ITC Hotels trades weak in firm market; stock down 15% from listing day high

Shares of ITC Hotels were down 5 per cent at Rs 161.25 on the BSE in Friday’s intra-day trade, extending its previous day’s 5 per cent decline in an otherwise firm market. The stock of ITC Group Company has declined 15 per cent from its high of Rs 189 touched on listing day i.e. Wednesday, January 29, 2025.

 

At 01:16 PM; ITC Hotels was trading 4 per cent lower at Rs 162.80, as compared to 0.95 per cent rise in the BSE Sensex.  

 

Currently, the stock trades under the ‘T’ group on the BSE. The T group is a surveillance measure that requires securities to be settled on a trade-to-trade basis. BSE said the trading in the equity shares of ITC Hotels shall be permitted under ‘B’ group with effect from w.e.f. Tuesday, February 11, 2025.

 

ITC Hotels was recently demerged from the ITC businesses, and listed as a separate entity for value unlocking for shareholders. The tobacco-to-FMCG conglomerate had fixed the demerger ratio at 1:10, which meant that shareholders holding 10 shares of ITC, as on January 6, 2025, would have received one share of ITC Hotels post the demerger.

 

Operating across all hospitality segments, ITC Hotels showcases a diverse portfolio of hotels through 6 vibrant brands – including ITC Hotels and Mementos in the luxury space, Welcomhotel in upper upscale, Storii in boutique premium experiential segment, Fortune in midscale and WelcomHeritage in heritage leisure. This multi-dimensional approach enables ITC Hotels to cater to a wide spectrum of travellers seeking a variety of experiences, the management said.

 

Buoyed by the government’s policy interventions for the hospitality sector and a flourishing domestic tourism industry, ITC Hotels has strong growth enablers in place. Debuting with a zero-debt balance sheet and a cash/cash equivalents of Rs 1,500 crore to cater to planned growth and contingency requirements, the management said.

 

Today, ITC Hotels operates a bouquet of over 140 properties with over 13,000 keys in over 90 locations. It plans to expand its portfolio to over 200 hotels with over 18,000 keys over the next 5 years, with approximately 2/3rd salience of managed properties. It launched 30 hotels within a period of 24 months recently (as on 31st December 2024), and has a robust target of adding at least one hotel a month on an average over the next 24 months.  ALSO READ: Nestle India share price climbs 8% after tepid Q3 results; profit rises 5%

 

ITC Hotels have an aggressive asset-light expansion strategy, with plans to increase its room inventory to ~18,000 keys from ~13,000 keys currently within the next 4-5 years. ITC Hotels expects to deliver strong growth in coming years led by rising contributions from management contracts, scale-up of recently opened hotels, premiumisation of portfolio and Industry tailwinds, according to Mirae Asset Sharekhan.

 

ITC Hotels, boasts a diverse portfolio of six brands, including two recent additions in the luxury segment: Storii and Mementos. With a strong presence in major cities, the company is strategically expanding into Tier 2/3 markets. While 80 per cent of its owned rooms are currently concentrated in top metros, ITC Hotels is shifting its focus towards managed properties, the brokerage firm said.

 

Meanwhile, over the past decade, ITC Hotels' revenue, Ebitda, and Ebit have expanded at compound annual growth rates (CAGR) of 10.0 per cent, 14.6 per cent, and 18.0 per cent, respectively. As of FY24, Ebitda margin of ITC Hotels was 34.4 per cent. The hotel business contributed 4.1 per cent of ITC's overall revenue in FY24, while Ebit contribution from the segment was 3.0 per cent.

 

With an Average Room Rate (ARR) increase from Rs 7,900 in FY19 to Rs 12,000 (CAGR growth of 8.7 per cent), ITC Hotels' Revenue Per Available Room (RevPAR) increased from Rs 5,200 in FY19 to Rs 8,200 in FY24 (CAGR growth: 9.5 per cent).

 

ITC’s Hotel business could attract premium valuation post listing vis-à-vis its current valuation under ITC, led by better price discovery in the market. However, on the flip side, there will be supply overhang in the stock owing to potential exit from existing shareholders like BAT (~15 per cent stake) and SUTTI (~5 per cent stake), said Mirae Asset Sharekhan.

 

“Based on our FY2027 EBITDA estimates for ITC Hotels at Rs 1,640 crore and ascribing an EV/EBIDTA multiple of 25x (around 25 per cent discount to Indian Hotel valuation), the ITC Hotels potential target price could be around ~Rs 200 per share (excluding cash & cash equivalents of Rs 1,500 crore in the enterprise value),” the brokerage firm said in December month report.