All You Need to Know Before Investing in ITC Share

ITC is the largest cigarette company in India and has diversified into multiple businesses over the years. Out of the top 10 cigarette brands in India, 6 belong to the ITC stable.

ITC's multi-business portfolio encompasses a wide range of businesses such Fast Moving Consumer goods comprising foods, personal care, cigarettes and cigars, branded apparels, education & stationary products, incense sticks and safety matches, packaging and agri-business.

The company's diversification drive has been mostly for forward and backward integration that has enhanced the productivity of its entire value chain creating a strong growth engine.

Core Business of ITC

ITC is a diversified conglomerate with businesses spanning fast moving consumer goods, hotels, paperboards and packaging, agri-business, and IT.

The company is the country's leading FMCG firm and the market leader in the Indian paperboard and packaging industry.

In the agri sector, it's acknowledged globally as a pioneer in farmer empowerment through its wide-reaching agri business. In the hotels segment, it's a pre-eminent hotel chain in India.

For years, ITC was planning to gradually shift towards an asset-light model in the hospitality sector for further expansion. It's only post pandemic after the year 2020 that the words have been put to action.

ITC's wholly owned subsidiary, ITC Infotech, is a specialised global digital solutions provider.

Over the last decade, ITC has successfully created an array of strong brands which are either #1 or #2. They are market leaders in their respective categories.

Business Verticals and % of Revenue as of 2024

1. Cigarettes: 37%
2. FMCG: 23%
3. Hotels: 3%
4. Paperboards & Packaging: 11%
5. Agri: 23%

Data Source: Annual Report

Key Personnel

Creating a strong management team is a vital component of running a successful business. A firm is only as good as the individuals who manage it.

Checking management quality entails doing a background check on persons in charge of the business.

ITC has had an efficient and experienced management over the decades. In the last four decades, each of the company's chairmen has been trying to diversify beyond the tobacco business with reasonable degree of success.

The big transition into the FMCG business comprising of foods, personal care, lifestyle and retailing has been credited to its chairman Mr Y.C. Deveshwar. He helped bring the company back on track by divesting the financial services and edible oil businesses and integrating the hotel and paper business segments.

Here are the key personnel of ITC:

• Sanjiv Puri - Chairman & Managing Director

Executive Directors:

• Nakul Anand
• Sumant Bhargavan
• Supratim Dutta (also the CFO)

Non-Executive Directors

• Shilabhadra Banerjee
• Hemant Bhargava
• Peter Rajatilakan Chittaranjan
• Arun Duggal
• Mukesh Gupta
• Shyamal Mukherjee
• Anand Nayak
• Sunil Panray
• Nirupama Rao
• Ajit Kumar Seth
• Meera Shankar
• David Robert Simpson

Subsidiaries

You'll be surprised to know that ITC has almost 80 subsidiaries under its kitty.

Here's the entire list -

Entire List of ITC Subsidiaries

Company Name	% of holdings	Cost (Rs million)
Welcom Hotels Lanka (Pvt) Ltd.	100	12479.9
Russell Credit Ltd.	100	6585.1
ITC Infotech India Ltd.	100	6170.1
Landbase India Ltd.	100	3255.7
Technico Agri Sciences Ltd.	100	1210
ITC IndiVision Ltd.	100	1200
North East Nutrients Pvt Ltd.	76	554.8
Technico Pty Ltd.	100	481.7
Srinivasa Resorts Ltd.	68	185.3
Gold Flake Corporation Ltd.	100	160
Prag Agro Farm Ltd.	100	128.2
Surya Nepal Pvt Ltd.	59	101.5
Pavan Poplar Ltd.	100	59.9
ITC Integrated Business Services Ltd.	100	45
Wimco Ltd.	100	35
Fortune Park Hotels Ltd.	100	4.5
Bay Islands Hotels Ltd.	100	1.2
ITC Fibre Innovations Ltd.	100	0.1
Technico Technologies Inc	100
Technico Horticultural (Kunming) Co. Ltd.	100
Technico Asia Holdings Pty Ltd.	100
MRR Trading & Investment Company Ltd.	100
ITC Infotech Ltd.	100
ITC Infotech GmbH	100
ITC Infotech France SAS	100
ITC Infotech Do Brasil LTDA.	100
ITC Infotech (USA) Inc	100
Indivate Inc	100
Greenacre Holdings Ltd.	100

Data Source: Annual Report

History of ITC

Starting with just cigarettes in 1910, the company has over the years transformed itself into an umbrella group that offers a diversified / varied product mix.

