ITC hotels could take up to 15 months to get listed: Puri

ITC chief Sanjiv Puri said listing of the proposed demerged hotel entity, ITC Hotels, will take 12-15 months to complete the regulatory process, while the shareholding structure of the company will provide stability to the hotels business and allow ITC to leverage the institutional strengths to build its fast-moving consumer goods (FMCG) business. Addressing shareholders in the company’s 112th annual general meeting held virtually on Friday, chairman amd MD Puri said the listing of ITC Hotels would take 15 months or more or less, since there are multiple steps in the regulatory process.

“The continued interest of ITC in the new entity (ITC Hotels) will provide long-term stability and instill a sense of assurance among partners, investors and employees, while enabling the new entity to leverage ITC’s institutional strengths including the timeless goodwill, world-class brands and governance processes,” Puri said. The comments come at a time when the shareholding structure from the demerger process of ITC Hotels has been criticized by a section of shareholders and analysts.

Last month, ITC announced its board has approved in-principle the demerger of the hotels business where ITC retains 40% stake and 60% will be owned directly by the company’s shareholders proportionate to their shareholding in ITC. Puri said there is no change in economic interest of ITC shareholders in the new arrangement since they will hold 60% directly and 40% indirectly through their holding in ITC.

“How many shares they will hold is just a mathematical exercise. Shareholders will ultimately have the same value,” he said. “The continued interest of ITC in the company will provide goodwill, will let the hotels use the logo and brands, intellectual property, and stabilize operations. It will also allow ITC to continue to enjoy the institutional synergies with hotels to build the FMCG business, especially in foods,” said Puri. Puri said for ITC, “The reorganisation will sharpen capital allocation, improve asset efficiency ratios, unlock value for its shareholders as well as enable leveraging of institutional synergies.

Thus, the proposed reorganisation will enable the business to architect the next horizon of growth as a pure-play hotels entity with a strong balance sheet and healthy pipeline, especially when the industry is poised for robust growth.” ITC’s hotels business last fiscal doubled segment revenue, while Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded by 930 basis points over 2019-20. A basis point is 0.01 percentage point. ITC has 120 hotels in 70 locations.

The company had embarked on an asset-right strategy in the business for the past five years with a bouquet of brands and managed properties now accounting for 55% of total rooms. In the last 16 months, ITC has added 18 hotels mostly through management contracts. In response to a shareholder query on the listing of the IT business, ITC Infotech, which operates as a wholly-owned subsidiary, Puri said issues of IPOs are continuously evaluated and, when and if it is felt the right thing to do, will be taken forward. “These are things we review periodically. It was in such a review that the demerger of the hotel business was finalized. This is an ongoing process,” he said. Puri said ITC Infotech has made appreciable progress in recent past and investments