British multinational British American Tobacco (BAT) has reduced its stake in Indian conglomerate ITC Ltd by 2.3% through a block deal worth Rs. 11,613 crore (USD 1.36 billion). The sale involved 29 crore shares of ITC at a floor price of Rs. 400 per share, representing a discount of about 7.8% from the company's previous closing price. The move is part of BAT's strategy to increase financial flexibility and focus on its transformation goals, including deleveraging and sustainable shareholder returns. Post-sale, BAT retains a 23.1% stake in ITC, continuing its long-term strategic partnership with the company.
BAT’s Strategic Stake Sale in ITC
In a significant financial maneuver, British American Tobacco (BAT) has decreased its stake in ITC Ltd, one of India's largest FMCG and hospitality conglomerates, by 2.3%. The transaction, valued at Rs. 11,613 crore (USD 1.36 billion), saw BAT offload up to 29 crore shares of ITC through a block deal executed via multiple tranches on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Following the sale, ITC's stock saw a minor decline of 1.46%, closing at Rs. 419.85 per share.
The block deal was structured with a floor price of Rs. 400 per share, offering a 7.8% discount from ITC's closing price of Rs. 433.90 on the preceding day. While the transaction was entirely secondary, meaning ITC itself did not receive any proceeds, it reflects a strategic decision by BAT to reshape its global portfolio.
BAT’s Long-Term Commitment to ITC
Despite the reduction in its stake, BAT remains a significant shareholder in ITC, holding a 23.1% stake post-sale. The multinational corporation reaffirmed its commitment to its longstanding partnership with ITC, citing the Indian conglomerate's importance in its global footprint. BAT's Chief Executive Tadeu Marroco highlighted ITC's role as a strategic asset, particularly in India—one of the world’s fastest-growing and most populous markets.
The relationship between BAT and ITC dates back to the early 1900s, with BAT's continued involvement reflecting mutual benefits, including access to the lucrative Indian market. Marroco emphasized that while the transaction aligns with BAT’s financial flexibility goals, ITC remains integral to the company’s future growth strategies in India and beyond.
BAT’s Financial Flexibility and Strategic Priorities
The sale of a 2.3% stake in ITC forms part of BAT's broader strategy to enhance financial flexibility as the company focuses on transformation, deleveraging, and providing sustainable returns to shareholders. The proceeds from the stake sale will likely contribute to BAT’s ongoing efforts to reshape its business portfolio.
BAT's shift towards multi-category consumer goods, including vapour products like Vuse, heated tobacco products such as glo, and the modern oral nicotine brand Velo, is part of the company’s broader vision to diversify beyond traditional tobacco products. The stake sale enables BAT to streamline its financial position, supporting these transformation efforts.
A Continued Strategic Partnership
Even with the reduced stake, BAT's ongoing commitment to ITC remains strong. Marroco’s statement underscored that the partnership is not just financial but also strategic. “ITC is a valued associate of BAT in an attractive geography with long-term growth potential,” he said, underlining BAT’s confidence in the company’s management and its ability to continue delivering value to shareholders.
This move follows a similar transaction earlier in 2024 when BAT sold a 3.5% stake in ITC for Rs. 17,485 crore. The repeated stake reductions reflect BAT’s evolving strategy to optimize its portfolio while continuing its long-term partnership with one of India’s most influential conglomerates.
Conclusion
BAT’s recent decision to reduce its stake in ITC by 2.3% underscores the company’s broader strategy of achieving financial flexibility and focusing on its transformation journey. While BAT's exit from a portion of its ITC stake marks a significant shift, it also solidifies the ongoing strategic relationship between the two companies. As BAT continues to adapt to changing global market dynamics, its sustained commitment to ITC highlights the importance of the Indian market in its long-term plans, ensuring both companies remain key players in the evolving global economy.
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