BLOCK DEAL: BAT sells 3.5% stake in ITC, shares jump as much as 9%; should you buy the stock?

ITC BAT stake sale, ITC share price today: As reported earlier, British American Tobacco (BAT) sold a 3.5 per cent stake in ITC via block trade on Wednesday, March 13, in the block deal window. The price band for the deal, as per reports, was Rs 384–400.25 per share. Post-block deal, ITC shares jumped nearly 9 per cent in the opening deals. The FMCG stock settled 4.49 per cent or Rs 18.15 higher at Rs 422.4 on BSE. 

BAT is expected to raise nearly Rs 16,775 crore through the said block deal. After the stake sale, BAT would still be holding 25.5 per cent of ITC. Read more

ITC share price target: Buy, Sell or Hold? Here's what leading brokerages suggest

Morgan Stanley on ITC

Morgan Stanley has maintained an overweight call on the cigarettes-to-hotels conglomerate with a target price of Rs 491. The revised target translates to an upside of 19.9 per cent from the previous close.

The brokerage believes BAT’s stake sale will clear the uncertainty around the stock, and they expect its outperformance to resume after the stake sale.

Morgan Stanley remains bullish on ITC based on the expectations of a moderate cigarette tax environment, continued scale-up of non-cigarette businesses, and reasonable valuations.

HSBC on ITC

HSBC double-upgraded the Kolkata-based company's stock to buy from hold with a target price of Rs 480. Amidst news of the ITC stake sale by BAT, the company's stock price has corrected from its peak, it notes. A stock price correction implies an attractive valuation for its cigarette business.

Additionally, the correction also creates a buying opportunity even as a tax overhang persists, the brokerage adds.

CLSA on ITC

CLSA has upgraded the diversified conglomerate to 'buy' from 'outperform'; however, the brokerage has reduced the target to Rs 468 from Rs 486. "Correction offers an attractive multiple in a volatile market. Cigarette volumes are to be muted, but premiumisation is underway, the brokerage said in its note.

FMCG is gradually becoming a key driver, the brokerage notes, adding that Agni will stabilise with value-added products. Quick commerce will accelerate portfolio premiumisation, the brokerage added.

Should you buy ITC shares today? 

In conversation with Zee Business Managing Editor Anil Singhvi, market expert Rakesh Bansal of Rakesh Bansal Ventures recommended buying ITC shares for targets of Rs 465 and Rs 470 with a stop loss of Rs 390 for the day in the special segment, 'Pick of the Day.'

ITC shares: What does Anil Singhvi suggest?

ITC के शेयरों में आगे आएगी सप्लाई?

Block Deal के बाद ITC खरीदना ही है...

किस लेवल पर खरीदें ITC?#ITC #StocksInNews #StocksToTrade #StockMarket https://t.co/Te9Gc0wpOg

— CA Anil Singhvi Zee Business (@AnilSinghvi_) March 13, 2024

What will be the impact of the deal on the company?

Atul Parakh, CEO of Bigul, said that the deal will increase ITC's free float, potentially boosting liquidity. With reduced BAT ownership, ITC's perceived corporate governance may improve, benefiting minority shareholders. 

"The proceeds could fund ITC's growth plans. The stake sale could lead to a re-rating of ITC's stock as investors view it as more independent," he said. 

"Long-term accumulation of ITC shares may be the next step, given its fundamentals. However, short-term investors should be mindful of volatility post-deal," the expert said. Parakh added that investors should monitor ITC's performance and conduct due diligence before investing.

ITC share price history

On a year-to-date (YTD) basis, the stock has slipped over 14 per cent. In comparison, the benchmark Nifty50 has gained around 2.75 per cent.

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