ITC board approves demerger of hotel business; listing in 15 months

The board of ITC on Monday approved the scheme of arrangement involving the demerger of its hospitality business. Under the plan, for every 10 shares held in ITC, ITC shareholders would receive 1 share of ITC Hotels.

Post implementation of the scheme, the shareholders of ITC would directly hold about 60 per cent in ITC Hotels, proportionate to their shareholding in ITC, as announced by the company earlier; the balance stake of about 40 per cent in the new entity would be held by ITC.

ITC has indicated a timeline of 15 months for the listing of ITC Hotels. The scheme of demerger is subject to various regulatory approvals including stock exchanges, Securities and Exchange Board of India (Sebi), National Company Law Tribunal (NCLT).

In its investor presentation filed with the stock exchanges, the company mentioned that the share entitlement ratio is a function of the share capital of the two companies; it has no bearing on the market capitalisation of ITC Hotels, only on the price per share.

As per the arrangement, ITC Hotels would be given a licence to use the ‘ITC’ prefix as part of its corporate name and also as part of some of its properties/brand name for a ‘suitable’ fee.

Trademarks jointly used by ITC’s other businesses and hotels business would be licensed to ITC Hotels, on mutually agreed terms.

Employees engaged in or related to the hotels business would be transferred to ITC Hotels, but the company indicated that the employment terms would be no less favourable than their existing terms of employment with the company.

However, financial investments like East India Hotels Ltd (EIH Ltd) and Hotel Leelaventure Ltd (HLV Ltd), and non-operational entities such as Logix Developers, would not be transferred.