After the demerger of ITC, its share price as well as the company's shareholding and other financial factors will be affected.

British American Tobacco is the largest shareholder in ITC. It will hold a 15.3% stake in the hotel company. According to the demerger document, this will make BAT the second largest shareholder in the hospitality company after the 40% stake of ITC's promoter. BAT's stake will be classified as foreign direct investment.

Shares of ITC Ltd closed at Rs 479.70 on Friday. The market cap of this company is Rs 5.99 lakh crore.

The global cigarette major is likely to exit the hotel branch after listing as it will help the company raise cash from the monetization of non-core assets. Earlier in October this year, BAT Chief Executive Tadeu Marrocco said that BAT was exploring ways to "unlock shares" in ITC to gain "financial flexibility" for the future.

"ITC Hotels is definitely not our intention to become a shareholder in hotels in India. Let's be very clear, so whenever we feel the time is right, we will sell it," Marrocco told institutional investors during BAT's Capital Markets Day meet in Southampton, UK, in October 2024.

He said the divestment of stake in ITC Hotels is part of BAT's plan to "create financial flexibility" where it can raise enough cash to continue its "buy-back programme".

In March this year, BAT reduced its stake in ITC from 29.1% to 25.46%. A shareholding of more than 25% in ITC gives veto rights and influence on the board.

During the Capital Markets Day meet, Marrocco had said that unlocking shares in ITC is not as easy a process as one might think because the central bank in India is asking us to prove all the history of shareholding from the 1930s to prove the sale and we have to gather board meetings and other things every time for bonus splits and other such things.
 

Will BAT launch new tobacco products in India?

As Marrocco had reported, BAT is also considering bringing its oral tobacco products to India.
According to BAT, there is a possibility of introducing a new category in India, which is modern oral. This includes products like nicotine pouches. However, it is not clear whether ITC plans to enter this segment. BAT currently does not have access to some of the fastest growing markets including India as well as Brazil and Turkey.

ITC Hotels Demerger Plan

The company announced plans to split its hotel business into a separate unit in August 2023. Under the plan, ITC will retain 40% ownership of ITC Hotels, while the remaining 60% will be distributed to ITC shareholders in proportion to their shareholding.
 

ITC Hotels Demerger Ratio

ITC has announced that shareholders will get one share of ITC Hotels for every 10 shares they hold in ITC.