ITC Hotels hits 5% lower circuit post weak debut. Things you should know

ITC Hotels made its market debut today, January 29, 2025, listing at Rs 188 on the BSE, a 30 per cent discount to its previously discovered price of Rs 270. Post listing, the stock hit the 5 per cent lower circuit, locked at Rs 178.60.

On January 6, a special trading session was conducted to determine the adjusted price for ITC shares post-demerger. ITC share price was reduced by Rs 27 on BSE to Rs 455. ITC Hotels, officially demerged from ITC the same day, remained a dummy entity in indices up to its listing with a fixed price of around Rs 270.

At Rs 37,000 crore, ITC Hotels is now the second largest hotel player by market cap, after Indian Hotels Company.

Why did ITC demerge its hotel business?

The debut follows ITC's decision to demerge its hotel and resort business into a standalone entity. The hospitality segment had long been a drag on ITC's overall performance for a few years. The group had hinted at a demerger to improve ITC's market positioning.

The post-pandemic boom in the hotel business (thanks to the revival of the tourism industry) translated into better earnings for ITC. Seizing this momentum, ITC decided it was the right time to spin off its hotel arm.

ITC Hotels and its performance..
Founded in 1975, ITC Hotels has expanded to over 140 properties across 90 plus destinations. It operates under six distinct brands:

• Luxury segment: ITC Hotels, Mementos
  
• Boutique premium segment: Storii
  
• Upper upscale segment: Welcomhotel
  
• Midscale segment: Fortune
  
• Heritage leisure space: WelcomHeritage

In FY23, ITC's hotel segment nearly doubled its revenue to Rs 2,689 crore from FY22 levels, with an operating margin of 20.7 per cent.

As a standalone entity, ITC Hotels boasts impressive numbers:

• Three-year annual revenue growth: 52 per cent
  
• EBIT growth (FY22-24): 126 per cent, from a loss of Rs 217 crore in FY22

The road ahead for ITC Hotels

ITC Hotels enters the market at a high-growth phase for the hospitality industry. Hotel occupancy rates hit a decade-high of 70-72 per cent in FY24, according to ICRA, as demand continues to outstrip supply.

The company is capitalising on this uptrend with ambitious expansion plans: adding 5,000 more rooms over the next four to five years and opening one new hotel per month for the next two years.

A key differentiator? ITC Hotels is debt-free, a rarity in the industry. It also has Rs 1,500 crore in cash from ITC, giving it ample firepower for future expansion.

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