Shares of ITC will be in focus on Tuesday morning as a report suggested a shareholder and the maker of Lucky Strike cigarettes British American Tobacco Plc (BAT) was looking to kick off a sale of part of its stake in the Kolkata-based company as soon as this week. Business Today could not verify the report independently.
ITC is one of the largest diversified players in India present in businesses such as cigarettes, FMCG, hotels, and paper.
Quoting people with knowledge of the matter said, a Bloomberg report suggested that BAT was in talks with Bank of America Corp and Citigroup Inc about a potential divestment of around $2 billion to $3 billion in the cigarette maker ITC through block trades of shares.
To recall, the London-listed BAT had in February said it was "actively working" to reduce its roughly 29 per cent stake in the cigarette maker ITC, which has interests in segments ranging from hotels to consumer packaged goods.
The stake sale would allow the maker of Dunhill and Lucky Strike cigarettes to pay down its debt and move faster towards the leverage range at which it could resume share buybacks. Also recently companies such as Whirlpool and Hyundai announced monetisation of their stakes in Indian companies.
BAT had in its preliminary quarterly results for the December quarter said it continued to pursue all opportunities to enhance balance sheet flexibility and, as part of this, it regularly reviewed its stake in ITC. "We recognise that we have a significant shareholding which offers us the opportunity to release and reallocate some capital," BAT said.
ITC shares have seen some selling off late, falling from Rs 480 level and bottomed out at sub-Rs 400 level. The cigarette stock is down 12.38 per cent year-to-date. ITC has cut its one-year gains to 7 per cent.