ITC tanks 5% as BAT mulls stake sale

Shares of ITC Ltd fell as much as 5% on Thursday after cigarette maker British American Tobacco said it is reviewing its stake in ITC. BAT is the largest shareholder of the Indian company with 29.03% stake.

"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," the British tobacco giant says in its earnings release.

"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. 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," the company says.

Reacting to the development, shares of ITC fell 5% to ₹410 on the BSE. The tobacco stock has slumped 12% in 2024.

ITC's third-quarter earnings came in line with Street expectations. Its net profit stood at ₹5,335 crore in the quarter ended December 31, 2023, growing 6.5% compared with ₹5,007 crore in the year-ago period. Revenue from operations rose 2% to ₹19,485 crore for the third quarter as against ₹19,021 crore in the corresponding period last year.

The cigarettes-to-hotel conglomerate declared an interim dividend of ₹6.25 per share for the financial year 2023-24.

ITC's earnings before interest, taxes, depreciation and amortisation dropped 3.2% to ₹6,024 crore, while expenses jumped 5.2% to ₹12,056.69 crore as compared to the year-ago period. The EBITDA margin dipped to 36.6% in Q3 FY24 versus 38.4% in the same period last fiscal.

The hotel business was the biggest contributor, followed by FMCG, while paperboard and agri remained under severe pressure causing a significant drag in overall profitability.

The revenue from FMCG cigarette business rose 2.5% to ₹8,295 crore as compared with ₹8,086 crore in the year-ago period, contributing around 45% of the revenue this quarter. This was also the third consecutive quarter where the company's cigarettes business witnessed single-digit growth. As per the company, the segment witnesses consolidation on a high base after a period of sustained growth momentum. The sharp cost escalation in leaf tobacco and certain other inputs as well as the rise in taxes also impacted revenue growth.

Businesses in FMCG, including packaged food and personal care products, reported 7.6% growth in revenue to ₹5,209 crore despite subdued demand conditions.

For the hotel business, it was the best-ever quarter, with segment revenue rising 18% YoY to ₹842 crore on the back of strong growth in ARRs (average room rates ) and occupancy across properties driven by retail, MICE segments and events like the ICC Cricket World Cup.