May 28 (Punjab Khabarnama) : Small shareholders will benefit from demerging the hotel business from ITC Group. The reason for this is that it will increase the value for them and the return ratio of the major company manufacturing daily use goods will improve. This has been said by ‘proxy’ consulting companies that advise institutional investors or shareholders on company proposals. The report has been released by proxy consultancy companies including InGovern Research Services, ISS and SES. This report has come at a time when ITC shareholders are scheduled to meet on June 6 to consider and approve the proposal to separate the business.
According to shareholder advisory firm ISS, demerging the hotel business is expected to enhance value for its shareholders and improve ITC’s return ratios. “This arrangement will enable ITC Hotels to operate with an optimized capital structure with the ability to raise capital to meet its growth needs,” ISS said in its report. “It can attract a group of investors, strategic partners and associates whose investment strategies are aligned with the hotel industry.”
The ITC board of directors had approved spinning off its hotel business as a separate entity in August last year. ITC shareholders will get one share in the soon-to-be-listed hotel unit for every 10 shares they hold in the company. On the benefits of the hotel business, InGovern, another consultancy, said existing ITC shareholders would get a direct stake in the publicly traded hotel entity. They will become shareholders of a special company focused solely on the hotel business. It said the move is in line with ITC’s corporate strategy to drive growth, ensure continued interest in the hotel sector and avoid potential forced acquisitions in the future.
According to the report, “Given the manner in which shares will apparently be exchanged under this proposal, it is beneficial for the growth of both the companies as well as small shareholders. We advise shareholders to vote in favor of the proposal.” Another consultancy, Glass Lewis, has also supported the proposal to demerge the hotel business from ITC Group. However, Institutional Investor Advisory Services (IIAS) has said that ITC Ltd. The shareholders of the company have been suggested to vote against the separation of the hotel business. It says it doesn’t fully unlock value for shareholders.
