British American Tobacco (BAT) has announced that it is actively working on monetizing its shareholding in India’s consumer goods giant, ITC. This move could bring the cigarette manufacturer closer to resuming its share buybacks, which disappointed investors when it was put on hold last year. Selling down its approximately 29% stake in ITC would allow BAT to pay off debt and advance towards the leverage range required for buybacks.
BAT’s Chief Executive, Tadeu Marroco, stated that the company has been working on completing regulatory processes to give them the flexibility to monetize their shareholding. While BAT did not provide specific details about the sale, analysts believe that it could be a positive development for the company’s future share buyback plans.
RBC analyst James Edward Jones described the potential stake disposal as a significant move that would bring BAT’s buyback timeline closer for investors. The resumption of share buybacks and high dividends are crucial factors in the investment case for tobacco companies, as they generate substantial cash flow.
In its recent results statement, BAT reported a 5.2% increase in adjusted diluted earnings per share, slightly surpassing analyst expectations. The company also forecasted low single-digit organic revenue growth for 2024 and expects a slow recovery in the US economy.
BAT’s decision to sell part of its stake in ITC builds upon its strategy to reduce debt and invest in new products. By monetizing its shareholding, BAT aims to optimize its financial position and accelerate the path toward resuming share buybacks.
This news will be of interest to investors and stakeholders in both the tobacco industry and the Indian consumer goods market. BAT’s move to divest its stake in ITC demonstrates the company’s commitment to its long-term growth strategy while addressing investors’ expectations for improved returns.
Disclaimer: This article is based on the latest information from the company and various sources, and should not be considered as financial advice. Readers are advised to do their own research and consult with a financial advisor before making any investment decisions.
