During the trading session on Monday, the shares of ITC Limited turned ex-date for the demerger of its hotel business. Investors whose names are listed in the record books will receive 1 share of ITC Hotels for every 10 ITC shares they own.
After the demerger, ITC Hotels will function as an independent entity. Under the demerger arrangement, ITC shareholders will still hold 100 percent of ITC Hotels – 60 percent directly and 40 percent indirectly through ITC. Moreover, analysts predict that ITC Hotels will likely be listed in February.
The price of ITC Hotels will be fixed in all NSE and BSE indices based on the difference between ITC’s closing price on 3rd January 2025, and the opening price during the Special Pre-Open Session (SPOS) on 6th January 2025.
The stock will be removed from all NSE and BSE indices at its last traded price, three business days after ITC Hotels gets listed. If the stock hits circuit limits, the removal will be delayed by two trading days for each circuit limit triggered.
Brokerages Target
According to the foreign brokerage firm Nomura, the shares of ITC Hotels are expected to list in the range of Rs. 200-300, with a market capitalization estimated to be between Rs. 42,500-62,000 crores.
Meanwhile, ICICIdirect, describing the demerger of ITC’s hotel business as beneficial for shareholders, has set a target price of Rs. 195 for ITC Hotels shares. This represents a potential gain of 15-30 percent from the expected listing price of Rs. 150-170. The brokerage also values ITC shares at Rs. 555.
The stock price of ITC post-demerger is anticipated to adjust by Rs. 12-15 per share. The brokerage believes that focusing on the core business will enhance ITC’s long-term earnings and return potential, which has led them to maintain a ‘buy’ rating on the stock.
Financials
ITC reported a significant growth in revenue from operations, experiencing a year-on-year increase of nearly 16.7 percent, rising from Rs. 17,774 crores in Q2 FY24 to Rs. 20,736 crores in Q2 FY25.
Similarly, during the same period, the company’s net profit increased from Rs. 4,965 crores to Rs. 5,054 crores, representing a marginal growth of around 2 percent YoY.
The company’s Hotels Segment delivered a strong performance on a high base from the previous year, which included G20-related business, with revenue rising 12.1 percent YoY (2-year CAGR of 16.5 percent) and segment PBIT increasing 20.2 percent YoY.
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Stock Performance
With a market cap of Rs. 5.53 lakh crores, the shares of ITC Limited closed in the red at Rs. 442.5 on Monday, down by 2.8 percent on BSE, as against its previous closing price of Rs. 482.
The stock has delivered negative returns of nearly 5 percent in one year, as well as around 0.3 percent returns in the last six months. Likewise, the shares of ITC have given negative returns of about 6 percent in the last one month.
About the Company
Established in 1910, ITC Limited, the largest cigarette manufacturer and seller in the country, presently operates in five business segments: FMCG cigarettes, FMCG others, hotels, paperboards, paper and packaging, and agri-business.
Written by Shivani Singh
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