ITC Hotels shares slide for second day, hit 5% lower circuit. What should investors do?

ITC Hotels share price hit a 5% lower circuit on its second trading session, the stock opened at an intraday low of ₹169.70 apiece on BSE.

Mahesh M Ojha, AVP — Research at Hensex Securities highlighted that ITC Hotels shares were offered at higher valuations. The fair value of ITC Hotels shares comes to around ₹28,000 crore market cap, whereas the stock is still available at ₹35,000 market cap. So, some more downsides are possible in the stock. We expect around 15-20 per cent more correction in this newly-listed stock.

On Wednesday, January 29, ITC Hotels shares debuted at ₹188 each on the BSE, while on the NSE, they were listed at ₹180. The stock opened at more than a 30% discount compared to the discovered price. The discovered price for ITC Hotels was ₹260 per share on the NSE and ₹270 per share on the BSE. Nevertheless, the stock experienced a decline during its debut session and closed significantly lower. On the BSE, ITC Hotels shares ended at the 5% lower circuit, while on the NSE, the stock closed down 3.53%.

ITC demerger

The demerger of ITC's hotel operations was finalized on January 1, 2025, with January 6 designated as the record date. Following this, a special trading session at the BSE and NSE took place on January 6 to determine the pricing for the ITC Hotels business after the demerger.

ITC Ltd maintains a 40 percent ownership in ITC Hotels, while the other 60 percent is allocated to current shareholders. ITC Hotels—the newly formed entity resulting from the hotel business demerger of the diversified company ITC Ltd that debuted on the stock exchanges on Wednesday—has announced plans to grow its portfolio to more than 200 hotels within the next five years.

“As ITC Hotels embarks on this new journey, it is committed to achieving new global benchmarks in hospitality while staying rooted in its vision of sustainability and inclusivity. The future indeed promises exciting opportunities to expand, innovate, and redefine luxury experiences. As we do so, ITC Hotels is also committed to enriching the tourism landscape of India contributing to the nation’s goals for a Viksit Bharat,” said Sanjiv Puri, Chairman, ITC Hotels.

What should investors do now? 

Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities said that Demerger Listing of ITC Hotel was in line with our expectation, while we also expect to see some selling pressure to continue due to passive fund exits as ITC shareholders who were not comfortable owning the hotels business while the demerger ratio was also not attractive as ITC shareholders get 1 share of ITC Hotels for every 10 held of ITC hence the pressure continues in the near term. As per the index demerger listing rules, ITC Hotels will be part of index and will be excluded from indices 3 business days after its listing date (if there are no circuit breakers).

As an investor one should wait and watch its quarterly earnings and management business outlook before taking the right informed decision. Long term growth prospects in hospitality are intact considering a favorable demand-supply in India's luxury hotels market outlook, and the company’s strategic expansion plans.

According to Seema Srivastava, Senior Research Analyst at SMC Global Securities, with a focus on sustainability, luxury, and technological advancement, ITC Hotels is well-positioned for sustained growth. Investors with a long-term view can gain exposure to this promising segment of the market.

Srivastava highlighted that Anil Chadha, the Managing Director of ITC Hotels, has expressed a strong interest in exploring opportunities in branded residences as part of the company’s strategic growth and diversification. This expansion into branded residences aligns with ITC Hotels’ legacy of excellence in hospitality and presents an opportunity to leverage its strong reputation in the luxury segment.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.