What Happens If ITC Hives Off ITC Infotech
NDTV
The cigarette to hotel conglomerate is reportedly mulling the demerger of its software business at a valuation of around Rs 25,000 crore.
The share trading volume for ITC spiked this week as there were rumors of yet another demerger plan. Following this news, ITC share price added 4% intra-day on Wednesday and closed 1.7% higher. Another scenario in which this can happen is that if ITC tobacco is separated from other businesses, then non tobacco assets would have no recourse to funding from tobacco. Some of those assets may have to be sold off and their asset value may be more than earning power value. A third scenario in which this can happen is to do with cost of capital. With ESG becoming a dominant force, a large number of global institutional investors and many other investor won't touch ITC stock. A low P/E (caused by apathy in this case) increases cost of equity capital.
Earlier this year, there were rumors that ITC would demerge its lucrative FMCG business and hotel business. This time, it's ITC Infotech, the company's IT service business that is being talked about.
The cigarette to hotel conglomerate is reportedly mulling demerger of its software business at a valuation of around Rs 25,000 crore.
According to several media reports, the company's board will soon meet to discuss the demerger plans and also appoint investment bankers.
