
ITC Hotels share made its stock market debut following the highly anticipated demerger from ITC Ltd., aimed at unlocking value for its 37 lakh shareholders. The stock was listed at ₹188 on the BSE, but quickly hit a 5% lower circuit, as many ITC shareholders who were hesitant to hold the hospitality business decided to exit their positions.
ITC Hotels Listing Below Special Price Discovery Value
The listing price of ITC Hotels was 31% lower than the estimated value from a special price discovery session held on January 6. The stock had been valued at approximately ₹260 on the Nifty and ₹270 on the BSE indices before listing.
For existing ITC shareholders, the acquisition cost for 100 shares of ITC Hotels stands at ₹54,040, as per the company’s notification.
Expert Recommendations: Should You Hold ITC Hotels Shares?
Analysts are optimistic about ITC Hotels’ growth potential due to favourable demand-supply dynamics, a strong industry outlook, and aggressive expansion plans. They suggest that investors hold onto their shares for long-term gains.
According to SBI Securities, any short-term weakness in ITC Hotels’ stock presents a buying opportunity for retail and high-net-worth investors (HNIs) looking to accumulate a quality hospitality business in their portfolio.
However, in the short term, forced exits by exchange-traded funds (ETFs) and certain shareholders may create downward pressure on the stock price.
Demerger Structure and ITC’s Stake in ITC Hotels
As per the demerger scheme, ITC Ltd. has retained a 40% stake in the newly formed hotel company, while the remaining 60% has been distributed among ITC shareholders in a 10:1 ratio (one ITC Hotels share for every ten ITC shares).
According to Prashanth Tapse, Senior VP of Research at Mehta Equities, investors should accumulate ITC Hotels stock on listing day, as the luxury hotel segment is witnessing rapid expansion.
He projects a target price of ₹300 within a year, as many hotel stocks are currently trading at around 30x EV/EBITDA.
Why the ITC Hotels Demerger is a Strategic Move
The demerger allows ITC Ltd. to focus on its high-margin, cash-generating businesses, while ITC Hotels operates as an independent entity with greater flexibility for expansion and potential strategic investments.
According to Deven Choksey Research, this move will enhance capital allocation, support independent growth trajectories, and improve valuation multiples for both companies.
ITC Hotels’ Financial Performance & Growth Metrics
The hotel chain has witnessed significant growth over the years:
- Average Room Rate (ARR) increased from ₹7,900 in FY19 to ₹12,000 in FY24 (51.9% increase, 8.7% CAGR).
- Revenue Per Available Room (RevPAR) grew from ₹5,200 in FY19 to ₹8,200 in FY24 (57.7% increase, 9.5% CAGR).
For FY24, the revenue breakdown was as follows:
- 52% from room sales
- 40% from food & beverage
- 8% from other sources
Final Verdict: Should You Invest in ITC Hotels?
With its strong brand presence, favourable industry outlook, and strategic growth plans, ITC Hotels is well-positioned for long-term success. While short-term volatility may persist, analysts advise holding or accumulating shares to benefit from the company’s future expansion and increasing profitability.