ITC Ltd shares will be in focus Wednesday morning, as British American Tobacco (BAT) Plc is expected to sell a 3.5% interest in the cigarette maker to institutional investors in block sales today. According to media sources, the suggested price range for the sale of shares is Rs 384-400.25 a share, which represents a 5% discount to the current market price at the lower end of the price band.
Abhilash Pagaria from Nuvama Institutional Equities anticipates that this action will result in a $105 million influx into domestic indices. He predicts a $65 million inflow, equivalent to 13 million shares, with a volume impact of 0.9 days. According to Nuvama’s alternative calculations, Sensex is expected to receive approximately $38 million in inflows, translating to 7.7 million shares, with a volume impact of 0.5 days.
ITC’s shares have fallen 13.48 percent to Rs 404.25 in 2024 so far. The stock is up 5.31 percent in the last year.
Because global index providers (MSCI and FTSE) are already using 24 percent of the float, which reflects the maximum foreign ownership limit, Nuvama Alternative does not imagine any weight rise in global passive indices.
Manish Chowdhury, Head of Research at StoxBox: “We feel that shares of ITC may be under pressure in the near term due to a significant supply of shares. A near-term peak appears to be in place around Rs 500-odd levels, which occurred soon before the announcement of the hotel business’s demerger into a new corporation on August 2023. However, we remain optimistic about the company’s medium to long-term prospects due to its excellent brand recall and vast runway for its FMCG division.
Chowdhury stated that with inflation projected to moderate further ahead, particularly in rural areas, we expect total business volumes to recover as we move forward. At the current valuation, we feel that the majority of the negatives have already been priced in, and investors should consider adding the company to their portfolios during every downturn.
In February, the London-listed BAT announced that it was “actively working” to sell its about 29% ownership in the cigarette manufacturer ITC, which operates in a variety of markets including consumer packaged goods and hotels.
The company that makes Lucky Strike and Dunhill cigarettes would be able to pay off its debt and go closer to the leverage range where it could start buying back shares using the proceeds from the stake sale. Businesses such as Whirlpool and Hyundai have said that they will monetize their investments in Indian businesses.
Also Read: ITC Share price
BAT stated in its preliminary quarterly results for the December quarter that it was still looking for ways to improve the flexibility of its balance sheet, and that part of this effort included routinely reviewing its ownership of ITC. We acknowledge that we own a sizable portion of the company, which gives us the chance to discharge and reallocate some funds, according to BAT.
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