Shares of the demerged hotels business of ITC Ltd, ITC Hotels Ltd, will list today. ITC Hotels, which runs six distinct brands namely Mementos, WelcomHotel, Storii, Fortune, and WelcomHeritage and ITC Hotels, is expected to list in the Rs 140-175 range. Following the listing of ITC Hotels, ITC shareholders are not expected to experience a material increase in value, as ITC's price will be adjusted to account for the holding company discount. But analysts are positive on ITC's prospects.
ITC Hotels will be removed from all NSE and BSE indices at its last traded price, effective at the ITC Hotels listing, plus three business days. ITC Hotels' comparable peers including Indian Hotels and EIH are currently trading at an FY26E EV/Ebitda multiple of 31 times and 21.2 times, respectively.
"Using an FY26E Ebitda estimate of Rs 1,458 crore, we anticipate ITC Hotel's listing to occur at an EV/Ebitda multiple of 20-25 times, implying a market capitalisation range of Rs 29,163 crore to Rs 36,454 crore. This would result in a potential listing price in the range of Rs 140-175 per share," DevenChoksey Research said.
Systematix in an earlier note estimated ITC Hotels' stock value at Rs 150 per share based on FY26 EV/Ebitda of 25 times. Nuvama anticipated the the initial market price for ITC Hotels shares will range between Rs 150-175 per share.
ITC Hotels performance Over the past decade, ITC Hotels has posted impressive growth, with revenue, Ebitda, and EBIT expanding at compound annual growth rates (CAGR) of 10 per cent, 14.6 per cent, and 18.0 per cent, respectively. As of FY24, Ebitda margin was a healthy at 34.4 per cent.
"The hotel business contributed 4.1 per cent of ITC’s overall revenue in FY24, while EBIT contribution from the segment was 3 per cent. The average Room Rate (ARR) has increased from Rs 7,900 in FY19 to Rs 12,000, up 51.9 per cent (CAGR growth of 8.7 per cent). Revenue Per Available Room (RevPAR) increased from Rs 5,200 in FY19 to Rs 8,200 in FY24, up 57.7 per cent, DRChoksey Research said.
The brokerage noted that the management fee income has been a notable driver of growth, with a CAGR of approximately 21 per cent over the last five years. ITC Hotel's revenue composition for FY24 reveals that 52 per cent came from room sales, 40 per cent from food and beverage, with the remainder attributable to other revenue streams.
ITC Hotels outlook
Looking ahead, ITC Hotels aims to expand its portfolio to over 200 properties with more than 18,000 keys by 2030E, with a shift in the owned-to-managed ratio to 35:65.
"We project a revenue/Ebitda/PBT CAGR of 15 per cent/18 per cent/17.2 per cent over FY24-FY27E, with an expected EBitda margin of 36.0% in FY26E and FY27E. This growth is underpinned by a strong expansion strategy and favorable trends within the hospitality sector. With a debt-free balance sheet and robust cash flow generation, ITC Hotels Ltd is well-positioned to capitalise on value-accretive M&A opportunities," DevenChoksey Research said.
ITC target price
The brokerge said the demerger of ITC'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 capitalise 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," DevenChoksey Research said.