ITC Limited has provided an important update regarding the demerger of its Hotels business, which is set to be executed through a Scheme of Arrangement approved by the National Company Law Tribunal (NCLT). The demerger is scheduled to take effect on January 1, 2025, with a record date of January 6, 2025 for determining the shareholders eligible to receive shares of ITC Hotels Limited.

Dossier of the Demerger

Under the demerger plan, ITC Hotels will issue equity shares to the shareholders of ITC, with approximately 60% of the stake being directly held by them. The remaining 40% stake will continue to be retained within ITC itself, ensuring that all current ITC shareholders hold 100% of ITC Hotels, either directly or through their holdings in ITC.

The detailed timeline highlights the approval of the NCLT Order on December 16, 2024, and confirms that all conditions specified in the Scheme have been satisfied, paving the way for the Appointed Date and Effective Date of the demerger to be January 1, 2025. The record date for the allotment of shares is set for January 6, 2025, ensuring smooth transition of shares to ITC’s shareholders.

Strategic Vision for ITC Hotels

The demerger of the Hotels business represents a crucial step in ITC’s larger corporate strategy to unlock value in its hospitality sector, focusing on brand equity and capital productivity. The demerged entity, ITC Hotels, will inherit a series of prestigious brands and intellectual property, including ITC’s globally recognized trademarks such as ‘ITC’, ‘Bukhara’, ‘Dum Pukht’, and ‘Dakshin’. A Trademarks License Agreement will enable ITC Hotels to use these valuable assets, continuing their legacy of excellence in the hospitality sector.

In addition to intellectual property, ITC Hotels will assume responsibility for key properties, assets, liabilities, and contracts forming part of the Hotels business. This will include the cash balance of Rs. 1500 crore set aside for planned growth and future contingencies, along with several high-value hospitality entities such as Bay Islands Hotels Ltd., Fortune Park Hotels Ltd., and WelcomHotels Lanka Pvt. Ltd., which will be transferred to the newly formed company.

A Strong Path for Future Growth

As part of the transition, ITC Hotels will be tasked with enhancing its brand through continued investment in luxury experiences and expanding its presence in key international and domestic markets. The company’s growth strategy includes aggressive expansion plans with more owned hotels, managed hotels, and new Greenfield projects. Notably, ITC Hotels is planning to add 300+ rooms to its owned hotels portfolio, with a focus on high-growth markets such as Puri and Bhubaneshwar.

In addition, ITC Hotels aims to increase its share of the managed hotel portfolio to two-thirds in the next five years, with 45 managed hotels planned across key locations. This ambitious pipeline is expected to generate significant management fees, with a target of growing the company’s fee-based revenue stream by 2.5 times by FY30.

Financial Overview

The financial performance of the Hotels business was also highlighted, with a strong showing of revenues and EBITDA. The total Revenue from Operations for H1 FY25 stood at Rs. 1,471 crore, with significant contributions from both operational and non-operational revenue sources. The company is also focusing on capital-efficient growth, with ongoing investments in renovations, expansions, and Greenfield projects. In fact, ITC Hotels has opened 28 managed hotels over the past two years, signaling its aggressive growth trajectory.

The Global Perspective

ITC Hotels’ international presence, particularly in Sri Lanka, has been bolstered by the addition of properties such as the ITC Ratnadipa in Colombo, which is expected to be a major contributor to future revenue and EBITDA. The strategic location and exclusive nature of this property, with luxury apartments designed by Philippe Starck (YOO), will position ITC Hotels as a leader in the luxury hospitality segment in South Asia.

Conclusion

The demerger of ITC’s Hotels business marks a significant milestone in the company’s corporate journey, aligning the hospitality sector with its long-term growth objectives and market position. With a strong balance sheet, strategic investments, and a robust pipeline of projects, ITC Hotels is poised for an exciting new phase of expansion and innovation. Investors and stakeholders are encouraged to stay informed on future updates, including the listing and operational developments post-demerger.

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