ITC shares now trade ex-hotels; Check stock price post demerger

At end of a special trading session on stock exchanges on Monday, January 6, for the price discovery of ITC Ltd., the market has assigned a price of ₹455.60, as the hotels arm spins off from cigarettes-to-FMCG conglomerate.

The price for ITC Ltd. was determined by the difference between the closing price of ITC Ltd. on January 3, and price of ITC discovered during the special pre-open session.

ITC shares opened ₹26 per share lower as against the previous close after the company went ex-hotel business. ITC Hotels shares will list by mid-February.

The Street was expecting ₹15-20 per share adjustment for the hotel business.

Under the scheme of demerger, shareholders of ITC Ltd. will get one equity share of ITC Hotels for every 10 shares of ITC held, with ITC keeping a 40% stake in the newly demerged entity. The rest of the 60% will be held by existing shareholders proportionate to their stake in ITC.

“We are expecting the listing to be on or before Feb 2025 and based on the peer valuation expectation in the luxury hotel space, we are expecting the listing to be anywhere in the range of ₹100-125 per shares on conservative basis,” said Prashanth Tapse of Mehta Equties.

Further, Tapse said that ITC Hotels’ demerger is expected to unlock substantial shareholder value and enable the newly-formed company to focus on growth in the luxury hospitality sector. Post demerger, we continue to remain optimistic on the stocks and the demerger entity (ITC Hotel). Hence, the analyst has recommended investors to hold and enjoy the unlocking shareholders value.

Will ITC Hotels be part of the Nifty 50?

Similar to Jio Financial Services, ITC Hotels will be the 51st Nifty 50 stock and the 31st stock on the Sensex and will be considered daily in the index weightage calculations.

“However, as it is not traded live, its market cap and price will remain constant till it lists,” said Nuvama Alternative & Quantitative Research.

ITC Hotels operates with over 140 hotels and nearly 13,000 operating keys as of October 2024. It has plans to grow its portfolio to over 200 hotels and over 18,000 keys by 2030. It also has a net cash surplus with negligible debt on its books.

In a note on December 31, brokerage firm SBI Securities had said that the hotels business has a long runway to capture the growth opportunities in the tourism industry of India. The brokerage advised investors to participate in the growth story of ITC’s hotels business by buying a minimum of 10 shares on or before January 3, 2025.

SBI Securities is projecting ITC Hotels to generate a net profit of ₹546 crore in financial year 2025, given the negligible debt on its books and an assumed tax rate of close to 28%.

For ITC, the demerger of its asset heavy hotels business will result in improved return ratios and cash flows. “We believe, post demerger, ITC’s medium-term fair value to be between ₹525 – ₹550,” the brokerage had said.