Will ITC Hotels' Demerger Bet Pay Off?

After piggybacking on its parent for decades, the hospitality chain now has to chart its own course

- Varuni Khosla

9 January was meant to be a special date for ITC Hotels, one that marked a new beginning. That was the day the hotel chain, whose properties are renowned for playing host to heads of state from around the world, debuted on the stock exchanges. However, cigarettes-to-biscuits conglomerate ITC's hospitality arm had a less-than-auspicious start on the bourses. Its shares listed at ₹180 on the NSE and ₹188 on the BSE—a discount of nearly 30% from their implied price of ₹260 following the hotel chain's demerger from its parent company.

Analysts, however, didn't read too much into the listing day disappointment and are largely positive on ITC Hotels' prospects. The company's market cap is currently at around ₹34,600 crore, which brokerages estimate has the potential to rise to anywhere between ₹42,500-₹62,000 crore.

In a note last month, global brokerage Jefferies put a 'buy' rating on the stock, with a target price of ₹240 in its base case scenario and a bull case target of ₹280.

Jefferies estimates that ITC Hotels' revenue will grow at a healthy compound annual growth rate of 15% over the FY24-27 period, noting that the company has steadily expanded its portfolio through both organic and inorganic routes. "Amid sectoral tailwinds, we expect ITC Hotels' India occupancy to ramp up from 69% in FY24 to 75% in FY27," it added.

The key strength of ITC Hotels post-demerger and listing is the value creation for shareholders, said Nikhil Shah, senior director, capital markets and investment services—hospitality, at real estate company Colliers India. "While market conditions have been volatile since its listing, the stock holds strong long-term growth potential. Additionally, the company has a presence across segments, from mid-scale to luxury to experiential stays, which enhances its market positioning," he said.