ITC stake strategic investment, not financial: BAT chief executive Marroco

British American Tobacco plc (BAT) still considers its holding in ITC a “strategic investment,” Chief Executive Tadeu Marroco said on Tuesday, days after the UK-based tobacco giant trimmed its stake in the cigarettes-to-soap conglomerate.

 

On May 28, BAT sold 2.5 per cent in ITC with net proceeds amounting to ₹12,941 crore. The sale reduced BAT’s holding in ITC to 22.93 per cent.

 

Responding to a question on how the ITC stake should be viewed during a post-results conference, Marroco said, “The ITC stake is still for us a strategic investment. It’s not a financial investment.”

 

Expanding on the rationale, Marroco pointed to the size of the Indian market, the demographics, the potential GDP per capita growth and highlighted that ITC is a very well-oiled and run company with leadership in distribution and cigarettes. 

 

“We have a multi-layer relationship with ITC coming back for many years. As you know, we have some inter-party relations with them in leaf, in IT and we have expectations that new category can be a big factor in the Indian market in the future. And we want to preserve as a consequence a relevant stake in ITC,” the BAT chief executive said.

 

Marroco also confirmed that BAT would keep its two directors on the ITC board so that it has an influence.

 

The partial monetisation of ITC stake is to enable increased financial flexibility. “This is basically a decision to allow us to have a financial flexibility to beef up the buyback a bit more and at the same time ensure that we get to the leverage corridor that we are aiming for between 2-2.5x by the end of next year,” Marroco said during the call.

 

This is the second instance in two years that BAT has sold a partial stake in ITC. In March 2024, BAT had sold 3.5 per cent to initiate its buyback programme. The sale brought its stake down to 25.44 per cent and generated net proceeds of 1.6 billion pounds.

 

The latest round has brought it down further to 22.93 per cent. A 25 per cent holding allows shareholders to influence or oppose resolutions, especially special resolutions that require 75 per cent of the votes cast to be in their favour.

 

In 2023, Marroco had outlined the importance of having “at least 25 per cent of shareholding in India” and said that it would enable BAT to keep board seats, veto resolutions of the company, and steer it to certain opportunities.