A TIME TO DEMERGE

With ITC's hotels business reporting its best quarter, the timing seems right for the business to demerge, improving returns for the conglomerate

- KRISHNA GOPALAN

SOMETIMES, TIMING IS everything. Take ITC's hotels business for instance. The last quarter of FY24 was the best ever for the business. The segment saw revenues of ₹898 crore, up 15% year-on-year (YoY) and a profit of ₹267 crore, an increase of 34% YoY. The standout was an improvement in margins, primarily driven by higher revenues per available room. To sum up, it does seem like an appropriate time to demerge the business, a decision that was first made public last July. With ITC's shareholders giving their go-ahead in early June, it is expected that the new entity will be listed in 15 months.

The contours of the merger will have ITC Hotels issue equity shares to ITC's shareholders. It will eventually result in 60% being held by ITC's shareholders proportionate to their shareholding in the conglomerate with the other 40% remaining with ITC. In revenue terms, the hotels business saw a spike of more than 15% to get past ₹3,100 crore in FY24. That's still only 3.61% of ITC's overall sales but it is significant. The profit before interest and taxes increased by 37% to ₹765 crore-still barely 3% of the conglomerate's overall profit--but the timing is most interesting.