ITC‘s soon-to-be-demerged hotel business will not include any board representation from its largest shareholder, BAT, as indicated in the company’s demerger document sent to shareholders. According to insights from an industry executive, this absence signals BAT’s potential disinterest in the hotel sector, possibly leading to the sale of its stake in ITC Hotels after the company’s anticipated listing in the next 4-6 months.
The document released on Friday reveals that BAT will hold a direct ownership stake of 15.32% in ITC Hotels through foreign direct investment, positioning it as the largest public shareholder after ITC’s promoter holding of 39.93%.
Tadeu Marroco, the CEO of BAT, said in December that ITC’s hotel sector is not of interest to the British tobacco company. Despite this, the document showed that BAT voted in favour of the demerger. Even after selling its whole investment, BAT will retain an indirect interest in the company through ITC’s ownership of the hotel company.
ITC’s board currently includes two representatives from BAT, namely Sunil Panray and Atul Singh. In March, BAT executed a block deal selling a 3.5% stake in ITC to institutional investors for INR 16,690 crore, reducing its holding to 25.51%.
Continue Exploring: ITC board approves hotel business demerger, expects ROCE to improve significantly
According to the document, the proposed board will feature ITC chairman Sanjiv Puri, who will assume the role of chairman and non-executive director within the new entity. Additionally, three other senior executives from ITC will join as non-executive directors: Anil Chadha, the chief executive of the hospitality business; Supratim Dutta, the executive director and chief financial officer; and RK Singhi, the company secretary. PR Ramesh, a former partner at Deloitte Haskins & Sells LLP, will also join as a non-executive director. The mentioned executive suggested that the board of ITC Hotels might expand post-listing. Furthermore, Puri is expected to retain his position as chairman, and Chadha could potentially be appointed as the managing director of the new company.
He mentioned that this decision will be made by the board of ITC Hotels following the listing. Nevertheless, he expressed doubt that BAT would assume a board position at that time as well.
Following the listing, BAT is expected to engage a merchant banker to facilitate the sale of its stake in ITC Hotels.
Continue Exploring: BAT set to divest up to 3.5% stake in ITC through block trade transaction
An analyst remarked that BAT’s departure from ITC Hotels is inevitable. “There are no significant hurdles for BAT to divest its stake in ITC Hotels, given that regulations in the hotel sector are not as stringent as those in tobacco,” the analyst explained. Responding to inquiries, a spokesperson for ITC mentioned that a meeting of the company’s ordinary shareholders has been scheduled for June 6 to approve the scheme of arrangements regarding the demerger of the hotel business.
