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British American Tobacco (BAT), a long-time foreign promoter of ITC Ltd, is poised to offload approximately 2.3% of its stake in the company through a massive Rs 11,600 crore block deal scheduled for May 28, 2025. The shares will be sold to institutional investors at Rs 400 per share—a notable 8% discount to ITC’s current market price. This transaction marks another step in BAT’s broader plan to rebalance its global investments and monetise its shareholding in the Indian FMCG-major.

Background: BAT’s Longstanding Stake in ITC

BAT has held a significant stake in ITC for decades, currently owning around 29.02% of the company. The proposed 2.3% stake sale would bring its holding down to just under 27%. BAT's relationship with ITC dates back to the pre-independence era, and while BAT has repeatedly indicated its strategic interest in ITC, periodic stake sales like this have allowed the company to raise liquidity without disturbing ITC’s operational autonomy.

This block deal is part of BAT’s ongoing efforts to reduce debt, improve its balance sheet, and deploy capital in faster-growing business areas globally, especially as it pivots more toward newer categories like vaping and nicotine pouches.

Deal Structure and Market Impact

According to the deal terms, the shares will be offered to institutional investors via a block trade at Rs 400 each—an 8% discount compared to ITC's last traded price on May 27. The total value of the transaction stands at Rs 11,600 crore, making it one of the largest secondary market block deals in recent memory in the Indian stock market.

Market participants are watching closely for the deal's impact on ITC’s stock price, as large stake sales at a discount often create short-term pressure. However, the fact that the shares are being absorbed by long-only institutional investors is being seen as a stabilising factor.

Strategic Rebalancing, Not an Exit

Despite reducing its shareholding, BAT has reiterated its strategic interest in ITC and the Indian market. In past interactions, BAT has expressed confidence in ITC’s diversified business model, which spans cigarettes, FMCG, hotels, paperboards, and agri-business. The stake sale is therefore being viewed as a capital reallocation strategy rather than a sign of reduced faith in ITC’s future.

Analysts suggest that BAT may continue to be a long-term promoter even with a reduced stake, especially since Indian laws cap foreign ownership in cigarette businesses and BAT’s historical role has been more of a strategic financial investor than a management influencer.

Institutional Appetite and Future Outlook

The significant discount offered in the block deal is likely to attract strong institutional interest. The Rs 11,600 crore ticket size may include participation from global funds, sovereign wealth funds, pension funds, and domestic mutual funds looking for exposure to ITC at attractive valuations.

The transaction also puts a spotlight on India’s deepening capital markets, where large block trades like this can be executed seamlessly without disrupting the normal trading flow. For ITC, while near-term volatility may persist due to supply overhang, the stock's long-term story remains intact, driven by its diversified earnings base and robust dividend profile.

Conclusion

The sale of a 2.3% stake in ITC by BAT at Rs 400 per share, totaling Rs 11,600 crore, is a significant event for both the company and Indian capital markets. While it introduces short-term liquidity dynamics, it also underlines the depth and maturity of Indian equity markets, capable of absorbing large strategic transactions.