India's ITC Ltd said on Monday it would spin off its hotels business from the rest of the company, separating it from its cigarettes and food businesses.

The cigarettes-to-hotels conglomerate would hold a 40% stake in the newly formed entity, to be named ITC Hotels Ltd, with the remaining 60% held by shareholders of ITC, if the demerger is given final approval by the board during its meeting on August 14.

"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.

Shares of the company hit a record high earlier in the day before falling as much as 4.3% after the announcement of the demerger.

($1 = 81.8947 Indian rupees) (Reporting by Varun Vyas in Bengaluru; Editing by Sohini Goswami)