Why ITC Is Falling

FMCG giant ITC has witnessed a decline in its shares, dropping over 4% during intraday trade. The reason behind this downward trend is a report suggesting that long-time investor British American Tobacco (BAT) is considering selling some of its stake in order to improve its financial standing. BAT, being the largest shareholder in the conglomerate that spans from cigarettes to hotels, plays a significant role in shaping ITC’s market.

BAT’s Stake and the Impact on ITC

ITC’s stock fell by 4.15%, reaching a low of Rs 414 compared to its previous close of Rs 431.90. BAT mentioned that its stake in ITC decreased from 29.19% in 2022 to 29.02% in 2023. In a release, BAT stated, “We continue to pursue all opportunities to enhance balance sheet flexibility and, as part of this, we regularly review our stake in ITC. We recognize that we have a significant shareholding which offers us the opportunity to release and reallocate some capital.”

BAT’s Financial Results and ITC’s Performance

BAT also provided insights into its financial results and the performance of its main associate, ITC Limited. The portion of post-tax results from associates and joint ventures rose from £442 million to £585 million, primarily driven by ITC’s performance in India. Specifically, BAT mentioned that its portion of ITC’s post-tax results increased by 19.8%, reaching £616 million compared to £514 million in 2022. These movements can largely be attributed to India’s economic recovery from the Covid-19 pandemic in 2023, which offset the translational foreign exchange headwind.

Factors Influencing ITC’s Performance

ITC’s third-quarter profit witnessed a growth of 10.8%, reaching Rs 5,572 crore compared to the previous year. The revenue from operations also saw a 2% rise, reaching Rs 17,665 crore, with the cigarettes business experiencing a growth of 3.6%. This performance demonstrates the resilience of ITC in a challenging market environment.

Q: What is the reason behind ITC’s falling shares?
A: The decline in ITC’s shares is primarily due to reports suggesting that British American Tobacco (BAT), its largest shareholder, is considering selling some of its stake to improve its financial standing.

Q: How has BAT’s stake in ITC changed?
A: BAT’s stake in ITC decreased from 29.19% in 2022 to 29.02% in 2023, according to the company’s release.

Q: What impact does BAT’s stake have on ITC?
A: BAT’s stake in ITC influences the market perception and financial stability of the company.

Q: How has ITC performed in recent times?
A: ITC’s third-quarter profit increased by 10.8%, reaching Rs 5,572 crore compared to the previous year. The revenue from operations also saw a 2% rise, with the cigarettes business experiencing a growth of 3.6%.

The decline in ITC’s shares can be attributed to reports of BAT considering selling some of its stake. However, it is important to note that ITC has shown resilience and positive performance in recent times. The company’s focus on enhancing balance sheet flexibility and adapting to market conditions will likely contribute to its long-term growth. For more updates on ITC and other business news, visit Top Q&A.

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