ITC Hotels share price falls 3% as BAT looks to divest stake

Shares of recently-listed ITC Hotels declined over 3% in intra-day trade on Friday, February 14, after British American Tobacco Plc (BAT), the biggest shareholder after ITC, said it will pare its stake in the hotels business by next year.

Tadeu Marroco, Chief Executive Officer, BAT in an earnings call said that BAT has no interest in becoming a long-term shareholder of a hotel chain in India. He added that the company will look for the right moment to divest in order to ensure maximum shareholder value.

"We will be divesting, and we will be using proceeds to make sure that we get to the leverage corridor of two and a half and two by 2026," Marroco said.

According to the latest shareholding pattern filed by the company, BAT holds a 15.29% stake in the demerged hotels entity.

BAT sold a 3.5% stake in ITC for ₹17,491 crore in March 2024. After the sale, BAT's ownership in ITC decreased from 29% to around 25.5%. This sale also allowed BAT to start its sustainable share buyback program, with £700 million planned for 2024 and £900 million for 2025.

ITC Hotels Share Price Impact

ITC Hotels share price following BAT's divestment plans declined 3.44% to the day's low of ₹164.05 apiece. The stock opened at ₹170.10, slightly higher than its previous close of ₹169.90 per share but soon gave up gains to trade close to the 52-week low level of ₹160.55.

ITC Hotels Ltd's shares were listed on Indian stock exchanges on January 29. ITC Hotels is a separate company that was created from the larger ITC Ltd, which is known for its cigarette and FMCG businesses. The share price of ITC Hotels was ₹188 each when it started trading on the BSE and NSE.

Jefferies recently initiated coverage on ITC Hotels with a 'Buy' rating, citing the potential for a valuation rerating. Jefferies has set a target price of ₹240, noting that the current discount to Indian Hotels Co Ltd (IHCL) may narrow over time.

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