Key points:
- ITC is actively pursuing the demerger of its hotel business, which was put on hold during the pandemic.
- The company is exploring alternate structures for its hotel business in line with industry dynamics.
- A separate listing of the hotel section is being considered by ITC.
- The hotel business of ITC has shown impressive financial performance, with significant revenue and profit growth in the fourth quarter of 2022-23.
ITC, the tobacco-to-hospitality conglomerate, is actively pursuing the demerger of its hotel business, a proposal it had put on hold during the pandemic. According to a report on CNBC-TV18, the process for the demerger is currently underway, with ITC exploring alternate structures in line with industry dynamics. The company is also considering a separate listing of its hotel section.
ITC Chairman and Managing Director, Sanjiv Puri, emphasized the significance of the hotel business demerger, stating that it is “very much on the table” following the recovery of the sector after the Covid-19 pandemic. Puri expressed the company’s intention to establish an alternative business structure for the hotel business, taking into account the robust recovery of the hotel industry.
Puri highlighted ITC’s progress in the last year, stating that they have opened nearly one hotel per month. As part of its “asset right” strategy, the company aims to achieve an optimal mix of owned and managed hotels. ITC had previously built numerous owned hotels, which impacted capital productivity. Consequently, the company decided to focus on hotels under management contracts, leveraging its market standing.
The positive news surrounding the demerger plans has led to a surge in ITC’s shares, reaching a record high of Rs 475, marking a 1.85 percent increase. The hotel business of the conglomerate also witnessed impressive financial performance. In the fourth quarter of 2022-23, revenues recorded a significant increase of 101 percent, amounting to Rs 782 crore, while EBIDTA stood at Rs 272 crore compared to Rs 32 crore in the same quarter the previous year. Furthermore, the hotel business achieved revenue growth of 99 percent, reaching Rs 809 crore, and posted a profit (before tax) of Rs 205 crore, compared to a loss of Rs 29 crore in the corresponding period of the previous year.
ITC, established in 1910, holds the position of India’s largest cigarette manufacturer and seller. The conglomerate currently operates across various business segments, including FMCG, hotels, paperboards, paper and packaging, and agribusiness. Its strong and steady performance, along with significant price movement and heavy volumes, has resulted in ITC’s shares reaching a new record high of Rs 479.05 on Wednesday.
With ITC’s market capitalization hovering around Rs 5.9 lakh crore, the company now ranks as the sixth-largest listed entity on Dalal Street. The stock has experienced a remarkable journey, having surged approximately 65 percent from its 52-week low at Rs 284.85 and delivering a return of over 210 percent since the lows witnessed during the Covid-19 pandemic. Over the past 6 months, ITC’s stock has gone up by 43% in value, providing strong returns to its investors.
As ITC proceeds with the demerger of its hotel business and explores alternative structures, stakeholders and industry observers eagerly anticipate the company’s future strategic moves in the hospitality sector.
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