ITC Faces Decline as British American Tobacco Plans Share Sale


itc



In this Article:

  • Introduction:

  • BAT's Strategic Move: Share Sale Imminent

  • BAT's Long-Term Relationship with ITC

  • Market Buzz and specifications

  • Current Market Position and Future Prospects

  • conclusion.


Introduction:

The recent downturn in ITC's stock has raised concerns among investors, with shares experiencing a 2.5% decrease on Tuesday, marking the second consecutive day of losses. This decline, totaling 20% from its peak at ₹499.7 on July 24 last year, has prompted speculation about the reasons behind ITC's struggle in the market.

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BAT's Strategic Move: Share Sale Imminent


Insider Sources Unveil BAT's Plans

Insiders have revealed that British American Tobacco (BAT), the largest shareholder in ITC, is gearing up to initiate a share sale as early as this week. With BAT currently holding a substantial 29% stake in ITC, this move could have significant implications for both companies and the market.


BAT's Intentions and Shareholding Pattern

According to the shareholding pattern from the December quarter, BAT has been contemplating the monetization of some of its ITC holdings. The strategic decision aims to leverage the significant shareholding in ITC, providing BAT with the opportunity to release and reallocate capital efficiently.


BAT's Long-Term Relationship with ITC


A Century-Long Association

CNBC-TV18's insights reveal that BAT has maintained its status as a shareholder in ITC since the early 1900s. Throughout this extensive period, the relationship has weathered various share capital changes and regulatory restrictions, underscoring the enduring nature of their association.


Regulatory Process and Flexibility

BAT's official release on February 8 emphasized their active efforts in completing the necessary regulatory processes. These processes are crucial to granting BAT the flexibility required to monetize a portion of its shareholding. The company has committed to updating stakeholders at the earliest opportunity.


BAT


Market Buzz and Speculations


Dealing Room Chatter

ITC featured prominently in CNBC-TV18's Dealing Room Chatter on Monday, hinting at a potential large block deal in the stock in the near future. This speculation adds another layer of uncertainty to ITC's current market situation.


Goldman Sachs Analysis

Goldman Sachs, in a note dated February 29, identified weak near-term earnings and the impending BAT stake sale as primary factors behind ITC's recent stock price correction. The brokerage firm suggests that while cigarette volumes may recover in the March quarter, the paper business could pose a near-term earnings challenge. A potential recovery is anticipated only in the September quarter of the financial year 2025.


Current Market Position and Future Prospects


Current Stock Performance

As of now, ITC shares are trading 1.8% lower at ₹401.95. The stock has dipped below all of its key moving averages and is experiencing a 14% decline year-to-date, reflecting the challenges it faces in the current market environment.


Conclusion:

The unfolding events surrounding ITC's stock decline and BAT's potential share sale highlight the complex dynamics at play. Investors and market observers are closely monitoring these developments, recognizing the broader implications for both companies and the market as a whole.