ITC: "Will"(s) "Gold Flake" assist "Ashirwad" to win "Bingo!"?

I went through 75% of this thread over the weekend (Will finish the remaining 25% by this week hopefully). Really thankful to this community for the depth of research (Especially scuttlebutt) in the thread. I get this feeling over and over when I deep dive into a new thread on ValuePickr :slight_smile:

I did not see a valuation attempt undertaken for ITC in the thread, so here is my attempt at a sum-of-parts SOTP valuation of ITC. Your inputs on the approach taken and suggested improvements would be very useful. I will take those on-board and post a revamped valuation.

Going by this valuation framework, ITC at the moment seems to be overvalued by ~15%. Of course it is clear that FMCG others is grossly undervalued right now because I have valued it basis EV/EBITDA and EBITDA is subdued because ITC is still in heavy investment mode in this segment. If we value FMCG Others as per P/S (According to me this is premature. Let ITC stabilise margins at 15%+ before we take this approach) and assign a P/S multiple of say 8x (Average of top 7-8 FMCG companies in India), then the segment would be valued 2.5x higher than it is valued right now.



Markets always value it for the future and hardly for the current. Having said that @harsh.beria93 did a wonderful write up on this in his portfolio page

Attached SOTP valuations from Ventura below


Yes, my broad conclusion is consistent with yours. Markets are forward looking and the FMCG business is artificially undervalued right now if valued using an EV/EBITDA metric. As operating leverage plays out in the segment, the FMCG EBITDA will stretch its arms and take the entire company valuation much higher.


Recently visited this place. “Coffee by Us” is a Unilever brand. It mostly sells ice creams, shakes, chocolates and sandwiches. One of the few places in Ahmedabad to have kwality walls icecream. ITC has a complete portfolio with

Sunbeam coffee
Yippe noodles
MasterChef instant frozen foods
Fabelle chocolates
Yippee and bingo snacks and
Sunfeast milk products

Such brand outlets can also provide visibility to lesser known ITC food brands.


Why is ITC given political donations every year to both the ruling party and the opposition every year?
Also using ITC Infotech to donate


Not just ITC, many listed companies have donated to both the ruling and opposition parties. These are some of the big names from the links you have given, in top down order. Didn’t check all, didn’t need to. And you can see some big names in both categories.

Ruling party
Cadila Healthcare Limited
Lodha Developers Thane Pvt Ltd, Lodha Constructions
Century Plyboards (India) Ltd
Larsen & Toubro Limited
Mahindra & Mahindra Ltd.
Jkumar Infra Projects Ltd
Capacite Engineering Private Limited
Uflex Ltd
Muthoot Finance Ltd.
Cromption Greaves Ltd
Paradeep Phosphastes
Torrent Pharmaceuticals Ltd.
Torrent Power Ltd.
Bharat Rasayan Ltd
Kalyan Jwellers India
Srf Ltd

Opposition party
Larsen & Toubro Ltd
Mahindra & Mahindra Ltd
Muthoot Finance Ltd
Torrent Power Limited
Ambuja Cement Ltd.
Hindustan Construction Co.Ltd.
Wockhart Ltd
Videocon Industries Ltd
Bharat Forge Limited
Crompton Greaves Ltd.
Adani Enterprises Limited
Torrent Phamaceuticals Ltd
Som Distilleries Pvt Ltd
Nesco Ltd
Zydus Candila Healthcare Ltd
Punj Lloyd Limited
Ballarpur Industries Ltd.
Gayatri Projects Ltd
Kalyani Steels Ltd;
Birla Corporation Ltd
Mahindra Life Space Developers Ltd

So it is a fairly regular practice for companies both listed and unlisted to donate, although I do not know if these donations get mentioned in the financial statements, like CSR or such related work.

And as some of ITC’s fortunes are directly tied up with policies I guess, ITC’s donations are in a way to protect its own interests. ITC donates to ruling and opposition parties, lobbies with the government, and may get something in return, perhaps not always but many times and we cannot know about this unless such lobbying gets reported in the media, or ITC itself discloses of such activity and I don’t remember this.

The donations got increased disproportionately, more than inflation, more than ITC’s stock return at 24% or so over the years, but compared to the size of the company, this is small and the donations to opposition party have been less compared to the ruling party.

So just part of the business, even in the developed countries. And if lobbying were an industry in India like in the US, ITC’s fortunes would have turned long ago.


ITC AGM Key Highlights: FMCG business, new launches, export potential & more


Stupendous Results from ITC for Q123, Also investor presentation here

The most sought after metric - FMCG margins :slight_smile: . Very gradual improvement.



Indeed good quarter for ITC. However FMCG other margin has shrunk to 7.8%, I think it was around 9% in previous quarter and 8% previous year. But still good one considering high inflationary environment. Let’s see how next coming quarters unfold in terms of FMCG other margin.

