ITC Block Deal: BAT To Offload 3.5% Stake

In a move that sent ripples through the Indian stock market, British American Tobacco (BAT) is likely to offload a 3.5% stake in ITC Limited (ITC) via a block deal. As per media reports, the price range for the proposed sale of shares is set at ₹384-400.25 a piece, which was a 5% discount to the prevailing market price at the lower end of the price band. This significant transaction is likely to be valued at approximately ₹17,491 crore.

On March 13, 2024, ITC’s stock price witnessed a jump of over 8%. The shares of ITC opened at ₹439.00 and touched the day high of ₹439.00 at 11:55 AM.

As per media reports, the lock-in period for the deal is 180 days. BAT’s shareholding in ITC will be 25.5% after the sale. ITC advised investors that its shareholding would not fall below 25% on February 09, 2024.

“With this transaction, BAT can accelerate the start of a sustainable buyback while enabling us to continue to deleverage towards a new target range of 2–2.5X adjusted net debt/adjusted EBITDA,” said Tadeu Marroco, chief executive of BAT. He also stated that BAT looks forward to remaining important shareholders in ITC as it continues its journey of growth.

BAT’s decision to sell a portion of its stake in ITC through a block deal is a significant event that has potential consequences for both companies and investors. While the immediate market reaction has been positive for ITC, the long-term ramifications will unfold over time.

During Q3 FY2024, ITC recorded a YoY growth of ~2.1% in gross revenue and profit after tax for the period amounted to ₹5,572 crore, reflecting a rise of ~10.8% on a YoY basis. It experienced a resilient performance in FMCG – Others amidst subdued demand conditions.

About ITC Limited

ITC Ltd was established in 1910. The company is one of the leading cigarette manufacturers and sellers in India. The company primarily operates in 5 business segments, which include — FMCG Cigarettes, FMCG Others, Hotels, Paperboards, Paper and Packaging, and Agri-Business.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.