Block Deal Announcement ITC Hotels Ltd

Executive Summary British American Tobacco (BAT) affiliated entities have initiated a strategic divestment of up to 7% equity in ITC Hotels Ltd via a block deal mechanism. The transaction is valued at approximately ₹2,998 crore and is driven by BAT’s global capital allocation and deleveraging objectives. 1. Transaction Structure & Pricing Selling Entities: Tobacco Manufacturers (India) Limited, Myddleton Investment Company Limited, and Rothmans International Enterprises Limited. Floor Price: Fixed at ₹205.65 per share. Valuation Context: The floor price represents a tight discount of approximately 1% to the December 4 closing price of ₹207.75 on the BSE. Lock-in Period: The selling entities and their affiliates are subject to a 60-day lock-in period post-transaction, ensuring near-term supply stability. 2. Strategic Rationale (Seller Side) The divestment is a structural move by the BAT Group to optimize its balance sheet. Utilization of Proceeds: Capital raised will be directed towards deleveraging, aiming to achieve a target leverage corridor of 2-2.5x adjusted net debt/adjusted EBITDA (adjusted for Canada) by the end of 2026. 3. Underlying Asset Performance (ITC Hotels Q2 Highlights) Despite the liquidity event, ITC Hotels demonstrates robust fundamental health and operational efficiency: Net Profit: Surged 74% YoY to ₹133 crore. Revenue: Grew 8% YoY to ₹839.5 crore. Operational Efficiency: EBITDA expanded 15.7% YoY to ₹245.7 crore. Margins: EBITDA margin improved by 200 basis points to 29.3% (up from 27.3%), signaling strong pricing power and cost rationalization.