ITC Limited is set to boost to its bottom line through an improved export performance. ITC's exports to the USA in 1HFY2000 have grown six times (volume terms) to 720 m cigarettes (120 m cigarettes in 1HFY99).
ITC (FY99 turnover Rs 76 bn) operates in five principal businesses - tobacco and cigarettes, hotels, paper and packaging and international trading. It is the industry leader in its core business of cigarette manufacturing and tobacco leaf procurement (67% market share), processing and exports in India. It is also one of India's largest foreign exchange earners (Rs 6.5 bn in FY99). ITC has a presence in the paper/packaging segment through ITC-Bhadrachalam Paperboards.
A major portion of ITC's exports earnings arise in the US. It is estimated that the company's export earnings from the US will multiply three times over Rs 290 m earned in FY99.
The news should come as a big boost to ITC, which is facing tough times at home. Declining cigarette sales, ban on cigarette smoking in public places and prohibition of cigarette sales on railway platforms have dented the company's performance for much of 1HFY2000. The company has been making significant investments in hotels and packaging segments to spread its risks.
The company is looking to increase export earnings by focusing on Middle East countries. It is planning to increase its production capacity, and to this end has shown interest in setting up facilities in Assam, where it will get a five year tax holiday.
The next few years are likely to see a sea change in ITC's revenue contribution pattern. Exports, hotels and packaging are likely to be the company's thrust areas, keeping the domination of cigarette segment in India intact.
Analysts have rated the stock as a 'BUY' on the back of its dominant position in the tobacco industry in India. Its commitment to its core areas and a strong distribution network has also supported the rating.
ITC Ltd has announced third quarter results of the financial year 2016-2017 (3QFY17). The company has reported 4.7% YoY and 5.7% YoY growth in revenues and net profits respectively. Here is our analysis of the results.
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