ITC's hotel business will not need significant capital raise, says CMD Sanjiv Puri

ITC Chairman & Managing Director Sanjiv Puri told CNBC-TV18 in an exclusive interaction that he does not foresee a significant need for capital raising in the soon-to-be-demerged hotel business.

Puri further said that the hotel business will have no debt and it will be able to fund its expansion over the next two to three years.

ITC's CMD spoke to CNBC-TV18 exclusively at the JPMorgan India Investor summit.

As per the scheme of arrangement announced in July, ITC will hold a stake of close to 40 percent in the new entity, while the remaining 60 percent will be held by the company's shareholders, proportionate to their shareholding in the company.

Puri said that ITC holding 40 percent in the hotel business has been well thought out and that the demerger process is on track for the 15-month journey. He further expects ITC's overall Return on Capital Employed (RoCE) to improve by 2,000 basis points with the hotel business demerger process.

Return on Capital Employed is a financial ratio used to assess a company's profitability and capital efficiency. In simpler words, it is used in understanding how well a company is generating profits from the capital it is putting to use.

ITC's hotels business contributed to nearly 5 percent of the combined revenue and EBIT over the last decade but more than 20 percent of the company's capex in the past. The EBIT margin for the hotels business for financial year 2023 was at a decade-high of 21 percent.

Puri said that ITC has opened 18 hotels in the last 16 months and that ITC will look to expand the presence of its hotels in tier-2 cities and beyond. He continued to maintain that the company will persist with the "asset right" strategy for the hotel business.

Shares of ITC ended little changed on Monday at Rs 443.1 and have gained 33 percent so far in 2023.