ITC Hotels made its stock market debut on January 29, listing at ₹180 per share on the National Stock Exchange (NSE). The listing price represents a steep 31% discount from its implied value of ₹260 per share. This marks the latest milestone in ITC’s decision to spin off its hotel business into a separate entity, a move aimed at unlocking value for its shareholders.
The demerger, finalized last year, saw ITC distribute shares of ITC Hotels in a 1:10 ratio. This meant that for every 10 shares held in ITC as of January 6, 2025, investors received one share of ITC Hotels. However, the market response to the newly listed stock has been lukewarm, reflecting cautious sentiment toward the hospitality sector.
Market Debut: A Rough Start for ITC Hotels
The much-anticipated listing of ITC Hotels didn’t go as expected. The stock opened at ₹180, significantly lower than its estimated pre-listing value of ₹260.
- ITC Hotels shares fell even further post-listing, dropping to ₹172 at one point.
- By 12:39 PM, the stock was trading at ₹175.05, down 32.67% from its estimated price.
- Trading volume was high, with nearly 1.95 crore shares exchanging hands.
The listing came without an IPO process, as the shares were directly allotted to existing ITC shareholders. The sell-off at debut suggests some investors opted to book profits or exit their positions amid broader concerns about the hospitality industry’s recovery and ITC Hotels’ future growth potential.
The Demerger: ITC’s Strategic Move
The separation of ITC Hotels from its parent company was intended to streamline ITC’s business structure and allow both entities to operate independently.
Under the demerger scheme:
- ITC shareholders received a 60% stake in ITC Hotels, proportionate to their holdings in ITC.
- The remaining 40% stake remains with ITC, ensuring the parent company retains a significant interest in the hospitality arm.
ITC’s move to demerge its hotel business aligns with a broader trend of conglomerates restructuring to unlock shareholder value. However, the subdued listing suggests that market participants are still evaluating the financial prospects of ITC Hotels as a standalone entity.
What’s Next for ITC Hotels?
The sharp discount at listing raises questions about ITC Hotels’ valuation and its ability to generate investor confidence.
Some key factors that could influence its future performance include:
- Industry Recovery: The hospitality sector has seen a post-pandemic rebound, but concerns remain about sustained demand and operational costs.
- Standalone Financials: ITC Hotels now needs to prove its ability to generate strong cash flows without ITC’s broader support.
- Investor Sentiment: Market participants will be watching how the company strategizes growth and expands its footprint.
Despite the weak debut, long-term investors may see value in ITC Hotels as it establishes itself independently. The coming quarters will be crucial in determining whether the demerger delivers on its promise of value creation.
