India's ITC extends slide on plan to keep hotel business stake post spinoff

BENGALURU, July 25 (Reuters) - Shares of Indian conglomerate ITC (ITC.NS) shares fell as much as 3.3% on Tuesday, extending a slide from the previous session, as investors baulked at the companys plans to retain a 40% stake in its hotels business after spinning it off.

ITC said on Monday it would spin off the hotel business, separating it from its cigarettes and food units, but retain a 40% stake in the new entity, with ITC shareholders holding the rest.

The companys stock ended nearly 4% lower on Monday.

\“We believe some investors may have preferred a vertical split (100% direct),\” Jefferies analysts said in a note, pointing to the cash-guzzling nature of the hotel business.

The business has contributed less than 5% to ITCs revenue and earnings before interest and taxes (EBIT) over the last decade but for over 20% of capital expenditure, Jefferies said.

\“We seek clarity on the rationale behind retaining a 40% stake, the royalty structure, any tax implications and the key criteria for gaining a strategic investor/partner in the business,\” said Emkay Research.

Nomura analysts said the \“not a clean de-merger\” could restrict value unlocking.

Reporting by Kashish Tandon in Bengaluru; Editing by Savio DSouza

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