British American Tobacco sells 3.5% stake in ITC for Rs 17,485 cr, offloads 43.68 cr equity shares
British multinational BAT Plc on Wednesday sold 3.5 per cent of its stake in ITC Ltd for Rs 17,485 crore through open market transactions. According to block deal data available with the BSE, British American Tobacco Plc (BAT), through its affiliate Tobacco Manufacturers (India) Ltd, offloaded more than 43.68 crore equity shares of ITC. The shares were sold at an average selling price of Rs 404.40 per share in block deals to institutional investors.
With this, the makers of Dunhill and Lucky Strike cigarettes stake will come down to 25.5% from 29%. At a time, it used to own 32%, which came down to 29% largely due to ESOPs issued by ITC. Following this, FMCG and tobacco giant ITC’s shares jumped more than 8% on March 13.
Foreign and domestic fund houses aggressively bid for ITC shares after BAT sold its stake in it. GIC Singapore bought as many as 9.2 crore shares of ITC, while ICICI Prudential MF acquired another 12.4 crore shares through multiple blocks. Both together lapped up shares worth Rs 8,627 crore.
Other fund houses that bought more than one crore shares of ITC included BofA Securities Europe, which acquired 2.04 crore shares, Capital Income Builder (1.76 crore), Citigroup Global Markets Mauritius (1.76 crore), Copthall Mauritius Investment ( 1.36 crore), Ghisallo Master Fund (1.15 crore), Monetary Authority of Singapore (1.20 crore), Morgan Stanley Asia Singapore (1.53 crore) and Societe Generale (1.83 crore shares).
BAT on Monday said that it was evaluating a possible disposal of a “small part” of its shareholding in ITC, without disclosing financial terms.
The lack of details made investors nervous, leading to ITC slipping more than 2% earlier this week, bringing its losses to 2.4% since Feburary 8, when BAT first said it would sell the shares.
Wednesday’s gains have flipped the stock to gains of nearly 4% since the stake sale plan was announced. BAT shares have added over 5% this week as it also announced a $895 million share buyback.
“There was an overhang of BAT holding stake in ITC. Now that the liquidity worry of this overhang is over, the stock has gone up,” Amit Purohit, vice president at Elara Capital, said.
Earlier in the day, Abhilash Pagaria of Nuvama Institutional Equities said BAT’s move would lead to $105 million inflows into domestic indices. He expects a $65 million inflow, equal to 13 million shares, with a 0.9-day volume impact.
Manish Chowdhury, Head of Research at StoxBox: “We believe that shares of ITC could be under pressure in the near term amid a large supply of shares. A near term top seems to be in place around Rs 500-odd levels which happened just before the announcement of the demerger of the hotel business into a new entity in August 2023. However, we remain constructive on the company from a medium to long term perspective owing to its strong brand recall and enormous runway for its FMCG business ahead.”
Goldman Sachs has also maintained its buy rating on ITC with a target price of Rs 480 on the back of improving FMCG profitability and steady recovery in in cigarette profit.
“We believe ITC’s cigarette business is likely to deliver healthy earnings’ growth over FY23-25E with a stable tax regime of 5-7% annual cigarette tax increases. In the FMCG business, we see strong growth potential for ITC’s brands in packaged wheat flour, noodles, premium biscuits, spices and salted snacks. We expect ITC’s FMCG business to grow revenues at a 12% CAGR over FY22-27E,” Goldman Sachs said.
