ITC Ltd shares were quoting at Rs 452 apiece on Monday morning, as the stock turned ex-date for demerger for the hotel business. The stock was adjusted by Rs 27 over its previous closing price of Rs 482 on BSE. This is against Rs 16-25 per share adjustments a few analysts were expecting before.
Similar to Jio Financial Services Ltd (JFS), Piramal Pharma and NMDC Steel, shares of ITC Hotels will now list on stock exchanges, most likely in February.
To be sure, while ITC Hotels will be visible as 51st constituent of Nifty50 and 31st constituent of Sensex and would be considered in weight calculations of the indices, it would not trade live.
So this Rs 27 price for ITC Hotels will stay constant until the stock actually gets listed. Today is the record date for the demerger and ITC shareholders who are owning 10 ITC shares would be eligible for one ITC Hotels stock and in the ratio thereafter.
Post its listing for three trading days, ITC Hotel's live market capitalisation would be considered to calculate weight in the indices. Analysts largely expected the initial market price for ITC Hotels shares to range between Rs 150-195 per share.
For ITC shareholders, there will be no material value addition, as the price of ITC has adjusted, taking into account the holding company discount. That said, ITC investors will get an opportunity to participate directly in the growth story of ITC’s hotel business.
"Looking at the robust key addition pipeline for ITC Hotels and strong industry tailwinds, we believe ITC Hotels Ltd has potential to outperform ITC Ltd over a medium to long term period. In the short term, there is apossibility that few shareholders (especially ETFs) may have to forcefully exit ITC Hotels Ltd and this can create pressure on the stock price," the brokerage said on December 30, 2024.
SBI Securities believes any short term pressure on the stock price of ITC Hotels Ltd will be a good opportunity for retail and HNI shareholders to accumulate quality business in their long term portfolio.
"Meanwhile, post demerger, investors can also continue to hold shares of ITC Ltd for long term given its diversified FMCG portfolio and steady growth in its core businesses (Cigarette & FMCG). Also, the demerger of its asset heavy hotels business will result in improved return ratios and cash flows. We believe, post demerger, ITC Ltd’s medium term fair value to be Rs 525-550," it said.
ICICIdirect, calling the demerger of ITC’s hotel business a win-win for shareholders, set a target price of Rs 195 for ITC Hotels shares, representing a potential upside of 15-30 per cent over its expected listing price of Rs 150-170. The brokerage values ITC shares at Rs 555.