British American Tobacco (BAT) is reportedly set to begin a begin a partial sale of its stake in Indian partner ITC as early as this week.
BAT is in talks with Bank of America and Citigroup about a potential sell off of around $2bn (£1.6bn) to $3bn (£2.3bn) worth of ITC stock through block trades, according to Bloomberg.
Sources, who wished to remain anonymous, said details of the selloff could still change and market conditions may delay the launch of the offering until next week.
Shares in the London-listed tobacco company nudged up 1.14 per cent on Tuesday morning despite being down over 22 per cent in the past year.
Last month, BAT said it has been “actively working” towards a partial sale of its 29 per cent stake in ITC, an Indian consumer goods conglomerate that also operates hotels, sending shares up six per cent.
The Lucky Strike cigarette maker wants its stake to remain above 25 per cent so it can keep board seats and veto rights.
Jefferies analyst Owen Bennett said keeping this stake is important for a couple of reasons.
“One, the Indian tobacco market is significant, and BAT has an advantage over peers currently as it acquired its stake before the government introduced limits on foreign direct investment in tobacco. Peers
would like to get more exposure, but can’t.
“Two, in addition to being a significant tobacco market, it also has the potential to be a significant reduced risk market in the future, both for inhalables, but also oral nicotine, the Indian market having a significant oral market alongside combustibles,” he explained.
BAT, Bank of America and Citigroup declined to comment. ITC did not immediately respond to City A.M.’s request for comment.