Additional Details on ITC Hotels' Delisting from Sensex and BSE Indices:
ITC Hotels, a demerged entity of ITC Ltd, was listed separately on the stock exchanges on January 29, 2025, after being spun off from its parent company, ITC. The shares of ITC Hotels were initially included in major indices like the Sensex and others by passive funds for rebalancing their portfolios, a temporary measure that was never meant to be long-term. These inclusion measures are typically done to ensure that index funds, which are designed to track major market indices, hold stocks that are part of those indices. However, as the stock has been volatile and did not hit the lower circuit limit on February 4, 2025, it will be removed from the indices before the market opens on February 5, 2025.
The stock closed at Rs 165 on February 4, 2025, marking a decline of 4.16%. This drop followed a period of volatility, which has impacted the stock's standing in the indices. As a result, index trackers that are programmed to follow the Sensex will have to sell shares worth over Rs 400 crore. Moreover, once the stock is excluded from the NSE Nifty as well, another Rs 700 crore in shares are expected to be sold off.
Key Points About ITC Hotels’ Financial Performance:
Market Capitalization: ITC Hotels' market capitalization has decreased from Rs 39,126.02 crore when the company was first listed to Rs 34,266.48 crore. This reduction reflects the volatility in its stock price since its public debut.
Initial Listing Pricing: When ITC Hotels was first listed, the stock was priced at Rs 180 on the NSE and Rs 188 on the BSE. The demerger allowed ITC Ltd shareholders to retain 40% of the new entity, while the remaining 60% was distributed to ITC Ltd shareholders on a 10:1 basis.
Revenue Performance: ITC Hotels has shown strong operational growth, particularly in terms of Average Room Rate (ARR) and Revenue Per Available Room (RevPAR). In FY24, its ARR increased by 51.9% (CAGR of 8.7%), and its RevPAR rose by 57.7% (CAGR of 9.5%). This growth is attributed to a robust hospitality market and a rise in demand for premium accommodations.
Room Sales and Food & Beverage Revenue: In FY24, room sales made up 52% of the total revenue, while food and beverage contributed 40%. The remaining revenue came from other services and operations.
Outlook and Market Sentiment:
Positive Long-Term Outlook: Despite the current volatility and the drop in stock price, analysts are optimistic about ITC Hotels' future prospects. They point to the company's strong brand backing from its parent, ITC Ltd, and the overall growth in the luxury hotel segment in India, driven by increasing consumer demand for premium accommodations.
Industry Cycle: ITC Hotels is poised to benefit from a strong industry cycle with limited new hotel capacity being added in the luxury segment. As demand continues to outpace supply, the company stands to capitalize on the growing need for upscale accommodation options.
Governance and Brand Support: ITC Ltd, which retained a 40% stake in ITC Hotels, continues to provide brand support and governance. This backing is expected to enhance the growth potential of ITC Hotels, especially in the face of market fluctuations and the capital-intensive nature of the hotel business.
Conclusion:
While ITC Hotels faces some short-term challenges, including its delisting from the Sensex and other major indices, its long-term growth potential in the hospitality sector remains strong. The company’s operational performance, supported by ITC Ltd's backing, positions it to navigate any near-term volatility and capitalize on opportunities in the premium hotel market.