Everything you need to know about demerger of ITC Limited

General
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ITC Limited has announced the demerger of its hospitality business, which will be transferred to a new entity, ITC Hotels Limited. As part of this scheme, ITC will issue 1 fully paid-up equity share of ITC Hotels for every 10 equity shares of ITC Limited held by shareholders.

The company has fixed January 06, 2025, as the record date to determine the shareholders who will be eligible for the corporate action. You can check the announcement here.

You will be eligible for the demerger scheme if you bought ITC shares on or before January 5, 2025.

When will I receive the shares of ITC Hotels Limited?

The credit of shares typically takes 30 - 45 days from the record date. However, since ITC is part of Nifty 50, this process could be sooner. You will receive an email from CDSL once the shares are credited to your demat account.

When will the allotted shares start trading on the exchanges?

The shares of ITC Hotels Limited are expected to start trading on the exchanges after the completion of the demerger process and regulatory approvals. The exact trading commencement date will be announced by the exchanges and ITC Limited after the Record Date (January 06, 2025). We’ll update the post once we have an update on this.

What will be the average price for the existing ITC shares and the shares I receive of ITC Hotels?

The average price is updated based on the company’s Cost of Acquisition release. This is typically released after the record date. We’ll update the post once we have an update on this.

What happens to the F&O contracts of ITC?

All existing F&O contracts of ITC with expiry dates January 30, 2025, February 27, 2025, and March 27, 2025, will expire on January 03, 2025, and will be physically settled just like it happens on the day of monthly expiry. You can learn more about the physical settlement here.

The settlement price for the purpose of the final settlement will be the weighted average price of ITC.

New derivatives contracts on ITC will be reintroduced, with expiry dates of January 30, 2025, February 27, 2025, and March 27, 2025, from January 6, 2025.

The option strike prices for trading on January 6, 2025, will be based on the price discovered in the Special Pre-Open Session (SPOS) on that day.

You can check the announcement from the exchange here.

6 Likes
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What does Cost of Acquisition mean?

Is there no formula like in Bonus shares where the market price just falls by half if the bonus issue is 1:1.

In this case for every hundred shares of ITC, the shareholders will get 10 shares of ITC hotels, I am sure there must be a logic/formula that is applied on the record date.

What will be the tax implication from existing shareholders point of view. Will it be similar to Bonus issue, where the existing shares will be loss (possibility of tax harvesting) while the new bonus shares given will have cost of zero.

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The cost will be divided in the ratio determined by the company. Usually this ratio comes in after the new shares of the demerged entity are issued.

So let’s say you had bought 1 share ITC at 400. Post demerger, you will have 1 share of itc and 10 shares of itc hotels. The company then calculates the ratio to the valuation of both the companies. Let’s say itc determines that hotel segment has 20 percent of the total value.

Your revised ITC stock will have cost of 80 percent of 400. That is 320.
ITC hotel 10 shares will have value of 20 percent of 400. That is 80 for 10 shares. So that makes it 8 rupees per share.

1 Like
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Got it. Very clear
One question - when the demerger ratio is 1:10. Does it mean for every 1 shares of ITC, I get 10 Share in hotel or vis-a- versa.

Read somewhere that for every 10 shares of ITC, I get 1 share of Hotel.

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You will get 1 IHL for 10 shares of ITC, not 10 for 1.

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Sir during Reliance demerger, all upcoming expiry contracts were closed on 19th July 2023, and reintroduced on 20th July 2023, with the same expiry dates.

Now In ITC demerger how can we trade & carry positions to next day.
i.e if take we position on 3rd Jan

7

some broker will sq.off FO position on 3rd only.

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If you take a position on January 3rd, 2025, it will expire on that day due to the settlement. Positions cannot be carried forward, and new contracts will be available for trading from January 6th, 2025. You can find the exchange circular here.

1 Like
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Sir if we buy FnO position@ 3:28pm tomorrow (3rd Jan)of ITC Ltd will the position be carried forwarded to 6th Jan or it expires on 3rd date itself

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it will expire on 3rd