ITC Hotels, which recently demerged from ITC Limited, has been officially removed from 22 BSE indices, including the benchmark Sensex, as of February 5, 2025. This move comes after its independent listing on January 29, 2025. Investors and market analysts are closely watching the impact of this removal on ITC Hotels’ stock performance and future growth.
Why Was ITC Hotels Removed from Sensex and Other BSE Indices?
After the demerger from ITC Limited, ITC Hotels was temporarily included in major indices to allow passive funds and institutional investors time to rebalance their portfolios. However, as per standard market practice, the stock has now been excluded from these indices.
Key Highlights of ITC Hotels’ Stock Movement:
- Demerger Ratio: ITC shareholders received 1 ITC Hotels share for every 10 ITC Limited shares held.
- Listing Price: ITC Hotels debuted at Rs 180 on NSE and Rs 188 on BSE.
- Market Valuation: Initially valued at Rs 39,126 crore, but later adjusted to Rs 34,266 crore.
- Stock Performance: The stock declined slightly post-listing due to market adjustments and institutional selling.
Impact on ITC Hotels’ Stock and Market Capitalization
Following its removal from the Sensex, index funds and ETFs tracking the index had to sell ITC Hotels shares worth over Rs 400 crore. Additionally, the stock is also expected to be removed from the NSE Nifty index, leading to another Rs 700 crore in share sales.
What This Means for Investors:
- Short-Term Volatility: Due to forced selling by index funds, the stock may experience fluctuations.
- Long-Term Potential: With a sharper focus on the hospitality industry, ITC Hotels can attract sector-specific investors.
- Standalone Growth Opportunity: The demerger allows ITC Hotels to operate independently and expand its premium and luxury hotel portfolio.
ITC Hotels’ Financial Performance: A Promising Future?
Despite market fluctuations, ITC Hotels has shown strong financial growth:
- Average Room Rate (ARR): Grew from Rs 7,900 in FY19 to Rs 12,000 in FY24 (51.9% increase).
- Revenue Per Available Room (RevPAR): Increased from Rs 5,200 to Rs 8,200 (57.7% growth).
These numbers indicate that ITC Hotels is well-positioned to capitalize on India’s booming tourism and hospitality sector.
Comparison with Reliance’s Jio Financial Spin-Off
ITC’s demerger strategy is similar to Reliance Industries’ spin-off of Jio Financial Services, where the newly formed entity remained in major indices temporarily before being excluded. This approach ensures a smooth transition for investors.
Conclusion: Should You Invest in ITC Hotels?
The removal of ITC Hotels from major indices may cause temporary price fluctuations, but long-term investors should look at the company’s strong financials, strategic growth plans, and position in the premium hospitality sector.
For those interested in the Indian hospitality market, ITC Hotels presents a compelling long-term investment opportunity as an independent entity.