ITC share price declined almost 5 per cent in intraday trade on the NSE on Wednesday, May 28, following a block deal through which British American Tobacco (BAT) offloaded roughly 2.5 per cent of ITC’s total shares.
ITC share price opened at ₹417.70 against its previous close of ₹433.90 and dropped 4.82 per cent to an intraday low of ₹413. However, it pared losses later and around 1:25 PM, the blue-chip stock traded 1.36 per cent down at ₹420.25.
According to a term sheet reviewed by Mint, BAT offloaded a $1.5 billion (approximately ₹12,926 crore) stake in ITC Ltd on Wednesday, more than it had announced earlier. BAT on Tuesday said it planned to sell a 2.3 per cent stake in ITC by offloading 290 million shares, valued at about $1.36 billion.
Is BAT stake sale a long-term investment opportunity in ITC?
Most fundamental experts believe BAT’s stake sale in ITC could weigh on the stock price in the short term. However, the stock will bounce back soon because of its comfortable valuation and the company’s bright growth prospects.
ITC’s share price has seen modest gains of 6 per cent over the last year (till May 27). The stock’s trailing twelve-month price-to-earnings (P/E) ratio of 15.2 is lower than that of several major industry peers, indicating relative undervaluation.
“ITC’s FMCG business, despite operating with relatively lower margins, has funded all its capacity expansions through internal accruals. This reflects a high level of cost-efficiency. Additionally, its brands enjoy strong consumer popularity. Overall, ITC presents a compelling long-term growth story,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Shreya Mehra, a research analyst at Bonanza, pointed out that despite BAT’s stake sale, it remains ITC’s largest shareholder, with over 20 per cent.
Mehra highlighted that while ITC’s FMCG sector faces moderation due to rising commodity prices, the company outperforms peers due to its strong presence in under-penetrated, largely unorganised categories.
Moreover, the agriculture business rebounded, driven by leaf tobacco and value-added products like coffee and spices, supported by strong customer relationships and efficient execution. Rising leaf tobacco costs were partly offset by an improved product mix, calibrated pricing, and cost management, Mehra noted.
“Although the stock dipped due to the stake sale, it offers a compelling long-term investment opportunity at an attractive valuation,” said Mehra.
Following the demerger of ITC Hotels from ITC in January this year, experts believe that the company’s return ratios and cash flows are likely to improve, as it sheds the asset-heavy hotels business.
ITC reported a consolidated net profit of ₹19,807 crore for Q4FY25, boosted by an exceptional gain of ₹15,145 crore during the quarter after the demerger of its hotels business.
After the Q4 results, Mirae Asset Sharekhan maintained a buy call on ITC with a target price of ₹522.
Sharekhan said the volume growth of ITC’s cigarettes business may sustain, with no increase in tax in the recent Budget. On the other hand, the company has taken relevant strategic actions to revive growth in the non-cigarette FMCG business in the near term.
“After the demerger of the asset-heavy hotels business, ITC’s return profile will substantially improve in the coming years. The stock continues to trade at a discounted valuation of 24 times and 22 times its FY26E and FY27E EPS, respectively,” said Sharekhan.
ITC share price technical view
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that ITC recently encountered resistance near the R3 level of the monthly Camarilla pivot and has since retraced towards the S3 pivot, currently hovering around the ₹415 mark.
“This price action indicates a potential sideways consolidation in the ₹415– ₹440 range,” said Patel.
“Given the technical setup, we expect ITC to trade within this band in the near term. Traders may consider a buy near current levels, with a target of ₹440 and a stop-loss placed below ₹410 on a daily closing basis,” said Patel.
On the other hand, B Krishnakumar, Senior Technical Analyst at Definedge Securities, pointed out that the ITC stock has been in a downtrend since September 2024, and it has been a rank underperformer versus the Nifty 50 index since July 2023.
“Technically, the ITC stock looks bearish, and there is no technical reason to consider exposure. Only a move past the resistance zone at ₹465-475 would warrant a closer look at ITC. For now, there are better sectors and stocks to focus on,” said Krishnakumar.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
