British American Tobacco Plc, the largest shareholder in ITC Ltd., has confirmed that they will soon be reducing stake in ITC Hotels Ltd. During the earnings con-call of the company, Chief Executive Officer, Tadeu Marroco, said that it will be looking to divest at the right moment.
BAT has no interest in being a long term shareholder of the hotel chain, he said. The firm will decide when is the best moment to maximise shareholder value, he added. "We will be divesting and we will be using proceeds to making sure that we get to the leverage corridor of 2.5 and 2 by 2026," Marroco said.
The move is in line with the company's asset light strategy. BAT holds 15.27% stake in ITC Hotels, post its recent de-merger. In March 2024, BAT had reduced its stake in ITC from 29.1% to 25.46%. Shareholding above 25% in ITC provides veto rights and influence in the board.
BAT has an associate in ITC, which is a very well run, very successful company, that performs at a pace of growth that is even much higher than the average of the shareholder, Marroco had said earlier.
The global cigarette maker is following a strategy that allows the company to generate cash and pursue buyback programme. A foreign direct investor in ITC, BAT intends to retain its stake in the company.
FDI in cigarettes is capped in India, which means if it pares stake in the cigarette company, it will not be able to add more again. BAT had already been looking to unlock ITC's shares, as it provides financial flexibility to the group. "This is the largest asset in our balance sheet," said Marroco.
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