ITC Hotels’ stock dropped 5% on the second trading day, starting at ₹188 and closing at ₹169.70. After ITC’s hotel businesses were demerged, the stock experienced a sharp drop, finishing lower on the BSE and NSE.
ITC Hotels listing:
On Wednesday, January 29, 2025, ITC Hotels’ shares went public on the BSE for Rs 188 per share. ITC Hotels’ share price is Rs 180 per share on the National Stock Exchange (NSE).
ITC Hotels was recently separated from the ITC enterprises to unlock shareholder value and listed as a distinct corporation. On January 6, 2025, the NSE and BSE stock exchanges convened a special session to determine the price of ITC shares, which is an ex-hotel business.
The demerger ratio was set at 1:10 by the tobacco-to-FMCG conglomerate, meaning that stockholders who owned 10 shares of ITC as of January 6, 2025, would have received one share in ITC Hotels following the demerger.
ITC Hotels’ stock price was down 4.79 percent on the BSE at 10:01 AM, trading at Rs 179 per share. The share price of ITC Hotels was Rs 179.9 on the NSE. In contrast, the benchmark BSE Sensex was up 0.38 percent, or 287 points. In contrast, ITC’s share price dropped 0.38 percent to Rs 433.6 per share.
The head of Nuvama Alternative & Quantitative Research, Abhilash Pagaria, says that domestic passive mutual fund (MF) schemes would need to sell ITC Hotels shares worth about Rs 1,500 crore since the stock will be removed from the indexes three days after it is listed.
ITC Hotels Outlook:
A PTI article claims that ITC intends to grow its hotel operations abroad, starting with West Asia and its neighbors. The business wants to increase the number of hotels in its portfolio from 140 to more than 200 in India.
ITC Hotels now operates 140 locations totaling 13,000 rooms, of which 45% are owned, and 55% are run under management contracts. The business intends to transition to an asset-light development strategy to boost its market position, concentrating on management agreements.
The firm, which operates under six different brands—ITC Hotels, Fortune, Mementos, Storii, WelcomHeritage, and Welcomhotel—opened its first hotel in Sri Lanka in April last year.
The firm offers a range of items to various clientele and sets itself apart with its luxury division. Analysts point out that ITC Hotels’ development trajectory is further supported by strategic alliances, such as its Global Distribution Agreement with Marriott, which increases its visibility among foreign tourists.
ITC Hotels Financials:
ITC Hotels’ revenue, Ebitda, and Ebit have grown at compound annual growth rates (CAGRs) of 10.0%, 14.6%, and 18.0% during the last ten years, respectively. ITC Hotels’ EBITDA margin as of FY24 was 34.4%. In FY24, the hotel business accounted for 4.1% of ITC’s total revenue, while the segment’s EBIT contribution was 3.0%.
ITC Hotels’ Revenue Per Available Room (RevPAR) grew from Rs 5,200 in FY19 to Rs 8,200 in FY24 (CAGR growth: 9.5%), while the Average Room Rate (ARR) went from Rs 7,900 in FY19 to Rs 12,000 (CAGR growth of 8.7%).
By 2030E, the firm intends to have 5,000 more rooms, of which about 500 will be company-owned, and the remainder will be under management contracts.
With an anticipated EBITDA margin of 36.0 percent in FY26E and FY27E, we forecast a revenue/EBITDA/profit before tax CAGR of 15.0%, 18.3%, and 17.2% during FY24-FY27E. A solid expansion plan and positive developments in the hotel industry support this growth. ITC Hotels Ltd. (ITCHL) is well-positioned to take advantage of value-accretive M&A prospects thanks to its debt-free balance sheet and strong cash flow production, according to analysts at Deven Choksey Research.
ITC Share Price Target:
The brokerage claims that the demerger of ITC Ltd.’s hotel division unlocks potential by enabling ITC to concentrate on its high-margin, cash-generating core sectors. In contrast, the independent hotel company can capitalize on market expansion and draw in strategic partners.
This action enables different development paths for both organizations, improves resource allocation, and is anticipated to raise value multiples. As a result, we raised our recommendation on ITC Ltd from “Accumulate” to “purchase,” the statement read.
