ITC-BAT sales rise 10% to Rs 1,587 crore, dividend falls 9%

ITC's related-party revenue from British American Tobacco rose 10% to Rs 1,587 crore in FY26, even as the cigarette maker cut its dividend payout to its largest shareholder by 9%.

BAT has described its stake in ITC as strategic, pointing to India's long-term market potential. The two companies have a long history of commercial ties, including leaf tobacco sourcing and brand licensing.

The dividend cut comes as ITC has been reinvesting cash into its FMCG and hotels businesses. The company's capital expenditure has risen over the past two years, and its board has signaled a preference for internal growth over higher payouts.

ITC's related-party transactions with BAT cover cigarette leaf, agri-products and intellectual property licensing. The 10% sales growth outpaced the broader cigarette industry's volume growth, which has been flat to negative in recent years due to tax hikes and health regulations.

BAT holds roughly 29% of ITC, making it the single largest shareholder. The stake is worth about Rs 1.2 lakh crore at current market prices. The dividend from ITC provides a steady income stream for BAT, which has been under pressure from declining cigarette volumes in developed markets and regulatory challenges around vaping.

For ITC, the growing business with BAT reinforces the strategic alignment between the two companies. The dividend cut, however, signals that ITC's board is prioritizing reinvestment over returning capital to shareholders. That could weigh on the stock in the near term, though the long-term growth story remains intact.

ITC's annual report for FY26 is expected to be published in the coming weeks, which will provide more detail on the dividend policy and related-party transactions.