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ITC share price: Shares of India’s leading cigarette manufacturer dip below Rs 400 amidst BAT stake sale buzz

ITC share price today

: Shares of India’s leading cigarette manufacturer, ITC, dropped by 2.5% to touch a low of Rs 399.45 on the

Bombay Stock Exchange

(BSE) on Tuesday. The drop comes amidst speculation that its largest shareholder,

British American Tobacco

(BAT), is gearing up to sell shares worth approximately $2-3 billion this week.
According to ET, BAT’s possible stake sale, pending regulatory approvals, has weighed on ITC shares.

Currently, BAT holds approximately 29% stake in the company, which has seen its shares almost double in value over the past three years.
At 12:00 PM, the stock was trading 1.75% lower at Rs 402.25 on the Bombay Stock Exchange.
Bloomberg reported that BAT has been in talks with Bank of America and Citigroup regarding a potential divestment of $2 billion to $3 billion through

block trades

. The transaction could occur as early as this week but might extend into the following week based on market conditions.

BAT has confirmed today that it is considering selling a small portion of its shares in ITC through an on-market block trade.
BAT stated, “There can be no certainty that any such transaction will proceed, nor can there be any certainty as to the terms of any potential transaction. A further announcement will be made if and when appropriate.”
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BAT informed analysts in a recent call that their substantial shareholding in ITC presents an opportunity to release and reallocate capital. They have been actively working on completing the necessary regulatory processes to enable them to monetise some of their shares in ITC.

Recently, BAT has indicated that holding a 25% stake in ITC should be enough to maintain strategic influence, which includes having veto rights.
BAT has encountered challenges due to decreasing cigarette sales in its major markets, particularly in the US, where it recorded a $32 billion write-down. Additionally, BAT’s net debt stands at $40 billion, which is equivalent to 3 times its EBITDA and nearly 60% of its market capitalisation.
Last month, Jefferies downgraded ITC to a hold rating and lowered its target price for the Nifty stock from Rs 520 to Rs 430.
Last month, investment firm Jefferies downgraded ITC to a hold rating and revised its target price for the Nifty stock from Rs 520 to Rs 430.
Jefferies observed that ITC has performed well over the past 2-3 years, with a significant rebound in cigarette sales after COVID-19, resulting in a higher stock rating. However, due to factors like the upcoming

BAT stake sale

, two taxation events within the next year, and a slowdown in volume growth, they expect the stock to maintain a stable trading range in the future.