ITC's primary shareholder, British American Tobacco (BAT), is collaborating with Wall Street banks Citi and Bank of America. This effort potentially involves reducing a portion of its holding and raising up to Rs 21,000 crore or $2.5 billion, in order to convert 3.5 per cent-4 per cent of ITC's stake into liquid assets.
Until the move receives approval from the Reserve Bank of India (RBI), no transaction will take place, according to a report in the Economic Times.
As of December 2023 disclosures, BAT holds a 29.03 per cent stake in the conglomerate spanning cigarettes to chips. Based on the closing price on Monday, BAT's shareholding is estimated at Rs 1.47 lakh crore. ITC's overall market capitalization stands at Rs 5.07 lakh crore.
BAT, known for brands like Dunhill, Kent, and Lucky Strike, could unlock value to reduce leverage and resume a share buyback program, having initiated a 2 billion buyback in 2022 without renewal last year.
The final sale price will depend on the market value at the time, with BAT considering discounts given its historical acquisition of shares at lower prices since 1910. Despite past perceptions of hostility towards ITC management and regulatory restrictions (ban on FDI), recent interactions indicate a more collaborative relationship between ITC and BAT, as per sources cited in the report.
BAT's request to sell ITC shares has been awaiting RBI approval for months. Due to their purchase predating the Foreign Exchange Management Act (FEMA), BAT requires banking regulator approval for repatriating funds post-stakesale.
“We have been actively working for some time on completing the regulatory process required to give us the flexibility to monetise some of our shareholding and will update you at the earliest opportunity,” BAT said during an earnings call last week.