British American Tobacco (BAT) views its investment in ITC as a strategic one, chief executive Tadeu Marroca said in an investor call on Tuesday, days after paring its 25.4% stake in the company. In a block deal last week, BAT reduced its holding to 22.9%, raising Rs 12,927 crore by offloading 313 million shares (2.5%) at Rs 413 apiece.
Importantly, the stake sale marked a significant shift in BAT’s position within the ITC boardroom. A 25% stake gives shareholders the power to influence or block special resolutions, which require 75% approval to pass. Marroco said BAT would retain two directors on ITC’s board after the block deal to maintain its influence in the boardroom.
“ITC is a strategic investment for us. It is not a financial investment precisely because of the potential of the market. The demographics, GDP, per capita growth that we are seeing are significant. ITC is also a well-oiled and well-run company. It is a leader in distribution, tobacco and cigarettes. We have a relationship for many years with ITC. We want to preserve a relevant stake in ITC,” Marocca said of its future plans concerning ITC.
BAT said that it would use the net proceeds from the block deal to extend the group’s existing share buyback programme by an additional approximately Rs 2,310.6 crore, taking the total amount to Rs 12,714 crore.
Marocca said during the investor call that the ITC block deal provided BAT with the financial flexibility to achieve its targets by the second half of the year.
The London-listed nicotine products seller had last sold 436 million shares, or about 3.5% of ITC, in March 2024. The stake was then offloaded for Rs 17,491 crore, which made it India’s third-largest block deal ever. On Tuesday, ITC shares were down 0.61% versus the previous day’s close at Rs 416.80 apiece on the BSE, even as the benchmark BSE Sensex was down 0.78%.
The company, which demerged its hospitality arm, ITC Hotels in January, posted a multifold growth in its Q4FY25 consolidated net profit to Rs 19,727 crore, mainly due to exceptional items. The profit in the year-ago period was Rs 5,121 crore. Excluding the exceptional items, ITC’s Q4 profit rose 3% year-on-year to Rs 5,155 crore. However, Q4 revenue increased 10% year-on-year to Rs 20,376 crore.
Out of 40 analysts tracking the company, 38 maintain a ‘buy’ rating, one recommends a ‘hold,’ and one suggests ‘sell,’ according to Bloomberg data. The average 12-month consensus price target implies an upside of 14.9%.