Indian conglomerate ITC this week shared that the demerger of its ITC Hotels has come into effect from January 1 this year.
In December, the National Company Law Tribunal approved the demerger. As per the guidelines of stock market watchdog Securities and Exchange Board of India (SEBI), the shares of ITC Hotels are likely to be listed by February 2025.
However, ITC will continue to hold a 40% stake in its hotel business. The remaining 60% shares will be allocated to its existing shareholders in proportion to their stake in ITC. The hotels business will also receive INR 15 billion ($174.8 million) in the demerger for planned growth and contingency requirements, the company said in an exchange filing.
As a standalone entity, ITC Hotels will compete with Tata’s Indian Hotels Company (IHCL), the Oberoi Group, and The Leela group.
ITC’s Investments in Hospitality
In an investor presentation, ITC said that the company has invested in renovations, ongoing projects, and new greenfields to grow the hotel division. “ITC Hotels is also well positioned to executive mergers and acquisitions and enter into alliances,” it said.
ITC is also looking beyond its own hotel division to take advantage of the growth in the industry. Last month, it announced that it acquired an additional 2.44% stake in Oberoi-parent East India Hotels (EIH).
It also increased its stake in Hotel Leela Venture (HLV), which owns and operates The Leela Mumbai, by 0.53%. Post these acquisitions, ITC holds over 16% shares in EIH and over 8% in HLV.
What’s Next for ITC Hotels?
Under the demerger, ITC will transfer hospitality entities including Bay Islands Hotels, Fortune Park Hotels, WelcomHotels Lanka, Gujarat Hotels, and Maharaja Heritage Resorts to ITC Hotels. However, its financial investments in EIH and HLV will not be transferred to the hotel arm.
The hotel business has over 140 operational hotels in its portfolio with a room inventory of over 12,000 keys, it said on its website. It is planning to add 300 rooms under its owned hotels, including 118 keys at Welcomhotel Puri by fiscal 2028.
Banking on the increasing interest among hotel owners, ITC Hotels is targeting a 2.5 times growth in management fees by the 2029-30 financial year. It currently has a pipeline of 45 managed hotels consisting of around 4,000 keys.
In its presentation, the company said that it is aiming to have over 200 hotels with more than 18,000 keys over the next five years. ITC Hotels is also looking at expanding ITC Narmada in Ahmedabad, ITC Royal Bengal in Kolkata, and Welcomhotel Bhubaneswar.
Lucrative Hotels Industry
The demerger comes amid growing positive investor sentiment towards the travel industry. Investment banking company Jeffries said as companies aim to capitalize on the strong outlook for the industry, the public listing landscape for hotels in India will likely expand.
According to Jeffries, the travel demand in India has remained robust post Covid, despite high prices. This, along with favorable macroeconomic conditions and supply-demand gap, is leading to a continuous boost in average room rates (ARRs) for hotels.
It listed four companies that are entering the stock market: ITC Hotels, parent company of The Leela hotels Schloss Bangalore, owner and developer Brigade Hotel Ventures, and asset owner Ventive Hospitality. Schloss, Brigade and Ventive are collectively raising INR 80 billion ($932 million).
These developments follow recent IPOs by Samhi hotels, Apeejay Surrendra Park Hotels, and Juniper Hotels collectively raising INR 40 billion ($466 million).
