British multinational British American Tobacco Plc (BAT) on Tuesday announced that its wholly-owned subsidiary Tobacco Manufacturers (India) (TMI) intends to sell 2.3% stake in consumer goods major ITC in a block trade deal. Following the completion of the proposed block trade, BAT will remain a significant shareholder of ITC, with a 23.1% holding.

"British American Tobacco announces that its wholly-owned subsidiary Tobacco Manufacturers (India) Limited ("TMI") intends to sell 2.3 per cent of the issued ordinary share capital in ITC Limited to institutional investors by way of an accelerated bookbuild process, subject to customary closing conditions," the British multinational company, which makes cigarette brands such as Dunhill and Lucky Strike, said in an exchange filing today.

The company says the transaction will provide BAT with increased financial flexibility as it delivers on its commitment to invest in transformation, deleverage and sustainable shareholder returns. "Proceeds will be used to progress to within the target 2-2.5x adjusted net debt/adjusted EBITDA leverage corridor (adjusted for Canada) by the end of 2026 and to continue our sustainable buyback programme by enabling an intended £200m increase in the share buyback to a total of £1.1bn in 2025."

BAT's initial investment in ITC dates back to the early 1900s, and the two companies have a longstanding, mutually beneficial relationship. As one of India's leading FMCG enterprises, ITC has delivered significant value for its shareholders.

Tadeu Marroco, Chief Executive of BAT, said ITC is a valued associate of BAT in an "attractive geography", with long-term growth potential where BAT benefits from exposure to the world's most populous market. "Whilst this transaction supports delivery on our commitments to BAT shareholders, we continue to view ITC as a core strategic component of our global footprint as we partner on business opportunities in India. I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders."

Further details of the value of net proceeds received will be shared once the transaction has been completed. Other than the intended increase to the 2025 share buyback, the transaction has no impact on 2025 or 2026 guidance.