ITC Hotels Demerger is set to occur as ITC Ltd., the cigarettes-to-FMCG conglomerate, spins off its hotel arm as a separate entity on the stock exchanges. The demerger has drawn significant attention, with a special pre-open session scheduled today, January 6, to determine the stock price. Under the demerger plan, ITC shareholders will receive one equity share of ITC Hotels for every ten ITC shares held. ITC will retain a 40% stake in the newly formed entity, with the remaining 60% distributed among shareholders proportionate to their holdings.
Analysts are divided on the expected valuation. Japanese brokerage Nomura predicts ITC Hotels shares could debut between Rs 200–300 per share, potentially positioning its market capitalization between Rs 42,500 crore and Rs 62,200 crore. Conversely, Nuvama Institutional Equities estimates a more conservative range of Rs 150–175 per share. Sharekhan echoes a similar valuation, suggesting the stock’s price discovery could be in the Rs 150–170 range, with prospects for premium valuation post-listing.
Special Session and Price Discovery Mechanism
A special pre-open session from 9:00 am to 9:45 am will facilitate price discovery for shares affected by the ITC hotels demerger. Normal trading for ITC shares will resume at 10:00 am. The price of ITC Hotels will be calculated as the difference between ITC’s closing price on January 3 and its price established during the special session.
The listing of ITC Hotels will also impact index calculations. The stock will be included in all NSE and BSE indices at a constant price for the listing day and the following three trading days. If circuit limits are hit, exclusion from indices will be deferred by two trading days each time. However, investors will be unable to trade the provisional version of ITC Hotels after the pre-open session. Trading will commence only after the formal listing of the scrip on the exchanges.
Market Impact and Investor Outlook
The demerger is anticipated to unlock value for shareholders, as ITC’s hotel business could command a higher valuation post-listing compared to its current valuation under ITC’s umbrella. Analysts suggest that better price discovery in the standalone market could attract investors seeking exposure to the hospitality sector. Nuvama forecasts a Rs 22-25 downward adjustment in ITC’s share price later today, reflecting its reduced stake in the hotel arm and incorporating a 20% holding discount.
Market watchers are closely following the developments of the ITC hotels demerger, with expectations of significant trading activity during and after the pre-open session. As ITC Hotels prepares for its formal entry into the stock market, the demerger marks a pivotal moment for ITC’s diversification strategy and shareholder value creation.
