ITC Hotels to debut on stock exchanges on January 29
What's the story
Kolkata-based diversified conglomerate ITC Ltd has announced that its recently demerged entity, ITC Hotels, will be listed on the stock exchanges on January 29.
The announcement came after both National Stock Exchange of India Limited (NSE) and BSE Limited approved the listing and trading of ITC Hotels' equity shares from January 29 onward.
Demerger details
ITC Hotels' journey post demerger
ITC Hotels has been functioning as a separate entity from ITC since January 6, and until now, has been a dummy entity in indices with a static price of around ₹260.
ITC on January 11 distributed 125.11 crore equity shares of ITC Hotels to its shareholders.
The distribution is part of a restructuring process under Sections 230 to 232 of the Companies Act, 2013, involving the demerger and reorganization of the two companies.
Restructuring process
Share allotment and trading restrictions
The share allotment is an integral part of the restructuring process, which is centered around the demerger and reorganization of ITC and ITC Hotels.
The newly allotted shares will be non-tradable until the stock exchanges grant necessary permissions for trading.
Under this demerger deal, ITC will keep 40% of the hotel shareholding and distribute the remaining 60% equally among existing ITC shareholders.
Market reaction
Listing date and market response
The listing date of ITC Hotel was announced after market hours on Monday, with ITC shares closing at ₹439.90 on the NSE, down ₹1.70 or 0.38%.
The revelation comes sooner than the mid-February date market players anticipated for the hotel chain's stock exchange debut.
The demerger is likely to draw appropriate investors and strategic partners/collaborations whose investment strategies are more aligned with hospitality.
Future outlook
Growth prospects post-demerger
The demerger is also expected to increase the value of the hotels business for ITC's shareholders by giving them a direct stake in the new entity.
The move comes as ITC recently adopted an 'asset-right' strategy in its hotels business.
After the demerger, ITC Hotels will become India's second-largest hotel chain with a portfolio of 140 hotels, further strengthening its foothold in the hospitality sector.