ITC Hotels listing: ITC Ltd has informed stock exchanges that its demerged hotel business ITC Hotels Ltd will list on January 29, following the approval from the National Stock Exchange of India (NSE) and BSE Limited. For this, ITC also issued a general guidance towards apportionment of cost of acquisition of the ordinary shares of ITC and the equity shares of ITC Hotels Ltd.
ITC said ITC Hotels has allotted 1,25,11,71,040 equity shares of face value Rs 1 each to the shareholders of ITC, whose names were recorded in the register of members of ITC or in the register of beneficial owners maintained by the depositories as on January 6, the record date. This was done in the ratio of one fully paid-up equity share of Re 1 each for every 10 fully paid-up ordinary shares of one each held in ITC.
It gave one example. The FMCG giant said if 1,000 ordinary shares of ITC were purchased at Rs 400 per share by a shareholder, the total cost of acquisition would amount to Rs 4,00,000, before the demerger.
Now based on the share entitlement ratio, 100 shares of ITC Hotels would be allotted to the said shareholder. The total cost of acquisition of ` 4,00,000/- would be apportioned in the aforesaid ratio Rs 3,45,960 or 86.49 per cent of Rs 4,00,000 being the total cost of acquisition of 1,000 ITC shares and Rs 50,040 or 13.51 per cent of Rs 4,00,000 being the total cost of acquisition of 100 shares of ITC Hotels shares.
"Following the correction in the ITC stock in the wake of demerger of the Hotel business, we estimate the market cap for Hotel business could be Rs 42,000 crore. Hence, the likely price of ITC Hotels is Rs 200. We assign a holdco discount to the hotel business of 20 per cent to ITC’s Hotel business (40 per cent shareholding now with ITC); this yields a revised SotP-based target of Rs 571 (earlier Rs 585). Maintain ‘BUY’," Nuvama said in a note on January 20.
A total of 39.88 per cent of ITC Hotels will be held by promoter ITC and the rest 60.12 per cent will stay with the public. Meanwhile, Nuvama sees low probability of a sharp hike in cigarette tax in the upcoming Budget given a small tax hike was taken last year; and legal cigarette volumes are gradually recovering amid an urban slowdown (3 per cent volume growth YoY).
"In case of a double-digit tax hike, tax collections could suffer due to the negative effect on legal cigarettes and market share gains for illegal players," it said.