ITC Hotels dips 3% after BAT unveils plans to divest its stake in company

ITC Hotels shares dipped 3.4 per cent in trade on BSE, logging an intraday low at Rs 164.05 per share. The selling at the counter came after British American Tobacco (BAT) revealed plans to divest its stake in ITC Hotels “at the right moment”.

 

Around 11:16 AM, ITC Hotels share price was down 2.91 per cent at Rs 164.95 per share on BSE. In comparison, the BSE Sensex was down 0.48 per cent at 75,769.8. The market capitalisation of the company stood at Rs 34,328.92 crore. The 52-week high of the stock was at Rs 189 per share and the 52-week low of the stock was at Rs 160.55 per share.

 

BAT's chief executive Tadeu Marroco in a post-results analysts meeting said that they have no interest in staying invested in ITC Hotels for the long term and they will figure out the the right time to disinvest. 

 

They will utilise the proceeds to get the leverage corridor of 2.5 and 2 by 2026. The company mentioned in its results release that the group’s direct stake in ITC Hotels is 15 per cent.  

 

ITC Hotels is a demerged entity of ITC Ltd. On July 24, 2023, ITC had announced to demerge its hotels business under a scheme of arrangement, by which 60 per cent of the newly incorporated entity would be held directly by ITC’s shareholders in proportion to their holdings in ITC. BAT is the single largest shareholder in ITC.

 

Last year, BAT reinitiated its share buyback after monetising 3.5 per cent of its stake in ITC. “Furthermore, in March 2024, we completed the monetisation of a portion of our ITC stake, lowering our holding from 29.02 per cent (December 31, 2023) to 25.45 per cent as of December 31, 2024, and enabling the initiation of a sustainable share buyback, starting with £700 million in 2024 and £900 million in 2025,” it said in the release.

 

In its results release, BAT mentioned it understands the importance of cash returns to shareholders and remains committed to a progressive dividend based on 65 per cent of long-term sustainable earnings.

 

Recently, Jefferies initiated coverage on ITC Hotel with a ‘Buy’ call and a target at Rs 240 per share.  In their bull case, they have a 12-month target price of Rs 280 on ITC Hotels share. In bear case, they value the stock at Rs 140.