Shares of hotels-to-cigarette conglomerate ITC Ltd declined more than 2% to fall below the ₹400 level on Tuesday for the first time in more than three weeks, amid reports that its largest public shareholder, British American Tobacco (BAT), is looking to pare its stake this week through large deals.
The company has been under pressure to return more cash to shareholders. It recently took a write down of more than £27 billion on the value of its US cigarette brands as more smokers give up the habit quicker than expected with some switching to alternatives such as vapes, nicotine pouches and heated tobacco sticks.
Shares of BAT were up 2.85% to 2,385p at 12:25 a.m. in London. ITC shares fell 1.2% to close at 404.45 rupees. Bank of America Corp. and Citigroup Inc. are arranging the sale.
Cash Return
BAT said that alongside a new buyback program it will also continue to use operating cash flow to further lower debt and fund investment in its business. BAT has already made significant investments in research and development of alternative nicotine products, including Vuse vapes and Velo nicotine pouches, that it says are less harmful than cigarettes.
The company has about $55 billion of outstanding debt, according to data compiled by Bloomberg, with almost $12 billion maturing in 2025.
Read More: BAT in Biggest Gain Since 2020 on Plan to Sell Stake in ITC
–With assistance from Julia Fioretti, Andy Hoffman, Dinesh Nair and P R Sanjai.
The company has about $55 billion of outstanding debt, according to data compiled by Bloomberg, with almost $12 billion maturing in 2025.
Read More: BAT in Biggest Gain Since 2020 on Plan to Sell Stake in ITC
–With assistance from Julia Fioretti, Andy Hoffman, Dinesh Nair and P R Sanjai.
The company has about $55 billion of outstanding debt, according to data compiled by Bloomberg, with almost $12 billion maturing in 2025.
Read More: BAT in Biggest Gain Since 2020 on Plan to Sell Stake in ITC
–With assistance from Julia Fioretti, Andy Hoffman, Dinesh Nair and P R Sanjai.
ITC shares declined as much as 2.45% to hit a low of ₹399.35 per piece on NSE in the first half of trade on Tuesday. This is for the first time the stock slipped below the ₹400 mark since February 16 this year and the second time since April 2023.
The stock was trading 1.95% lower at ₹401.4 apiece on NSE at 1:20 pm.
Tobacco giant BAT holds around 29% shareholding in ITC through three of its group entities. Last month, BAT revealed its plans to pare stake in ITC to improve balance sheet flexibility.
Analysts, however, believe that BAT paring its stake is unlikely to impact the fundamentals of the Indian tobacco major but the stock reaction might be due to concerns over increased supply of shares in the market post block deals.
ITC shares have declined more than 10% in the past six months while around 1% in the past month.
The reports follow large trade deals in ITC wherein around 1.2 crore shares or 0.9% of equity changed hands on Monday. ITC shares declined around 1% on Monday, March 11.
ITC reported a 2% growth in its consolidated revenue to ₹19,337 crore for the December quarter against ₹18901 crore in the year ago quarter. Profit after tax rose by 10.5% to ₹5,572 crore in the quarter over the last year
The sale of 43.69 crore ordinary shares in ITC through a block trade, will cut the Dunhill cigarette maker’s shareholding to about 25.5% from about 29%, a report in CNBC Awaaz stated. BAT has a 180-day lock-in period to sell further stake in ITC.
BAT’s wholly owned subsidiary Tobacco Manufacturers (India) Limited wants to sell 43.68 crore shares of ITC to institutional investors using an accelerated bookbuild process, subject to customary closing conditions. BAT plans to buy back shares over a period ending December 2025.
“We look forward to remaining important shareholders in ITC as it continues its journey of growth,” Tadeu Marroco, CEO of BAT, said in a statement.
Earlier, BAT said it would use the proceeds of the sale to buyback BAT shares over a period ending December 2025, with about £700 million this year itself.
BAT, ITC’s single-largest shareholder, has hired Wall Street investment banks Bank of America and Citigroup to manage the share sale.
Recently, BAT said that a 25% stake in ITC should be sufficient to retain strategic influence, including veto rights.
BAT, which has been facing tough times due to a significant decline in cigarette volumes across its key markets, has a net debt of $40 billion. That is about three times of EBITDA and nearly 60% of the market cap.