ITC Hotels Listing: All You Need To Know About Demerger, Listing, Valuation, Ex- Date, Trading Details

The demerger of ITC Hotels Ltd. from cigarette maker ITC Ltd. will be effective Jan. 1, 2025, and the stock will go ex-demerger on Jan. 6, 2025, according to the disclosures made to the stock exchanges.

Investor looking to own ITC Hotel shares should have ITC shares in their account on Jan. 6, 2025 — the record date for the demerger. This means, the last date to acquire the parent's shares is Jan. 3, 2025, Friday.

Every investor will receive one share of ITC Hotels for every 10 ITC shares they hold. The Kolkata-based Classic cigarette maker, which is part of key indices, will undergo special trading session to determine the share price on Jan.6, 2025. The share price of ITC will adjust to the extent to provide an intrinsic value for ITC Hotels.

ITC Hotels shares will subsequently be credited to the demat accounts of investors who held ITC shares as on Jan. 6, 2025.

ITC Hotels: Business And Financials

Demerging the hotels arm will make ITC Hotels India's second largest hotels chain with 140 hotels and 12,965 keys (rooms), including 28 hotels with 1,642 keys in the last 24 months. The company has another 46 hotels with 4,300 keys in the pipeline which will get operationalised by March 2030, taking the total number of properties to 186 with 17,265 keys between them.TC

ITC Hotels manages properties under Welcomhotel, Mementos, Storii, Fortune and WelcomHeritage brands.

ITC Hotels has also pivoted to asset-light model, expanding on a fast basis via management contracts. The company said that, "In line with the ‘asset right' strategy, nine managed properties were operationalised and management contracts for fifteen properties were signed-up during the (H1FY25) first half of the year.

At the end of 6-months to September 2024, the hotels business had a revenue of Rs 1,450 crore and profit before interest and tax of Rs 304 crore. The company has very negligible debt on its books and estimated profit after tax for the same period is at Rs 222 crore, assuming a tax rate of 27%.

ITC Hotels has seen its Management Fee grow at 21% compounded annual growth rate over the last five years. The company will see managed portfolio to rise from 33% in the current fiscal ending March 2025 to 42% five years later, thereby increasing the margin profile of the company.

The ITC Sonar Bangla operator will have zero debt and significant cash generation to accelerate growth, the company said in its analyst presentation. The company will invest nearly Rs 300 crore a year, i.e. 8–10% of the revenues, in capital investments including on renovations, on-going projects, and new hotels. This will be generated largely from internal accruals.

ITC Hotels: Valuations

ITC Hotels will have an equity capital of Rs 208.07 crore comprising of Rs 208.07 crore shares with face value of Rs 1 each. As the ITC share price goes ex-demerger on Jan. 6, it will correct to adjust for demerger of the hotel assets and this intrinsic value of the hotels business will get corrected from ITC's current share price.

So what is the value of ITC Hotels?

The market value of ITC Hotels will be derived based on trading once the shares are credited and listed on both the stock exchanges. Since ITC is a bellweather index stock, the resulting arm — ITC Hotels — will be traded as part of the index till it meets the exchange criteria.

According to the company, ITC Hotels on a consolidated basis had a revenue of Rs 3,103 crore in FY24 and Rs 1,450 crore for the six months ended September 2024. The hotels arm had an Ebitda margin of 32% in H1FY25 and EBIT of Rs 304 crore during the same period. To be clear nearly 33% of the portfolio comprises of managed assets and hence the revenue from this asset light model flows through to the EBIT.

The company is debt free and assuming a tax rate of 25.2%, the company is expected to post a profit after tax of Rs 227.4 crore in H1FY25. For the full fiscal ending March 2025, ITC Hotels is estimated to post a revenue of Rs 3,190 crore and a profit after tax of Rs 501 crore. Based on a revenue jump of 20% in FY26, ITC Hotels could post a revenue of Rs 3,828 crore and at Ebitda margin of 36% (Rs 1,380 crore), with profit after tax of Rs 681 crore thereby, implying an earnings per share or EPS of Rs 3.4 per share.

ITC Hotels' peers — Indian Hotels Co., EIH Ltd., Ventive Hospitality Ltd., Lemon Tree Hotels Ltd. and Juniper Hotels Ltd. — trade a FY26 price to earnings of 40–75 times.

A conservative 40-times FY26 price to earnings of ITC Hotels would mean, the hotel could trade at around Rs 130 per share.

But street values many hotels at an enterprise value to Ebitda metrics as well. Indian Hotels Co. trades at nearly 27-times EV/ EBITDA for FY26. That would peg the ITC Hotels price to Rs 172 per share.