BAT, ITC’s Largest Shareholder, Plans to Divest 2.3% Stake, Targeting Up to Rs 12,000
British American Tobacco (BAT), a leading global tobacco company and major stakeholder in ITC, is set to divest approximately 2.3% of its stake in the Indian conglomerate. This move aims to raise over ₹11,600 crore (around $1.4 billion). Following this transaction, BAT’s ownership in ITC will decrease from 25.4% to 23.1%. The company stated that the proceeds will enhance its financial flexibility and support its ongoing transformation and shareholder return commitments.
Details of the Stake Sale
BAT’s affiliate, Tobacco Manufacturers (India), plans to sell up to 290 million shares of ITC through a bulk sale on Indian stock exchanges. The transaction is being managed by Goldman Sachs and Citigroup, with a floor price set at ₹400 per share, reflecting a 7.8% discount from ITC’s closing price of ₹433.9 on May 27. This sale is entirely secondary, meaning it involves existing shares rather than new ones. Investors participating in this sale will not receive the recently declared dividend of ₹7.9 per share, as the stock will go ex-dividend on May 28. The total estimated size of the transaction is around ₹11,613 crore (approximately $1.4 billion).
Strategic Importance of ITC
BAT continues to regard ITC as a vital part of its global strategy. Tadeu Marroco, BAT’s chief executive, emphasized the company’s commitment to collaborating on business opportunities in India. Previously, BAT had indicated the importance of maintaining at least a 25% stake in ITC to retain veto rights and influence over the board. The latest stake sale will reduce BAT’s shareholding below this threshold, raising questions about its future influence within the company.
Use of Proceeds from the Sale
The funds generated from this stake sale will be directed towards reducing BAT’s net debt and supporting its sustainable buyback program. The company aims to achieve an adjusted net debt to EBITDA leverage ratio of 2-2.5x by the end of 2026. Additionally, BAT plans to increase its share buyback program by £200 million, bringing the total to £1.1 billion by 2025. This strategic financial maneuvering is part of BAT’s broader efforts to enhance shareholder returns while navigating the evolving market landscape.
Impact on ITC’s Shareholding Structure
Following the completion of BAT’s stake sale, the Indian government, through public sector insurers and the Specified Undertaking of the Unit Trust of India (SUUTI), will emerge as the largest shareholder group in ITC, holding a combined 26.5% stake. Earlier this year, ITC’s hotel business was demerged and listed as a separate entity, with shares distributed to existing ITC shareholders. BAT has also expressed its intention to exit the hotel segment, further reshaping its investment strategy in India.
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