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ITC Hotels Demerger: Should I Hold, Sell, or Buy More Shares?

Samraat

Samraat Jadhav  |2374 Answers  |Ask -

Stock Market Expert - Answered on Jan 06, 2025

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more
Asked by Anonymous - Jan 06, 2025Hindi
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Hi, I’ve been closely tracking the ITC Hotels demerger updates and noticed that the discovered value declined to ?455.6 after the special pre-open session, a drop of ?27. As a retail investor, I had intended to keep ITC shares for the long term, but this dip has made me a bit uneasy. Is this decline just a temporary reaction from traders, or does it suggest more significant issues regarding the demerger's effect on ITC’s overall outlook? Should I retain my investment, exit, or think about increasing my position at this stage?

Ans: some key points:
Share Distribution: ITC shareholders received one share of ITC Hotels for every ten shares they held in ITC. ITC will retain a 40% stake in ITC Hotels, while the remaining 60% will be held by shareholders.
Listing: ITC Hotels shares are expected to be listed on the NSE and BSE by mid-February 2025.
Financials: ITC Hotels had a revenue of ?3,003 crore in the financial year ended March 2024, with plans to grow its portfolio to over 200 hotels and more than 18,000 rooms by 2030.

ITC Hotels currently contributes 4% of ITC’s total revenue and 2.5% of its EBIT but accounts for 14% of the company’s total assets. This makes the demerger accretive to ITC’s return on capital employed (ROCE).

Based on industry valuation multiples ITC hotels is expected to have an equity value anything between ?36200 to ?42000 crore, translating to add a value of ?17-19 post listing. ITC Hotels has zero debt and a cash reserve of ?1,500 crore. It posted a revenue of ?1,471 crore in H1FY25 with EBITDA margins of 28%.

Analysts have set a target price range of ?150-195 per share, indicating a potential upside of 15-30% over its expected listing price.

If you're looking for a long-term investment with growth potential, ITC Hotels could be a good addition to your portfolio.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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