The Board of Directors of ITC Limited, at its meeting held today, evaluated and discussed various alternative structures for the Hotels Business towards crafting the next horizon of growth as also enhancing value creation for all stakeholders.
The Board noted that the Company’s Hotels Business has matured over the years and is well poised to chart its own growth path as a separate entity in the fastgrowing hospitality industry with sharper focus on the business and an optimal capital structure, whilst continuing to leverage ITC’s institutional strengths, brand equity and goodwill, the statement said.
After due consideration, the Board accorded its in-principle approval to the demerger of the Hotels Business under a scheme of arrangement; with the Company holding a stake of about 40% in the new entity and the balance shareholding of about 60% to be held directly by the Company’s shareholders proportionate to their shareholding in the Company. 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, as per the statement.
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. In addition, it 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 by the Company 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, according to the statement.
Commenting on the proposed reorganistion, Sanjiv Puri, Chairman of ITC Limited 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 reorganization, both ITC and the new entity will continue to benefit from institutional synergies.”
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