ITC Hotels Demerger: IiAS Advises Shareholders To Vote Against Due To Limited Value Unlocking

Institutional Investor Advisory Services (IiAS) has advised the shareholders of ITC to vote against the proposed demerger of the company’s hotel business, arguing that it only partially unlocks value.

What Happened: IiAS has voiced concerns over the proposed structure of the demerger, as reported by NDTV Profit. The advisory firm is of the opinion that it neither fully unlocks value for shareholders nor significantly reduces any capital support responsibilities for the hotel business from ITC.

Last year, the board of ITC had given its nod to the demerger of its hotel business into a separate entity, with ITC retaining 40% ownership of ITC Hotels. However, IiAS has questioned the board’s plan for this 40% holding and the logic behind ITC retaining a 13.7% equity stake in EIH Ltd and a 7.6% equity in HLV Ltd.

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In response to these concerns, the Kolkata-based conglomerate stated that the hotel chain is a valuable asset that could attract potential investors, and retaining a 40% stake in ITC Hotels would provide stability and flexibility for any future equity fund raised by the hotels business.

IiAS, however, pointed out that the hotel division’s relatively small revenue, which constitutes only 3% of the company’s total revenues, may limit potential synergy between ITC’s hotel business and its other businesses.

The demerger plan, which failed to impress investors when announced, is set to be voted on by ITC’s 36 lakh shareholders. The electronic voting process, which began on May 22, will close on June 5.

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