For about 36 lakh shareholders of Kolkata-based diversified conglomerate ITC Ltd, today (January 6) is the record date for the much-awaited demerger of the company’s hotel business.
While ITC Hotels shares will not get listed today, bourses will create a dummy ticker and include it as the 51st Nifty stock and 31st Sensex stock till the actual listing happens in the next few weeks. Until then, you can’t buy or sell ITC Hotels shares.
ITC share price to fall after demerger
Under the special call auction session, ITC Hotels share price would be computed using the difference between ITC’s last closing price and its settling price at the end of the special session. The 1:10 demerger ratio would also be used in the calculation.
Nuvama expects ITC’s share price to be adjusted by Rs 22-25, reflecting its 40% stake in the hotel business and incorporating a 20% holding discount.
ITC will give 1 ITC Hotels shares against every 10 ITC shares to all unitholders whose name appears on the record books on Monday. As part of the demerger deal, ITC would retain 40% of the hotel shareholding and the remaining 60% would be equally distributed among existing ITC shareholders.Also read | ITC Hotels share listing price can go up to Rs 300 after demerger. What brokerages sayMost brokerages on the Street are anticipating that ITC Hotels share price could come out to be anywhere between Rs 150-200 per share.
“Assuming ~18% EBITDA CAGR (FY24-26E; vs 20%+ for peers) and 15-25% discount to IHCL valuations (given lower scale), fair value should range from Rs 190-220/share (+/-5%), in our view,” Ambit Capital’s analyst Karan Khanna said.
The demerger, analysts say, allows ITC to sharpen its focus on high-margin businesses like FMCG, where EBITDA margins improved to 10% in FY24 and are expected to reach 12% by FY26.
“In the short term, there is a possibility that few shareholders (especially ETFs) may have to forcefully exit ITC Hotels Ltd and this can create pressure on the stock price. We believe, any short term pressure on the stock price of ITC Hotels Ltd will be a good opportunity for retail/HNI shareholders to accumulate quality business in their long term portfolio,” SBI Securities said.
By operating independently, ITC Hotels will focus exclusively on hospitality, adopting asset-light models to enhance profitability. ITC, meanwhile, is positioned for a potential re-rating due to its leaner and more focused business profile, Satish Chandra Aluri of Lemonn Markets Desk said.
ITC shares ended last week 1.5% lower at Rs 482 on BSE and have underperformed by rising just about 1% in the last one year.
An analysis by Japanese brokerage firm Nomura said ITC Hotels shares can list in the range of Rs 200-300 per share at a market capitalization of around Rs 42,500-Rs 62,000.
“We expect value unlocking for ITC Hotels with the creation of a pure-play hotels entity, which can embark on its next growth phase under a new structure with access to equity/debt markets for future funding growth requirements. Also, the luxury hospitality sector in India has undergone re-rating over the past couple of years given limited supply of keys in the luxury segment, high structural demand, higher occupancy rates, increase in average room rates, improvement in margins and de-leveraging of balance sheets,” said Nomura analyst Mihir P Shah.
