ITC Demerger: F&O Contracts To Expire Early Ahead Of Demerger & Special Trading Session; Check Dates

The National Stock Exchange (NSE) has announced that all derivatives contracts for ITC Ltd will expire early, on January 3, 2024, ahead of the company's demerger. The circular from the NSE outlines the expiration of three existing contracts with original expiry dates of January 30, February 27, and March 27, 2025. Investors are observing these developments as ITC prepares to spin off its hotels business into a separate listed entity.

Early Expiration of Derivatives Contracts

The NSE stated that the early expiration of ITC derivatives contracts is designed to facilitate a smooth transition ahead of the demerger. The methodology for settlement will be communicated by respective Clearing Corporations.

New derivatives contracts on ITC Ltd will be introduced on January 6, 2025, aligning with the ex-date of the demerged entity. The new contracts will retain the original expiry dates of January 30, February 27, and March 27, 2025.

To determine the base price for the demerged entity, ITC Hotels, a special pre-open session (SPOS) will be held on January 6, 2025, between 9:00 am and 10:00 am. This session will establish the fair market value of ITC Hotels.

Record Date & Share Allotment

ITC Ltd has fixed January 6, 2025, as the record date for the demerger. Eligible shareholders will receive one fully paid-up equity share of ITC Hotels Ltd., with a face value of Re 1 each, for every ten equity shares held in ITC Ltd.

ITC Hotels has outlined its post-demerger shareholding structure, with approximately 60% of the stake allocated directly to ITC shareholders, proportionate to their holdings in ITC Ltd, and the remaining 40% retained by ITC.

Special Trading Session

On the record date, the NSE and BSE will host a special trading session to determine the fair market price of ITC Hotels. Orders unmatched during the pre-open session will transition to the regular trading session at their respective limit prices, provided they fall within the dynamic price band.

If no equilibrium price is discovered during the SPOS, all orders will be cancelled. In such cases, trading will continue under a call auction mechanism until a fair price is determined.

Valuation & Listing Expectations

ITC Hotels is expected to list with an EV/EBITDA multiple in the range of 20.0x-30.0x, according to SBI Securities. Based on this calculation, the estimated share price for ITC Hotels Ltd. is projected to fall between Rs 113 and Rs 170 per share. This valuation aligns with the average EV/EBITDA multiple of its industry peers, including Indian Hotels and EIH Ltd, which stands at approximately 25x.

Share Performance

ITC Ltd shares were trading with mild gains of 0.24% at Rs 478.15 on the NSE as of 11:25 am on Tuesday. Over the past year, the stock has delivered marginally positive returns, rising just over 2%.

The demerger of ITC Hotels marks a major step in ITC Ltd's restructuring efforts. By creating a standalone entity for its hospitality business, ITC aims to unlock shareholder value and provide a clearer focus on its distinct business verticals.

For investors, the early expiration of derivatives contracts and the special trading session represent critical milestones. Understanding the valuation dynamics and the structure of the demerger will be key to making informed decisions.