ITC Hotels Will Need To List By This Date To Remain In Global Indices

The special pre-open session for ITC demerger saw the ITC shares correcting by Rs 26 per share on the NSE and Rs 27 per share on the BSE.

The demerged value of ITC Hotels will continue to remain dormant on the nearly 50 indices of the NSE and BSE. This means the Nifty 50 will have 51 stocks and Sensex 30 will have 31 stocks, with ITC Hotels remaining dormant at a price of Rs 26 per share on the Nifty 50 and Rs 27 on the Sensex.

As per regulation, ITC Hotels shares should be credited to the demat account of eligible ITC shareholders within 60 days from Dec. 16, the date on which it received NCLT nod for the demerger. This date comes to Feb. 14, 2025.

However, it is noteworthy that ITC is part of global and domestic indices like FTSE Global and MSCI, which are largely tracked by foreign investors. A quick look at the shareholding pattern of ITC shows that foreign investors held close to 15% in the cigarette major and will hold little over 9% in ITC Hotels as per Sept. 30, 2024 data.

As per FTSE Global Indices guidelines, ITC Ltd. will have to disclose the listing date for ITC Hotels within 20-days of demerger i.e. Jan. 6, 2025, to be retained in the FTSE Global Indices.

If ITC Ltd. fails to disclose listing date for ITC Hotels by January 31, 2025, the hotel arm risks to be dropped from all the indices. This will lead to heavy selling in the stock upon listing as foreign investors benchmarking their active and passive portfolios will have to exit the stock.

ITC Hotels is likely to be eligible to be part of the MSCI and FTSE Global Indices as its market value on listing is expected to be well above the threshold and foreign holding limit will be substantial upon listing.

ITC Hotels does not have any FDI cap and upto 100% foreign holding is allowed through automatic route. ITC will continue to hold around 40% in the hotel arm, hence around 60% of the remaining shareholding is open to foreign holding. Further, BAT and SUUTI together hold close to 23% of ITC Hotels and they could exit the shares upon listing.

The exchanges have given in-principle listing to ITC Hotel shares based on whcih the special pre-open session concluded on Jan. 6, 2025. The management will now have to ensure all regulatory nods are in place before the shares can be credited to demat account and traded on the stock exchanges.

Trading in ITC Hotels shares will take place on trade-to-trade basis. Once the ITC Hotels shares are credited to the shareholders and exchange permits trading there will be a pre-open session for ITC Hotels, the Hotels shares will only be removed from the indices after the end of third day. In case the share price of ITC Hotels hits the circuit on first two days, then exclusion will be deferred by another three days. 

After two consecutive days of ITC Hotels' share price not hitting the price band, it will be removed from the indices after the third trading day even if it hits the price band on the last day.