As far as I know, even with a 40% holding in a controlled subsidiary, the accounts will need to be consolidated in parent books. This will negate any improvement in ROCE at consol levels. Please correct me if I am wrong here.
The real test will be how does the hotel co do its fund raising in future- will it be external lenders, borrowing from parent or more equity. With a 9% OPM, its returns will be lower than the cost of capital. Can ITC cut the umbilical cord and set the hotel co free?
The entire exercise of 60% spin off will make the hotel co accounts transparent. It will force them to be more capital efficient and stay away from grandiose projects. And hopefully ITC will not keep on funding them.
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