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Wednesday, October 4, 2023

ITC to spin off Rs 2600 crore hotel business after 19 years

KOLKATA: Sanjiv Puri-led TIC has finally proposed to spin off its hotel business into a separate company 19 years after its creation. The conglomerate’s board of directors approved on Monday the much-discussed spin-off of the hotel division.

According to a company statement, ITC will have 40% of the hotel company while the remaining 60% will be with shareholders from ITC on a proportionate basis.
ITC Hotels was established as a separate company during the 1980s, and subsequently, in August 2004, ITC Hotels merged with parent company ITC. At the company’s General Shareholders’ Meeting in 2021, Puri indicated for the first time a possible restructuring of the hotel business. Details of the proposed reorganization, including the outline of the arrangement, will be submitted to the board for approval at its meeting to be convened on August 14, 2023.

The board also approved the incorporation of a wholly owned subsidiary of the company, to be called ITC Hotels.
The hotel division took a big turn in 2022-23. It had posted a segment revenue of Rs 2,585 crore in 2022-23 from Rs 1,285 crore in 2021-22, a growth of 101%. The segment’s profit was Rs 542 crore in 2022-23, one of its highest ever, up from a loss of Rs 183 crore in the same period a year earlier. Now, the hotel division has more than 120 hotels and 11,600 keys.
ITC said that ITC’s board of directors, at its meeting, evaluated and discussed various alternative structures for the hotel business in order to design the next growth horizon and also enhance value creation for all stakeholders.
At Rs 6.1 lakh crore, ITC top valued consumer goods firm briefly
For a brief period of time during the Monday session, ITC had become the most valued FMCG company in India, surpassing HUL. However, after Kolkata-based major FMCG announced the spin-off of its hotel business, shares fell sharply to close nearly 4% lower. Market players said it was the ‘buy on rumours, sell on news’ strategy that brought down ITC after the spin-off announcement. As of the close of the session on Monday, with a market capitalization of Rs 6.11 lakh crore, HUL was the fifth most valued company in India, followed by ITC with Rs 6.10 lakh crore, BSE data showed.

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