BAT to pare 3.5% ITC stake for ₹16,775 Crore; shares offered at 5% discount

13 Mar 2024 , 10:57 AM

British American Tobacco has announced a block agreement to sell a 3.5% equity share in India's ITC Ltd to institutional investors for up to ₹16,775 crore.

According to reports, the British tobacco maker's India unit wants to sell up to 43.69 crore ITC shares through rapid book building at ₹384-400.25 per share. At the low end of the pricing range, the share sale is priced at a 5% discount to Tuesday's closing price.

The block trade sale of ITC shares will reduce the single-largest shareholder's position to roughly 25.5%, down from about 29%. BAT has a 180-day lock-in period to sell further stock in ITC.

"We anticipate maintaining our significant ownership stake in ITC as it progresses on its path of expansion," stated Tadeu Marroco, CEO of BAT.

BAT, on the other hand, intends to utilise the proceeds from the ITC stake sale to repurchase its own shares over a period ending in December 2025, beginning with GBP 700 million in 2024, it added. "With this transaction, BAT can accelerate the start of a sustainable buyback," Marroco said in a statement.

According to reports, the business has chosen Wall Street financial banks Bank of America and Citigroup to arrange the share sale.

BAT's original investment in ITC originates from the early 1900s. "As one of India's leading FMCG enterprises, ITC has delivered significant value for its shareholders and BAT continues to be fully supportive of ITC's management team, performance, and strategy," BAT stated in a press release.

Analysts believe that while ITC's proposed share sale would not change the fundamental outlook, it may have a temporary impact on the stock owing to excess supply. Despite the short-term impact, Jefferies sees a possible purchasing opportunity due to ITC's strong brand position and development in FMCG.

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