The much-anticipated ITC Hotels demerger has taken center stage as ITC shares trade ex-hotels. With the record date falling today, the market saw special trading sessions on BSE and NSE to determine ITC Hotels’ fair price. ITC’s share price dropped by ₹26 or 5.4% on NSE, closing at ₹455.60, and by ₹27 or 5.6% on BSE, closing at ₹455. This adjustment aligned with market expectations of ₹15-20 per share for the hotel business.
As part of the demerger, ITC Hotels’ share price will reflect the difference between ITC’s January 3 closing price and its adjusted price post the special pre-open session (SPOS) on January 6. With a demerger ratio of 1:10, shareholders will receive one ITC Hotels share for every 10 ITC shares held. The listing date for ITC Hotels is yet to be confirmed.
ITC Hotels: A Leading Player in Hospitality
ITC Hotels, one of India’s largest hospitality chains, operates 140 hotels with approximately 13,000 keys as of October 2024. The company has ambitious plans to expand to 200+ hotels and 18,000+ keys by 2030. Notably, 35% of its portfolio is owned, with the remaining under management or franchise agreements.
In FY24, ITC Hotels saw a 20% year-over-year (YoY) increase in Average Room Rate (ARR) and an 18% YoY rise in Revenue Per Available Room (RevPAR), achieving an occupancy rate of 69%. With a Return on Capital Employed (RoCE) of ~20% and negligible debt, ITC Hotels is positioned for robust growth in the luxury hospitality segment.
Expert Predictions on ITC Hotels Listing
Prashanth Tapse, Senior VP (Research) at Mehta Equities, predicts ITC Hotels’ shares will list in the range of ₹100-125, based on peer valuations in the luxury hotel sector. He emphasized that the demerger unlocks significant shareholder value and enables ITC Hotels to focus solely on its growth strategy.
“Post-demerger, we remain optimistic about ITC and ITC Hotels. Investors should hold onto their shares to benefit from the long-term value creation,” Tapse added.
Index Inclusion and F&O Eligibility
ITC Hotels is likely to be included in the MSCI Global Small Cap Indexes post-listing. Meanwhile, ITC Ltd will remain in the Standard Index. Brokerage firm Nuvama highlighted that ITC Hotels will require at least six months of trading history to qualify for Futures & Options (F&O) inclusion, subject to SEBI approval.
Centrum Broking’s Positive Outlook
Centrum Broking forecasts that ITC Hotels’ revenues will reach ₹45.7 billion by FY27E, with EBITDA margins of ~35%, driven by robust domestic demand in the hospitality sector. The firm maintains a ‘Buy’ rating for ITC shares, targeting ₹583 apiece.
Investment Recommendations for ITC and ITC Hotels
According to SBI Securities, the ITC Hotels demerger offers investors an opportunity to directly participate in the company’s growth story. While ITC Hotels could outperform ITC over the medium to long term, ITC Ltd will continue to benefit from its diversified FMCG portfolio and improved return ratios post-demerger.
Ganesh Dongre, Senior Manager at Anand Rathi, suggests that ITC shares have established a strong support base at ₹430, advising investors to accumulate in the ₹430-450 range with a stop-loss at ₹400. He expects the stock to touch ₹520 upon breaking the ₹480 resistance level.
What Should Investors Do?
While short-term fluctuations may occur, particularly as institutional investors adjust their holdings, experts view these as opportunities for retail investors to build long-term positions. ITC Hotels’ debt-free status and healthy return ratios make it an attractive investment in the luxury hospitality sector.
For ITC shareholders, the demerger offers a chance to benefit from ITC Hotels’ targeted expansion while continuing to hold ITC Ltd shares for steady growth. Investors are encouraged to monitor the listing developments and capitalize on market dips.
The ITC Hotels demerger signifies a new chapter for both ITC and its hospitality arm. With promising growth potential and a robust strategy, the future appears bright for shareholders of both entities. Are you ready to make the most of this investment opportunity?
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