British American Tobacco to Divest Stake in ITC Hotels

British American Tobacco (BAT) has announced plans to sell its stake in the Indian hotel chain ITC Hotels. This decision comes as the company seeks to optimize its financial strategy and reduce its leverage. The sale will be conducted through its wholly owned subsidiaries, including Tobacco Manufacturers (India) Limited, Myddleton Investment Company Limited, and Rothmans International Enterprises Limited, targeting institutional investors.

The exact number of shares to be sold remains undetermined, as BAT aims to maximize the overall pricing outcome for the group. Funds generated from this transaction will assist in achieving the company’s goal of an adjusted net debt to adjusted EBITDA ratio of between 2 and 2.5 times by the close of 2026.

According to BAT’s Chief Executive, Tadeu Marroco, a direct investment in ITC Hotels is not aligned with the company’s strategic objectives. Marroco expressed satisfaction that the proceeds from this sale will contribute to the company’s financial targets. “Therefore, I am pleased that the proceeds from this transaction will further support continued progress towards our stated 2026 leverage corridor,” he stated.

BAT’s connection to ITC Hotels stems from the demerger process completed by parent company ITC earlier this year. In May, BAT divested a stake valued at $1.5 billion in ITC Limited, which led to ITC Hotels being established as a separate listed entity in January. Founded in 1975, ITC Hotels currently manages over 140 properties across more than 90 destinations within the Indian subcontinent.

The hotel chain’s shares began trading on January 29, 2025, at a price of Rs 188 (£1.56) on the Bombay Stock Exchange (BSE) and Rs 180 (£1.50) on the National Stock Exchange (NSE). This initial offering was below the valuation of Rs 260-270 established during a special price-discovery session earlier that month. On Thursday, ITC Hotels’ shares closed unchanged at Rs 207.80 (£1.73) on the NSE. The promoter company, ITC, retains a 39.85 percent stake in the hotel business.

This strategic move reflects BAT’s ongoing efforts to streamline its portfolio and focus on core operations while addressing its financial leverage objectives. As the company adapts to the evolving market landscape, investors will be closely monitoring the outcome of this divestment and its implications for BAT’s future financial health.