Under the demerger scheme, shareholders will receive one ITC Hotels share for every 10 ITC shares they hold
The much-awaited demerger of ITC Hotels will have its record date on January 6, with today being the last day for investors to purchase ITC shares to become eligible for receiving ITC Hotels shares once the demerger occurs.
Under the demerger scheme, shareholders will receive one ITC Hotels share for every 10 ITC shares they hold, with ITC retaining a 40% stake in the newly demerged entity. The remaining 60% will be distributed among existing shareholders in proportion to their holdings in ITC.
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How Will The ITC Hotels Share Price Be Determined?
On January 6, a special pre-open session will be held to determine the price of ITC Hotels. The price will be calculated based on the difference between the closing price of ITC on January 3 and the open price of ITC discovered during the special pre-open session.
Afterward, the ITC Hotels stock will be maintained at a fixed price on the NSE and BSE indices for the listing day and for the following three business days. If the stock hits its circuit limit, the exclusion will be delayed by two trading days.
For instance, if ITC Hotels lists on February 10, 2025, it will be compulsorily removed from indices on February 13, 2025, as per Nuvama Alternative & Quantitative Research.
What Do Brokerages Say?
While an official listing date has not been confirmed, it is expected to occur within a month, with mid-February being the latest possible date.
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According to Japanese brokerage firm Nomura, ITC Hotels’ shares could list in the Rs 200-300 range, with a market capitalization of around Rs 42,500 crore to Rs 62,000 crore.
“We expect value unlocking with the creation of a pure-play hotel entity, which can embark on its next growth phase under a new structure, accessing equity and debt markets for future funding needs. The luxury hospitality sector in India has seen re-rating due to high structural demand, limited supply of luxury hotel rooms, rising occupancy rates, and improved margins,” Nomura explained.
With the promising growth potential of the domestic tourism industry and ITC Hotels’ strong financial position, SBI Securities has advised clients to purchase ITC shares before January 3 to take advantage of this special situation.
SBI Securities forecasts that ITC Hotels could list at an EV/EBITDA multiple of 20.0x-30.0x, translating to a share price range of Rs 113 to Rs 170 per share.
“Though some short-term pressure on ITC Hotels’ stock price is possible due to forced exits by some shareholders (such as ETFs), we believe that any such pressure will present a good opportunity for retail and HNI shareholders to accumulate a quality business for long-term growth,” said SBI Securities.
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Centrum has set a target price of Rs 583 on ITC with a buy call, while SBI Securities estimates that post-demerger, ITC’s medium-term fair value will fall in the Rs 525-550 range.
Analysts expect ITC’s standalone valuation to align more closely with FMCG peers due to improved return ratios and focused growth. Meanwhile, ITC Hotels could emerge as a premium hospitality stock with tailored growth strategies, according to Satish Chandra Aluri from Lemonn Markets Desk.
When Will ITC Hotels List?
Though no official date has been confirmed, approval for the listing may take a few weeks.
“Since ITC Hotels is being carved out from one of the largest corporations, we expect the listing process to be fast-tracked, and ITC Hotels could list within a month,” said Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research.
Nomura expects ITC Hotels to list before mid-February.
Recent Examples Of Spin-Off Listings:
- Jio Financials: Demerged from Reliance Industries, listed 33 days after the record date.
- Piramal Pharma: Demerged from Piramal Enterprises, listed 45 days after the record date.
- NMDC Steel: Demerged from NMDC Ltd, listed 4 months after the record date.
How will ITC shares react?
ITC’s share price is expected to adjust by Rs 22-25 on the ex-date, reflecting its 40% stake in the hotel business and incorporating a 20% discount for its holding, according to Nuvama.
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