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ITC weighs 'alternate structure' for hotels business for value creation

Puri also said that there were many smaller pieces in the portfolio that required support from institutional strengths, and that's why they structured the way they were

ITC | hotel business | Hospitality industry

Ishita Ayan Dutt  |  Kolkata 

Anand explained that this would complete ITC’s spread. In the last 4 to 5 years, ITC was focused on creating properties which would be completed over the next year.

Diversified conglomerate, ITC, will examine an “alternative structure” for its hotels business.

Answering questions on the company’s restructuring plans, Chairman Sanjiv Puri said at a media interaction that the firm is focusing on an asset-right strategy and will look at some alternative structuring vehicles for value creation. However, Puri clarified, that it was just under consideration.

In 2004, approved amalgamation of its subsidiaries Hotels and Ansal Hotels with itself. It is not clear whether an alternative structure would mean a demerger.

Explaining the reason behind diversification, Puri said the idea was to align market opportunities with internal capabilities.

At this moment of time, there are some businesses like hotels, which were an earlier diversification, which have come to a stage and have a strategic focus and makes it possible for alternative structuring, Puri said.

“What it will be, and how it will be done, at this point in time, it’s only an area that has been flagged,” he said.

Puri also said there were many smaller pieces in the portfolio that required support, and that’s why it was structured the way it was. “Nothing is cast in stone. We have to look at what will unlock maximum value for stakeholders,” Puri said.

As far as hotels are concerned, ITC adopted an asset-right strategy in the recent past, and currently of 10,000 rooms, 5,300 are managed. About 4,000 rooms are under construction, of which 3,000 are in the managed segment.

ALSO READ: ITC clocks growth in e-sales, expects festive season to push overall demand

Nakul Anand, executive director of ITC, overseeing the hospitality business, said by the end of this phase, out of 14,000 rooms, more than 8,600 would be in the managed segment.

Anand said this would complete ITC’s spread. In the past four to five years, ITC had focused on creating properties that would be completed over the next year.

While some diversifications are showing growth, those that have not have been restructured. Lifestyle business, for instance, has been restructured.

Puri said, the lifestyle retailing business had not matched expectations.

“We decided, the first step was to restructure it,” he said. Last year, ITC sold menswear brand John Players to Reliance Retail.

On the lifestyle retailing business, Puri said, currently very few stores were open. “Unless we have a specific idea on how we can win in this segment, we are not going to expand it or grow it. It may even shrink,” he said.

However, in the non-cigarettes portfolio, the fast-moving consumer goods segment, particularly the essentials segment, has been growing in the wake of the pandemic. Capacity utilisation in the essentials segment was high. He said, there was fair amount of buoyancy in the segment.

As far consumer trends, there was a propensity for larger packs. In rural areas, however, there was demand for smaller packs. Puri said he expects an uptick in demand in the festive season.

ITC is seeing normalisation in the unlock phase. In the paperboards and packaging segment, capacity utilisation was at 90-95 per cent. However, localised lockdowns had caused some disruptions in cigarettes in July and August.

First Published: Mon, September 07 2020. 19:29 IST