ITC Hotels’ Exit from BSE Indices 2025: A New Chapter of Growth and Opportunities for Investors

Since the start of February of 2025, ITC Ltd’s hospitality branch ‘ITC Hotels’ was delisted from Indian stock markets along with the BSE Sensex. This has raised concerns between various stakeholders in stock markets and significantly investors and analysts tracking hotels and their effects on broader stock indices.

The History

As ITC Ltd opted to demerge the business in 2024, ITC Hotels, as the luxury hospitality division of the parent brand, had to be registered as a stand alone entity for filing purposes. ITC Hotels separated from ITC Ltd, which is primarily known for its operation in fast moving consumer goods (FMCG) and tobacco businesses. This allowed ITC Hotels to combine their heavily diversified segments under one umbrella. This development was viewed as an attempt to determine and curb unnecessary expenditures and was part of a wider strategy destined to create value to both businesses.

On January 29, 2025, the company split from ITC and started trading under ITC Hotels ITC Hotels, commencing trading on BSE. This decision enabled the company to enjoy inclusion to BSE indices, even though this inclusion was granted for a mere few days during which passive funds and index trackers could restructure their portfolios prior to portfolios exclusion on February 5, 2025.

What Happened?

The company’s inclusion to BSE Sensex and other indices was designed to ease the exit of institutional investors who had breakout or restores in these indices. During the index rebalancing, this was done to mitigate significant market volatility due to partial portfolio reallocation. There was an announcement of the company being removed from the BSE indices, and the move was certainly executed. The automatic cut off exclusion date was set for February 5, 2025.

The removal of the ITC Hotels’ stock listing on indices had a severe implication for less active investors, such as those who passively invest in index funds based on the BSE Sensex and other stock indices. Since the stock was excluded from these indices, all passive funds, that are benchmarked against these indices, were compelled to divest their positions in ITC Hotels. Therefore, the stock price of ITC-Hotels experienced some sharp movements since the hotels had to deal with substantial selling pressure as a result of the exclusion.

The Financial Impact

ITC-Hotels’ inactive removal from the BSE Sensex and Nifty 50 will likely result in institutional selling of approximately ₹1,100 crores. This reduction in selling is somehwhat out of character because it is stemming from fund limitations rather than strategy modification, which has taken some traders by suprise even if this is within the operating norm.

This news is concerning to active traders in the short term, but the astounding operational performance shown by the company suggests to seasoned analysts that the company has growth potential, thus supporting the long term strategy.

The Performance of ITC Hotels

ITC Hotels has greatly prospered despite having experienced shocks in the market due to sudden changes in index or market expectations. The ITC-Hotels operates at higher average room rates, ARR, and revenues per available room, RevPAR, than the market, and has significantly progressed over the five years under examination.

ITC Hotels’ REVPAR increased from 5200 in FY19 to 8200 in ITC Hotels F’ 24, which translates to an increase of 57.7%. This strongly suggest that the company has remarkably performed in the hospitality industry while overcoming dire challenges such as increasing service delivery costs and terrible economic conditions globally. In addition, ITC Hotels’ ARR also increased by 51.9% from 7900 to 12000 within the same fiscal year.

Such strong operational performance places ITC Hotels in a good position for future growth. The ITC Group of Companies further expects the company to move from a current portfolio of 10 operational hotels to over 200 hotels and more than 18,000 rooms by 2030. This is quite evidently a projection deeply rooted in confidence in the hospitality industry which most fiercely competitive.

ITC Hotels Sustains Maintaining Growth Projections

The removal from the BSE indices might have scared away a few investors and shaken the sentiment, however, stays bullish in the case of ITC Hotels. Additionally, the company’s plans for growth in the hotel portfolio are ambitious, which displays a proactive approach towards business management. In addition, this expansion is likely to further improve its position in the luxury and business hotel categories which have remained strong during the economic crises.

ITC Ltd which is the parent company ng ITC Hotels mentioned that this demerger will assist the hotel business unit perform their activities without being hindered by the extensive FMCG and tobacco operations provided by ITC Ltd. There is a market share of over 35% held by ITC Hotels, and such specialization will allow more focus for strategic partnerships, capital-raising, acquisitions, new marketing benefits, and competitive advantages.

Conclusion

That being said, the delisting of ITC Hotels to the BSE indices on February 5, 2025 is quite a remarkable event, showing the machinations and subtleties of the stock exchange. For passive or index investors, however, it triggered a forced liquidation of their positions, something that caused short-term gyrations in the stock price. Nonetheless, this removal does not alter the fundamentally strong position of the company, which continues to grow her most important metrics and has an impressive pipeline for further development.

For long-term investors, the exclusion from the indices could constitute a buying opportunity for a more aggressive stance as the ITC Hotels stirs. ITC Hotels is set towards perpetual growth, and the company’s move towards more aggressive expansion of the hotel portfolio speaks volumes of the company’s confidence to outperform in the years to come. Even though there might be short-term volatility in the stock price, investors concentrating to the more operationally profitable ventures of the company along with long-term plans are likely to consider ITC Hotels an attractive bet.

To sum up, even though the expungement from the BSE indices may have led to some turbulence in the market, ITC Hotels has strong fundamentals, and investors with a long term focus are bound to benefit.

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