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ITC shareholders approve demerger of hotel business with 99.6% majority – Industry News
Shareholders of diversified conglomerate ITC have approved a proposal to demerge its hotel business into ITC Hotels with an impressive 99.59% voting in favour. This also paves the way for listing of ITC hotels on the exchanges. The scheme of arrangement of ITC and ITC Hotels has been approved by members with the requisite majority, the Kolkata-based company said in a regulatory update on Thursday.
ICT will list ITC hotels upon completion of the demerger process and upon receipt of regulatory approvals. In early August 2023, ITC received board approval for the spin-off of its hotels business and use of the ITC brand. In May, the National Company Law Tribunal directed the ITC to convene a shareholders’ meeting on June 6 to seek approvals for the demerger. Under the demerger, shareholders would receive one share of the hotel business for every 10 shares held in ITC. No cash consideration would be paid under the spin-off scheme. Post-demerger, ITC will own 40% of ITC Hotels, while the remaining 60% will be held by ITC shareholders in proportion to their shareholding in the parent entity.
Previously, 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 – asked investors to support the measure.
With ITC continuing to hold 40% of the hotel business and the existing 13.69% EIH and 7.58% equity HLV, the transaction does not provide a complete exit from the hotel business for ITC shareholders, IiAS said in a note to shareholders. EIH was formerly East India Hotels, while HLV was previously known as Hotel Leela Venture. “While partially releasing value (up to 60%), capital support is likely to continue to be provided by ITC to the hotel business in its capacity as promoter,” IiAS said.
According to the IiAS, the ITC’s argument for synergies between the hotel business and its other agro-industrial sectors FMCG business is not materially reflected in intersegment revenues. Synergies are likely limited by the size of revenue from the hotel business, which is ITC’s smallest and represents 3% of ITC’s aggregate revenue. SES made a “for” recommendation for the resolution as no concerns were identified. InGovern also supported the initiative, saying that the hotel business has matured over the years and is now ready to chart its own growth path as a separate entity.