News of BAT’s plans to sell about 4% of its 29% stake in ITC led its share prices to jump. Photo credit: BAT
British American Tobacco (BAT) saw its share price rise by over 7% after announcing it was “actively working” to sell some of its shares in ITC Ltd. ITC share prices dropped 4%.
BAT is ITC’s largest investor with a 29.03% stake. Tadeu Marroco, BAT’s c.e.o., said, “We continue to pursue all opportunities to enhance balance sheet flexibility and, as part of this, we regularly review our stake in ITC. We recognize that we have a significant shareholding which offers us the opportunity to release and reallocate some capital.”
However, Marroco stated that BAT aims to maintain a level of influence at ITC and that a 25% ownership was necessary for veto powers. “This means that given the fact that we have above 29%, there is space for us to reduce our shareholding,” he added.
Emphasizing that ITC is a “fantastic company”, Marroco said, “It is a very fast-growing company in a very fast-growing market with the most populous country in the world and contributing for BAT in terms of earnings, also in terms of cash because they have a very good policy in terms of dividend payouts and the share price actually has doubled in the last three years.”
BAT's share of ITC's after-tax earnings increased by 19.8%, amounting to £616 million/US$778 million (compared to £514 million/US$649 million in 2022). This uptick was primarily driven by India's economic rebound in 2023 following the challenges of trading conditions from Covid-19 in 2022, which more than compensated for adverse effects from foreign exchange fluctuations.