Strong Balance Sheet For Demerged Hotels Business Chairman of ITC

The planned demerged hotels industry would have a sound financial sheet and be debt-free, according to Sanjiv Puri, chairman and managing director of ITC Limited.

Speaking to analysts via conference call, Puri said that the new business, once it is established, would have the ability to acquire funds when necessary through debt, equity, or from strategic investors.

According to Puri, the board of the new business will decide whether such money is needed and it would operate under an asset-light model with a little amount needed.

 

The ITC board obtained preliminary permission on July 24 to demerge the hotel industry into a new corporation that will be listed under a scheme of arrangement.

 

ITC will directly control 40% of the new entity’s shares, with the other 60% being held by the company’s shareholders.

 

ITC will continue to invest in the hotel industry with this stake, and it will also benefit from synergies from the demerged corporation for its food vertical, according to Puri.

 

The hotel corporation, according to Puri, “would have a healthy financial sheet and be debt-free. Additionally, it has the option of raising funds via debt, equity, or strategic investors.

 

We have already declared our transition to an asset-right approach, Puri added. This point of view is spreading, and management contracts are now being used to run multiple hotels. We added that one should consider a different structure that would provide lasting benefit.

 

Puri claims that this is a pivotal moment with several chances. The institutional capabilities of ITC will support the new demerged entity’s operational stability as it determines its development trajectory.

 

This demerger will increase returns for ITC as a whole, concentrate on more precise capital allocation, and also unleash value of the current shareholders.

 

Puri said that the financial ratios of ITC will significantly improve as a result of the demerger.

 

According to ITC, return on invested capital (ROIC) would increase by double digits, while return on capital employed (ROCE) should increase by 18 to 20 percent.

 

“Everyone wins in this arrangement. The institutional strength, reputation, and goodwill of ITC will support the hotels business, the firm stated.

 

This layout is the greatest at this moment, according to Puri. Except in the event that the new corporation acquires a trophy property where investments are required, I do not see any change in the direction of the asset-right approach.

 

Shareholders, creditors, SEBI, and NCLT must all agree to the demerger plan before it can be implemented.

 

According to ITC, the new firm would run on an ideal financial structure, and the goal is to provide significant value to the shareholders in a pure play hotel company.

 

According to the business, occupancy, average room prices, and occupancy levels had all dropped to very low levels throughout the epidemic. However, because to the strong macroeconomic foundations of the economy, it has seen a V-shaped rebound.

 

According to ITC, there is a healthy pipeline of management contracts in the future.