ITC on Monday gave its long-awaited approval to demerge its hotels business as it looks to unlock value for shareholders amid a surge in its share price.
However, the structure of the demerger has soured the announcement of the spin-off for shareholders as the company has proposed it will retain ownership over 40% of the new entity, leaving the rest to be owned by shareholders, who expected more value to be unlocked through the demerger.
See Also: Why Are Spicejet Shares Cruising Today
The cigarettes-to-hotels conglomerate’s shares have been under pressure since the announcement, with the stock losing nearly 6% over the last two days.
The hotels division is one of the most capital-intensive in ITC’s portfolio but generates the least amount of revenue. This has weighed on ITC’s dividend payout ratio for years—a major point of concern for investors in the traditionally high-yielding stock.
However, while the hotel business is generally unpredictable, the segment’s performance has been improving steadily, with its revenue almost doubling to ₹808.7 crore in the March quarter.
Get Ring The Bell, Benzinga India’s weekly briefing. Designed specifically for investors like you.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.