ITC, one of India’s oldest and most diversified companies, has made headlines again with its decision to demerge its hotel business, ITC Hotels, effective January 1, 2025. If you’re wondering what this means for you an an existing or potential investment (considering buying ITC shares for the long term), this blog will declutter the topic for you. We’ll cover two main questions:

1. Is this demerger good news for existing ITC shareholders?
2. Should new investors buy ITC stocks for the next 10-15 years, or are there better alternatives?

But before we dive in, let’s quickly understand what a demerger is.

In simple terms, a demerger is when a company separates one part of its business into a new, independent company. Think of it like splitting a giant pizza into two separate slices, each functioning independently.

ITC’s Hotels Demerger: What’s Happen ?

ITC, known for its cigarettes, FMCG products, hotels, and paper business, is demerging its hotel division into a separate company called ITC Hotels Ltd.

Here are the key points:

• The demerger will take effect on January 1, 2025.
• ITC will own 40% of ITC Hotels, and existing ITC shareholders will get 60% of ITC Hotels’ shares.
• For every 10 shares of ITC Ltd one owns, the shareholders wil receive 1 share of ITC Hotels.
• ITC Hotels will be listed on the stock exchanges.

Recently, Sanofi India also had a similar demerger of its ‘pharma business’ and ‘consumer healthcare business.’ Eventually, on 13-Sep-2024, Sanofi Consumer got listed on the stock exchange and existing Sanofi India shareholders got Sanofi Consumer’s shares in appropriate proportions.

 

 

Shares of ITC were trading higher in Tuesday’s trade after the FMCG major said the appointed and the effective date of the demerger of its hotels business ITC Hotels Ltd will be January 1, 2025. The NCLT, Kolkata Bench, has sanctioned the scheme of arrangement among ITC and ITC Hotels and their respective shareholders and creditors and the said order was received by ITC December 16 at 5.26 pm, ITC informed BSE and NSE on Tuesday.

 

ITC shares were trading 0.63 per cent higher at Rs 473. The FMCG stock has risen 12 per cent in 2024 so far against 1.1 per cent rise in the BSE FMCG index during the same period.

“We further advise that ITC Limited and ITC Hotels Limited have mutually acknowledged that all the conditions specified in Clause 28 of the Scheme have been fulfilled and satisfied, including filing of the aforesaid Order with the Registrar of Companies, West Bengal, and accordingly, the Appointed Date and the Effective Date of the Scheme shall be the first day of the following month i.e. 1st January, 2025, in accordance with Clauses 5.1(iii) and 5.1(xvi) of the Scheme, respectively,” ITC said.

Sanofi India board approves demerger of consumer healthcare business.