Rs 9,395 crore block deal! GQG exits ITC shares after a sharp 30% crash this year

ITC saw a large block deal on Thursday, with a GQG-linked emerging markets fund selling shares worth about Rs 9,395 crore at Rs 257.35 apiece, even as Fidelity, ICICI Prudential Mutual Fund, SBI Mutual Fund and other domestic and foreign investors bought into the FMCG major. According to block deal data, GQG Partners Emerging Markets Equity Fund sold 36.51 crore ITC shares across multiple tranches.

Another seller, Alliance Witan Plc, sold 16.11 lakh shares worth about Rs 41 crore. The total block deal value stood at nearly Rs 9,437 crore.

The largest buyer was Fidelity Advisor Overseas Fund, which purchased 13.4 crore shares worth about Rs 3,448 crore. ICICI Prudential Mutual Fund bought 9.4 crore shares worth around Rs 2,419 crore, while SBI Mutual Fund bought 3.76 crore shares valued at about Rs 968 crore. Nippon India Mutual Fund bought shares worth nearly Rs 696 crore.


Other buyers included Mirae Asset Mutual Fund, Edelweiss Mutual Fund, Kotak Mahindra Mutual Fund, Aditya Birla Sun Life Mutual Fund, ICICI Prudential Life Insurance, Bajaj Life Insurance, BNP Paribas Arbitrage, Citigroup Global Markets Singapore, Ghisallo Master Fund and Morgan Stanley Asia Singapore.

The large trade comes at a weak point for ITC shares. The stock has fallen nearly 30% so far this year, hit by concerns over cigarette taxation, sluggish volume recovery and muted investor appetite for some defensive consumer names.

Analysts have remained divided on the near-term triggers for ITC. HDFC Securities has maintained an “Add” rating on the stock with a sum-of-the-parts-based target price of Rs 300. The brokerage valued the cigarettes business at Rs 137 per share and the other FMCG business at Rs 98 per share.

HDFC Securities said ITC had chosen a phased approach to cigarette price increases after the tax hike, instead of taking a one-shot increase, except in the KSFT segment. Their channel checks suggested that most of the required price hikes were now in place.

The hotel business remains another part of the ITC story, though it is now listed separately as ITC Hotels. Jefferies has been constructive on the hospitality outlook, citing strong domestic travel demand, weddings, leisure travel and a gradual recovery in business travel. The brokerage said management expects sustained revenue performance, helped by favourable demand-supply dynamics in key metro markets.

Jefferies also noted that ITC Hotels is moving towards a more asset-light model, with a target portfolio mix of one-third owned and two-thirds managed hotels, compared with about 40% owned and 60% managed currently. The brokerage said managed properties require lower capital and generate higher margins, supporting better return on capital over time.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.