Synopsis

ITC's business with major shareholder British American Tobacco (BAT) saw a 10% expansion in sales to Rs 1,587 crore in FY26, though dividend payouts to BAT decreased. Despite a complex history, BAT views its stake as strategic, citing India's market potential. These related-party transactions suggest strengthening ties between the two entities.

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Kolkata: ITC Ltd expanded its business with its largest shareholder, British American Tobacco (BAT), by 10% year-on-year (YoY) to Rs 1,587 crore in 2025-26, according to the company's latest annual report. However, dividend payout to BAT declined 9% YoY to Rs 3,896 crore during the year.

BAT holds a 22.9% stake in ITC through three entities—Tobacco Manufacturers (India), which owns 17.79%; Myddleton Investment Company (3.88%); and Rothmans International Enterprises (1.24%).

BAT, known for cigarette brands such as Dunhill and Rothmans, purchases raw tobacco from ITC. The Indian company sold goods worth Rs 1,587 crore to British American Tobacco (GLP) Ltd, which also extended advances of Rs 1,370 crore to ITC during the year.

Meanwhile, the dividend paid to Tobacco Manufacturers (India) fell to Rs 3,198 crore in FY26 from Rs 3,558 crore a year earlier, while Myddleton Investment Company received Rs 698 crore, compared with Rs 681 crore in FY25, the report said. However, the annual report does not mention any dividend payment to Rothmans International Enterprises.

ITC's net profit grew by less than 1% to Rs 20,286 crore in FY26, while gross revenue increased 10% to Rs 80,867 crore.

The report reveals that ITC purchased investments worth Rs 154 crore from British American Tobacco (Investments) Ltd during the year, compared with nil in FY25.

ITC also acquired equipment and other intangible assets worth Rs 117 crore from BAT during the year, against nil in FY25. Similar purchases amounting to Rs 286 crore were made from Benson & Hedges (Overseas) Ltd, according to the report.

Analysts say these related-party transactions reflect improving ties between India's largest cigarette maker and BAT. BAT also owns a 6.28% stake in ITC Hotels, although the company has said the investment is not of strategic interest as hospitality is not part of its core business.

BAT and ITC have had a long and often uneasy relationship. In 2018, BAT vetoed a share-reward programme for ITC employees. Two to three decades ago, BAT attempted to gain management control of the Indian company, but the move was resisted by then ITC chairman K.L. Chugh.

However, BAT's current chief executive, Tadeu Marroco, has maintained that its stake in ITC is a "strategic investment" and "not a financial investment". He has said BAT remains attracted by the size of the Indian market, its favourable demographics and the country's long-term GDP per capita growth potential.