Disc - Invested.


ITC exits from lifestyle retailing business


Some pointers from the results.

  1. Revenue from agri beat revenue from cigarette in the current qtr.

  2. Net profit from paper is now much higher than agri and FMCG.

  3. FMCG others business is lagging on every parameter. Requires hardwork and concentrated effort. FMCG results have been disappointing.

  4. Hotels have had a good turnaround. Sentiments will change if the profitability rises.

  5. Itc infotech results are in-line with other it cos. The management is looking to divest but I am of the opinion as a shareholder that the divestment should not happen unless ITC Infotech is beating LTI, LTTS, Mphasis and Mindtree on most parameters.


The inclusion of hotel Samrat is not clear. Plus the hotel is to be given on lease for 60years or 99 years without the adjacent land parcel.


Very insightful interview.

  • ITC’s strategy of backward integration has served them well over time and company is doubling down on it through expansion in their MAARs network.
  • ITC plans to spend 3000 cr. on capex annually with 70% going towards FMCG.
  • There might be hit in topline in the future as some topline growth recently has come from large trading opportunities in agri commodities segment which come at very low margins
  • FMCG strategy is to create mega brands and once done, expand through offerings in adjacencies
  • Currently have 6 mega brands (1000 cr.+ annual sales) and hoping to add a couple more brands in this club
  • Currently in discussion with another D2C brand in mother and child space
  • With more stable tax regime on cigarattes in the recent past, should be able to claw back some market share from unorganized players

Disclosure: Invested (position size here, sold shares in last-30 days)


ITC Results


Itc launches Candyman xl chocolate. The pricing and packaging seem to be in direct competition to Cadburys dairymilk. I have seen a lot of dairymilk chocolates being sold at Pan Parlours/ smoking shops. Makes for a good opportunity to exploit cigarette distribution to increase sales for Fantastik XL range.

Commercial for Candyman

Paves way for Fabelle to fight with premium sweets and chocolates.


Interesting news appear in ET about rural focus of ITC FMCG business. I see this as the most critical variable beside Cigarette tax for long term wealth creation of ITC.


ITC seems to be doubling its efforts in the hotels segment rather than bowing to a segment of investors who wanted to demerge hotels business. Although, their strategy to go asset light seems to be paying off.

ITC currently seems to be the second largest Hotel brand in India after Indian hotels (Tata).


I think I did read about their interest in hotels in this thread itself. Perhaps it is true that no matter what, they will not leave this segment, even if it were to bring some losses. And I guess right now, there will not be any backlash considering the CMP. Investors are happy.

Also, even if the management’s actions are seen unfavorable regarding hotels segment, if other segments are growing, and if that growth is reflected in the price, and along with the almost given dividend yield, I guess everything will be fine.


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ITC spices :

I have covered about ITC spices a while ago here.

ITC focuses on sustainable food safe spices. The new factory that was inaugurated recently is a fully backward integrated factory covering from seed to product. Its important to note that ITC is working with the farmers around this region for many years.

About ITC Global Spices processing Unit
Spices : Chilli, Turmeric, Blended organic spices
Area : 6 Acres
Capacity : 20,000 Tonne per annum ( phase I )
production lines : 4 lines ( Tropical spices, seed spices, High VO spices and sterilised products )
certification: BRC, FDA FSMA, FSSC 22000, USFDA Organics, NPOP

When the Phase II is completed it would be 38,000 Tonnes. They are also working on spices competitiveness with farmers using agri full stack application ITC MAARS. WIth such a scale and automation I expect them to be efficient and may bring costs down compared to competitors. There is also a huge scope of export markets.

ITC distribution Network :

I did and scuttlebutt and wrote about increased rack space for ITC products in tier-2, tier-3 cities. Covered here.

with recent article saying that ITC is focussing on the Rural areas, our conviction on improved distribution is validated.

In the last quarter report company has claimed that ‘Fiama’ and ‘Vivel’ has got a good traction.

One of my good friend who works in FMCG says distribution is the King when it comes to selling FMCG. ITC seems to be more aggressive in distribution compared to earlier. They always had good connections due to their cigarette business. But with FMCG they are now more and more visible and gaining shelf space in markets.

This is from the tier-3 rural side. I was quite happy to see Fiama/Vivel got almost same shelf space as Pears.

This also agrees with the claim that they got more traction. I did not see Fiama/Vivel there a year ago.

Overall happy with aggressive efforts and pushing more distribution to reach end retail stores. My observations are mostly from southern part of India. Conclusions may vary depending on your location. So please take my observations with a pinch of salt.

This is not an investment advice. Holding same as of last post. No transactions last 30 days.