ITC Hotels Ltd, a prominent hotel chain, has recently been excluded from the BSE Sensex and 22 other BSE indices, effective February 5, 2025. This unexpected move, announced just before market opening, has sent shockwaves through the financial world. The shares of ITC Hotels are now trading at ₹167.05, showing a slight increase of ₹2.40 or 1.46 per cent as of 11:09 am on the BSE. However, prior to this announcement, the shares had experienced a significant 4.16 per cent decline, trading at ₹165.
The exclusion of ITC Hotels from the BSE indices has had a profound impact, leading to substantial selling pressure. Index funds have been quick to offload shares worth over ₹400 crore, with an additional ₹700 crore in selling anticipated following the hotel chain’s expected removal from the NSE Nifty. This sudden shift in market dynamics has left investors and analysts alike scrambling to understand the implications for ITC Hotels and the broader market.
The journey of ITC Hotels took an interesting turn recently when the company demerged from ITC Ltd and listed separately on January 29, 2025. The initial listing prices on the NSE and BSE were ₹180 and ₹188, respectively, marking a 31 per cent discount from its implied price of ₹260. Under this demerger structure, ITC 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. This strategic move aimed to unlock value for shareholders and position ITC Hotels for future growth.
Despite facing challenging market conditions, ITC Hotels has demonstrated resilience and shown strong operational performance over the years. Key metrics such as Average Room Rate have seen a steady increase from ₹7,900 in FY19 to ₹12,000 in FY24, reflecting a compound annual growth rate (CAGR) of 8.7 per cent. Similarly, Revenue Per Available Room has improved from ₹5,200 to ₹8,200 during the same period, indicating a positive trend in the hotel chain’s revenue streams.
While the market valuation of ITC Hotels has decreased from ₹39,126.02 crore at listing to ₹34,266.48 crore, there are underlying strengths in the business model. Room sales continue to be a significant contributor, accounting for 52 per cent of total revenue, with food and beverage services making up 40 per cent. This diversification of revenue streams has helped ITC Hotels weather market fluctuations and maintain a competitive edge in the hospitality industry.
As industry experts and analysts delve deeper into the implications of ITC Hotels’ exclusion from the BSE indices, the broader market is closely watching how this development will unfold. The sudden shift in investor sentiment and the subsequent sell-off of shares highlight the interconnected nature of financial markets and the need for adaptability in a rapidly changing landscape.
In conclusion, the exclusion of ITC Hotels from the BSE Sensex and other indices marks a significant moment in the company’s history and the financial markets at large. While challenges lie ahead, the resilience and operational strength displayed by ITC Hotels position it well for future opportunities and growth. As investors recalibrate their strategies and analysts assess the impact of this move, the story of ITC Hotels continues to unfold, showcasing the dynamic nature of the business world.
