British American Tobacco pares 3.5% stake in ITC for $2.1 bn

British American Tobacco (BAT), the biggest shareholder in ITC Ltd, sold a 3.5% stake in the Indian conglomerate for about ₹17,500 crore (about $2.1 billion) on Wednesday, 13 March.

Shares of ITC were up 5.7% at 10am on Wednesday.

BAT had announced on Tuesday that its wholly owned subsidiary Tobacco Manufacturers (India) Ltd intended to sell up to 436.85 million shares, or about 3.5% stake, in ITC to institutional investors by “an accelerated bookbuild process”, or a block trade, subject to customary closing conditions.

BAT sold the shares at an average price of ₹400, a 0.01% discount to the previous session’s closing at ₹404.45.

BAT held a 29.02% stake in ITC by the end of 2023, down from 29.19% in 2002-end. The company’s plans to cut stake in ITC came even as it is “further optimizing” its geographic footprint by exiting 36 markets.

BAT holds its stake in ITC through Tobacco Manufacturers (India) Ltd, Myddleton Investment Co. Ltd, and Rothmans International Enterprises.

Following the completion of the block trade, BAT still remains a significant shareholder in ITC with a 25.5% stake.

BAT said it intends to use the proceeds from the sale to buy back its own shares until December 2025, starting with £700 million ($895 million) in 2024.

“I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders. We look forward to remaining important shareholders in ITC as it continues its journey of growth. With this transaction BAT can accelerate the start of a sustainable buyback, while enabling us to continue to deleverage towards a new target range,” Tadeu Marroco, chief executive of BAT, said.