In a landmark move aimed at unlocking shareholder value and driving accelerated growth, ITC Limited has officially announced the demerger of its hotel business into a separate listed entity, ITC Hotels, effective from January 1, 2025. This strategic initiative positions ITC Hotels for enhanced focus and operational agility in the rapidly expanding Indian tourism and hospitality sector. Under the demerger structure, ITC Limited will retain a 40% stake in the new entity, with the remaining 60% being proportionately distributed among ITC shareholders. Additionally, ITC will transfer INR 1,500 crore to the demerged entity while retaining the trademarks of its iconic restaurant brands—Bukhara, Dum Pukht, and Dakshin—and earning royalties from them.
Strategic Growth and Expansion Plans
Post-demerger, ITC Hotels is set to embark on an ambitious expansion plan, targeting a 33% increase in room inventory to reach a total of 17,265 rooms over the next four years. The number of hotels is projected to grow from 140 to 186. “The demerger allows us to be more nimble, and agile, and attract increased investments. We are well placed across segments from luxury to premium with our six brands, and the demerger positions us perfectly for accelerated growth,” said Anil Chadha, Managing Director of ITC Hotels.
Key highlights of the expansion plan include: Welcomhotel: 1,796 additional rooms across 13 new properties., Fortune Hotels: 1,439 rooms across 18 new properties.,ITC Hotels: Expansion of existing properties by 102 rooms., Storii: 578 rooms across 10 new properties., WelcomHeritage: 162 rooms in four locations., Mementos: Introduction of a new property with 223 rooms.
Asset-Light Expansion Model
As part of its asset-light strategy, ITC Hotels will primarily expand through management contracts while continuing to own large luxury properties. “About 80% of our pipeline hotels are brownfield projects, ensuring faster realization and expansion. Our owned-to-managed property ratio will shift to 35:65, compared to the earlier 45:55 split,” Chadha added. The company aims to increase the share of premium hotel rooms under management contracts from 30% to 42% over the next five years. “We will open at least one hotel every month over the next two years, ensuring steady growth,” Chadha stated.
Market Impact and Shareholder Value
The demerger has resulted in an adjustment of ITC’s share price, which settled at INR 455.6 per share post-demerger. Analysts believe the move will provide shareholders direct exposure to the hospitality sector while enabling ITC Limited to concentrate on its core businesses, including FMCG, agriculture, and paperboards.
Looking ahead, ITC Hotels is poised to expand into international markets, with plans for two additional hotels in Nepal and potential opportunities in Sri Lanka. “Apart from unlocking value for the group, we are looking at expanding our presence overseas,” Chadha revealed.
Key Differentiators Post-Demerger
Following the demerger, ITC Hotels will focus on several strategic priorities to differentiate itself in the competitive hospitality landscape:
Brand Equity: Leveraging Indigenous experiences, signature cuisines, and responsible luxury., Asset-Light Expansion: Aiming for two-thirds of its portfolio to be under management contracts within five years., Digital-First Approach: Enhancing revenue management, customer engagement, and operational efficiency., Capital Productivity: Optimizing existing assets and exploring new revenue streams., Employer of Choice: Investing in talent development, diversity, and inclusion.
Future Roadmap and Expansion Plans
With a zero-debt balance sheet and strong cash flows, ITC Hotels is well-positioned for selective inorganic growth opportunities. Upcoming investments include: Greenfield Developments: New projects in key tourist hubs such as Puri and Bhubaneswar., Managed Hotels Expansion: A pipeline of 45 managed hotels comprising approximately 4,000 keys, targeting 200+ hotels with 18,000+ keys within five years., Increased Management Fees: Aiming for a 2.5x growth in management fees by FY30.
Recent launches, including ITC Narmada, ITC Royal Bengal, and WH Bhubaneswar, have demonstrated significant growth potential, while flagship properties like ITC Ratnadipa in Colombo are expected to contribute substantially to revenue and profitability in the coming years.
The demerger of ITC Hotels marks a pivotal milestone in ITC Limited’s journey, reinforcing its commitment to shareholder value creation. With a focused strategy, strong financial backing, and a commitment to sustainability and operational excellence, ITC Hotels is well-equipped to capitalize on India’s booming tourism and hospitality sector, setting the stage for long-term success and value creation.
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