British American Tobacco sells 2.3 pc stake in ITC for Rs 11,613 crore

British multinational BAT (British American Tobacco) Plc on Wednesday trimmed its stake in Indian conglomerate ITC by 2.3 per cent through a block deal worth Rs 11,613 crore (USD 1.36 billion), according to the deal terms accessed by PTI.

After the stake sale, shares of ITC slipped 1.46 per cent to trade at Rs 419.85 apiece on the National Stock Exchange. Equity benchmark indices Sensex and Nifty dropped in early trade on Wednesday, dragged by ITC.

The 30-share BSE benchmark gauge Sensex declined 200.32 points to 81,351.31 in early trade. The NSE Nifty dipped 61.2 points to 24,765.

BAT sold the stake in Kolkata-based ITC through its arm Tobacco Manufacturers (India) Ltd. In March 2024, BAT Plc sold a 3.5 per cent stake in ITC Ltd for Rs 17,485 crore.

Before the latest transaction, BAT owned a combined 25.44 per cent stake in ITC Ltd through its affiliates Rothmans International Enterprises, Myddleton Investment Company and Tobacco Manufacturers (India) Ltd.

As per the block deal, up to 29 crore equity shares of ITC were sold at a floor price of Rs 400 per share. This represents a discount of about 7.8 per cent to ITC’s closing price of Rs 433.90 on the NSE on Tuesday, sources said.

Goldman Sachs (India) Securities Pvt Ltd and Citigroup Global Markets India are the placement agents for the transaction, they added.

The sources said 29 crore shares amount to around a 2.3 per cent stake in the company. At the offer floor price, the total size of the transaction is pegged at Rs 11,613 crore.

The shares sale were executed through multiple tranches on the BSE and NSE under the bulk sale route. The sale is entirely secondary in nature, meaning that ITC will not receive any proceeds from the deal, and the stake is being sold solely by Tobacco Manufacturers (India) Ltd. The seller and its affiliates will be subject to a lock-up period of six months post-sale.

In a regulatory filing on the London Stock Exchange, BAT plc on Tuesday announced that its wholly-owned subsidiary Tobacco Manufacturers (India) Ltd intends to sell 2.3 per cent of the issued ordinary share capital in ITC Ltd.

The transaction will provide BAT with increased financial flexibility as it delivers on its commitment to invest in transformation, deleverage and sustainable shareholder returns.

BAT's initial investment in ITC dates back to the early 1900s, and the two companies have a longstanding, mutually beneficial relationship. As one of India's leading FMCG enterprises, ITC has delivered significant value for its shareholders.

Following completion of the block trade, BAT will remain a significant shareholder of ITC, with a 23.1 per cent holding in FMCG-to-hotel conglomerate ITC, it added.

"ITC is a valued associate of BAT in an attractive geography with long-term growth potential where BAT benefits from exposure to the world's most populous market.

"Whilst this transaction supports delivery on our commitments to BAT shareholders, we continue to view ITC as a core strategic component of our global footprint as we partner on business opportunities in India. I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders," BAT's chief executive Tadeu Marroco said.

BAT is in the multi-category consumer goods business. Its strategic portfolio comprises global cigarette brands and a growing range of nicotine and smokeless tobacco products, including vapour brand Vuse; heated product brand ‘glo’ and Velo, a modern oral (nicotine pouch) brand.

Of the Sensex firms, ITC, IndusInd Bank, Nestle, Titan, Kotak Mahindra Bank, Mahindra & Mahindra, Reliance Industries and Maruti were among the laggards on Wednesday. Infosys, Eternal, Tata Motors, Tech Mahindra, Bharti Airtel and Tata Consultancy Services were among the gainers.

"BAT’s decision to sell 2.3 per cent stake in ITC will keep the stock subdued," V.K. Vijayakumar, chief investment strategist at Geojit Investments, said.

In Asian markets, South Korea's Kospi, Japan's Nikkei 225 index and Shanghai's SSE Composite index were trading in the positive territory while Hong Kong's Hang Seng quoted lower.

US markets ended sharply higher on Tuesday. Nasdaq Composite jumped 2.47 per cent, S&P 500 surged 2.05 per cent and Dow Jones Industrial Average climbed 1.78 per cent.

Foreign Institutional Investors (FIIs) bought equities worth Rs 348.45 crore on Tuesday, according to exchange data.

Global oil benchmark Brent crude climbed 0.37 per cent to USD 64.33 a barrel.