ITC Declines 3% Post Major Block Deal; Trades Ex-Dividend ₹7.85 Per Share

Shares of FMCG giant ITC experienced a 3% dip to ₹413 on the National Stock Exchange (NSE) during Tuesday’s intra-day trade following a large block deal. Approximately 385 million equity shares, representing about 3% of ITC’s equity, changed hands on the NSE. At 09:57 AM, the stock was trading 1.2% lower at ₹421.10, compared to a modest 0.22% decline in the Nifty50 index. In total, 413.84 million shares, roughly 3.3% of ITC’s total equity, were traded across NSE and BSE.

Reports indicate that British American Tobacco (BAT), which holds a 20.3% stake in ITC, is contemplating further reduction of its stake through a potential on-market sale. On Tuesday, BAT’s wholly owned subsidiary, Tobacco Manufacturers (India) Limited (TMI), announced plans to sell nearly 2% of ITC’s issued ordinary share capital to institutional investors via an accelerated book-build process (block trade). Media sources suggest that BAT intends to sell approximately 2.3% stake, equating to 290 million shares, at a price of ₹400 per share. This price reflects an approximate 8% discount to the last trading price and includes a 6.5% ex-dividend adjustment, valuing the transaction near ₹11,600 crore. However, BAT’s press release clarifies that there is no certainty the transaction will proceed or under what terms.

This is not BAT’s first stake reduction in ITC; last year, the company sold 437 million shares (about 3.5% stake) for roughly $2 billion (₹17,000 crore), at a price of ₹389 per share. Despite these block deals, ICICI Securities notes that such transactions are unlikely to affect ITC’s core business fundamentals. BAT is believed to be exploring options to reduce its debt, and proceeds from share sales in ITC could aid this objective. ICICI Securities remains optimistic about ITC’s medium- to long-term growth prospects, highlighting discounted valuations as an attractive feature. The brokerage maintains its Buy rating on ITC stock.

Regarding dividends, ITC’s board on May 22, 2025, recommended a final dividend of ₹7.85 per share for the fiscal year ending March 31, 2025. The record date for entitlement is fixed on Wednesday, May 28, 2025.

Looking ahead, Mirae Asset Sharkhan projects sustained growth in cigarette volumes, supported by the government’s decision not to raise taxes on cigarettes. FMCG market coverage has expanded to twice pre-pandemic levels, with direct reach enhanced by approximately 1.4 times compared to pre-pandemic times. Strong product launch momentum, coupled with increased digital and modern trade penetration nearing 31%, is expected to drive consistent mid-to-high teen revenue growth in the non-cigarette FMCG segment over the coming years.

ITC has strategically acted to revive growth in its non-cigarette FMCG businesses, which is crucial following the demerger of its asset-heavy hotel business. This divestment is expected to significantly improve ITC’s return profile in the near future. Despite the positive outlook, the stock currently trades at a discounted valuation of 24 times and 22 times its estimated earnings per share (EPS) for fiscal years 2026 and 2027, respectively. The brokerage firm retains its Buy recommendation with an unchanged sum-of-the-parts (SOTP) price target of ₹522.

About ITC: ITC is a diversified conglomerate with a strong presence in cigarettes, FMCG, agriculture, and paperboard, paper, and packaging sectors within India. Its core strategy revolves around leveraging the cash flows from its highly profitable cigarette business to drive growth in FMCG and other segments. The recent demerger and separate listing of its hotel business has improved growth visibility and enhanced shareholder value.