ITC Chairman Sanjiv Puri shares details on ITC Hotels demerger proposal; here are the key takeaways

ITC's chairman and Managing Director Sanjiv Puri and other senior executives of ITC Ltd took various questions on the demerger of ITC Ltd and ITC Hotels. The board of ITC gave its in-principle approval to demerge the hotels business on July 24, 2023. Here are the key takeaways from the interaction

ITC Hotels to use ITC brands

The demerged entity ITC Hotels will have a 'royalty-like' arrangement for the use of ITC brands. This will be in line with industry standards. ITC Ltd and ITC Hotels have entered an agreement for the same.

“ITC will stay invested in the hotels business with this holding and also draw synergies for its foods vertical from the demerged entity. The hotel entity will have a strong balance sheet and also be debt-free. It can also raise capital either through debt, equity or from strategic investors," said Sanjiv Puri

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40% Stake in ITC Hotels

Sanjiv Puri has said that the 40% stake in ITC Hotels would help the demerged entity to grow faster. He added that it will have access to all the goodwill, brand assets and so on for its growth and success. The 40% stake is expected to provide headroom for growth by bringing in some strategic investors.

“It is win-win situation for all. The hotels entity will get the backing of ITC's institutional strength, brand and goodwill…this is the best arrangement at this point of time. I do not see any change in the direction of asset-right strategy, except if the new entity gets a trophy property where investments are needed," Puri said.

ITC Hotel's balance Sheet

Sanjiv Puri called the ITC Hotel's balance sheet strong and that it can be used to raise capital. He also cleared that the demerged entity can still access ITC's balance sheet.

“It is that ITC Hotels has a strong balance sheet, starting out with Rs 6,000 crore in net assets and with no debt”, Puri said.

Asset-right strategy

Sanjiv Puri has assured that the new entity will also have the asset-right strategy (not asset-zero or asset-light strategies) which is based on management contracts. “If a trophy property comes up, then the board will decide at that point,” he added.

Investor's Exit

While answering if the company will facilitate for investor's exit, Puri said that every investor will have to take independent decision and the company will not do anything about it. He also added that the market dynamics will assist if an investor wants to leave. As per Puri, investor's interest in ITC Hotels will be the same as in ITC as the tourism sector is thriving.

“Tourism industry is in good shape and the (investor) interest in this (the new company) will be equal (to that in ITC) if not more… anybody who does not wish to be with it (ITC Hotels), market dynamics will give an exit. We won’t participate in that,” he said.