ITC: Hotel Demerger a Win-Win Opportunity for Investors



ITC: Hotel Demerger a Win-Win Opportunity for Investors

As we approach the new year, ITC's strategic decision to demerge its hotel business presents a compelling opportunity for investors. This move is expected to unlock significant value for shareholders, making it a prime time to consider adding ITC to your portfolio.

▎🟠 Buy for Strong Growth in Both Entities

The demerger, effective January 1, 2025, will create two distinct entities: ITC Hotels and ITC (ex-hotels). This separation is poised to drive robust growth in both businesses, appealing to diverse investor interests.

▎🟢 ITC Hotels: Target Price ₹195

Following the demerger, ITC Hotels is expected to list at a price range of ₹150-170. With a target price of ₹195, this represents a potential upside of 15-30%. The hotel segment is set for asset-light growth, with projected revenue and EBITDA CAGR of 14% and 18% respectively from FY24 to FY27. Supported by ITC’s strong brand and governance, ITC Hotels is well-positioned to thrive in the competitive hospitality market.


▎🔵 ITC (Ex-Hotels): Target Price ₹555

On the other hand, ITC (ex-hotels) is anticipated to benefit from an improved return profile post-demerger. This entity will leverage FMCG growth synergies and gain the flexibility to exit hotel exposure if desired. With a target price of ₹555, the potential for value creation remains strong.


▎🔸 Key Details:

• Demerger Date: January 1, 2025

• Share Distribution: Shareholders will receive 1 ITC Hotels share for every 10 ITC shares held (record date: January 6, 2025).

• Listing Timeline: ITC Hotels is expected to be listed by February 2025.

▎Conclusion

The ITC hotel demerger is not just a structural change; it's a strategic move that unlocks potential for both entities. Investors can look forward to strong growth prospects in ITC Hotels while benefiting from the enhanced operational focus of ITC (ex-hotels). This dual opportunity makes ITC an attractive buy for those looking to capitalize on the evolving landscape of the hospitality and FMCG sectors.

Stay ahead of the curve and consider adding ITC to your investment strategy today!

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