ITC lights it up

even for investors familiar with the Indian market, ITC is nothing short of a pandora’s box. despite being one of the country’s largest conglomerates, it has somehow failed to hold sway over the markets. consider the fact that its stock finished the trading session of February 1, 2020 at Rs 218.5/share and two years later, finished the trading session on January 31, 2022 at Rs 219/share. this, at a time when many others rallied to multiples of their pre-pandemic price on the back of an almost non-stop bull run in 2021. so when ITC registers a gain of 9% in a week, it’s bound to turn heads.

here’s what’s behind the rally.

tax break

well, not so much a break as much as tax on cigarettes and other tobacco products remaining unchanged at 28%. it was widely anticipated that there may be a hike introduced in this year’s budget since there was none in the last. but the fact that cigarette sales are yet to reach pre-pandemic levels and that a hike may even have had a negative impact on poll prospects might have influenced the decision.

stellar report card

cigarette sales contribute to about 40% of ITC’s revenue, still its single largest component, with FMCG accounting for ~27% in the July to September quarter. the results for the subsequent quarter were also largely positive. overall profit and revenue for the quarter grew 12.7% and 32.5% over the corresponding year-ago period, at Rs 4,156 crore and Rs 15,862 crore respectively.

the cigarettes business saw a 13.6% yearly growth in revenue and 14.4% yearly increase in profit. the FMCG segment reported a yearly revenue growth of 9.3% for the quarter aided by the acquisition of spice firm, Sunrise. 

the laggard continues to be ITC’s hotels business which it is aggressively expanding, recently launching the ‘Mementos’ and ‘Storii’ brands. despite registering a Rs 51 crore profit against a Rs 67 crore loss in October to December 2020, ARRs (average room rates) are still below pre-Covid levels.