ITC Special Pre-open Session On Jan. 6: How ITC And ITC Hotels Will Trade Jan. 6 Onwards
ITC stock will undergo a special pre-open session on Jan. 6 for price discovery after ITC Hotels shares are demerged.
The hotels business of cigarette major ITC Ltd., is all set to list on the Indian exchanges once its goes ex-demerger on Jan. 6, 2025.
The board of ITC Ltd., last year, approved a scheme of arrangement among ITC and their respective shareholders and creditors to demerge its hotels arm into ITC Hotels Ltd. The demerger will be effective from Jan. 1, 2025. The last date to be eligible to get shares of ITC Hotels was Jan. 3, 2025 since investors should be holding shares in ITC on the ex-date of Jan.6, 2025.
The demerger will be done through a special pre-open session that will result in ITC Hotels Ltd. The hotel arm will be ascribed an intrinsic value based on the special pre-open session on Monday between 9:00 am and 10:00 am.
Since the shares of ITC Hotels are yet to be transferred to eligible ITC shareholders and exchanges permission pending, the ITC Hotel stock will remain in benchmark indices Nifty 50 and BSE Sensex as a dormant stock.
ITC will continue to trade in the normal market after adjusting for the demerger of the hotels business arm.
ITC Hotels Trading
Upon demerger ITC Hotels will be retained in indices till the shares of ITC Hotels are credited into the demat of eligible shareholders and they get listed and begin trading. As per regulations the shares should be credited within 60 days from receipt of NCLT order. ITC received the NCLT order on Dec. 16, 2024.
The ITC Hotels till then will remain in the indices at constant price which is the difference between ITC's closing price the day before the demerged entity (Jan. 3) and price ex-hotel price arrived on Jan. 6 during special pre-open session.
According to exchange regulations for listing companies through scheme of arrangement and index reconstitution rules, ITC will have a pre-open session on Jan. 6, 2025, between 9:00 a.m. and 9:45 a.m. for price discovery. The stock will resume normal trade from 10:00 a.m. onwards.
Once the ITC Hotels shares are credited to the shareholders and exchange permits trading, the ITC Hotels 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 both 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.
ITC Demerger: Tax Implications
Every shareholder of ITC Ltd. will be given a share of ITC Hotels for every 10 shares they hold in the parent conglomerate.
Since there is a separation from an existing company and new shares are allotted to the investor based on the holdings in ITC, there has to be an apportionment of the total cost that has been incurred for the shares.
The cost of shares are normally the book value which will be demerged from the parent.
ITC's hotels segment had a net worth of Rs 7,818.4 crore at the end of Sept. 30, 2024. This accounted for 9.5% of the total net worth of ITC at the end of the same period. ITC Hotels' book value per share stands at Rs 37.57 per share.
