ITC Ltd., an Indian tobacco company, has announced plans to spin off and list its hotel operations as part of its strategy to boost non-cigarette businesses. British American Tobacco plc (BAT), which owns a stake in ITC, will retain a 40% stake in the hotel business, while shareholders will receive the remaining 60%. The move aims to attract investors and strategic partners whose investment strategies align closely with the hospitality industry.
ITC, primarily known for its cigarette sales but with interests in hotels, paper, and consumer staples industries, has seen its shares steadily climb in value since 2020. The company's stock has reached levels comparable to Hindustan Unilever, the Indian subsidiary of Unilever plc.
Experts have praised the decision to separate the hotel business, believing that it will unlock value and provide independence for each entity under the ITC umbrella. Utkarsh Sinha, managing director at Bexley Advisors, a boutique investment bank in Mumbai, expressed optimism about the move, stating that "letting them out into the open might be valuable."
BAT is ITC's largest shareholder, holding a 29% stake in the company. Speculation has been ongoing regarding BAT divesting its holding to unlock value. Previously, BAT's CEO Tadeu Marroco had highlighted the opportunities presented by India's oral tobacco market through its ownership of ITC. However, BAT declined to comment on the spin-off of ITC's hotel business.
Following the announcement, ITC's shares fell by 3.9% at the close of trading in Mumbai. Despite this, the stock has more than doubled in value over the past two years.
In summary, ITC Ltd. plans to spin off and list its hotel operations in order to bolster its non-cigarette businesses. Its board has approved shareholders receiving a 60% stake in the hotel business, while ITC will retain a 40% stake. This move aims to attract investors and partners aligned with the hospitality industry. Although ITC's shares fell after the announcement, the company has experienced significant growth in recent years.
Reference:
[1] Indian Tobacco Company ITC Plans Spinoff of Hotel Operations
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