Why ITC share price fell ? Reason explained

Last Updated on July 25, 2023 by Brajesh

Yesterday ITC officially announced demerger of its hotel business resulted in huge selling pressure on its shares . Thus the prices which were surging till afternoon took a u turn and fell sharply by 3.87 percent. The stock hits its 52 week high at 499.60 and the as a result of the announcement it fell to 407.90.

ITC in its regulatory filing informed that demerger has been done under a scheme where company is going to hold 40% stake in the the new entity and balance holding of 60 percent will be held directly ny company’s shareholder to their shareholding proportion.

Business of ITC

ITC is a big group with a market capital of Rs. 5,87000 Cr, having a diversified business which includes, FMCG, Cigarettes, hotels, agriculture, paper , IT etc. Analyst were keeping their eyes on the restructuring news of ITC including demerger of its services too along with hotel.

ITC management felt that hotel business has matured over the years and is well placed to have its own growth , hence decided to create a separate path for hotel business.

So the big question is whether market was not aware of this news ?


Reason for share price fall

Taken from The Mint  🙁ITC Share Prices)

Experts see a combination of factors behind the stock’s fall. But the biggest reason could be the anticipation of partial value unlocking after the demerger. Since ITC would still retain 40 per cent shares of the demerged entity, investors appear to be believing that value unlocking, after the demerger, will not be significant.

Value unlocking in a company means finding the hidden value of its different parts or segments. This is done by reorganizing the company through demergers, spin-offs, divestitures, or strategic partnerships, among others to show how valuable each part is. It tends to help the company perform better and attract more investors.

Shrey Jain, Founder and CEO of SAS Online said as this move was entirely anticipated, the 4-5 per cent decline can be seen as profit booking, nothing more.



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