BAT Prepares to Exit ITC Hotels in Phased Stake Sale, Eyes Balance Sheet Optimization

Image Source : Equitypandit

British American Tobacco (BAT) is reportedly gearing up for a phased divestment of its 14.55 percent stake in ITC Hotels, following the hospitality company’s demerger from ITC Limited earlier this year. The move aligns with BAT’s broader strategy to deleverage its balance sheet while maintaining its strategic position in ITC Limited.

Stake Sale Strategy and Timeline

- BAT’s stake sale in ITC Hotels is expected to unfold in multiple phases, with initial transactions likely to commence in the coming weeks.

- The company had previously indicated that it does not intend to be a long-term shareholder in ITC Hotels, reinforcing expectations of a gradual exit.

- The proceeds from the stake sale will be used to optimize BAT’s financial position, similar to its earlier divestment in ITC Limited.

ITC Hotels’ Performance and Market Position

- ITC Hotels reported a 19 percent year-on-year rise in consolidated net profit to Rs 257.85 crore for Q4 FY25, compared to Rs 216 crore a year earlier.

- Revenue from operations increased to Rs 1,060.62 crore from Rs 1,015.4 crore in the same period, reflecting steady growth in the hospitality sector.

- For the full financial year 2024-25, ITC Hotels posted a consolidated net profit of Rs 637.64 crore and revenue of Rs 3,559.81 crore.

Market Implications and Investor Sentiment

- BAT’s phased exit could impact ITC Hotels’ stock performance, with analysts closely monitoring the timing and scale of the divestment.

- The hospitality sector has seen renewed investor interest, with firms like GQG Partners increasing their stake in ITC Hotels following BAT’s partial exit from ITC Limited.

- ITC Hotels shares declined 1.7 percent on June 13, closing at Rs 213.9 on the BSE, reflecting market anticipation of BAT’s next move.

Looking Ahead

- BAT’s exit from ITC Hotels is expected to be structured to maximize shareholder value while ensuring minimal disruption to the company’s operations.

- The hospitality industry’s post-pandemic recovery and ITC Hotels’ strong financial performance may attract new institutional investors as BAT reduces its stake.

Sources: The Economic Times, CNBC TV18, The Telegraph India.