ITC stock surges 9% amid block deal; BAT likely seller

Shares of ITC Ltd surged as much as 8.6% to hit a high of ₹439 apiece on the BSE on Wednesday as the stock witnessed strong volume, with more than 43.8 crore shares, representing 3.5% of the total equity, exchanging hands on the BSE. The buyers and sellers couldn't be immediately ascertained. However, reports suggest that British American Tobacco (BAT), ITC's largest shareholder, was looking to sell 43.7 crore shares, or 3.5% stake, in the company via a block deal, which would fetch ₹17,491 crore.

According to reports, the London-listed company was reportedly planning to sell its stake in ITC for ₹400.4 per share, which is at a discount to the Tuesday's closing price of ₹404.25.

BAT is the largest shareholder in ITC with a 29% stake. The London-listed company has reportedly said that the net proceeds of the block deal will be utilised to buy its own shares over a period ending December 2025, starting with about ₹7,430 crore in 2024.

At 10:57 am, the share price of the cigarette-to-hotel conglomerate was trading 6.78% higher at ₹431.65. In contrast to this, the broader BSE Sensex was trading flat at 73,633.40. The company's market capitalisation stood at ₹5,35,455 crore. The company hit a 52-week high of ₹499.60 on July 24 last year, and a 52-week low of ₹369.70 on March 17 last year.

In the year-to-date period, the share price of ITC has slumped 8.13%.

Recently, BAT said that it would pursue all opportunities to enhance balance sheet flexibility including regular review of its stake in ITC. "We continue to pursue all opportunities to enhance balance sheet flexibility and, as part of this, we regularly review our stake in ITC. We recognise that we have a significant shareholding which offers us the opportunity to release and reallocate some capital," said BAT.

"Our shareholding in ITC has existed in one way or another since the early 1900s and is subject to numerous share capital changes and regulatory restrictions," it added.  

In February, the company also reportedly informed investors that "with the transaction, BAT can accelerate the start of a sustainable buyback, while enabling the company to deleverage towards a new target range of 2-2.5x adjusted net debt/adjusted EBITDA."

In the October to December quarter of FY24, the net profit of ITC grew 6.5% to ₹5,335 crore, which was in line with the street expectations. The company’s revenue from operations surged by 2% to ₹19,485 crore as against ₹19,021 crore in the corresponding period of the previous year.