ITC Hotels exits Sensex and other BSE indices amid stock volatility
ITC Hotels exits Sensex and BSE indices after temporary inclusion for passive fund rebalancing. Analysts see long-term potential despite short-term volatility, with strong industry growth and ITC’s continued brand support.
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ITC Hotels has been removed from 22 BSE indices, including the Sensex, before trading began on February 5.
The demerged entity, which was briefly included in benchmark indices for portfolio rebalancing, no longer meets the criteria for index inclusion.
The company was spun off from ITC Ltd. and debuted on the NSE and BSE on January 29, with an initial valuation of Rs 39,126 crore. However, the stock has since declined, bringing its market capitalization down to Rs 34,266 crore. ITC Ltd. continues to hold a 40?per cent?stake in ITC Hotels, while the remaining 60 per cent?was distributed to ITC shareholders in a 10:1 ratio.
Share price performance and impact of exclusion
ITC Hotels' stock closed at Rs 165 on February 4, marking a 4.16 per cent?decline. Passive funds tracking the Sensex and BSE indices were required to sell ITC Hotels shares worth approximately Rs 400 crore, with an additional Rs 700 crore of selling pressure anticipated from its exclusion from the NSE Nifty.
Despite short-term volatility, analysts believe the company is well-positioned within the hospitality sector. The removal from key indices, while pressuring the stock price in the immediate term, does not alter ITC Hotels' operational fundamentals.
Strong industry positioning and growth potential
ITC Hotels has shown impressive operational performance, with its Average Room Rate (ARR) increasing from Rs 7,900 in FY19 to Rs 12,000 in FY24, reflecting a compound annual growth rate (CAGR) of 8.7 per cent. Similarly, its Revenue Per Available Room (RevPAR) rose from Rs 5,200 to Rs 8,200 during the same period, achieving a CAGR of 9.5 per cent.
In FY24, room sales accounted for 52?per cent?of the company’s total revenue, while food and beverage contributed 40 per cent. The company is expected to benefit from growing demand for premium accommodations amid limited new hotel capacity.
Future outlook remains positive
Despite the near-term stock correction, analysts remain optimistic about ITC Hotels' long-term growth. The parent ITC Ltd. continues to provide brand support and corporate governance, which should help stabilize the business. Investors will closely watch upcoming financial results and strategic expansions as ITC Hotels establishes itself as a standalone hospitality giant.
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