ITC Limited

ITC Limited is an Indian conglomerate company headquartered in Kolkata, West Bengal. ITC has a diversified presence across industries such as FMCG, hotels, , packaging, paperboards, specialty papers and agribusiness.

The company has 13 businesses in 5 segments. It exports its products in 90 countries. Its products are available in 6 million retail outlets. Established in 1910 as the Imperial Tobacco Company of India Limited, the company was renamed as the India Tobacco Company Limited in 1970 and later to I.T.C. Limited in 1974.

"ITC Limited" was originally named "Imperial Tobacco Company of India Limited", succeeding W.D. & H.O. Wills on 24 August 1910 as a British-owned company registered in Calcutta.

ITC entered into the hospitality sector with hotel business in 1975 with the acquisition renaming of ITC Welcomgroup Hotel Chola in Madras.

ITC has a weightage of 2.54% on Nifty-50 index.

Shareholding Pattern

Holder's Name No of Shares % Share Holding

No of Shares 12322638181 100%

Promoters 0 0%

Foreign Institutions 1230197373 9.98%

Banks/Mutual Funds 1317323452 10.69%

Others 3927273356 31.87%

General Public 1761425886 14.29%

Financial Institutions 4071916089 33.04%

GDR 14502025 0.12%

FY2023 Q4 and Full Year Results

ITC Ltd on Thursday reported a 22.66 per cent rise in consolidated net profit at Rs 5,225.02 crore in the fourth quarter ended March 2023, led by a strong growth momentum across operating segments.

The company had posted a net profit of Rs 4,259.68 crore a year ago, ITC Ltd said in a regulatory filing.

Its revenue from operations increased 7 per cent to Rs 18,799.18 crore in the period under review against Rs 17,754.02 crore in the year-ago period.

ITC's total expenses increased 2.18 per cent to 12,907.84 crores during the fourth quarter. It was Rs 12,632.29 crore in Q4 FY22.

The total income of ITC in the March quarter grew 7.75 per cent to Rs 19,667.94 crore.

The Kolkata-headquartered company sustained "strong growth momentum" across its operating segments, said ITC in its earning statement.

For the fiscal ended March 2023, ITC's consolidated net profit surged 25.45 per cent to Rs 19,427.68 crore. It had reported a net profit of Rs 15,485.65 crore in the year-ago period.

Its consolidated revenue from operations climbed 17.34 per cent to Rs 75,826.58 crore in FY23.

This is the first time ITC's operational revenue crossed Rs 75,000 crore and its total segment revenue crossed Rs 83,897.14 crore, almost USD 10 billion (without deducting Inter-segment revenue of Rs 8,070.56 crore).

According to ITC, after two years of pandemic-led disruptions, FY2022-23 marked a return to normalcy in operations. However, geopolitical tensions, continued supply chain dislocations and climate crisis resulted in unprecedented inflation and volatility in global commodity and energy prices.

"Against the backdrop of a challenging operating environment as aforestated, the company's consumer centricity, agility in seizing market opportunities, focus on execution excellence and proactive strategic interventions enabled it to post strong performance across all operating segments," it said.

During the quarter, revenue from the "total FMCG" segment, which also includes cigarettes, surged 15.07 per cent to Rs 13,033.43 crore. It was Rs 11,325.63 crore in Q4 FY22.

Its revenue from the cigarette business increased 12.61 per cent to Rs 8,082.26 crore in the January-March quarter of this fiscal. It was Rs 7,177.01 crore in the year-ago period.

The segment witnessed a sustained volume clawback from illicit trade on the back of deterrent actions by enforcement agencies and relative stability in taxes, it added.

The company's revenue from the FMCG-others segment also rose 19.34 per cent to Rs 4,951.17 crore against Rs 4,148.62 crore.

ITC's FMCG-others segment consists of branded packaged foods, such as staples, snacks, meals, dairy and beverages, apparel, education and stationery products, personal care products, safety matches and incense sticks.

"Staples, Biscuits, Snacks, Noodles, Dairy, Beverages, Soaps, Fragrances, Agarbatti drive growth," ITC said, adding education and stationery products business continues to witness strong traction.

Moreover, FMCG-others segment EBITDA in the March quarter grew 76 per cent, led by margin expansion driven by premiumisation, judicious pricing actions, digital initiatives, strategic cost management, supply chain agility and fiscal incentives (including PLI), it said.

Revenue from ITC's hotel segment jumped nearly two-fold to Rs 808.72 crore from Rs 407.42 crore in Q4 FY22.

Terming hotels business as "stellar", ITC said its RevPAR (Revenue per available room) was well ahead of pre-pandemic levels.

However, ITC's agribusiness revenue declined 17.55 per cent to Rs 3,607.30 crore as it was impacted by restrictions on wheat and rice exports. It was Rs 4,375.42 crore in the October-December quarter of the preceding fiscal.

ITC's revenue from the "paperboards, paper and packaging' segment was Rs 2,221.01 crore, up 1.75 per cent from Rs 2,182.77 crore earlier. This also had the impact of the planned shutdown of pulp mills for capacity expansion.

"Softening of pulp prices, muted demand mainly in global markets and relatively higher base impacted YoY Segment Revenue growth," it said.

Revenue from other segments, which include its information technology services, branded residences etc, surged 31.88 per cent to Rs 868.29 crore against Rs 658.35 crore in Q4 FY22.

Meanwhile, in a separate filing, ITC said its board in a meeting held on Thursday recommended a final dividend of Rs 6.75 and a special dividend of Rs 2.75 per ordinary share of Re 1 each for the financial year ended March 31, 2023. Together with the interim dividend of Rs 6 per ordinary share declared by the board would be Rs 15.50.

Besides, the board has also approved the appointment of Alka Marezban Bharucha as an Independent Director and Hemant Malik as a Wholetime Director for five and three years, respectively.

Shares of ITC Ltd on Thursday settled at Rs 419 on BSE, down 2.02 per cent from the previous close.

Brokerage Outlook

Nirmal bang Institutional Equities, Brokerage believe that cigarette volume (calculated) would have grown by in low teens (est. ~8% cig. volume growth), leading to revenue growth of 13.6% YoY on a low base of 3.5% YoY growth (3QFY22 sales were up 8.4% over 3QFY20).

At the current market price, ITC now trades at 17.4x/15.7x FY23E/FY24E EPS and continues to offer decent low-risk upside on a one-year basis. Brokerage, Nirmal bang Institutional Equities thus maintain our Buy rating with an unchanged target price of Rs285, valuing ITC at a multiple of ~20x on Sept’23E EPS.

Sustainability as a driving force for ITC

To ensure a positive environmental footprint, we adopted a low-carbon growth strategy which focused on enhanced use of renewable energy sources as well as reduction in specific energy consumption.

Efforts to reduce specific water consumption at our units and augment rainwater harvesting activities contributed to the imperative need to ensure water security.

All ITC's goal is to achieve the greenest and safest operations across all its operations.