Last September ITC chairman Sanjiv Puri had told TOI in San Francisco that alternate structures were being explored for ITC Hotels “in line with (the strong) industry recovery dynamics.” On Monday after the demerger was approved, Puri said: “The proposed demerger of the hotels business is testament to the company’s commitment to creating sustained value for stakeholders. Creation of a hospitality focused entity will engender the next horizon of growth and value creation by harnessing the exciting opportunities in the Indian hospitality industry. In the proposed reorganisation, both ITC and the new entity will continue to benefit from institutional synergies.”
Details of the proposed reorganisation, including the scheme of arrangement, will be placed for board approval on August 14, 2023. Over the last two decades ITC’s hotels business has scaled up significantly in terms of room inventory, revenue and profits. It currently has over 120 hotels and 11,600 keys across 70 plus locations. The group’s hospitality brands include “ITC Hotels” in the luxury segment; “Welcomhotel” in premium segment; “Fortune” in mid market to upper-upscale and “WelcomHeritage” in the leisure and heritage segment. Two new brands, “Mementos” in luxury lifestyle and “Storii” in premium segment were recently launched.
“The proposed reorganisation would ensure continued interest of the company in the hospitality business, provide long term stability and strategic support to the new entity in its pursuit of accelerating growth and sustained value creation as also enable leveraging of cross synergies between the company and the new entity. The demerger will help the new entity in attracting appropriate investors and strategic partners/ collaborations whose investment strategies and risk profiles are aligned more sharply with the hospitality industry,” ITC said in a statement. The demerger will “unlock value of the hotels business for the company’s shareholders by providing them a direct stake in the new entity along with an independent market driven valuation thereof. This move also reinforces the sharper capital allocation strategy put in place in recent years, manifest in the pivot to ‘asset-right’ strategy in the hotels business,” the statement added.