This, as mentioned in the article, is part of treasury investment activity. In fact, its like a trend these days where many cos. which have cash on the balance sheet have invested and created a portfolio of equity stocks rather than ploughing the money back in business or distributing out to shareholders. The large ones seems like running an investment bank on the side
Its all independent judgement where Finance dept\Promoters of these cos. running this sort of investment portfolio shd be considered a factor in ur investment decision.
Personally, I don’t see this as an intent of investing\not investing further in Hotel Business.
According to Senior research analyst of ET NOW @vivekiyer72
ITC IN FOCUS: SOURCES TO ET NOW
ITC cigarette distributors intimated of price hikes
Price hikes said to be in the range of 5-8%
Distributors already received the new shipments yesterday
New Shipments have new printed prices on cigarette brands
“ITC grows frozen snack business three times during Covid”
Read more at:
This is the classic example of creating the market instead of following the trend . Frozen foods market is not so big, ITC started with Prawns , now they are growing in a big way. We have to wait for the results to see
The question really is what will re-rate this stock? or what is stopping the stock from rerating.
Management - no concalls, no accountability, earlier in this thread/on Twitter people have expressed how terrible the AGM was.
All these small things here and there like frozen foods/sanitizer etc etc are too small to move the needle. ITC is a cigarette company. Period. Investors shouldn’t pretend otherwise.
We keep talking about ITC being a FMCG giant, margins have continously improved. Stock for the most part has either gone nowhere or down. Meanwhile other FMCG cos multiples are going up like there’s no limit.
People continously complain about the availability of products.
BAT stake - big question mark - BAT owns 30% of ITC.
As an ITC investor and a BAT investor - I’d prefer ITC starts buying back its stake from BAT, and BAT uses that money to buyback own stock. Win Win for both.
30k cr on Balance Sheet - Capital Misallocation of the highest order. Tobacco is such a stable business for the most part, they should lever up the balance sheet mildly (1-2x EBITDA) like other tobacco companies globally and increase returns to shareholders.
Their ESG credentials are great, but nobody cares. They sell Tobacco. Period.
They pretend like tobacco doesn’t exist - very little/no mention of tobacco in presentations. They should be working with the government to reduce illicit trade, bring in reduced harm products - vaping/heated tobacco/nicotine pouches/snus etc.
VST is buying 5% of shares to issue ESOP to stop losing talent.
Godfrey Philips has a family feud going on.
ITC should be capitalising on this.
And ofcourse, Price drives perception.
Global tobacco derating since 2017, let’s see how that goes.
P.S. All investors ought to look at how many shares the CEO owns, he’s been at ITC for decades btw. no skin in the game.
As far as I understand they don’t publish how the bonus is decided for management - maybe if ROIC and TSR were in the criteria, things would be different.
I could see this in charts of all major tobacco players globally but could not know reasons behind this global in sync behaviour. Are you aware of why suddenly in 2017 world derated these companies despite each country having its own Independent taxation system and business dynamics? Multi Decades long stable journey of global majors, be it US, Europe, UK, Japan, India etc. abruptly ended in 2017…why?
A few reasons.
Most factors are associated with developed markets. But monkey see monkey do, and Indian Tobacco stocks have also derated in sympathy.
In India, the reason is largely the terrible excise regime - it only increases illicit trade and ‘bidi’ consumption. And this has affected volume growth and Govt also loses revenue - but well, it is the government, so smart/thoughtful decision making is rare (if not non-existent)
Bidi is a large manual labour employer, so of course the government has different incentives - damn the long term consequences.
India also has the lowest affordability for cigarettes in the world. By far.
In the Developed Markets:
increases duties (again, nothing new)
Vaping and regulation around that.
Bans on certain flavours - FDA threatened to ban Menthol nearly 1.5-2 yrs ago. Haven’t done anything.
BAT experience from menthol ban in Canada shows, 95% or so of customers just switch.
Man wants his nicotine high, he’ll get it.
Thanks for the insights. What could be the reason for Indian Tobacco manufacturers & the Govt not introducing Vaping / E-Cigs? Is it purely political or is it that their could be third party illegal cartridges which may contain chemicals and other substances that are normally out of control from legal authorities?
In very classic behaviour, the Union Health Ministry issued an ordinance and banned E-cigarettes post the whole news regarding the FDA being strict and the US having a teenage Juul epidemic, without much thinking (as usual)
My bet would be 90% of Indian smokers wouldn’t even have known about such alternative before this ban.
And, as expected, an ill-thought policy decision had adverse impacts.
They should be instead have regulated this to allow incumbent players to introduce reduced harm products in the market. Maybe via ID verifications, limits of number of products sold per ID etc for devices all selling online - so less flows into black market and less underage buying.
Not one shopkeeper will bat an eye or think twice before selling a cigarette or a bidi to a visibly underage person.
The Juul pods sold in UK/Europe have signifcantly less nicotine levels than the ones sold in the US.
So Government can regulate that as well. And they also restrict what flavours can be sold.
So sensible regulation can work.
there was some buzz about ITC announcing a de-merger of some of its entities later this month which may have caused the stock price to make new highs. Personally, I feel a demerger would be very impractical. BAT, which is the biggest stake-holder in ITC after the Indian govt, will simply dump the stock in the demerged entity which does not deal with tobacco. I don’t think ITC management would want to lose control of hotels, paper or the FMCG businesses. From the AGM proceedings I feel that the management would consider some alternative structures like REIT or InvIT to monetize stake in some of its businesses.
The Hotel arm can be the likely candidate for demerger.
Personally, I feel a demerger would be very impractical. BAT, which is the biggest stake-holder in ITC after the Indian govt, will simply dump the stock in the demerged entity
Why would you think -minus BAT in new structure is a losing proposition? One can argue that, given the opportunity, it can attract better suitors than BAT and can be value adding game also. Anyway we will have to wait to see the emerging structure before one can come to any conclusion.
In my opinion, any of suggested restructuring in corporate structure, would required notice as separate business item in agenda of board meeting which shall be informed to stock exchange. Current addition to Board meeting agenda is only to consider interim dividend, hence very unlikely in my opinion that we shall see some major restructuring announcement. Let us wait for formal announcement by management rather than work on assumption, in my opinion.
Can you pls share some reference of this Buzz, I couldn’t find it anywhere. I feel the run up was more to do with untouched taxation in new budget and expectation of improved revenue and margins in FMCG.