From being a one-product category, ITC's portfolio now spans 20 categories with over 1,500 products.

ITC is one of a handful of enterprises in the world having traversed a 100-year journey and managed to remain contemporary, relevant and competitive.

Today, it is acknowledged as one of India's most valuable business corporations.

Over the years, the company has announced 8 bonus issues and in 2005, the company had split the face value of its shares from Rs 10 to Rs 1.

In recent years, ITC's Achilles' heel has been its cigarettes business, which still contributes around 75% of its earnings before interest and tax.

You see, the management of ITC recognised way early that the company was not well positioned to create long-term value in businesses such as edible oils and financial services. So they exited these businesses.

In the past, investors and analysts often questioned ITC management's capital allocation strategy for its investments in the low-margin FMCG and capital-intensive hotels segments.

In fact, 25-35% of capex every year was allocated to the hotel business. This business is known for its lower return on capital employed (ROCE).

But recently, the company has moved to an asset right model. The management has said it will only complete existing projects and not start any greenfield projects in the cash-guzzling hotels and paper businesses.

As a relatively late entrant to the FMCG industry, ITC made an aggressive entry by challenging incumbents on every single product vertical.

It competed with Hindustan Unilever (HUL) and P&G with their own line of personal care products. The company even introduced its own line of biscuits directly taking on Britannia and Parle-G.

They also took on the noodle's giant, Nestle with their own brand of instant noodles.

Here's an interesting trivia... ITC is among the companies that have stood the test of time and continue to remain part of the Sensex even after all these years.

ITC has been a Sensex component ever since the year 1986.

Corporate Social Responsibility (CSR)

ITC has been an early adopter of CSR initiatives.

• Promoting nutrition and healthcare
• Improve quality of education and Government school infrastructure support
• Protection of Indian classical music
• Promotion of Sports

Market Cap and Shareholding Pattern of ITC

ITC has had multiple phases of negligible returns in the past two decades. But investors who chose to stay put, grew their wealth in the stock 26 times, at a compounded annual rate (CAGR) of 17% during this period.

What is interesting is that the stock of ITC offered multiple value buying and profit booking opportunities from time to time.

The company's marketcap as of February 2024 stands at Rs 5,095 billion.

ITC is interestingly a zero promoter holding company with most of the shareholding (85.3%) underlying with the institutional investors.

To know more, check out the latest shareholding pattern of ITC.

With the absence of a promoter, few investors still remain skeptical about the company sustaining its dividend track record.

However, so far so good. The company has made bigger payouts even with the absence of promoters.

Recommended Videos on ITC

Videos have become one of the most important means of communication. They have changed how we work, share information, and record our memories.

You can't ignore the fact that many people prefer watching videos rather than reading articles.

That is why, our editors at Equitymaster, post regular videos on important topics on our YouTube channel.

Here are some of the videos we have on ITC that are still relevant -

• ITC: Is this the Pause Before Another Bull Run?

• 'ITC-Like Stocks' to Beat Sensex 3x

As an avid reader of Equitymaster, you would be aware of all the content that we put up on the website.

But that isn't the only way to keep track of all that's going on in Equitymaster.

To get the most out of your Equitymaster experience, join our YouTube channel.

More about India's Top FMCG Company

As things stand now, ITC is quite capable of achieving a growth of 15% per annum in earnings over the medium term.

And this combined with the dividend yield of around 3%, puts the stock in a good position to earn more than decent returns for its investors.

Here are links to some very insightful Equitymaster articles on ITC:

• Do the 'ITC's of Your Portfolio Have Upside?
• ITC or Coal India - Which is the Better Dividend Stock?
• Can Zomato Go the ITC Way?
• ITC to Coal India: Are these the Best Dividend Stocks You can Count on?
• The 5 Most Searched Stocks on Equitymaster will Surprise You...
• A Great Time to Buy ITC

Happy investing!