and 11,600 keys across 70-plus locations.

(With text inputs from PTI)