British American Tobacco Set to Offload Up to 15.3% in ITC Hotels

Shares of ITC Hotels Ltd. are expected to draw strong market attention on Friday, December 5, 2025, as British American Tobacco (BAT) moves ahead with a large block deal worth nearly ₹3,000 crore. BAT plans to offload around 7% of the company’s equity, continuing a shift in its portfolio after the ITC group’s hospitality business was demerged earlier this year.

According to sources, the floor price for the offer has been set at ₹205.65 per share, just around 1% lower than Thursday’s closing price of ₹207.80. The modest discount signals that demand for the stock is likely strong, especially from institutional buyers looking to increase exposure to the newly independent hotel chain.

BAT will divest up to 14.58 crore shares through its subsidiaries - Tobacco Manufacturers (India) Ltd., Myddleton Investment Company Ltd., and Rothmans International Enterprises Ltd. Together, these entities hold BAT’s 15.3% stake in ITC Hotels, a stake that was created not by choice, but as a result of the group’s restructuring.

Why Is BAT Selling Its Stake Now?

BAT has made it clear that its direct stake in ITC Hotels is not strategic for the tobacco giant. The CEO of BAT, Tadeu Marroco, explained that the shareholding emerged purely due to ITC Ltd.’s demerger earlier this year. With ITC Hotels now operating as an independent listed company (since January 2025), BAT is simply realigning its global portfolio.

More importantly, the sale helps BAT move toward its leverage target of 2–2.5x adjusted net debt to adjusted EBITDA (excluding Canada) by the end of 2026. The proceeds of nearly ₹3,000 crore will contribute directly to its balance-sheet strengthening plan.

The company added that it may eventually sell between 7% and 15.3% of its total holding, depending on market appetite.

How Will the Block Deal Work?

This transaction will be entirely secondary, which means ITC Hotels will not issue any new shares. Instead, the existing shares held by BAT’s subsidiaries will be transferred to new investors. Global investment major Citi Global Markets is leading the sale as the deal’s banker.

Once the sale is completed, there will be a 60-day lock-in period for BAT and its affiliates. During this time, they cannot sell any more shares. This clause ensures stability in the stock and helps avoid excessive volatility in the weeks following the block deal.

The block deal pricing and structure indicate that BAT expects a smooth execution, supported by strong institutional interest after the demerger. ITC Hotels has been one of the more closely watched listings this year, given its established brand value and its parent company ITC’s continued backing.

What Does the Sale Mean for ITC Hotels and Investors?

For ITC Hotels, BAT’s exit is not expected to change day-to-day operations. BAT was not a strategic shareholder and had no role in management. The parent company, ITC Ltd, continues to hold 39.85% of the hospitality business, retaining significant influence and long-term commitment.

For investors, the block deal could improve liquidity in the stock and bring more institutional participation. The small discount also signals confidence in the company's prospects, with the business benefiting from a strong recovery in travel and hospitality.

ITC Hotels closed marginally higher at ₹207.80 on Thursday, and traders will be watching closely to see how the market absorbs the large share sale throughout the trading hours.

Where Does This Leave ITC Hotels Going Forward?

With BAT beginning its exit, ITC Hotels moves closer to building a more independent investor base. The company’s performance as a standalone hospitality brand will now rely on its operational strategy, expansion plans, and ability to grow in a rapidly evolving hotel and tourism landscape.

As investors assess the next phase for the company, one question remains: Will ITC Hotels use this moment to unlock stronger long-term value for shareholders?

References

Economic Times
CNBC