ITC is one of the leading, and fast moving consumer goods companies in India. The article speaks about how there are various other successful products and services offered by ITC, besides its cigarette business. The article tries to correct the misconception that ITC is a tobacco company, though most of the profits still come from it.
Earlier known as the Imperial Tobacco Company, the company’s name was later shortened to the acronym ITC. It’s initial turnover came primarily from tobacco products, but due to increasing tax policies of its cigarettes, (high excise duties), the company diversified into offering various other products and services.
Cigarettes contributed to 45 percent of the company’s total turnover for the year 2020-21(Source : ITC annual report). The decline of percentage of the tobacco business has led to an underperformance in its share price compared to the nifty, due to the declining return on capital employed due to low profitability of its other business and services.
ITC Fundamental analysis shows that the high profitability of its cigarette business is offset by low margin businesses like packaging, and capital guzzling businesses like hotels.
The cigarettes had a profit of Rs 12729 crore. Due to this, at Rs 222, ITC share price in online trading quoted at a low price earnings ratio of 16 and the dividend yield is an attractive 4.94 percent.
- ITC has other products and services besides cigarettes
These products and services are as follows:
- Branded packaged goods which had a share of 22 percent in the turnover
- Personal care products, apparels, education and stationery products, safety matches and incense sticks contributed about 5 percent to the turnover.
- Hotel businesses had a share of 3.94 percent.
- Agri businesses, which included wheat, soya, spices, coffee, unmanufactured tobacco, and aqua contributed 12 percent to the sales.
- Paperboard, paper and packaging had a share of 10 percent to the turnover.
Branded packaged Goods
Brands are Aashirwad, Sunfeast, Bingo, B natural, Yippee, Candyman, Fabella, and Sunbean with all the brands having significant market share are among the leading companies in the field.
Personal Care Products
Savlon, Nimyle, Vivel, Fiama, Engage, Charmis, Mangaldeep, Dermanique, and Essena Di wills are the brands.
Education & Stationery products
Classmate and Paperkraft are the products. Classmate is no 1 in notebooks.
These businesses had a profit before tax of Rs 832 crore on a turnover of Rs 14709 crore.
Hotel Business
The company has 107 properties under ITC hotels brand. The business had a loss of Rs 534.91 crore (turnover of Rs 624 crore).
Agri Business
The turnover of agri businesses was Rs 7866 crore, and profit before tax was of Rs 821 crore. Leaf Tobacco, spices, frozen marine products, coffee, and processed fruits form the bulk of this sector.
Paperboard and Packaging
Profit before tax was Rs 1099 crore on a turnover of Rs 4619 crore. This division, besides making boxes for cigarettes, also works with Colgate, Tata Tea and others for their packaging needs and is among India’s leading packaging companies.
- Reducing carbon emissions
The company has made efforts to reduce carbon emissions by using renewable sources of energy with 41 percent use. It is the only company to be 15 years carbon positive, 18 years water positive and 13 years solid waste recycling positive.
- Using environment friendly ways to do business
For their packaging business, a lot of timber is needed to manufacture cartons, electrical insulation papers, writing and printing papers.
To reduce the loss in the forests, ITC has developed a farm plantation program, to support the farmers by providing them with saplings at a low price and also providing technical knowledge with a buyback guarantee.
- Providing digital access to the farmers with e-choubal
The company’s agribusiness division has helped farmers with e-choubal. The quality of agricultural products has improved and there are 6100 e-choubals in 35,000 villages in 10 states. The help to the farmers include demonstration of best farming practices, crop monitoring, and advisory and online farming practices. Also, more crop per drop, lower production costs, and lower wastage were other advantages provided to the farmers.
- The company does not have a promoter
ITC is professionally run and does not have any promoter. There is a significant foreign institution holding and domestic mutual fund holding. The company is debt free and pays a significant amount of its profits as dividend.
Conclusion
ITC is a well known fast moving consumer giant. But a significant portion of its turnover used to come from cigarettes, and most of the profits still come from it. But its other businesses are also growing as the company is diversifying, and the company has made a lot of effort in empowering farmers, and reducing carbon emission.
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