In the world of stocks, especially for India’s FMCG giant ITC Ltd, recent developments have sent share prices tumbling. Driving this slowdown is British American Tobacco (BAT) expressing its views on the possibility of selling its stake in ITC through a block market transaction
Market reaction and stock price
In response to BAT’s announcement, ITC’s share price plummeted 2.46 per cent, to a record low of Rs 399.30 as compared to its previous close of Rs 409.40.The movement shows the immediate impact of BAT’s debate on market sentiment about ITC.
BAT’s Stake and Potential Disposal
BAT, which currently holds a majority stake in ITC, signaled a change in strategy by announcing its intention to reduce its stake in the Kolkata-based group by around 29 per cent The move is part of BAT’s broader commitment to improving the quality of its investments.
Market Analyst Survey
According to Vineet Bolinjkar, head of research at Ventura Securities, the potential sale of BAT’s stake in ITC is not expected to have a significant impact on the company. Instead, rapid decision-making processes can take place in the ITC. Additionally, talks on re-listing of ITC hotels, which could subsequently unlock benefits for stakeholders.
Market activity and shareholder reaction
Around 15.97 lakh shares traded during the trading session after the announcement of BAT on the Bombay Stock Exchange (BSE). This volume exceeded the two-week average volume by 6.08 million shares, indicating increased market activity in response to the news. The counter witnessed a turnover of Rs 64.12 crore, contributing to ITC’s market capitalization of Rs 5,01,630.29 crore.
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It was taken over by ITC
In a separate development, ITC made an acquisition in Sproutlife Foods Pty Ltd, where it demonstrates a commitment to strategic investments and diversification.
Highlights of financial performance
Despite recent market volatility, ITC continues to demonstrate the resilience of its financial performance. The company posted a 10.8 per cent rise in net profit in the FY24 quarter, to Rs 5,572 crore from a year ago. Revenue from operations also grew marginally by 2 per cent, to Rs 17,665 crore, while the cigarette segment grew by 3.6 per cent
Growth in the hotel industry
ITC’s hotel business is set to be spun off into a separate entity, and revenue rose sharply in the third quarter. Revenues in this segment grew by an impressive 18 per cent, thanks to a strong recovery in domestic tourism and increased demand from listed companies
In conclusion, although ITC’s share price has been temporarily impacted by the potential sale of BAT shares, the company’s strong financial performance and strategic plan continue to position it well in the market.