In my opinion, the most optimal thing is a full spinoff whereby ITC Ltd would offload the entire ITC Hotels stake to shareholders.
Benefits of this are:
- Holdco discount eliminated (so full value unlock)
- Shareholders can choose which businesses they want to participate in
- Full spinoff is tax free (now if ITC wants to reduce stake – they’ll pay taxes)
- Fully independent board and management (not just a puppet of ITC mgmt – for now, I assume ITC Ltd will effectively be a promoter)
- Capital allocation independent of ITC, focused on ITC Hotels and ITC Hotels minority shareholders ONLY
- Potential for ITC stake sale will continue to be a overhang
Think of an alternate universe where HDFC Ltd would sell the mortgage business to HDFC Bank and offload AMC, Life, Ergo stakes to shareholders. Shareholders get to choose which line of business they want to participate in and have a much higher value unlock due to all the shares they receive.
or what Adani Enterprises did in 2015. Each of the Adani businesses was able to chart its own course.
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