ITC: Should you buy this stock post Rs 12,927 crore block sale by BAT?

ITC shares recovered some of the lost ground in Wednesday's trade after the Rs 12,927-crore worth block sale by British American Tobacco (BAT) earlier in the day. The stock, which fell 5 per cent in the early trade, was later quoting at Rs 420.05 apiece on BSE, down 3.19 per cent. Stock analysts are largely positive on ITC's prospects. 

"BAT's decision to sell 2.3 per cent stake in ITC kept the stock subdued. This provides an opportunity for long-term investors to buy this fairly-valued bluechip stock," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. 

BAT had announcement that it was considering selling a small portion of its stake in the FMCG company. On Wednesday, it sold 31.30 crore shares, representing 2.5 per cent of the company’s total outstanding equity via its arm Tobacco Manufacturers (India) Limited. 

The stake was sold at Rs 413 per share, amounting to Rs 12,926.90 crore (approximately $1.515 billion). The final price reflected a 4.8 per cent discount to Tuesday’s closing price of Rs 433.90 per share.

Tobacco Manufacturers (India) held 20.3 per cent stake in ITC as of March 31. It was BAT is the largest investor in ITC.

The ITC stock continued to trade at discounted valuations of 24 times FY26 and 22 times FY27 earnings per share, said Sharekhan that maintained its 'Buy' rating on the stock on May 26 with an unchanged target of Rs 522.

This brokearge felt volume growth of the cigarettes business is expected to sustain, with no increase in tax in the recent budget. ITC has undertaken relevant strategic actions to revive growth in the non-cigarette FMCG business in the near term, Sharekhan said.

"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 valuations," it said.

ICICI Securities has cut its earnings estimates by 5 per cent for FY26 and FY27 largely on lower margin expectations. It maintained its 'ADD' with a DCF-based revised target price of Rs 450 from Rs 440 earlier as it 
rolled forward its earnings estimates to FY27. 

"We remain positive about ITC due to its steady momentum in the cigarette business and expected recovery in FMCG performance. Post the 4QFY25 performance, we have cut our FY26E and FY27E Ebitda estimates by 9 per cent and 8 per cent, respectively. We maintain a 'Buy' recommendation with a revised SoTP-based target price of Rs 497 (previously Rs 543)," said Antique Stock Broking.