ITC mulls ‘alternate structuring’ for value creation in hotels business

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September 8, 2020 2:01 AM

The chairman said ITC was witnessing higher rural demands for its FMCG products than that in the urban areas. “At this moment, we are not seeing a change from the trends which was picking up as the lockdown happened, other than the fact that some discretionary items have started to recover.

In hotels business, at present over 50% of assets are in the managed segment.

Diversified conglomerate ITC has started mulling “some alternate structuring” to enhance “value creation” for its hotels business, chairman Sanjiv Puri on Monday said. “The hotels (business) have come to a stage where now our strategic focus is in a fashion, where it makes it possible for us to examine alternate structuring. What will we do, how will we do — I think at this point of time it is only an area which has been flagged off,” Puri said during an interaction with media persons.

The company, which has been focussing on an asset-right strategy, will look at some alternative structuring vehicle to enhance value creation in its hotels segment, he pointed out.

Stating that the asset-right strategy was announced in the recent past, the chairman said the company renovated the brand ‘WELCOMHOTEL’, which, it believed, had indigenously best traction for the five-star upscale hotels. “And, we have got very, very healthy pipeline…And the good thing that we have got interest not only in India, but in the adjacent markets, and we got interests from some far-off markets. It is a healthy pipeline. Progress on the ground could have been good this year. But because of the current situation, some of the hotels that itself were in the pipeline or could have been flagged off, there have been some recalibration in the timeline of that,” he said.

In hotels business, at present over 50% of assets are in the managed segment. Currently, of about 10,000 keys that the company has, about 5,300 keys are in the managed segment. It has about 4000 rooms, which are under construction, and of them 3000 are in the managed segment, while the 1,000 are owned. Thus, of 14,000 rooms, more than 8,600 would be in the managed segment.

On ITC Infotech, Puri said the company believed “a young player” like it had an opportunity to scale up. “And at the moment we are focussing on scaling up it.”

The chairman said ITC was witnessing higher rural demands for its FMCG products than that in the urban areas. “At this moment, we are not seeing a change from the trends which was picking up as the lockdown happened, other than the fact that some discretionary items have started to recover. Though they are still depressed, but they have started to show some levels of recovery. And the demands for essentials items like hygiene remains at the higher level,” he said, adding demands for discretionary items like deodorant, perfumes and some types of cosmetics started to recover.

On cigarette, he said June saw some progression in demands, but during the next two months demands were impacted due to local lockdowns.

Notably, speaking at the annual general meeting of the Cigarette-to-FMCG-to-hotel major, Puri said the current spate of localised lockdowns was impacting the recovery momentum. “The near-term outlook remains uncertain as consumer trends and industry dynamics constantly evolve in the backdrop of the yet unfolding impact of the pandemic and shape of economic recovery,” he said, adding his company will continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures.

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