Indian Media: ITC Has Replaced BAT as the World’s Third-Largest Tobacco Company

After a sharp sell-off in British American Tobacco shares, India’s ITC Ltd has become the world’s third-largest tobacco company.

Breaking news: According to a December 7 report by The Telegraph in Kolkata, India, ITC Ltd has overtaken British American Tobacco (BAT) to become the world’s third-largest tobacco company after a steep sell-off in BAT shares sent its stock price sharply lower.

ITC has diversified its business from tobacco into fast-moving consumer goods, hotels, paper, and agricultural products. As of the close of trading on December 7, its market capitalization reached US$68.6 billion, while British American Tobacco closed with a market capitalization of £51.58 billion (about US$64.9 billion).

ITC was founded in 1910 as the Imperial Tobacco Company of India Limited. As the company’s ownership gradually became Indianized, its name was changed to I.T.C. in 1970 and then to ITC Limited in 1974.

BAT was founded in 1902 as a joint venture between the American Tobacco Company and the UK’s Imperial Tobacco Company, and it continues to hold a significant stake in ITC Ltd in India. Through three entities, BAT holds 29.04% of ITC, a stake valued at US$19.9 billion.

However, BAT’s stake in ITC is equivalent to nearly one-third of BAT’s own market capitalization. BAT’s shareholding in ITC is classified as foreign direct investment, but India prohibits foreign direct investment in tobacco companies, limiting BAT’s options in the country.

BAT is listed among ITC’s public shareholders and has two representative directors.

ITC shares have been on an upward trend, far outperforming the broader market. The stock has risen 34.7% over one year and 125.5% over three years, as investors continue to bet on the company’s diversification strategy, improving profitability in its FMCG business, growth in cigarette sales, and the recovery of the hotel sector.

In the six months ended September 30, 2023, the tobacco business accounted for only 37% of ITC’s total revenue. However, it contributed 78% of the company’s profit before tax.

By contrast, British American Tobacco shares hit a multi-year low on Wednesday after the company announced a US$31.5 billion writedown on the value of some U.S. cigarette brands. BAT fell as much as 10% on the London market, its lowest level since September 2010.

It is worth noting that BAT has already set a target for half of its revenue to come from non-combustible products by 2035.