Shares of ITC fell sharply on Tuesday amid reports that British American Tobacco (BAT), its largest shareholder, is gearing up to divest a portion of its stake in the company as soon as this week.

What Happened: BAT, headquartered in London, is enlisting the services of Wall Street majors such as Bank of America and Citigroup to facilitate a deal worth approximately $2.5 billion, according to media reports. The divestment is expected to be executed via the block deal route.

These block deals typically occur at a discount to the prevailing market price. However, details of the transaction are subject to change, and the offering’s launch may extend into the following week depending on market conditions, as reported by Bloomberg.

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Analysts suggest that while the proposed stake sale does not change the company’s fundamental outlook, it may exert short-term pressure on the stock due to greater anticipated supply.

Buying Opportunity? Nonetheless, this development could present an appealing buying opportunity for investors considering ITC’s robust brand presence and growth potential in its fast-moving consumer goods (FMCG) business, as noted by brokerage Jefferies, which recently revised its rating on the stock to “hold” from “buy.”

One of the significant challenges BAT faces in offloading a 4% stake in ITC is navigating the regulatory restrictions imposed by the Reserve Bank of India (RBI) on foreign ownership in tobacco firms, which restricts the eligible buyers for these shares.

Price Action: ITC’s share price was down 2.33% at ₹399.85 near the start of trade on Tuesday.

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