Diversified conglomerate, ITC, will examine an “alternative structure” for its hotel business.
Answering questions about the company’s restructuring plans, ITC President Sanjiv Puri said in a media interaction that the firm is focusing on an asset rights strategy and will seek some alternative structuring vehicles for the creation of value. However, Puri clarified that it was being considered.
In 2004, ITC approved the merger of its subsidiaries ITC Hotels and Ansal Hotels with itself. It is not clear if an alternative structure would mean a spin-off.
Explaining the reason behind diversification, Puri said the idea was to align market opportunities with internal capabilities.
At the moment, there are some businesses like hotels, which were diversified earlier, which have reached a stage and have a strategic focus and allow an alternative structuring, Puri said.
“What will be and how will it be done, at this time, is just one area that has been marked,” he said.
Puri also said that there were many smaller pieces in the portfolio that required support, and so it was structured the way it was. “Nothing is set in stone. We have to see what will generate the most value for stakeholders, ”Puri said.
When it comes to hotels, ITC adopted an asset rights strategy in the recent past and currently, out of 10,000 rooms, 5,300 are managed. About 4,000 rooms are under construction, of which 3,000 are in the managed segment.
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Nakul Anand, chief executive of ITC, which oversees the hospitality business, said that by the end of this phase, out of 14,000 rooms, more than 8,600 would be in the managed segment.
Anand said this would complete ITC’s spread. For the past four to five years, ITC had focused on creating properties that would be completed within the next year.
While some diversifications are showing growth, those that have not been restructured. The lifestyle business, for example, has been restructured.
Puri said the lifestyle retail business has not lived up to expectations.
“We decided that the first step was to restructure it,” he said. Last year, ITC sold the John Players menswear brand to Reliance Retail.
In the lifestyle retail business, Puri said, there are currently very few stores open. “Unless we have a specific idea on how we can win in this segment, we are not going to expand or grow it. It can even shrink, ”she said.
However, in the non-cigarette product portfolio, the fast-moving consumer goods segment, particularly the commodity segment, has been growing in the wake of the pandemic. Capacity utilization in the commodities segment was high. He said there was quite a bit of buoyancy in the segment.
In terms of consumer trends, there was a propensity for larger packages. In rural areas, however, there was a demand for smaller packages. Puri said he expects a rebound in demand in the holiday season.
ITC is undergoing a normalization in the unlock phase. In the cartons and packaging segment, capacity utilization was 90 to 95 percent. However, localized closures had caused some disruptions in cigarettes in July and August.
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