British American Tobacco seeks to monetise stake in ITC for balance sheet flexibility

British American Tobacco (BAT), has announced its intention to "monetise" a portion of its stake in ITC, India's leading cigarette manufacturer, as part of its ongoing efforts to enhance balance sheet flexibility. This move comes as ITC undergoes a transformation, with BAT expressing its desire to maintain a level of influence in the company.

For the quarter ending December 2023, BAT held a 29.03% stake in ITC, making it the largest shareholder in the Kolkata-based conglomerate. Tadeu Marroco, Chief Executive of British American Tobacco, stated, "We recognize that we have a significant shareholding which offers us the opportunity to release and reallocate some capital."

Shareholders of British American Tobacco were working with Wall Street banks Bank of America and Citi to pare some of its stake in the domestic cigarette maker in a bid to raise up to Rs 21,000 crore ($2.5 billion), as per an ET report.

BAT's association with ITC dates back to the early 1900s, subject to various regulatory restrictions and share capital changes. Marroco highlighted ongoing efforts to complete the regulatory process necessary to monetise some of their shareholding.

Following BAT's announcement, ITC's stock experienced a decline of over 6% in last 5 days on the National Stock Exchange.

BAT aims to retain a minimum 25% shareholding in ITC to preserve its veto rights, it currently holds above 29%. Marroco acknowledged the complexities involved in reducing BAT's stake, including historical shareholder records dating back a century and ITC's inorganic growth.

While Marroco refrained from providing a specific timeline for the stake reduction, he assured stakeholders of BAT's commitment to creating flexibility for future capital allocation decisions.

Also Watch: Paytm crisis: Brokerage firm Macquarie downgrades Paytm to underperform; cuts target price to Rs 275