ITC Transfers rs1500 Crore to ITC Hotels Ahead of Demerger

ITC is set to transfer ₹1,500 crore in cash and cash equivalents to ITC Hotels, providing significant financial support for growth initiatives and contingency planning ahead of the demerger scheduled to take effect on January 1, 2025. This allocation will also include the transfer of assets and trademarks associated with the hotel business, ensuring the demerged entity is well-equipped for independent operations.

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Shares of ITC Ltd ended at ₹477.10, down by ₹1.80, or 0.38%, on the BSE.

The investor presentation, shared on December 30, outlined ITC Hotels’ strategic focus on growth through a combination of capital investments and operational excellence. It is expected to allocate 8-10% of its revenue toward capital expenditures, which include renovations, ongoing projects, and the development of new greenfield ventures. This capital infusion underscores ITC Hotels’ ambition to strengthen its presence in the hospitality sector while pursuing selective inorganic growth opportunities. According to ITC, these alliances and acquisitions will aim to enhance shareholder value and support the long-term growth trajectory of the company.

ITC Hotels will inherit a robust financial position, characterized by a zero-debt balance sheet and strong cash-generating businesses. This financial strength is expected to enable the company to scale its operations effectively and seize opportunities in the competitive hospitality market. The company’s leadership has emphasized that this transition marks a strategic milestone, positioning ITC Hotels as an independent entity capable of driving sustainable growth while maintaining its premium positioning in the market.

In addition to its financial assets, ITC Hotels will also retain its workforce, ensuring continuity of service for employees transitioning from ITC. The terms of employment for these employees will remain at least as favorable as their current conditions, reflecting ITC’s commitment to preserving employee welfare and retaining talent during the restructuring process. This seamless transition aims to safeguard operational stability and uphold the high standards for which ITC Hotels is known.

However, not all investments related to ITC’s hospitality ventures will be transferred to the new entity. Financial stakes in EIH and HLV, along with non-operational investments such as Logix Developers, will remain under ITC’s control as per the demerger scheme. Additionally, ITC Hotels is finalizing an operating service agreement to manage the ITC Grand Central hotel in Mumbai, a move designed to streamline operations and optimize resource allocation.

Post-demerger, ITC Hotels will issue equity shares directly to ITC’s shareholders. Sixty percent of the shares will be distributed to shareholders, while ITC will retain a 40% stake in the demerged entity. The Record Date for determining eligible shareholders for ITC Hotels’ shares has been set as January 6, 2025. This structure ensures that shareholders benefit directly from the growth potential of the newly independent ITC Hotels while allowing ITC to maintain a significant stake.

The demerger represents a strategic restructuring aimed at unlocking value for ITC’s shareholders and fostering growth in the hospitality sector. ITC Hotels, with its legacy of excellence and a strong financial foundation, is well-positioned to capitalize on emerging opportunities in the industry. By focusing on organic growth, selective acquisitions, and operational efficiency, the company aims to solidify its leadership position and expand its footprint in the evolving hospitality landscape. This transition is expected to drive long-term value creation for shareholders, employees, and other stakeholders, marking a new chapter in ITC Hotels’ journey.