Shares of ITC Limited surged over 3 per cent on 5 July to hit a fresh 52-week high amid reports that the process of demerging the hotel business is underway.
The Kolkata-based company is reportedly exploring structures for its hotel business in line with industry dynamics, according to a CNBC-TV18 report.
The stock ended 1.87 percent higher at Rs 476.05 on the National Stock Exchange (NSE). The ITC stock has gained over 43 per cent in 2023 so far.
The report comes days after brokerage firm Nomura also said in a report that divestment of ITC’s hotel business is underway. The company is evaluating different alternate structures such as REIT and JV to ensure that the demerger is cost-and tax-effective.
Advertisement
"Hotels business is witnessing strong improvement in ARR (average room rentals), with travel and tourism activities (including business and foreign inbound travel) back at pre-Covid levels. No large capex planned for the business, as ITC has moved to an asset right model; and, current hotel margins are sustainable over the medium term," Nomura analyst Mihir Shah had said in a report last month.
Over the last decade, the hotel business has contributed less than 5 per cent to ITC’s revenue and EBIT. However, it accounted over 20 per cent of ITC’s capex in the past.
ITC Limited reported a 21.4 per cent year-on-year growth in standalone net profit at Rs 5,086.9 crore for the quarter ended March 2023. The revenue from operations (excluding) grew 5.6 per cent to Rs 16,398 crore, beating analysts’ estimates. Hotel business revenue for the reported quarter doubled to Rs 781 crore.
