The broking firm Jefferies downgrades the rating on the stock of Tata Consumer Products to “Hold” from “Buy”. The brokerage house has cut the target price by 17.3% to Rs 430 from Rs 520 after the company’s largest shareholder, British American Tobacco, decided to divest its stake in the company. Since then the company’s shares have seen a fall in price. 

“We have a significant shareholding (in ITC) which offers us the opportunity to release and reallocate some capital. We have been actively working for some time on completing the regulatory process required to give us the flexibility to monetise some of our shareholding (in ITC,” said BAT. As of now, BAT holds a 29% stake in the company and wants to bring it down to 25%. 

The brokerage house believes that there will be uncertainty for tobacco taxation over the next 12 months, given the background of the full budget due in another seven months. This budget could be important for tobacco taxation, said Jefferies. 

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In the near future, the brokerage expects a soft volume growth in the range of 0%-3%. Overall, the company’s earnings per share growth might increase to 8% in the financial year.

The brokerage house expects the company’s cigarette profit margin to grow by 7% on an annual basis over FY23-26 and FMCG revenue by 10%.