Calcutta, Aug. 13: ITC is set to merge ITC Hotels with itself.

The company’s board will meet on August 25 to consider the amalgamation of subsidiaries ITC Hotels, Ansal Hotels and Bay Islands Hotels, ITC informed the Bombay Stock Exchange today.

ITC Hotels’ share zoomed 20 per cent once the news of the proposed merger filtered in. The stock rose to Rs 162 from yesterday’s close of Rs 135. However, ITC’s share fell from Rs 1,042.45 (Thursday’s closing price) to end the day at Rs 1,018.75

The possibility of a merger had been doing the rounds for quite sometime now. Company officials, however, refused to comment on the rationale behind merging the hotels business with ITC.

Analysts feel growing anti-smoking campaign by the government and mounting state levies has hurt ITC’s cigarette business, forcing it to diversity into new areas. Almost three-quarters of ITC’s revenue come from cigarettes. Moreover, spurred by the booming economy and rising domestic travel, the Indian tourism industry has been on a roll over the past one year.

Foreign tourists are also flocking in — up 18.2 per cent in 2003-04 to 2.92 million from 2.47 million in the previous year. Foreign exchange earnings surged 26.55 per cent to $3.83 billion from $3.03 billion last year.

ITC entered the hotels business in 1975 with the acquisition of a hotel in Chennai, which was rechristened Welcomgroup Chola Sheraton. Today, the chain comprises over 55 hotels across 55 destinations in India. These include super deluxe and five-stars, heritage palaces, havelis and resorts and full-service budget hotels.

ITC Hotels runs both owned and licensed hotels and provides management and consultancy services to those owned by ITC Limited and other hotel companies.

It owns ITC Hotel Windsor Sheraton & Towers in Bangalore and Welcome Hotel Rajputana Palace Sheraton in Jaipur. At present, the company has 3065 rooms under management.

ITC Hotels recorded a higher net profit of Rs 6.9 crore in the first quarter of 2004-05 against Rs 0.59 crore in the corresponding period last year. The company’s total income has gone up 37 per cent to Rs 42.6 crore against Rs 31.1 crore in the same quarter last year.

Bay Islands Hotel, a wholly-owned subsidiary of ITC Hotels, will also merge with ITC. The company owns Fortune Resort Bay Island in Port Blair. In 2003-04, it earned a total income of Rs 46.10 lakh and a net profit of Rs 23.91 lakh.

Ansal Hotels, which is also on the merger list, had earned around Rs 36.76 crore in 2003-04. ITC Hotels holds 48 per cent in the company. Ansal Hotels owns the Marriott Welcomehotel at Saket in New Delhi. The hotel is managed by ITC Hotels under an operating services agreement.