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Informist, Thursday, Feb. 13, 2025

 

By Avishek Rakshit

 

KOLKATA – British American Tobacco p.l.c. will sell its stake in the newly listed ITC Hotels Ltd. and use the proceeds to maintain its leverage between 2.0% and 2.5% by 2026, Chief Executive Tadeu Marroco said Thursday. British American Tobacco has a direct 15.3% stake in ITC Hotels, making it the largest public shareholder and second-largest amongst all shareholders in the ITC group company. British American Tobacco also has lion's share of 25.5% stake in ITC Ltd. – the promoter company of ITC Hotels.

 

"BAT (British American Tobacco) has no interest to become a long term shareholder of a hotel chain in India, and as a consequence, at the right moment it will be decided what is the best moment to maximize shareholder value," Marroco told sector analysts after declaring the company's preliminary financial results for the year ended 2025.

 

Although Marroco did not specify any timeline for the stake divestment, he said, "We will be divesting and we will be using proceeds to making sure that we get to the leverage corridor of 2.5-2.0% by 2026." Marroco also did not specify whether British American Tobacco will fully sell its direct stake-holding in ITC Hotels, or partially, or in tranches.

 

During 2024, the world's second-largest tobacco company continued to focus on deleveraging the group, with a leverage ratio of 2.44 times, which is within the company's adjusted net debt to adjusted earnings before interest, tax, depreciation, and amortisation range of 2.0-2.5 times. For 2025, British American Tobacco has given a guidance to maintain its leverage range.

 

Leverage refers to the use of borrowed money, or debt, to finance asset acquisitions, run business operations, or scale it up with the objective of increasing the potential return on investment. Companies resort to borrowed money mostly to fund growth or deepen their market presence in times of market growth.

 

Amidst the challenging global landscape of falling tobacco sales, Marroco said that British American Tobacco is focussed on driving shareholder value and will launch a 900-million-pound sterling share buyback in 2025. In 2024, the company had bought back shares worth 700 million pounds sterling.

 

Marroco said that although the global tobacco industry volume is expected to shrink by 2% in 2025, British American Tobacco is aiming for a 1% revenue growth at constant currency rates.

 

In 2024, the company reported an over 5?cline in revenue to 25.9 billion pounds sterling but posted an organic growth of 1.3% at constant currency rates. The company's profit from operations was 2.7 billion pounds sterling against a loss of 15.8 billion pounds sterling from operations in 2023.

 

On the National Stock Exchange, shares of ITC Hotels closed almost 2.8% lower at INR 169.86 on Thursday. End

 

Edited by Ashish Shirke

 

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