It was long awaited and finally ITC‘s board has taken the decision to demerge the hotels business into a new entity.
- Name of the new entity is proposed to be “ITC Hotels Limited (IHL)”
- In such kind of demergers, normally existing shareholding of the main Company gets replicated in the new entity i.e., 1:1 share issue. However, ITC has proposed a different structure:
- 60% of IHL will be owned by the existing shareholders of ITC; and
- 40% will be owned by ITC (i.e., indirectly by ITC’s shareholders)
The structure seems to be intended towards ITC’s board exercising management control over IHL and also providing the requisite support to the new entity as and when needed.
Investors are not going to like it immediately. However, unlikely that it’s going to be any major issue.
The detailed scheme of arrangement is proposed to be placed for Board approval on August 14, 2023. That may include revisions based on the feedback from various stakeholders.