Addressing shareholders in the company’s 112th annual general meeting virtually on Friday, Puri said the continued interest of ITC in the new entity (demerged hotel business) will provide “long term stability and instill a sense of assurance among partners, investors and employees, while enabling the new entity to leverage ITC’s institutional strengths including the timeless goodwill, world-class brands and governance processes.”
Puri said for ITC, “the reorganisation will sharpen capital allocation, improve asset efficiency ratios, unlock value for its shareholders as well as enable leveraging of institutional synergies. Thus, the proposed reorganisation will enable the business to architect the next horizon of growth as a pure play hotels entity with a strong balance sheet and healthy pipeline, especially when the industry is poised for robust growth.”
Last month, ITC announced that the company’s board of directors has given its in-principle approval for the demerger of the hotels business. As per the proposed scheme of arrangement, ITC Ltd will hold a 40% stake in the new entity and the balance 60% will be owned directly by the company’s shareholders proportionate to their shareholding in ITC Ltd. The proposed structure has been criticized by a section of shareholders and analysts.
ITC’s hotels business last fiscal doubled segment revenue, while EBITDA (earnings before interest, taxes, depreciation and amortization) margins expanded by 930 basis points over 2019-20. A basis point is 0.01 percentage point. There are over 120 hotels, with 11,600 keys in 70 locations. The company had embarked on an asset right strategy in the business for the past few years with a bouquet of brands and managed properties now accounting for 55% of total rooms. In the last 16 months, ITC has added 18 hotels mostly through management contracts.Puri said in the fast moving consumer goods (FMCG) business, ITC has immense opportunity to grow. He said the company in the past three years have launched nearly 300 new products including several of them in the premium segment.“In a relatively short span of time, ITC has built a portfolio of 25-plus vibrant brands in the FMCG businesses that represent an annual consumer spend of Rs 29,000 crore. It is a source of immense satisfaction that two of our flagship brands are already in the league of over Rs 5,000 crore, whilst five more brands have touched spends between Rs 1,000 crore and Rs 4,000 crore,” said Puri.
The ITC chairman said the market size of the FMCG segment is estimated to be upwards of Rs 21 trillion by 2030 and in this the addressable market for ITC is estimated to be about Rs 5 trillion.
