British American Tobacco is "actively working" to sell some of its shareholding in India's ITC, it said on Thursday, sending its shares up almost 8% as investors cheered a move towards resuming share buybacks.

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The maker of Dunhill and Lucky Strike cigarettes disappointed investors when it opted against a fresh buyback programme last year to focus on reducing debt and investing in new products.

As a result, it has come under pressure to reduce its roughly 29% stake in ITC, an Indian consumer goods giant that makes a large portion of its revenue from cigarettes but also operates hotels, a paper business and more.

Such a stake sale would allow it to pay down debt and move faster towards the leverage range at which it could resume buybacks. BAT's results statement said it was "actively working" to find a way to do so.

"There is space for us to reduce our shareholding," Chief Executive Tadeu Marroco told investors, adding that the process was very complicated and it was difficult to say when exactly a stake sale might be possible.

He added that the company wanted to retain a level of influence at ITC and that a 25% stake was required for veto rights.

BAT's comments mark the strongest signal yet that the company could dispose of some of its stake.

Chris Beckett, head of equity research at Quilter Cheviot, said that as well as the ITC commentary, the market was also relieved that BAT's dividend, up 2% on last year, remained intact after some concerns it could be cut.

The stock had been "unloved" following the loss of the buyback, he said, adding: "Getting to a buyback would be a good thing".

The shares remained 6.4% higher at 1415 GMT.

High dividends and share buybacks are a key element of the investment case in highly cash-generative tobacco companies.

BAT also reported a 5.2% rise in adjusted diluted earnings per share on Thursday, slightly beating analyst expectations.

Rival Philip Morris International, in contrast, missed analyst expectations for fourth quarter profit and forecasts for 2024 on Thursday.