BAT bets big on India again, as ITC seeks to expand tobacco trade deal
Kolkata: In a sign of improved relations between
ITC
and its largest shareholder, British American Tobacco (
BAT
), the Indian company significantly grew the sale of raw tobacco to the London-headquartered cigarette maker in 2024-25 and received nearly double the amount in advances compared with the year before.
BAT, popular for brands like Dunhill, Rothmans and Vuse, bought products (raw tobacco) for Rs 1,445 crore from ITC in FY25, up 35% from the previous year, as per ITC's latest annual report. The advances that ITC took from BAT increased to Rs 1,690 crore from Rs 881 crore in FY24.
Advances between related parties are typically loans and other financial benefits.
ITC did not specify on the type of the advance in the report.
ITC, the country's largest exporter of raw tobacco, has also proposed to take shareholders' approval during the annual general meeting next month to expand its business with BAT. Under Indian regulations, related-party transactions that exceed Rs 1,000 crore or 10% of the annual consolidated turnover of a company require shareholder approval.
ITC wants to take approval for raw tobacco export of up to Rs 2,320 crore by 2026-27. It is also seeking to buy '30 crore of raw international tobacco from BAT. ITC said in the annual report that it has been exporting un-manufactured tobacco to BAT for the past several years and the proposed transaction will aid the growth in business.
BAT and ITC have a long bitter-sweet relation. In 2018, BAT vetoed a share-rewards programme for ITC employees. Around 2-3 decades back, BAT wanted to wrest ownership control of the Indian company but it was resisted by the then ITC chairman, KL Chugh. Chugh's successor,
YC Deveshwar
, worked hard to ensure that the stake held by SUUTI (Specified Undertaking of
Unit Trust of India
) in ITC was not sold to BAT. He believed that BAT was only interested in tobacco and may reverse the diversification of ITC, a conglomerate with businesses ranging from paper products to FMCG and information technology.
BAT's current chief executive, Tadeu Marroco, has recently said the company wanted to retain its veto rights in ITC.
Last month, BAT sold a 2.5% stake in ITC for $1.5 billion (around Rs 12,926 crore), the proceeds of which the British company wanted to use to expand a share buyback programme. In 2024, BAT had sold 3.5% in ITC for about $2 billion. After those block deals, BAT now owns around 23% in ITC, making it the biggest shareholder, followed by
Life Insurance Corporation of India
which owns 15.5%.
ITC has no promoter holding.
BAT's Marroco had told analysts earlier this month that the company's stake in ITC was "still a strategic investment" and "not a financial investment". He said BAT was attracted by the size of the Indian market, demographics and potential GDP per capita growth. BAT has some inter-party relations with ITC in leaf and IT, he had said.
"We want to preserve, as a consequence, a relevant stake in ITC. So we keep our two board directors, so we have influence on the board ... Obviously there was an opportunity now to increase the buyback," Marroco had said.
BAT also owns a 15.3% stake in ITC Hotels, which it has indicated would exit at an opportune time since the hotel business is not the company's focus area.
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