BAT chief executive Tadeu Marroco said in its preliminary earnings release for 2023 that the company continues “to pursue all opportunities to enhance balance sheet flexibility” and as part of this regularly reviews its stake in ITC. “We recognise that we have a significant shareholding which offers us the opportunity to release and reallocate some capital,” he said.
Marroco further said BAT’s shareholding in ITC has existed since the early 1900s and “is subject to numerous share capital changes and regulatory restrictions.” “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,” he said.
ITC’s share price fell by 4.04% on Thursday to close at Rs 414.45 on the Bombay Stock Exchange, a day when the benchmark Sensex too fell by 1%.
In December, the BAT CEO had told in an analyst call that BAT is open to paring its stake in the ITC to about 25% but such a transaction would be complex mainly due to India’s restrictive FDI rules for the tobacco sector and that the Reserve Bank of India’s approval would also be required for such deals. India at present does not permit FDI in the manufacturing of cigars, cigarettes and tobacco substitutes.
Marroco had said BAT doesn’t need more than 25% shareholding in ITC to have a strategic influence and veto rights. “Today, we have more than that, but you cannot underestimate the complexity related to making divestments in ITC,” he had said.Life Insurance Corporation of India is the second largest shareholder in ITC with 15.2% holding, followed by Specified Undertaking of the Unit Trust of India which has a 7.81% stake. ITC has no promoter holding.ITC is India’s top cigarette maker accounting for 3 out of 4 cigarettes sold legally. It recently became the largest in fast moving consumer goods, and runs the second largest hotel chain in India. It is also the largest private sector company in agri-business and owns the largest paper business in the country.
BAT quite often has been the only shareholder at ITC to raise issues in the company like it had done a few years back on granting of ESOPs. BAT has one representative in ITC’s board.
Around two decades back, BAT wanted to wrest ownership control of ITC, which was strongly resisted by the then ITC chairman, K.L. Chugh. Chugh’s successor Y.C. Deveshwar had worked hard to ensure that SUUTI’s stake in ITC was not sold to BAT. He believed that BAT was only interested in tobacco and would reverse ITC’s diversification.
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