ITC corrects cost allocation figure in hotels business demerger 

The shares of ITC Limited were trading at ₹435.55 down by ₹4.55 or 1.03 per cent on the NSE today at 1.10 pm.

ITC Limited issued a correction today regarding the cost apportionment illustration in its demerger communication with ITC Hotels Limited (ITCHL). The company revised the total cost of acquisition for 100 shares of ITCHL to ₹54,040 from the previously stated ₹50,040 in its January 27 communication.

The correction pertains to the demerger arrangement sanctioned by the National Company Law Tribunal, Kolkata Bench, on October 4, 2024, which became effective January 1, 2025. Under the scheme, ITCHL has allotted approximately 125.12 crore equity shares of ₹1 each to ITC shareholders, with a share entitlement ratio of one ITCHL equity share for every ten ITC ordinary shares held.

The company provided updated guidance on cost allocation, stating that 86.49% of the original acquisition cost should be attributed to ITC shares and 13.51 per cent to ITCHL shares. Using an example, for 1,000 ITC shares purchased at ₹400 per share (total cost ₹4,00,000), ₹3,45,960 would be allocated to ITC shares and ₹54,040 to the resulting 100 ITCHL shares.

ITC advised shareholders to consult their tax advisors for specific implications, noting that the share allocation under the demerger scheme would not be considered a transfer under Section 47(vid) of the Income-tax Act, 1961.