ITC said on Monday that it would spin off its hotel business, separating it from its cigarettes and food units, sending shares 4 per cent lower on Monday. 

The cigarettes-to-hotels conglomerate would hold a 40 per cent stake in the newly-formed entity, to be named ITC Hotels, with the remaining held by shareholders of ITC if the demerger gets final approval from the board on August 14. 

Details of the proposed reorganisation, including the scheme of arrangement, will be placed for the board’s approval at the same meeting. 

“Hotels business has matured over the years and is well poised to chart its own growth path as a separate entity in the fast-growing hospitality industry with sharper focus on the business and an optimal capital structure,” ITC said in a statement. 

Indian hotels have turned into a hot sector as pandemic-led disruptions eased, with operators enjoying higher rates and occupancy. 

The Indian hospitality industry was expected to witness rapid growth going forward, ITC said. 

ITC has over 120 hotels and 11,600 keys across more than 70 locations and competes with the Tata Group’s Indian Hotels Co that owns Taj Hotels as well as Marriott Hotels and Oberoi to name a few. 

The hotel business accounted for nearly 4 per cent of ITC’s total revenue from services and sales and contributed over 2 per cent of its annual profit, according to its latest annual report. 

ITC’s largest segment in terms of revenue is its consumer goods business, led by cigarettes. The Goldflake brand cigarette-maker will report its June-quarter results next week.