ITC is one of India’s foremost private sector companies with a market capitalization of over $30 billion and a turnover of $6 billion. While ITC is an outstanding market leader in its traditional businesses of cigarettes, hotels, paperboards and so on, it is rapidly gaining market share in nascent ventures like packaged food and confectionery and branded Apparel.
Cigarette business resilient despite tax shocks
ITC is a dominant player in the tobacco industry with a market share of 80 %.India cigarettes market volumes is growing at 5% per annum, and is likely to maintain this pace for several years. ITC has taken several initiatives in terms of pack modernization, improvement in smoke profile and introduction of new brands. Severe taxation and regulatory milieu for cigarettes in India are still a cause for concern.
Non-cigarette FMCG business: earnings poised to grow
The surplus cash generated from the cigarette business (after reinvestment) has been deployed in high return businesses for the last five years. ITC has forayed into the packaged food business with the launch of Sunfeast, Bingo and Aashirwad. The company grabbed the market share in a short span of time thanks to strong distribution and brand leveraging.
In personal care, the company is currently present through brands like Vivel, Fiama, Superia and Essenza. Recently, ITC forayed into skin care with the launch of Vivel Active Fair.
Hotel business: presence across segments
The ITC Welcomgroup is the second largest hotel chain in India. ITC Welcomgroup has a presence in the premium, budget and heritage segments, either directly or through subsidiary and joint ventures. The hotel business would gain momentum in the second half of FY11, thanks to greater tourist inflow and strong macro economic conditions.
Agri business: enjoying preeminence
ITC’s agri-business division is the country’s second largest exporter of agri-products worth Rs.1000 crore. Its extensive links with the farmers have enabled ITC to build a highly cost effective procurement system.
Paperboards and packaging: first choice suppliers
The business caters to a wide spectrum of packaging, graphics, communication and speciality paper requirements through its four world-class manufacturing units, six sales offices and a good network of more than 50 dealers in India, and 15 international distributors. ITC continues to delight investors by posting exceptionally strong performance on a year-on-year basis
By Sunil lain, vice-president, equity research, Nirmal Bang Securities
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