ITC Hotels made a weak entry into the Indian stock market on January 29, following its demerger from its parent company, ITC Ltd.
The ITC shares were listed at ₹188 each on the Bombay Stock Exchange (BSE), reflecting a 30.37% discount to the price of ₹270 per share at the time of discovery.
On the National Stock Exchange (NSE), ITC Hotels shares were listed at ₹180 each, a discount of 30.77% compared to the discovered price of ₹260 per share.
After the listing, the shares continued to decline and were hit with a 5% lower circuit limit on the BSE, settling at ₹178.60 per share.
ITC Hotels is the newly demerged entity from ITC Ltd, which is primarily known for its cigarettes and FMCG business. The date for the ITC Hotels listing was set for January 29.
ITC Hotels will be removed from the Nifty 50 and Sensex indices on the T+3 day (three business days after the listing). The demerger ratio for ITC Hotels was 1:10, meaning shareholders of ITC Ltd received one ITC Hotels share for every ten ITC shares they held. ITC Ltd retained a 40% stake in the newly formed entity, with the remaining 60% being distributed among shareholders.
Following the demerger, ITC Ltd shareholders are not expected to see a significant increase in value as the price of ITC Ltd shares will be adjusted to reflect the holding company discount, according to DevenChoksey Research.
Regarding the valuation of ITC shares, DevenChoksey Research has updated its target price to ₹520 after the demerger of its hotel business.
The hotel segment was previously valued at an EV/EBITDA multiple of 17.3x. Post-demerger, the research firm has adjusted the target price downward by ₹12 per share, considering the retained 40% stake and the 20% holding company discount, changing the target price from ₹534 to ₹520.
