FMCG ITC Rises 8.6% As BAT Sells 3.5% Stake: Block Deal Or Not, This Mega Dividend Stock Is Evergreen To Buy!

FMCG giant ITC has witnessed its single-biggest rally since September 2021, skyrocketing by nearly 8.6% on BSE. This is despite the British American Tobacco (BAT plan to sell up to 3.5% stake in ITC, making it one of the biggest block trades in the Indian stock market. When BAT sells its ITC stake, the FMCG player will witness significant drops in its share price. But when that happens, what do investors do? Buy or Sell? Block or not, ITC is an evergreen stock!

At the time of writing, ITC's share price traded at Rs 424.40 apiece, up by 4.98% on BSE with a market cap of Rs 5,29,526.37 crore. ITC shares have gained by a whopping 8.6% overall in the latest trade to hit an intraday high of Rs 439 apiece.

ITC is swaying near Rs 439 levels. This is still lower by 18.54% from its all-time high levels of Rs 499.60 apiece. In simple words, ITC is still undervalued. The stock has underperformed its sector by 27.93% in the past year, as per Trendlyne data.

Hence, more buying opportunity! Because ITC is seen to mingle between Rs 460-500.

BAT's Block Deal:

BAT PLC on March 12th announced that its wholly-owned subsidiary Tobacco Manufacturers (India) Limited ("TMI") intends to sell up to 436,851,457 ordinary shares (the "Block Trade Shares") in ITC Limited ("ITC") to institutional investors by way of an accelerated bookbuild process (the "Block Trade"), subject to customary closing conditions. The Block Trade Shares represent up to c.3.5 per cent of ITC's issued ordinary share capital.

Post the completion of the block deal, BAT will still be a significant shareholder of ITC, with a 25.5% stake compared to the current 29% shareholding.

Tadeu Marroco, Chief Executive of BAT said: "I am confident that ITC, under the stewardship of its current management, will continue to create further value for its shareholders."

Marroco added, "We look forward to remaining important shareholders in ITC as it continues its journey of growth. With this transaction, BAT can accelerate the start of a sustainable buyback while enabling us to continue to deleverage towards a new target range of 2-2.5x adjusted net debt / adjusted EBITDA."

ITC is a valued associate of BAT in an attractive market with long-term growth potential where BAT benefits from exposure to the world's most populous market. BAT's initial investment in ITC dates back to the early 1900s and the two companies have a longstanding, mutually beneficial relationship.

What Should Investors Do In ITC Stock?

Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher said, "ITC LTD our Technical Pick BUY given at 417 on 11-Mar, there is a block deal around 385 level today, our stop loss is 396, one can exit for now."

Further, Jigar S. Patel, Research Analyst at Anand Rathi said, After reaching a peak near the 475 mark on January 4, 2024, ITC has experienced a significant decline of approximately 75 points, which represents a decline of approximately 16%. However, in the subsequent 18 trading sessions, ITC has shown stability by avoiding further declines and has instead consolidated within a range of 400-416. Notably, in the previous trading session, there was notable buying interest observed at lower levels, accompanied by substantial trading volume."

From a technical standpoint, Patel added, "the formation of a bullish AB=CD pattern on the daily chart of ITC within the mentioned price zone of 400-416. Interestingly, this zone also coincides with the 0.382% retracement level of a price swing that occurred between January 2023 and July 2023, as indicated on the chart. Additionally, it has formed a complex structure on the daily Relative Strength Index (RSI) indicator, resembling a 'W shape' below the 30 level, which suggests a potentially lucrative buying opportunity."

Thus, he said, "one can buy in the zone of 420-430 with an upside target of 475 and a stop-loss would be placed near 399 on a daily close basis."

Also, Prabhudas' long-term target stays between Rs 465-480 on ITC.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.