ITC Share Price Today: ITC shares surged by 8.6 per cent to the day’s high at Rs 439 on BSE after the announcement that British American Tobacco (BAT) Plc intends to sell about 3.5 per cent of its stake in ITC to institutional investors through block deals on Wednesday. Despite the reduction, BAT, as ITC’s largest shareholder, will retain approximately 25.5 per cent ownership post-transaction, preserving its strategic position in the leading domestic cigarette maker. BAT will have to wait for 180 days before paring its stake further.
The proposed sale will be conducted within a price range of Rs 384 and 400.25 per share, implying a discount of up to 5 per cent at the lower end of the range, based on ITC’s closing price on Tuesday on the BSE.
BAT, whose initial investment in ITC dates back to the early 1900s, said it continues to be fully supportive of ITC’s management team, performance and strategy.
“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 of 2-2.5x adjusted net debt / adjusted EBITDA,” BAT CEO Tadeu Marroco said in a statement.
Capital International or GIC Singapore may buy stake in ITC, said sources to CNBC Awaaz. Additionally, domestic funds such as ICICI Prudential MF and Aditya Birla Mutual Fund have shown key interest in the block deal. Other long-only and certain insurance funds have also showcased some interest, per sources.
On March 12, ITC shares closed 1.83 per cent lower at Rs 401.9 on NSE following reports that BAT would launch the stake sale during the week.
A key challenge BAT had faced in offloading stake in ITC is navigating the regulatory hurdles imposed by the Reserve Bank of India on foreign ownership in tobacco firms, which limits who can buy those shares.
The complexity of divesting ITC’s shares was immense, BAT CEO Tadeu Marroco said in December.
“There are specific RBI approvals that are required in respect of any action-taking about our stake, and this adds a significant level of additional bureaucracy,” he said. As a result, “the universe of buyers is limited” for ITC shares, he said.
What Brokerages Say?
“We believe that shares of ITC could be under pressure in the near term amid a large supply of shares after an expected 3.5% stake sale by British American Tobacco (BAT). A near-term top seems to be in place around Rs. 500-odd levels which happened just before the announcement of the demerger of the hotel business into a new entity in August 2023,” said Manish Chowdhury, Head of Research, StoxBox.
Chowdhury also expressed a positive outlook, stating, we maintain a favorable view on the company in the medium to long term due to its robust brand recognition and significant growth potential in the FMCG sector. Anticipating a further moderation in inflation, particularly in rural areas, we anticipate a resurgence in overall business volumes moving forward. Given the present valuation, we are of the opinion that a majority of the downsides are already factored in, and investors might contemplate adding the stock to their portfolio during market downturns.
Goldman Sachs has maintained its buy rating on ITC with a target price of Rs 480 on the back of improving FMCG profitability and a steady recovery in in cigarette profit.
“We believe ITC’s cigarette business is likely to deliver healthy earnings’ growth over FY23-25E with a stable tax regime of 5-7% annual cigarette tax increases. In the FMCG business, we see strong growth potential for ITC’s brands in packaged wheat flour, noodles, premium biscuits, spices and salted snacks. We expect ITC’s FMCG business to grow revenues at a 12% CAGR over FY22-27E. ITC’s FMCG EBITDA margin is expected to increase to ~12% by FY27E from ~9% in FY22,” Goldman said.
CLSA has upgraded ITC to buy from outperform earlier but slashed the target price to Rs 468 from Rs 486 saying that cigarette volumes are likely to be muted but premiumisation is underway.
Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, stated, “ITC LTD is our Technical Pick with a BUY recommendation given at 417 on 11-Mar. A block deal around 385 levels occurred today, prompting us to advise an exit for now with a stop loss at 396. Looking at the longer term technically, the stock exhibits robust support around the 360-380 level, and our long-term target is set at 465-480.”
Comments
0 comment