Foreign investors can hold up to 100% stake in ITC Hotels Ltd. upon listing. This is because the hotel sector falls under 100% automatic route under FDI regulations, the company said in a statement to NDTV Profit.
Foreign investors can hold up to 100% stake in ITC Hotels Ltd. upon listing. This is because the hotel sector falls under 100% automatic route under FDI regulations, the company said in a statement to NDTV Profit.
ITC Ltd. the parent of ITC Hotels currently has a 34% percent foreign holding cap which includes 10% for non-resident Indians and 24% for foreign portfolio investors held together as a composite cap on the stock. However, this cap will not be applicable to ITC Hotels Ltd. In addition, the cigarette major is held 25.46% through foreign direct investment route by British American Tobacco.
This stake held by BAT is grandfathered as the rules came in post-acquisition of this holding. BAT can now only pare down its stake from ITC and will not be able to increase its stake in the cigarette and FMCG major.
The global cigarette major has already disclosed that it will exit all non-core businesses and hence it it likely to exit ITC Hotels as well.
Also Read: Why BAT Will Exit ITC Hotels, But Not ITC
How Much Can Foreign Investors Hold In ITC Hotels?
While the investment rules allow for 100% stake to be held by foreign investors, in reality foreign investors may not be able to hold more than 60% stake in the company. This is because as per the scheme of arrangement proposed the parent and approved by the shareholders, creditors and finally by the NCLT, the parent ITC will own around 40% stake in the hotel arm after listing. Hence, foreign investors can hold 60% in the hotels business including BAT which will hold around 15.3% stake in the hotel arm.
Foreign investors will hold around 9% stake in the hotels business at the time of listing based on September 30, 2024 shareholding of ITC Ltd.
Among the key domestic institutions LIC stake will be around 9% stake in the hotels arm, it held little above 15% in the cigarette major. The SUUTI stake will also be around 4.68%.
Also Read: ITC Hotels Demerger: Parent's F&O Contracts Expire On Jan. 3 Ahead Of Special Trading Session
Stake Sale Overhang In ITC Hotels
Stake held by global cigarette major BAT and SUUTI stake are likely to come to the market upon the listing of ITC Hotels. The timings of the stake sale is uncertain but this overhang will remain on the stock.
The government can monetise the SUUTI stake in ITC Hotels to raise money and BAT could exit Hotels arm to exit non-core business. The last time it exited ITC was in March of 2023 when it sold 3.5% ITC stake to raise Rs 16,690 crore. BAT stake in ITC Hotels could fetch the company as much as half a billion dollar.
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