ITC Ltd's business dealings with its largest shareholder, British American Tobacco (BAT), climbed 10% to Rs 1,587 crore in FY26. While operational ties deepened with new investments and trade, the dividend payout to BAT fell 9% to Rs 3,896 crore. This reflects a shift toward closer commercial collaboration despite lower cash returns for the stakeholder.
What Happened
ITC Ltd witnessed a notable shift in its relationship with its largest shareholder, British American Tobacco (BAT), during the 2025-26 fiscal year. Commercial transactions between the two entities, including raw tobacco trade and advances, expanded by 10% to reach Rs 1,587 crore. However, the dividend payout to BAT saw a decline of 9% during the same period, totaling Rs 3,896 crore. This divergence highlights a phase where operational collaboration is increasing even as total dividend distributions to the promoter shareholder have dipped.
Operational Ties And Related-Party Deals
The increase in business transactions is accompanied by new financial activity between ITC and BAT entities. During FY26, ITC purchased investments worth Rs 154 crore from British American Tobacco (Investments) Ltd, a category of transaction that was not present in the previous year. Additionally, ITC acquired equipment and intangible assets worth Rs 117 crore from BAT, along with Rs 286 crore in similar purchases from Benson & Hedges (Overseas) Ltd. These movements indicate that the companies are deepening their operational and supply chain integration.
Breakdown Of Dividend Payments
The total dividend of Rs 3,896 crore paid to BAT is split among its specific entities. Tobacco Manufacturers (India) received Rs 3,198 crore, a decrease from the Rs 3,558 crore it received in FY25. Conversely, Myddleton Investment Company, another BAT-linked shareholder, saw its dividend receipt rise to Rs 698 crore. While the dividend income for the primary entity dropped, BAT continues to hold a 22.9% stake in the Indian conglomerate, viewing it as a core part of its global strategy.
Strategic Importance And Historical Context
BAT’s leadership, including CEO Tadeu Marroco, has consistently described the investment in ITC as strategic, citing India's demographics and long-term growth potential. This perspective suggests that the relationship is viewed as a long-term asset rather than just a source of dividend income. Historically, the interaction between the two companies has been complex, including past instances where BAT attempted to influence management decisions or veto specific employee share programs. The current rise in trade and asset-related transactions marks a shift toward a more collaborative operational environment compared to those earlier periods of friction.
What Investors Should Track
Investors may monitor how these related-party transactions evolve in future quarters. The key monitorable will be whether the operational collaboration leads to improved efficiencies or if it raises questions regarding capital allocation between the two entities. Furthermore, analysts will watch for any changes in ITC's dividend policy that could impact future payouts to all shareholders, including the promoter group. The sustainability of the trade volume growth between ITC and BAT entities will also be a factor to observe in upcoming annual reports.