BAT pares stake in ITC to 22.9%, relinquishes veto power in key move

Business Standard

28-05-2025

BAT's latest stake sale trims its ITC holding below 25 per cent, ending veto rights just a year after it cited the importance of maintaining control through board influence
British American Tobacco plc (BAT) has sold a 2.5 per cent holding in ITC, ceding veto power in the cigarettes-to-soap conglomerate.
In an intimation to the London Stock Exchange (LSE) on Wednesday, the maker of Dunhill and Lucky Strike stated that it had completed the block trade of 313,000,000 ordinary shares in ITC Limited to institutional investors via an accelerated bookbuild process. The shares represent 2.5 per cent of ITC, and net proceeds from the sale amounted to Rs 12,900 crore.
With this sale, BAT's holding is expected to be around 22.9 per cent. On Tuesday, while announcing the stake sale, BAT had said it would remain a significant shareholder of ITC with a 23.1 per cent holding.
A 25 per cent holding enables shareholders to influence or oppose resolutions, especially special resolutions that require 75 per cent of the votes cast to be in favour.
An email sent to BAT received a response referring to the exchange filing, with the company stating, 'no further comments will be provided at this time.'
However, in 2023, during a Deutsche Bank – Global Consumer Conference, Tadeu Marroco, chief executive of BAT, had outlined the importance of having 'at least 25 per cent of shareholding in India.'
He had said that a 25 per cent stake would allow BAT to retain board seats, veto company resolutions, and steer towards certain opportunities.
But BAT had sold 3.5 per cent in ITC in March 2024 to initiate its buyback programme. That sale, which reduced its stake to 25.45 per cent, generated net proceeds of £1.6 billion after transaction costs and taxes, and was used to begin the buyback.
Later that year, during Capital Markets Day, Marroco said about ITC, 'We have to be mindful that there is a foreign direct investment (FDI) ban in India, which means that if you sell, you don't come back.'
According to Abneesh Roy, executive director and head of the research committee at Nuvama Institutional Equities, a holding below 25 per cent means BAT can no longer block special resolutions. 'Till date, we remember only once BAT has blocked a special resolution on ESOP. So, not a material thing,' he said.
It was in 2018 that BAT used its veto power to block a special resolution granting stock options to employees of ITC and its subsidiaries.
The plan received 63.49 per cent of votes in favour, short of the requisite 75 per cent majority. While 98.77 per cent of institutions voted in favour, 89.22 per cent of non-institutional public shareholders (which included BAT) voted against it.
BAT had said at the time that it had made its position clear since 2010—that it would not support proposals that diluted shareholder value. This led ITC to adopt a new scheme, the Stock Appreciation Rights Scheme (SARS), which resulted in minimal additions to share capital.
Since then, BAT's position appears to have shifted significantly, with the UK-based company paring its stake in ITC for the second time in two years. The turn of events is especially ironic, given that in 1994 BAT had attempted to secure a majority stake to gain control of ITC.
It's a long way since then—the British multinational is now focused on its commitment to invest in transformation, deleverage, and enhance shareholder returns.