ITC Share Price Today: ITC shares surged by 8.6 per cent to the day’s excessive at Rs 439 on BSE after the announcement that British American Tobacco (BAT) Plc intends to promote about 3.5 per cent of its stake in ITC to institutional buyers by way of block offers on Wednesday. Despite the discount, BAT, as ITC’s largest shareholder, will retain roughly 25.5 per cent possession submit-transaction, preserving its strategic place within the main home cigarette maker. BAT must watch for 180 days earlier than paring its stake additional.
The proposed sale shall be carried out inside a value vary of Rs 384 and 400.25 per share, implying a reduction of as much as 5 per cent on the decrease finish of the vary, primarily based on ITC’s closing value on Tuesday on the BSE.
BAT, whose preliminary funding in ITC dates again to the early 1900s, mentioned it continues to be totally supportive of ITC’s administration staff, efficiency and technique.
“I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders. We look forward to remaining important shareholders in ITC as it continues its journey of growth. With this transaction BAT can accelerate the start of a sustainable buyback, while enabling us to continue to deleverage towards a new target range of 2-2.5x adjusted net debt / adjusted EBITDA,” BAT CEO Tadeu Marroco mentioned in a press release.
Capital International or GIC Singapore could purchase stake in ITC, mentioned sources to CNBC Awaaz. Additionally, home funds equivalent to ICICI Prudential MF and Aditya Birla Mutual Fund have proven key curiosity within the block deal. Other lengthy-solely and sure insurance coverage funds have additionally showcased some curiosity, per sources.
On March 12, ITC shares closed 1.83 per cent decrease at Rs 401.9 on NSE following experiences that BAT would launch the stake sale throughout the week.
A key problem BAT had confronted in offloading stake in ITC is navigating the regulatory hurdles imposed by the Reserve Bank of India on overseas possession in tobacco corporations, which limits who should buy these shares.
The complexity of divesting ITC’s shares was immense, BAT CEO Tadeu Marroco mentioned in December.
“There are specific RBI approvals that are required in respect of any action-taking about our stake, and this adds a significant level of additional bureaucracy,” he mentioned. As a outcome, “the universe of buyers is limited” for ITC shares, he mentioned.
What Brokerages Say?
“We believe that shares of ITC could be under pressure in the near term amid a large supply of shares after an expected 3.5% stake sale by British American Tobacco (BAT). A near-term top seems to be in place around Rs. 500-odd levels which happened just before the announcement of the demerger of the hotel business into a new entity in August 2023,” mentioned Manish Chowdhury, Head of Research, StoxBox.
Chowdhury additionally expressed a constructive outlook, stating, we keep a good view on the corporate within the medium to long run as a consequence of its strong model recognition and important development potential within the FMCG sector. Anticipating an extra moderation in inflation, significantly in rural areas, we anticipate a resurgence in total enterprise volumes shifting ahead. Given the current valuation, we’re of the opinion {that a} majority of the downsides are already factored in, and buyers may ponder including the inventory to their portfolio throughout market downturns.
Goldman Sachs has maintained its purchase score on ITC with a goal value of Rs 480 on the again of enhancing FMCG profitability and a gentle restoration in in cigarette revenue.
“We believe ITC’s cigarette business is likely to deliver healthy earnings’ growth over FY23-25E with a stable tax regime of 5-7% annual cigarette tax increases. In the FMCG business, we see strong growth potential for ITC’s brands in packaged wheat flour, noodles, premium biscuits, spices and salted snacks. We expect ITC’s FMCG business to grow revenues at a 12% CAGR over FY22-27E. ITC’s FMCG EBITDA margin is expected to increase to ~12% by FY27E from ~9% in FY22,” Goldman mentioned.
CLSA has upgraded ITC to purchase from outperform earlier however slashed the goal value to Rs 468 from Rs 486 saying that cigarette volumes are prone to be muted however premiumisation is underway.
Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, acknowledged, “ITC LTD is our Technical Pick with a BUY recommendation given at 417 on 11-Mar. A block deal around 385 levels occurred today, prompting us to advise an exit for now with a stop loss at 396. Looking at the longer term technically, the stock exhibits robust support around the 360-380 level, and our long-term target is set at 465-480.”
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