British American Tobacco Reduces ITC Stake by 2.5%
British American Tobacco Plc (BAT) has announced a significant divestment, selling a 2.5 percent stake in Indian conglomerate ITC Ltd for approximately Rs 12,941 crore. This transaction, executed through open market dealings, reduces BAT’s shareholding in ITC from 25.44 percent to 22.94 percent. The sale involved 31.30 crore equity shares, priced between Rs 413.12 and Rs 413.78 each, and is part of BAT’s strategy to enhance financial flexibility and shareholder returns.
Details of the Transaction
The recent sale by BAT’s affiliate, Tobacco Manufacturers (India) Ltd, has led to a decrease in its stake in ITC from 20.31 percent to 17.81 percent. Following this transaction, BAT now holds a total of 22.94 percent in ITC through various affiliates, including Rothmans International Enterprises and Myddleton Investment Company, as of the end of the March quarter. The deal was confirmed in a filing to the London Stock Exchange, where BAT stated that the block trade was completed through an accelerated book build process. The net proceeds from this transaction are reported to be around Rs 12,100 crore.
Despite the reduction in stake, the identity of the institutional buyers involved in the deal has not been disclosed. Following the announcement, ITC shares experienced a slight decline, closing 1.19 percent lower at Rs 421 per share on the National Stock Exchange.
Strategic Implications for BAT
BAT has emphasized that this divestment will provide the company with greater financial flexibility. The proceeds from the sale are intended to support its ongoing transformation efforts, reduce debt, and enhance returns for shareholders. Specifically, BAT plans to extend its share buyback program, initially announced in March 2024, by an additional £200 million, raising the total buyback for 2025 to £1.1 billion. This extension is expected to commence after the completion of the current tranche set to conclude by December 31, 2025.
BAT’s Chief Executive, Tadeu Marroco, expressed confidence in the ongoing partnership with ITC, highlighting the company’s role as a core strategic asset within BAT’s global operations. He noted that ITC remains a valuable associate in a market with significant long-term growth potential.
Historical Context and Future Outlook
BAT’s relationship with ITC dates back to the early 1900s, marking over a century of collaboration. ITC is recognized as one of India’s leading fast-moving consumer goods (FMCG) companies, and BAT’s continued investment reflects its commitment to the Indian market. In March 2024, BAT had previously divested a 3.5 percent stake in ITC for Rs 17,485 crore, indicating a trend of strategic adjustments in its holdings.
Looking ahead, BAT’s management remains optimistic about the future of ITC under its current leadership. The company believes that ITC will continue to generate value for its shareholders, reinforcing BAT’s strategic interests in one of the world’s most populous markets. As BAT navigates its transformation and investment strategies, its relationship with ITC will likely remain a focal point in its operations in India.
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