Share price of ITC Hotels drops 3% as BAT announces phased exit by 2026

The recently listed ITC Hotels has been making headlines after its share price witnessed a sharp decline. British American Tobacco Plc (BAT), a significant stakeholder, has announced its intention to divest its shareholding by 2026. Let's explore the details of this major development and understand its impact on ITC Hotels' performance and shareholder sentiment.

Why Did ITC Hotels Share Price Decline?

Shares of ITC Hotels dropped over 3% on February 14, following British American Tobacco's (BAT) announcement to gradually divest its stake in the company. BAT, the largest shareholder in ITC Hotels after ITC Ltd., clarified during an earnings call that it has no long-term interest in remaining associated with a hotel chain in India.

Tadeu Marroco, BAT's CEO, stated, "We will be divesting, and we will be using proceeds to make sure that we get to the leverage corridor of two and a half and two by 2026." This move comes as ITC Hotels is still navigating its identity as an independent listed entity.

ITC Hotels Share Price: Current Market Performance

The ITC Hotels stock opened slightly higher at ₹170.10 compared to its previous close of ₹169.90. However, it soon reversed gains, plunging 3.44% to a day's low of ₹164.05. This price movement brought the stock alarmingly close to its 52-week low of ₹160.55.

Key Stock Price Details

• Opening Price: ₹170.10
• Day's Low: ₹164.05
• 52-Week Low: ₹160.55
• Listing Price: ₹188 (on January 29, 2025)

Since its listing, ITC Hotels has faced considerable pressure, partially influenced by BAT's earlier decision to sell a portion of its stake in March 2024. This trend continues as investors remain cautious about the company's standalone growth prospects.

BAT's Exit Strategy: The Key Trigger

British American Tobacco's decision to offload its stake has been a long time coming. BAT holds a 15.29% share in ITC Hotels, down from 25.5% after an earlier divestment in March 2024. That sale fetched ₹17,491 crore, funds BAT used to launch its sustainable share buyback program worth £700 million for 2024 and £900 million for 2025.

BAT's exit underscores its strategic focus on its core business areas, distancing itself from ITC Hotels' long-term trajectory.

Impact on Shareholders and Market Sentiment

BAT's planned exit has sent ripples across the market, with investors concerned about potential downward pressure on ITC Hotels' valuation. While analysts have mixed opinions, the immediate reaction reflects a cautious approach from institutional and retail investors alike.

Summary: What Lies Ahead for ITC Hotels?

The near-term outlook for ITC Hotels appears challenging as the company grapples with uncertainties surrounding BAT's exit. While the hospitality sector in India holds immense growth potential, ITC Hotels must demonstrate its ability to operate independently and deliver consistent financial performance.

Key Takeaways:

• BAT's exit by 2026 may lead to short-term volatility in ITC Hotels' share price.
• Market sentiment will hinge on the company's ability to meet investor expectations in the post-demerger phase.