The shareholders of diversified conglomerate ITC have approved a proposal to demerge its hotels business into ITC Hotels with a whopping 99.59% votes in favour. This also paves the way for the listing of ITC Hotels on the bourses. The scheme of arrangement of ITC and ITC Hotels has been passed by the members with requisite majority, the Kolkata-based company said in a regulatory update on Thursday.
ITC will list ITC Hotels after the completion of the demerger process and on receipt of regulatory approvals. Earlier in August 2023, ITC received board approval for the demerger of its hotels business and use of ITC brand name. In May, the National Company Law Tribunal directed ITC to convene a shareholders’ meeting on June 6 to get approvals for the demerger. Under the demerger, shareholders would get one share of the hotels’ business for every 10 shares held in ITC. No cash consideration would be paid under the demerger scheme. Following the demerger, ITC will own 40% in ITC Hotels, while the remaining 60% will be held by ITC shareholders in proportion to their ownership in the parent entity.
Earlier proxy advisory firm Institutional Investor Advisory Services (IiAS) had asked shareholders to vote against the proposal. On the contrary, two other proxy advisory firms – Stakeholders Empowerment Services (SES) and InGovern Research Services – had asked investors to support the move.
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With ITC continuing to hold 40% of the hotels business, and its existing 13.69% holding in EIH and 7.58% equity in HLV, the transaction does not provide a complete exit from the hotels business to ITC’s shareholders, IiAS said in a note to shareholders. EIH was formerly East India Hotels, while HLV was earlier known as Hotel Leela Venture. “While it partially unlocks value (to the extent of 60%), capital support will likely continue to be provided by ITC to the hotels business in its capacity as a promoter,” IiAS had said.
According to IiAS, ITC’s argument of synergies between the hotels business and its other agri and FMCG businesses is not materially reflected in the inter-segment revenues. The synergies are likely limited by the size of the hotel business revenues, which is ITC’s smallest and accounts of 3% of ITC’s aggregate revenues. SES had a “for” recommendation for the resolution as no concern has been identified. InGovern also supported the move stating that the hotels business has matured over the years and is now ready to chart its own growth path as a separate entity.
From: financialexpress
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