Introduction: ITC Demerger News 2021
On Tuesday 16th March 2021, Zee Business reported the news of demerger of ITC businesses of ITC. What are the key developments regarding this stock and whether it will be positive or not? To get an insight with respect to this development read this article.
The ITC demerger will unlock bigger value for the company. According to the Zee Business sources, the board of directors of ITC would decide on demerger in April 2021 and investment bankers have started their work on demerger
Demerger of business segments of ITC: ITC Demerger News
The news about the ITC Demerger businesses went viral on the market since the news was reported by Zee Business on Tuesday 16th of March. As per their sources, Demerger of ITC will take place in ITCs FMCG, Infotech & Hotel Businesses.
As per the reports, Separation of the business might act as Value Unlocking for the company. Further, Advisory Board of the company might take a call on demerger in April 2021 (Sources - Zee News).
Market responded strongly to this news of demerger and stock price surged by more than 3% on Wednesday, even touching the levels of Rs.213 on NSE.
Will Demerger prove Value Unlocking for ITC? ITC Share Demerger
If we keep aside the news, the demerger of ITC business demerger into FMCG, Infotech & Hotel Business might not act as the only tool for value unlocking of the stock. Because:
ITC Tobacco business is its main pain-point owing to which market is not rewarding the stock. And Hence, always appears to be an undervalued stock.
According to ongoing news and discussion, FMCG, Agri-business and Tobacco business as well may remain under one segment. The Valuation angle of the stock from Tobacco Business viewpoint and also the ESG parameters will then also dominate the particular business segment.
Hotels and Infotech business of ITC are not its key engines just like in case of FMCG.
Hence, demerger may not solely act as Value Unlocking step for ITC.
What Should Go Well for ITC? ITC Demerger 2021
For value unlocking, ITC Demerger Impact may need to look over other options as well rather than the demerger of business segments.
Besides demerger, another key driver for the growth of ITC and its value unlocking can be improvement in the Company's EBITDA Margin, specifically in FMCG and Agribusiness.
Improvement in EBITDA Margin in their core FMCG and Agribusiness, might further result in re-rating of PE.
ITC share demerger news is currently going through steadiness and it will be interesting to watch when the stock will be re-rated by the market, and especially by Institutional Investors. As of now, Patience Testing will remain in the stock.
Conclusion: Know more about the ITC Demerger News Update
The news on ITC demerger into 3 businesses is not yet confirmed by the management of the company and furthermore it might be a grapevine. Along with that, focus on improvement in EBITDA margin should be on cards in order for re-rating of the business. Apart from that, there is low downside risk in the stock and hence for some time it may remain a Dividend Payout Stock. At this point of time, always be cautious on taking investment decisions based on news.