British American Tobacco (BAT) is set to sell a 3.5% stake in ITC Limited through a block deal today, with a total size of Rs 16,775 crore. The deal is expected to occur at a maximum 5% discount to yesterday’s closing price of Rs 404.45.
Analysts from leading financial institutions have expressed bullish sentiments on ITC’s prospects despite the stake sale. HSBC has upgraded ITC to a “Buy” rating with a target price of Rs 480, citing attractive valuation for its cigarette business amidst taxation concerns. Similarly, Morgan Stanley maintains an “Overweight” rating on ITC with a target price of Rs 491, expecting the stock’s outperformance to resume post the stake sale.
CLSA has also upgraded ITC to a “Buy” rating with a target price of Rs 468, noting that the recent correction offers an attractive multiple in a volatile market. They highlight the potential for premiumization in ITC’s cigarette business and the gradual emergence of FMCG as a key driver of growth.
Overall, analysts remain bullish on ITC’s long-term prospects, citing expectations of a moderate cigarette tax environment, continued growth in non-cigarette businesses, and portfolio premiumization. Despite near-term challenges, the consensus among analysts suggests that the stake sale by BAT presents a buying opportunity for investors looking to capitalize on ITC’s growth potential in the Indian market.
