ITC shares decline over 4%; here's why

If you are wondering why the shares of ITC Limited present in your portfolio fell during the afternoon trading session, then you are in the right place. The company’s shares dropped by over 5% in today’s trading session, hitting a low of Rs 408.65 each on the BSE. Finally, they settled down for the day at Rs 414.45 each, representing a decline of 4.04% compared to Wednesday’s closing levels.

BAT’s Statement

British American Tobacco (BAT) stated that it is working towards completing the regulatory process to reduce its stake in the diversified conglomerate.

“We continue to pursue all opportunities to enhance balance sheet flexibility, and as part of this, we regularly review our stake in ITC. We recognize that we have a significant shareholding which offers us the opportunity to release and reallocate some capital,” BAT said in its Q4 earnings on February 8.

“We have been actively working for some time on completing the regulatory process required to give us the flexibility to monetise some of our shareholdings,” it added.

The shares of British American Tobacco Plc’s shares rose after it announced plans to overcome regulatory hurdles for selling at least part of its stake in the Indian company ITC, valued at approximately Rs 1,40,000 crores or USD 17.7 billion.

In 2023, British American Tobacco’s shareholding in ITC decreased to 29.02%, down from 29.19% in 2022.

If BAT were to dilute its stake by 4% to have a 25% shareholding in ITC, the value of the shares offloaded would be around Rs 20,690 crore at ITC’s current market cap.

The crucial question to pose is: In what manner does BAT intend to dilute its stake, and who is expected to be the buyer? For that, we need to wait patiently for the next move of BAT.

Financial Performance

In Q3FY24, ITC’s revenue from operations witnessed a 2% YoY growth, totalling Rs 19,484 crore compared to Rs 19,020 crore in the corresponding period last year.

Furthermore, the FMCG conglomerate, ITC, reported a 6% year-on-year increase in its consolidated net profit, reaching Rs 5,335 crore for the quarter ending December 2023.

The revenue from its cigarettes business experienced a 3% YoY rise, reaching Rs 8,295 crore. In contrast, the FMCG-others business showcased strong performance with revenues of Rs 5,218 crore in the third quarter, reflecting an 8% YoY growth.

The Company’s ROCE and ROE stand at 39% and 29% respectively while the company’s shares are trading at a PE of 25.3 times in the market.

Furthermore, the company’s market cap stands at Rs 5.17 lakh crore, and the stock has delivered a return of around 10% in a year.

Investors should keep this share on their radar.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.