British American Tobacco (BAT), the largest shareholder in India's ITC, is working with Wall Street banks Citi and Bank of America to help pare some of that stake and raise up to Rs 21,000 crore ($2.5 billion), according to people with knowledge of the matter. This would translate to monetising 3.5-4% in ITC.
However, no transaction will happen until the Reserve Bank of India (RBI) approves the move.
BAT has 29.03% holding in the cigarette-to-chips conglomerate, as per December 2023 disclosures. Based on Monday’s closing price, BAT’s shareholding is valued at Rs 1.47 lakh crore ($17.75 billion). ITC’s total market capitalisation amounted to Rs 5.07 lakh crore ($61.17 billion).
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BAT sells cigarettes under brands such as Dunhill, Kent and Lucky Strike. The value unlocking could potentially help it prune leverage and resume a share buyback programme to enhance shareholder value. It launched the 2 billion buyback in 2022, but didn’t renew it last year.
The final sale price will be dependent on market value at the time of the transaction but people cited above said BAT, which initiated the exercise some time ago, is open to selling at a discount too, having bought the shares in various tranches since 1910, at a much lower price. The British company has been subject to numerous share capital changes such as stock splits and regulatory restrictions, including a ban on fresh FDI in the sector. It was once perceived to be hostile to the ITC management and a potentially unfriendly acquirer. However, of late, both ITC and