Why ITC Share Price Plunged More Than 4% Today

ITC’s board granted preliminary approval for the spin-off of its hotel business, according to a stock exchange filing by the company.

What Happened? Under the proposed plan, ITC will retain around 40% of the hotel business, with the remaining shares going to ITC’s existing shareholders, based on their current shareholdings.

ITC has slated the final approval of this plan for their next board meeting on August 14, 2023. The company promises to make all required disclosures in line with the SEBI Listing Regulations and other relevant laws.

The tobacco giant believes the hotel business, currently comprising over 120 hotels across 70 locations, can achieve greater growth as a separate entity within the booming hospitality industry, while still benefitting from ITC’s strengths and brand recognition.

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Sanjiv Puri, Chairman of ITC Limited, stated that this reorganisation would lead to further growth and value creation by capitalizing on India’s vibrant hospitality industry.

Historically, high capital expenses in the hotel business have concerned investors, given the relatively lower returns. However, ITC aims to address these concerns with this new structure.

ITC’s recent annual report shows gross revenue growth of 17.6% to ₹69,480.89 crores, with a notable profit after tax of ₹18,753.31 crores. Despite muted demand, ITC’s other FMCG segments showed strong growth, and the hotel business saw a significant recovery.

Price Action: ITC Ltd. shares fell by 4.30% towards the end of Monday to end the day at ₹469.35.

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