IiAS advises ITC shareholders to vote against demerger

ITC Ltd.’s board approved the demerger of its hotels business into a separate entity in August 2022, with ITC retaining 40% ownership and shareholders acquiring the remaining 60%. The demerger is expected to be completed this year, after which ITC Hotels will be listed.

Proxy advisory firm IiAS recommends voting against the demerger, arguing it only partially unlocks value and doesn’t materially reduce ITC’s capital support responsibilities for the hotel business. IiAS questions ITC’s plan for its 40% holding and the rationale behind retaining stakes in EIH Ltd. and HLV Ltd.


ITC responded that the 40% stake provides stability, flexibility, and headroom for future dilution. The company argues the hotels business has matured and can raise capital independently, with a strong balance sheet post-demerger.
IiAS points out the hotel division’s small revenue contribution and potential need for future capital support from ITC. Another proxy firm, InGovern Research, recommends voting in favor but cautions about the royalty fee and potential capital inflow from ITC.

Analysts are optimistic about the demerger as the capital-intensive hotel business has been a drag on ITC’s books. All 36 lakh ITC shareholders can vote on the resolution, which requires more than 75% approval.

BAT Plc., the largest shareholder in ITC with 25.49%, has voted in favor and will directly own 15.32% of ITC Hotels post-demerger, making it the largest public shareholder after ITC’s 39.93% promoter holding. However, BAT won’t have board representation in the demerged hotel business.