ITC Hotels Makes Market Debut Amid Mixed Reactions
ITC Hotels has officially entered the stock market, marking a significant milestone for the company and its shareholders. On Wednesday, the shares were listed at Rs 188 on the Bombay Stock Exchange (BSE) and Rs 180 on the National Stock Exchange (NSE). This debut brought the company’s market capitalization to approximately Rs 39,000 crore, benefiting around 37 lakh ITC shareholders. However, the initial excitement was tempered as the stock quickly hit a 5% lower circuit at Rs 178.60 due to profit-taking activities. This article delves into the details of ITC Hotels’ stock listing, its implications for shareholders, and the company’s future prospects.
Initial Stock Performance and Market Reactions
The debut of ITC Hotels on the stock market was met with mixed reactions from investors. The shares opened at Rs 188 on the BSE and Rs 180 on the NSE, but soon faced downward pressure. The stock fell to Rs 178.60, hitting the 5% lower circuit limit shortly after its listing. This decline was attributed to profit-taking by investors who may have been looking to capitalize on the initial surge in stock price.
The listing price was notably lower than earlier expectations set during a special price-discovery session on January 6, where the stock was valued at approximately Rs 260 on Nifty and Rs 270 on BSE indices. For ITC shareholders, the total acquisition cost for 100 shares of ITC Hotels stands at Rs 54,040. This discrepancy between expected and actual listing prices has raised concerns among investors, prompting some to reassess their strategies.
Despite the initial drop, analysts suggest that shareholders should consider holding onto their shares for the medium to long term. Akriti Mehrotra, a Research Analyst at StoxBox, emphasized the potential for growth in the hospitality sector, urging investors to remain optimistic about their investments.
ITC Hotels: A Strong Player in the Hospitality Sector
ITC Hotels operates 140 hotels across more than 90 locations in India, making it a significant player in the country’s hospitality industry. The company manages six distinct brands: ITC Hotels, Mementos, Welcomhotel, Storii, Fortune, and WelcomHeritage. This diverse portfolio allows ITC Hotels to cater to various market segments, from luxury to midscale accommodations.
The company has reported a 12% year-on-year revenue growth in Q2FY25, with an expansion in its EBITDA margin by 70 basis points. This growth is attributed to higher Revenue Per Available Room (RevPAR), effective operating leverage, and strategic cost management. The hospitality sector is poised for further growth, driven by increasing tourism demand and limited supply.
ITC Hotels has ambitious expansion plans, aiming to open 28 new hotels within the next 24 months. The company targets a total of over 200 properties within five years, employing an asset-light model to support long-term revenue growth and margin improvement. This strategy positions ITC Hotels favorably in a competitive market, as it seeks to capitalize on the growing demand for quality accommodations.
Future Outlook and Investment Considerations
Looking ahead, ITC Hotels is optimistic about its growth trajectory. The company anticipates sustained demand for its services, bolstered by its expansion plans and the overall recovery of the tourism sector. The average room rate has seen a significant increase, rising from Rs 7,900 in FY19 to Rs 12,000, while Revenue Per Available Room has grown from Rs 5,200 to Rs 8,200 between FY19 and FY24.
SBI Securities has suggested that the recent price declines present a buying opportunity for retail and high-net-worth investors. They believe that the robust pipeline of new additions and favorable industry trends could allow ITC Hotels to outperform its parent company, ITC Ltd, over the medium to long term. However, they also caution that some shareholders, particularly exchange-traded funds (ETFs), may be forced to exit their positions, potentially exerting downward pressure on the stock price in the short term.
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