ITC Hotels Dropped From Sensex And BSE Indices; Here's Why

The demerged entity debuted on the NSE and BSE at Rs 180 and Rs 188 per share, respectively, giving it a market valuation of Rs 39,126.02 crore

ITC Hotels began trading as a separate entity on January 29

Source : ITC

ITC Hotels was removed from 22 BSE indices before trading started on Wednesday, February 5. The company, which was spun off from ITC, had been temporarily included in the Sensex and other indices to help passive funds with portfolio rebalancing.

ITC Hotels began trading as a separate entity on January 29. According to a notice from BSE, "As ITC Hotels did not hit the lower circuit till the cut-off time, the company will be dropped from all BSE indices effective prior to the open of trading on Wednesday."

ITC Hotels' shares last closed at Rs 165, down 4.16 per cent. Following the stock's exclusion from the Sensex, index trackers were forced to sell over Rs 400 crore worth of shares, with another Rs 700 crore in sales expected when the stock is removed from the NSE Nifty.

The demerged entity debuted on the NSE and BSE at Rs 180 and Rs 188 per share, respectively, giving it a market valuation of Rs 39,126.02 crore. However, its value has since dropped to Rs 34,266.48 crore. As part of the demerger, ITC Ltd retained a 40 per cent stake in ITC Hotels, while the remaining 60 per cent was distributed to ITC shareholders in a 10:1 ratio. The total acquisition cost for 100 shares of ITC Hotels stands at Rs 54,040.

Meanwhile, ITC Hotels has demonstrated strong operational performance, with its Average Room Rate (ARR) increasing from Rs 7,900 in FY19 to Rs 12,000 in FY24, reflecting a 51.9 per cent growth (CAGR of 8.7 per cent). Revenue Per Available Room (RevPAR) also grew from Rs 5,200 to Rs 8,200 during the same period, a 57.7 per cent rise (CAGR of 9.5 per cent). In FY24, room sales accounted for 52 per cent of total revenue, while food and beverage contributed 40 per cent.

Although ITC Hotels' shares may experience near-term volatility, analysts remain optimistic about the company's long-term potential.