In a significant move within the Indian corporate landscape, British American Tobacco (BAT) is set to offload a substantial portion of its holding in ITC Hotels. The tobacco giant, which is the second-largest shareholder in the hospitality company, plans to sell a 7% stake this Friday, a transaction valued at approximately Rs 3,000 crore.
The Details of the Stake Sale
The term sheet for the deal reveals that BAT intends to sell the shares at Rs 205.7 per share. This price represents a slight 1% discount to ITC Hotels' closing price on the National Stock Exchange (NSE) this past Thursday. The sale is being executed by BAT's wholly-owned subsidiaries: Tobacco Manufacturers (India), Myddleton Investment, and Rothmans International Enterprises.
This transaction is not an isolated event but part of a broader, strategic withdrawal. BAT's CEO, Tadeu Marroco, explicitly stated that "a direct stake in ITC Hotels is not a strategic holding for BAT." The company inherited its stake following the demerger of ITC's hospitality business in January of this year.
BAT's Broader Exit Strategy from ITC
BAT currently holds a 15.3% stake in ITC Hotels, worth roughly Rs 6,500 crore. The company has announced its intention to potentially sell between 7% and its entire 15.3% holding. The primary motives cited are to reduce debt and exit what it considers a non-strategic asset.
This sale follows a pattern of BAT reducing its exposure to ITC. The conglomerate, famous for brands like Dunhill and Rothmans, still holds 22.9% in the parent company, ITC Ltd, an investment dating back to the early 1900s. However, it has been steadily divesting:
- In March 2024, BAT sold a 3.5% stake in ITC Ltd, raising about $2 billion.
- Subsequently, in May, it sold another 2.5% stake, garnering $1.4 billion.
Implications for the Market
The planned stake sale will be closely watched by investors in the Indian hospitality and FMCG sectors. It underscores a major global investor's shift in strategy, choosing to focus on its core tobacco business and streamline its portfolio. The transaction's success and final pricing will also serve as a key indicator of institutional investor appetite for the newly listed ITC Hotels entity.
For ITC Hotels, while the exit of a large shareholder like BAT introduces some near-term stock volatility, it also paves the way for a more diversified shareholder base. The market will now observe how the company leverages its independent structure to grow in the competitive hospitality industry.
