ITC shares snap three-day losing run, rebound 2% as street sees positives in hotel business demerger – News18

Snapping its three-day losing run, cigarettes-to-hotels conglomerate ITC shares rebounded by more than 2% in Wednesday’s trade.

ITC shares declined nearly 6% in the three sessions after the company announced a proposal to demerge the hospitality business into a separate company named ITC Hotels Ltd.

Shares of the company closed 1.85% lower at Rs 462.20 apiece on BSE on Tuesday after its Board of Directors approved the demerger of the hotel business.

As per the proposal approved in-principle by the board, the company will hold a 40 % stake in the new entity and the balance shareholding of about 60 % will be held directly by the company’s shareholders proportionate to their shareholding in ITC.

On Wednesday, ITC shares ended the losing streak and recovered more than 2% as analysts observed that the demerger of the hotels business would help address capital allocation concerns over the medium to long term.

Despite the initial knee-jerk reaction to the ITC shares by investors following the announcement, most analysts confirmed their ‘buy’ rating or ‘hold’ call on the stock.

The street is expecting the share value of the demerged entity to be between Rs 12-23 per share.

Analysts have stated that the move would not have any major impact on ITC shares and its profitability has been driven by the FMCG business.

Some analysts expect ITC to go for higher dividend payouts in future with surplus cash.

ITC shares have increased over 40% so far this year and the stock has gained more than 56% in the last 12 months. The stock was the second-best performer on the Nifty 50 index before the three-day slide.

Shares of ITC Ltd were trading 2.23% higher at Rs 472.50 apiece on BSE at 1:49PM.