ITC Hotels demerger: Stock listing date, share price calculation, F&O inclusion & more

Today is the effective date for the demerger of ITC Hotels. Shares of ITC Ltd will turn ex-date for the hotels business demerger on January 6, 2025. On this date, ITC would determine shareholders who are eligible for ITC Hotels shares -- expected to be listed on stock exchanges within a month's time. The demerger ratio is set at 1:10, which means shareholders will be allotted one ITC Hotels share for every 10 ITC shares that eligible shareholders hold. 

Nuvama noted the stock price of ITC Hotels will be calculated based on the difference between the closing prices of ITC on January 3, 2025, and open price of ITC discovered during the SPOS (special pre-open session) on January 6, 2025.

ITC Hotels, ITC share price
ITC's share price is expected to be adjusted by Rs 22-25, reflecting its 40 per cent stake in the hotel business and incorporating a 20 per cent holding discount. According to Nuvama's FMCG team, led by Abneesh Roy, the adjustment is expected to be Rs 18 per share. "In addition, based on discussions with multiple market participants, we anticipate that the initial market price for ITC Hotels shares will range between Rs 150-175 per share," Nuvama said.

ITC index inclusion

The domestic brokerage noted that ITC Hotels would be maintained in all the NSE and BSE indices at a constant price i.e., the difference between the close price of ITC on January 3, 2025, and open price of ITC discovered during the SPOS (special pre-open session) on January 6, 2025.

ITC Hotels will be 51st constituent in Nifty50 and 31st constituent in Sensex and daily will be considered in weight calculations of the indices. However as it is not traded live so its  market-cap and price will remain constant until it lists. 

Later, it would be dropped from all the NSE and BSE indices at the last traded price, which is effective at the open of ITC Hotels listing date + three business days. 

"If the stock hits circuit limits, the exclusion will be postponed by two trading days each time. For instance if supposedly ITC Hotels lists on February 10, 2025, then the stock will compulsorily be deleted on February 13, 2025," Nuvama noted.

Post its listing for three trading days, live market-cap will be considered to calculate weight in all the indices.

ITC Hotels listing date

Nuvama said while there is no concrete listing day yet and it may take a few weeks’ time to get all the listing approvals. "ITC Hotels being carved out from one of the biggest giants. So, we expect the listing process should be fast tracked and quite likely ITC Hotels may be listed in a month’s time (or even earlier)," it said citing three cases of Jio Financial Services, Piramal Pharma and NMDC Steel.

Jio Financial Services got demerged from Reliance Industries. It took 33 days for the listing post the record date. Piramal Pharma took 45 days for the listing post its demerger (record date) from Piramal Enterprises. NMDC Steel took almost four months for the listing post record date for demerged from NMDC Ltd.

MSCI, FTSE rejig
Based on estimates, ITC Hotels is expected to meet the criteria for inclusion in the MSCI Global Small Cap Indices, Nuvama said. As a result, ITC Ltd will remain part of the Standard Index. However, following the listing of ITC Hotels, the hotel business will be moved to the Small Cap Index and will no longer be part of the Standard Index, Nuvama said.

 MSCI intends to apply a Price Adjustment Factor (PAF) to the market price of ITC on January 06, 2025 to reflect the spin-off. 

Since ITC Hotels is not expected to start trading on the ex-date, MSCI intends to temporarily add a detached security ITC (DET) to the MSCI Global Standard Indexes as of close of January 06, 2025 (effective January 07, 2025). The price of ITC (DET) will be calculated by taking the difference between the closing price of ITC on January 03, 2025 and January 06, 2025. MSCI intends to maintain ITC (DET) at this price until ITC Hotels begins trading.

When ITC Hotels starts trading, MSCI intends to apply a PAF to the market price of ITC (DET) based on terms of spin-off. 

"Thereafter, MSCI intends to delete ITC (DET) from the MSCI Global Standard Indexes as of the close of the first trading day of ITC HOTELS using the closing market price of ITC HOTELS. Simultaneously, MSCI intends to add ITC Hotels to the MSCI Global Small Cap Indexes as of the close of its first trading day," Nuvama said.

In the case of FTSE, the ITC Hotels stock will be excluded if it does not list within 20 working days after the record date of the demerger. 

"Based on my general understanding, there should not be any exclusion of ITC Hotels," said Abhilash Pagaria - Nuvama Institutional Equities.

F&O entry
It is unlikely. As per the current methodology, a stock needs to have at least six month trading history to even qualify for derivative inclusion. After fulfilling all the quantitative qualification criteria for the derivative inclusion , the stock will need SEBI approval, which is quite subjective, Nuvama said.