NSE Symbol: ITC | BSE Code: 500875
In August 1910 ITC was established, as Imperial Tobacco Company of India Limited. In its initial years, the company concentrated on tobacco products. During this time, the ownership of the company 'Indianised' and as a result, it was renamed as Indian Tobacco Company in 1970 and subsequently to I.T.C. Limited in 1974.
It was in the seventies that the company decided to diversify its business portfolio and pursue other ventures. In 1975 ITC took its first step towards diversification when it purchased a hotel in Chennai. Since that purchase, ITC Hotels has grown to become the second biggest hotel chain in India.
The company entered the Paperboards business in 1979, and in 1990, it established the Agri-Business division with the objective of exporting agricultural commodities. In 2000, ITC transformed its operations into a wholly owned subsidiary known as ITC Infotech India Limited. Over the years, ITC also pursued other avenues like local lifestyle, fast-moving consumer goods, information technology, education and stationery products, all of which have proven to be profitable with a massive room for growth in the future.
I.T.C. Limited, also known as Indian Tobacco Company, is one of the biggest corporations in India that primarily operates in five segments - FMCG, agri-business, Information technology, paperboards & packaging, and lastly, hotels. The vision of the ITC is to become India's most valuable conglomerate, driven by world-class performance. The company currently employs more than 30,000 employees across 60 locations in India. Here are some of the brands of the company to list out, such as Aashirvaad, Sunfeast, Fiama Di Wills, Engage, Vivel, Classmate, PaperKraft, Wills Lifestyle, et cetera.
It is based in Kolkata, West Bengal and considered to be one of the most valuable companies in the country. It has a product portfolio comprising Fast Moving Consumer Goods (FMCG), Paperboard and Specialty Papers, Agri-Business, Packaging, Hotels, and Information Technology.
The total market capitalization of ITC, as of February 2018, is more than Rs.3,27,000 crore.
The company's revenue for the third quarter of Fiscal Year 2018 decreased last year over the same period. As of December 31, 2017, the total income from products and services, is Rs.9,852.74 crore, in contrast to Rs.13,470 crore earned in Q3 FY17. Cigarettes led this fall in the FMCG segment and Agri-Business.
In 2017 Cigarette industry in India came under severe pressure after the implementation of Goods and Service Tax (GST). The regulatory constraints and the sharp hike in cess led to a 9% increase in the price of cigarettes which in turn, impacted cigarette sales volume across India. Being a prominent player in the tobacco industry, ITC was hit severely by this which is clear from the fact that its cigarette sales dropped by almost Rs.4,000 crore between the corresponding quarters.
Similarly, Agri-Business was also thumped but due to other reasons such as the limited trading opportunities, lower export incentives, and the reductions in authorized crop size in Andhra Pradesh.
However, other segments like hotels, paperboards, and FMCG have done well. The growth in the hotel's sector was driven by an increase in room tariffs, food & beverage revenue, and operating margins, while in the case of paper, paperboards and packaging segment, the profits were driven majorly by higher volumes, imported pulp, and advantageous input costs.
In the case of FMCG - Another segment such as packaged food, personal care products, and stationery items, the profits were driven by cost management, improved scalability, and marketing.
Hence, it is clear that despite the loss in sales of cigarettes, the NIFTY 50 company has managed to make a profit by showing a better performance in other segments. The net profit for the third quarter of Fiscal Year 2018 is up by 16.8%, while EBITDA is up by 10.1%. Similarly, gross sales value also moved up by 6.3%.
I.T.C. Limited is a company built on firm foundations. It is fundamentally sound and has made profits regularly over the years, as reported in their previous financial statements. The debt of the company is negligible and has delivered excellent returns on equity over the years. Moreover, ITC is one of the prominent FMCG marketers in India, making it a preferred choice in this category.
ITC is a leading player in the tobacco industry of India. The market share of the ITC is more than 70%, making it a leader in cigarettes market. The recent hike in cess and the subsequent hike in price has put the tobacco industry under pressure. However, due to a never-ending demand for cigarettes in the country, ITC is more than likely to recover from this cess hike and continue to deliver consistent growth in the tobacco segment.
ITC is also focussed on expanding its FMCG portfolio, and with this segment, the company has the vision of Rs.10,000 crore investment in the next 5 to 7 years. Furthermore, ITC Hotels are also continually improving, as seen in the numbers for the last quarter which means that revenue from non-tobacco segments is also increasing, although cigarettes still account for a significant portion of the profit made by the company. Nonetheless, as these segments grow, we may see this proportion of profits alter over the years, in favor of hotel business and FMCG products.
Investing in ITC stocks is a great option, especially if the idea is to stay funded for a long time. Provided that the stock is trading around Rs.270 as of February 2018, the entry price appears to be favorable.