New Delhi: British American Tobacco or BAT which is ostensibly the parent of Indian heavy hitter ITC with 29.54 per cent share holding has suffered a massive meltdown in its parent market in recent times. While the stocks of standalone tobacco majors have seen a decline, BAT’s year-on-year market cap erosion between December 2017 and December 2018 was down sharply from 115 billion pounds to 59 billion GBP, an erosion of 48.7 per cent.
Incidentally, with India being a growth market for such transnational companies, ITC’s contribution to BAT’s market cap is an astounding 15 billion GBP.
Seen very much as an Indian company despite BAT being a substantive shareholding, Domestic Financial Institutions and SUTTI between them hold 30.17 percent which is more than the parent BAT’s.
Remarkably, ITC from a pure play tobacco major has become a diversified conglomerate with a market cap of nearly $50 billion on its own. Fears of tighter regulation have weighed on BAT’s shares, equally a new CEO is due to take charge next month which leaves the future trajectory open ended.
A likely ban on menthol cigarettes it sells under the Newport brand have contributed in the share price erosion.
Another key reason in BAT taking a hammering on the bourses has been the RAI acquisition. BAT which owned 42 per cent of RAI acquired the remaining stake of 58 percent for $49 billion effective July 25, 2017, subsequently rating agencies downgraded the company, impacting it on the bourses. (IANS)
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