ITC Hotels Demerger: Key Details, Shareholder Benefits, and Market Impact

The Indian stock market is set to witness significant corporate actions, particularly in the Futures & Options (F&O) segment, with leading companies like ITC Ltd, Tata Motors Ltd, Vedanta Ltd, ABFRL, and Siemens Ltd announcing plans for business demergers. These demergers aim to streamline operations, unlock shareholder value, and create independent business entities with a sharper focus.

Below are the key updates on the ITC Hotels demerger and other prominent corporate actions.

1. ITC Hotels Demerger: Key Details

The ITC Ltd board had approved the demerger of its Hotel business on August 14, 2023, as part of its strategic realignment.

Structure of the Demerger:

• Shareholding Distribution:
  • ITC will hold a 40% stake in the newly demerged entity, ITC Hotels.
  • The remaining 60% stake will be allocated directly to ITC’s shareholders in proportion to their existing shareholding.
• Entitlement Ratio:
  • Shareholders will receive 1 equity share of ITC Hotels for every 10 equity shares of ITC held.

Approvals and Effective Date:

• The National Company Law Tribunal (NCLT) Kolkata bench approved the demerger scheme on October 4, 2024.
• The demerger is set to become effective from January 1, 2025, marking a critical milestone for ITC’s strategic separation of its hotel business.

Valuation and Impact on ITC’s Stock:

As per JM Financial’s estimates, the demerged hotel business is expected to have a valuation of approximately ₹25 per share out of ITC’s current target price of ₹530 per share.

This move aims to unlock the potential of ITC Hotels as an independent entity, enhancing focus on growth and profitability in the hospitality sector.

2. Tata Motors Demerger: Commercial and Passenger Vehicle Split

The Tata Motors board, in its meeting on March 4, 2024, approved the demerger of its businesses into two separate listed entities:

New Structure Post Demerger:

1. TML (Commercial Vehicles): Will house the commercial vehicle business and all related investments.
2. TMPV (Passenger Vehicles): Will include the passenger vehicle business, electric vehicle (EV) business, Jaguar Land Rover (JLR), and their associated investments.

Entitlement Ratio:

• Shareholders of Tata Motors Ltd will receive shares in a 1:1 ratio in both the listed entities.

Approvals:

The demerger is subject to shareholder, creditor, and regulatory approvals, which are expected to be completed within 4-6 months.

3. Vedanta Demerger: Creation of Independent Businesses

The Vedanta board approved a strategic demerger on September 29, 2023, aimed at unlocking the value of its diversified businesses.

New Independent Entities:

The demerger will create five separate companies, each focused on distinct business segments:

• Vedanta Aluminium
• Vedanta Oil and Gas
• Vedanta Power
• Vedanta Base Metals
• Vedanta Steel and Ferrous Materials

Shareholder Entitlement:

• Shareholders will receive 1 equity share in each of the five newly listed companies for every 1 share of Vedanta held.

Approvals:

• Stock exchanges BSE and NSE have granted approvals.
• The scheme is now pending clearance from shareholders, SEBI, NCLT, and other regulatory authorities.

4. ABFRL Demerger: Separation of Madura Fashion & Lifestyle

The Aditya Birla Fashion and Retail Ltd (ABFRL) board, on April 19, 2024, approved the demerger of its Madura Fashion & Lifestyle Business into a new entity named ABLBL.

Shareholder Entitlement:

• ABFRL shareholders will receive 1 equity share of ABLBL for every 1 equity share of ABFRL held.

Approvals:

• The stock exchanges issued a No Objection Certificate (NOC) on October 30, 2024.
• The NCLT directed ABFRL to convene a shareholder meeting for approval on November 28, 2024.

This demerger is expected to enhance the operational focus and growth trajectory of the Madura Fashion business.

5. Siemens Demerger: Spinning Off Siemens Energy India Limited

The Siemens Ltd board, at its meeting on May 14, 2024, approved the demerger of its Siemens Energy India Limited (SEIL).

Shareholder Entitlement:

• Shareholders of Siemens Ltd (SIEM) will receive 1 equity share of SEIL for every 1 equity share of SIEM held.

Approvals:

• The scheme has received approvals from shareholders, creditors, and stock exchanges.
• The process now awaits final regulatory clearances.

Demergers Unlocking Shareholder Value

The demerger announcements by ITC, Tata Motors, Vedanta, ABFRL, and Siemens signal a strategic move to enhance focus, improve operational efficiency, and unlock value for shareholders. Each demerger aims to create independent business entities that can better pursue growth opportunities within their respective domains.

• ITC Hotels Demerger is particularly significant, as it positions ITC’s hospitality business to thrive independently, adding ₹25 per share to its overall valuation.
• Shareholders across these companies stand to benefit from the improved transparency, specialized management, and growth potential of the demerged entities.

Investors are advised to keep an eye on shareholder meetings, NCLT approvals, and regulatory clearances to track the progress of these corporate actions.

FAQs

1. What is the entitlement ratio forITC Hotels Demerger: Key Details, Shareholder Benefits, and Market Impact?
Shareholders will receive 1 equity share of ITC Hotels for every 10 equity shares of ITC held.

2. When will the ITC Hotels demerger become effective?
The demerger will be effective from January 1, 2025.

3. How will Tata Motors’ business be split post-demerger?
Tata Motors will separate its businesses into two entities:

• TML: Commercial vehicle business.
• TMPV: Passenger vehicle, EV, and JLR businesses.

4. What is the Vedanta demerger plan?
Vedanta will split into five independent companies: Aluminium, Oil & Gas, Power, Base Metals, and Steel & Ferrous Materials.

5. What will happen to Siemens shareholders post-demerger?
Shareholders will receive 1 equity share of SEIL for every 1 equity share of Siemens Ltd held.