Come January 1, 2025, ITC Ltd. will officially demerge its hotel business, creating a new and independent entity, ITC Hotels Ltd. This decision, which received final approvals after being proposed in June 2024, marks a significant milestone for one of India’s most diverse conglomerates.

The move is part of ITC’s broader strategy to streamline its operations, allowing its core businesses—FMCG and tobacco—to drive growth while giving ITC Hotels the flexibility to chart its own course in the fast-evolving hospitality industry.

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Why is the Hotels business getting separated from ITC Ltd?

By separating ITC Hotels, ITC Ltd. is doubling down on its "Asset Right" strategy, which prioritizes growth through management contracts rather than heavy capital investments. This makes ITC Hotels a leaner, more efficient player in the premium and luxury hotel market.

For ITC Ltd., the demerger enhances focus on its high-growth FMCG and tobacco divisions, ensuring better capital allocation. For ITC Hotels, operating independently allows it to raise funds and unlock its full growth potential.

Key Details for Shareholders

• Share Allocation: ITC shareholders will receive one share of ITC Hotels for every 10 shares of ITC Ltd. they own.
• Ownership Split: ITC Ltd. will retain a 40% stake in ITC Hotels, while the remaining 60% will go directly to its shareholders.

The Bigger Picture

Ahead of its hotels business demerger in January 2025, ITC Ltd. has also raised its stakes in luxury hotel operators EIH (The Oberoi Group) and HLV (The Leela Mumbai) by acquiring shares from its wholly-owned subsidiary, Russell Credit. ITC now holds 16.13% in EIH and 8.11% in HLV, up from its previous holdings, with acquisitions costing ₹111.22 crore for EIH and ₹10.93 crore for HLV .This increased stake reinforces ITC’s long-term commitment to the luxury hospitality sector, aligning with its plan to unlock shareholder value through the demerger. Owning a higher stake in premium hotel operators complements ITC Hotels' focus on luxury and premium segments post-demerger.

• For the hospitality industry: Gaining a separate listing and a separate board will help the company allocate its assets and cash and reserves in a way that will help it capitalize on the growing demand for premium and luxury hotels, both domestically and internationally.​​​​​​​
• For ITC shareholders: This demerger offers direct exposure to the growing hospitality market while ITC Ltd. sharpens its focus on its core strengths.

Plans for ITC Hotels

• ITC Hotels will soon be listed on the NSE and BSE, becoming the second-largest listed hotel company in India after the Tata-led Indian Hotels Ltd.

• The company will expand its reach with brands like Mementos and Storii, targeting luxury and premium segments.

• ITC Hotels plans to leverage its partnerships with ITC MasterChef and Kitchens of India to enhance guest experiences.

What’s Next?

The demerger of ITC Hotels draws a strategic shift for ITC Ltd., reflecting its focus on capital efficiency and prioritizing high-margin businesses like FMCG and tobacco. This move allows ITC Hotels to independently pursue growth opportunities in the hospitality sector. By distributing 60% of ITC Hotels’ ownership directly to shareholders, ITC offers its shareholders the value and its investors a direct exposure to the growing hospitality market. ITC Hotels is well-positioned to expand its footprint in India’s premium and luxury hotel segments with its sustainable "Asset Right" strategy, which emphasizes growth through management contracts rather than heavy capital investments.

The demerger also highlights the increasing maturity of the Indian business landscape, where companies aim to streamline operations and unlock sector-specific value. It sets a precedent for similar strategic moves in the future. With a focus on new luxury brands, sustainability, and partnerships, ITC Hotels is poised to emerge as a leader in India’s rapidly expanding hospitality industry. The separation enhances operational clarity and creates growth-focused entities, signaling a win-win for ITC Ltd., ITC Hotels, and their shareholders.

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