Post-listing of the hotel business, ITC's balance businesses are expected to garner better return ratios, but there are concerns on the new subsidiary and what happens to British American Tobacco's holding in the long run
Even as ITC has finally decided to spin off its cash-guzzling business of hotels into a separate segment, analysts do not see it as much of a gamechanging strategy for the fast-moving consumer goods (FMCG) company, which draws its majority of revenues by selling cigarettes. Though there are a few concerns that have clouded the stock, post-listing of the hotel business ITC’s balance businesses are expected to be able to garner better return ratios, which would increase its profitability.
“We seek clarity on the rationale behind retaining 40 percent stake in the new entity, the royalty structure, any tax implications and the key criteria for a strategic investor, partner or collaborations in the business,” says Nitin Gupta, analyst, Emkay Global Financial Services. However, Gupta maintains a positive outlook and sees a K-Shaped recovery in ITC’s ‘other FMCG’ business.