ITC Hotels share price lists at ₹188 apiece on BSE, a discount of 31% to discovered price

ITC Hotels shares made a sluggish debut in the Indian stock market today, January 29, after being demerged from its parent ITC Ltd. ITC Hotels share price was listed at ₹188 apiece on the BSE, a discount of 30.37% to the discovered price of ₹270 per share.

On NSE, ITC Hotels shares were listed at ₹180 apiece, a discount of 30.77% to the discovered price of ₹260 per share.

After the listing, ITC Hotels shares extended the decline and were locked at 5% lower circuit on the BSE at ₹178.60 apiece.

ITC Hotels is a demerged entity of cigarettes-to-FMCG conglomerate ITC Ltd. ITC Hotels listing date was fixed for today, January 29.

Catch ITC Hotels Listing Live Updates here

ITC Hotels shares will be removed from Nifty 50 and Sensex on T+3 day, which is listing, plus three business days. ITC Hotels demerger ratio was 1:10, meaning existing ITC shareholders received 1 ITC Hotels share for every 10 ITC shares. The parent ITC Ltd retained a 40.0% stake in the new entity, with the remaining 60.0% distributed to shareholders.

Following the demerger and listing of ITC Hotels Ltd, ITC Ltd shareholders are not expected to experience a material increase in value, as ITC Ltd's price will be adjusted to account for the holding company discount, said DevenChoksey Research.

ITC Shares Valuation

DevenChoksey Research values ITC shares on a Sum-of-the-Parts (SOTP) basis and has revised its target price to ₹520 post the demerger of its hotel business. Previously, the hotel segment was valued at an EV/EBITDA multiple of 17.3x. Following the demerger, the brokerage firm has adjusted the target price by ₹12 per share, accounting for the 40.0% retained holding and a 20.0% holding company discount, resulting in a revision of the target price from ₹534 to ₹520.

“The demerger of ITC Ltd's hotel business unlocks value by allowing ITC to focus on its high-margin, cash-generative core segments, while the standalone hotels entity gains flexibility to capitalize on industry growth and attract strategic investors. This move enhances resource allocation, supports distinct growth trajectories for both entities, and is expected to improve valuation multiples. Accordingly, we upgrade our rating on ITC Ltd to ‘Buy’ from ‘Accumulate’, it said.

ITC Hotels Business Update

ITC Hotels is one of the largest hotel companies with 140 hotels and ~13,000 operating keys as of October 2024. The company targets to grow its portfolio to 200+ hotels and 18,000+ keys by 2030. Around 35% of the hotel portfolio is owned by ITC Hotels and the balance is managed (including franchise model).

The ARR and RevPAR of its owned hotels has grown 20%/18% YoY respectively in FY24 with occupancy level of 69%. The return ratios are healthy with RoCE of ~20%. It has a net cash surplus with negligible debt on books, thus providing healthy growth opportunity going ahead.

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