The Hindu Business Line : ITC, hotel subsidiaries to merge

ITC Ltd has decided to consolidate its hotels business and has accordingly proposed to amalgamate its wholly owned ITC Hotels Ltd and other hotel subsidiaries with the main company. The ITC board will consider the proposed amalgamation at its meeting here on August 25.

ITC on Friday informed the BSE that a meeting of its board of directors has been convened on August 25 to consider, among other things, amalgamation of the subsidiaries such as ITC Hotels, Ansal Hotels Ltd and Bay Islands Hotels Ltd (a wholly owned subsidiary of ITC Hotels in Port Blair), with the company.

ITC Hotels, headquartered in Delhi, has also informed the BSE that a meeting of its board was being convened on August 25 to consider the proposed merger with ITC Ltd, the holding company. ITC officials, when contacted, declined to comment, as the proposal will first have to be discussed by the board. Sources told Business Line that the company may actually be following the Hindustan Lever model, which some years ago saw the merger of the key companies in the group such as Ponds, Brooke Bond and Lipton, with the main company to emerge as a much stronger entity in the market place.

ITC too may be trying the same formula, especially since the hotels business essentially involves a lot of real estate (land and building), and hence prone to collection of NPAs. ITC had already merged Bhadrachalam Paperboards Ltd with the main company to position itself as a leader in the paperboards market.

A veteran corporate watcher said it was quite simply a case of a strong one supporting a not-so-strong one for the overall good. It is expected that the valuation of the ITC Hotels property may also go up substantially. He said the synergies that will emerge will be good for the company, as Welcomgroup, with its hoteliering capability and strong positioning in chosen consumer segments such as super deluxe hotels, 5-star mid-market and heritage properties, has already consolidated its position in the business.

ITC Hotels, for the year ended March 31, 2004, recorded a gross income of Rs 168.72 crore. PBT for the period leapfrogged to Rs 27.83 crore (Rs 1.44 crore). Dividend at Rs 2 per share was recommended by the board. The ITC Hotels stock on the NSE on Friday touched a new high of Rs 162.30, up from Thursday's close of Rs 135.25, on news of the proposed merger with ITC.

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