ITC is projecting to export up to Rs 2,335 crore of raw tobacco to British American Tobacco (BAT) next fiscal year, a 17% increase from the estimated shipments in fiscal 2023. In a regulatory filing, the Kolkata-based tobacco-to-hospitality conglomerate said it would seek shareholder approval for the plan since it is a relatedparty transaction.
ITC is an associate company of Tobacco Manufacturers (India), which is a subsidiary of London-based BAT, making both related parties. As per Indian regulations, a related-party transaction exceeding Rs 1,000 crore in a fiscal year, or 10% of the annual consolidated turnover, requires shareholder approval.
ITC said its proposed transaction with BAT for the next fiscal year would account for around 3.64% of the annual consolidated sales for the ongoing FY23. “This is a routine business transaction and shareholder approval is being sought in line with regulatory requirements on related-party transactions,” an ITC spokesperson told ET.
BAT, which sells cigarettes under brands such as Dunhill and Rothmans, has been one of the largest buyers of Indian raw tobacco from ITC. As per the filing, the export will be made to a subsidiary of BAT.
For FY23, ITC had taken shareholders’ approval for raw tobacco shipment of up to Rs 1,990 crore to BAT. In FY22, approval was taken for Rs 1,797 crore.
ITC also intends to import unmanufactured tobacco of international origins of Rs 15 crore from BAT next fiscal year. ITC said these transactions would be entered in the ordinary course of business and on an arm’s length basis.
ITC is India’s largest cigarette manufacturer, accounting for three out of four cigarettes sold legally, with brands like Navy Cut and Classic. It is also engaged in the development, procurement and supply of unmanufactured tobacco and is the largest exporter of raw tobacco from India.
ITC shares have been on a roll since the budget due to much lower increase in cigarette taxation than what was expected by the Street.
The government had increased the national calamity contingent duty (NCCD) on cigarettes by 15-16%.
NCCD is levied on the excise duty and is expected to increase cigarette prices by at the most 2-3%.
On Monday, the ITC share closed 0.75% higher at Rs 374.10 on the BSE, where the benchmark Sensex fell 0.41%. The share price had touched a 52-week high of Rs 388.20 a week ago.