• News
  • Finance
  • ParentsKids

ITC Hotels Debuts on Stock Exchange with Notable Discount

Instructions

The shares of ITC Hotels made their debut on the National Stock Exchange (NSE) at Rs 180 per share, marking a significant discount from the previously implied price. This listing follows the company's demerger from its parent organization, ITC, aimed at unlocking shareholder value. The stock exchanges conducted a special trading session to determine the new value of ITC’s hotel business after the demerger, setting the stage for this unique IPO-less listing. Despite some brokerage estimates predicting higher prices, the actual listing price came in lower than expected by certain analysts.

Demerger and Share Distribution Strategy

The decision to separate ITC's hotel business into a distinct listed entity was made to enhance shareholder value. Under this plan, shareholders received new ITC Hotels shares based on their existing holdings in ITC. For every ten shares held in ITC, investors received one share in the newly formed ITC Hotels. This distribution ensured that approximately 60% of the new company's shares were allocated directly to ITC shareholders, while the remaining 40% remained with ITC itself.

In detail, the demerger process involved transferring ownership stakes in various hospitality entities to ITC Hotels. These entities include Bay Islands Hotels Ltd, Fortune Park Hotels Ltd, Landbase India Ltd, Srinivasa Resorts Ltd, WelcomHotels Lanka Pvt Ltd, Gujarat Hotels Ltd, International Travel House Ltd, and Maharaja Heritage Resorts Ltd. This strategic move allowed for a clear separation of assets and focused management of the hotel business. The demerger ratio of 1:10 ensured a fair distribution of shares among ITC shareholders, maintaining proportional representation in both the parent and subsidiary companies.

Pricing Dynamics and Market Reaction

The initial public offering (IPO)-less listing of ITC Hotels shares saw a notable discount compared to earlier expectations. Shares opened at Rs 180 each, reflecting a reduction of nearly 31% from the anticipated Rs 260 per share. This pricing discrepancy highlights the market's cautious approach towards valuing the newly separated entity. The stock exchanges facilitated a special trading session to accurately gauge the post-demerger value of ITC’s hotel business, resulting in an adjusted share price of Rs 455 for ITC without the hotels' value.

Brokerage firms had varying predictions regarding the listing price. Nuvama estimated the shares would list between Rs 150-175, while Sharekhan projected a range of Rs 150-170. In contrast, Nomura, a Japanese brokerage, anticipated a higher range of Rs 200-300 per share. The actual listing price fell slightly above Nuvama’s upper limit but below Nomura’s lower estimate, indicating a mix of optimism and caution among market participants. This divergence in estimates underscores the complexity of valuing newly separated businesses and the influence of market sentiment on share prices.