ITC Ltd’s association with the hotel business that is proposed to be spun off from the tobacco-to-foods conglomerate will ensure the success of the demerged entity and create value for all stakeholders, chairman Sanjiv Puri said at the annual general meeting on Friday.
The terms of the demerger will be decided on August 14 when the ITC board meets to finalise the share swap ratio and the tobacco giant’s first quarter results. Puri emphasised that the economic interest of all stakeholders would be maintained post restructuring.
The chairman also said the ministry of corporate affairs (MCA) had cleared the proposal to name the demerged entity as ITC Hotels Ltd.
The parent will retain a direct 40 per cent stake in the hotel business. The remaining 60 per cent stake will be distributed among the existing shareholders on a proportionate basis.
Shareholders were keen to know how many shares they would be allotted in lieu of their present holding in ITC Ltd and whether their interests would be protected.
“The most important facet of sustaining and protecting shareholder value is to make sure that ITC Hotels succeeds. The continued interest of ITC in ITC Hotels … will provide goodwill, will let the hotel use our the ITC logo, brands, our intellectual property and stabilise the operations and later flourish,” Puri explained.
The institutional synergies that ITC enjoys in the FMCG businesses, particularly foods, will also be retained. “Ultimately the valuations follow the value that is created, whether it’s from ITC or it is created from ITC Hotels,” he added.
Puri also sought to assuage shareholders’ concerns about the shareholding structure, which has sparked adverse comment in some quarters. The ITC stock has corrected 10 per cent since the announcement of the hotel business demerger on July 24.
“There is no change in economic interest. Under the new arrangement that’s been approved in principle by the board, 60 per cent will be held directly by shareholders; (another) 40 per cent will be held indirectly through your holding in ITC,” Puri told the shareholders.
Expansions
While the hotel remained a focus for shareholders, the company spelt out plans for other business segments, notably non-cigarette FMCG.
ITC has commissioned five state-of-the-art factories and will invest in four more facilities, including one in Uluberia where a new unit to manufacture personal care products will come up within a year.
Two factories will be built in Madhya Pradesh, of which one is for plant-based moulded packaging that will find applications in pharma, cosmetics and electronics.
FMCG
Puri said ITC had created a portfolio of over 25 vibrant brands in the FMCG businesses that account for an annual consumer spend of Rs 29,000 crore. Two flagship brands – Ashirvaad and Sunfeast – have recorded business worth over Rs 5,000 crore.