ITC Ltd., an Indian tobacco company in which British American Tobacco Plc owns a stake, plans to spin off and list its hotel operations in a much anticipated move to boost its non-cigarette businesses.
(Bloomberg) — ITC Ltd., an Indian tobacco company in which British American Tobacco Plc owns a stake, plans to spin off and list its hotel operations in a much anticipated move to boost its non-cigarette businesses.
ITC’s board has given in-principle approval for shareholders to get 60% of the hotel business, while ITC would retain a 40% stake, it said in a stock exchange filing on Monday.
The move will help the hotel business attract investors and strategic partners “whose investment strategies and risk profiles are aligned more sharply with the hospitality industry,” according to the filing.
Shares of ITC, which primarily makes money by selling cigarettes but also holds interests in hotels, paper and consumer staples industries, have been steadily climbing since 2020 to reach a level similar to Hindustan Unilever, the Indian unit of Unilever Plc.
“The ITC umbrella has several valuable entities under it, each of which can benefit from independence,” said Utkarsh Sinha, managing director at boutique investment bank Bexley Advisors in Mumbai, “letting them out into the open might be valuable.”
BAT is ITC’s largest shareholder with a 29% stake and there has long been speculation about whether the UK company will divest its holding at some point to unlock value. BAT Chief Executive Officer Tadeu Marroco said in June that owning ITC gives the UK company a big opportunity in India’s oral tobacco market. BAT declined to comment on ITC’s hotel business spin off.
Shares of ITC fell 3.9% at the close in Mumbai. The stock has more than doubled in the past two years.
Read more: ITC Dethrones India Unilever Unit to Become No. 1 Consumer Stock
(Updates with detail throughout)
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