you have not taken into account the dividend yield of the company here. It is slightly above 6 per cent and could be growing at around 5 per cent or so if not more. it is definitely equivalent or more than fixed deposits by major banks in the country.
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Itc was a part of the erstwhile Starwood preffered guest program. Now since spg was bought by Marriott and Itc continues be part of the new Marriott Bonvoy program for more than two years now. Also these itc propeties are listed under Marriott sites as well which is the largest hotel group in the world. May be they are not known as specially itc hotels here but they are well known name specfically the properties in Goa, Delhi, Agra, Chennai, Hyderabad and Kolkata with the international tourists and corporate circles. Now with the current conditions, the hotel industry will underperform for a few years but I don’t think they have to agresssively market themselves in the hotel space
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Has anyone got recent update on ICMLs ? As for as I remember 9 was commissioned and 2 more was near completion. These are crucial for FMCG margin expansion. Total 20 ICML’s were originally planned.
A really interesting opinion piece by BloombergQuint. They propose that ITC should adopt the Chinese model to separately carve out their supply chain platform (which is ITC’s moat) like Pinduoduo.
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Thanks for correcting. I think e-choupal initiative of ITC was innovative and customised for India solution. This helped them build the FMCG business and will possibly put them into a new growth territory with the recently ushered Agri reforms.
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How can this not be a paid article. The meaning is incoherent at various places apart from the intent to demerge. Additionally, it is trying to imply that Mr. YC Deveshwar was a govt stooge.
IMHO, YC Deveshwar was one of the biggest geniuses of the modern Corporate India.
ITC can keep exploring new avenues on the back of Cigarette revenue. Won’t that be investor friendly? Why kill a golden hen and repent with short term benifits.
Finally, no Indian bluechip company is giving 5% dividend. The article is calling 5% dividend as pennies to promote a demerger.
Clearly, the intent here is to detail the train of ITC.
The only part of the article I would agree with is that it’s agri business can be the next big booster after FMCG on the back of revenues from Tobacco business.
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5% div yield being called pennies could be coming from the fact that first - this development is only recent of 80% plus payout, second - if cigarette profits dwindle, it will not take much time for the percentage to come back to 3% and third - when compared to the wealth generated by other FMCG companies or blue chips in last 10-15 years - this is indeed peanuts.
While I agree that article may be with strong focus on demerger - but there has to be a time when all businesses stand on their own and responsible for their own BS and P&L. Imagine if the Hotels were to run as separate unit then many would have been shut down or sold in current downturn and a leaner and cleaner Hotel business would have emerged (not just statements on change of strategy) - which would have been a better evolution - survival of the fittest and not survival of the rich, with perennial source of funds…
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e-choupal was started in 2000. We are 20 years ahead now and other all FMCG companies which do not have this innovation - all are doing better than ITC when it comes to profitability. I see many mention and talk about e-choupal a lot when it comes to ITC. It indeed looks like a great set up and win-win fr farmers and corporates but I would think that most FMCG companies would be following similar strategy of procurement in some other form. Copra procurement of Marico is less talked about but is equally impressive and effective. I am no expert - All I ask and would want to know that in 20 years this innovation has not resulted in meaningful profit margin for ITC by virtue of easy and low cost procurement and partnership - Why is that so? Would be great if someone can provide insights on what I am missing here. Thanks
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ITC Hotels partnership with Marriott Bonvoy cover only the nice and high end hotels which they call “ITC luxury collection” forms about less than 15% of their hotel portfolio. They still have Welcom Hotels, Welcom Heritage Hotels and Fortune Hotels which are low-mid to high-mid tier hotels (aka 1-3 star hotels). They have over 100 hotels and ITC can be called a Hotel chain as much as they can be called FMCG company apart from tobacco company. 
ITC claims they would be asset light going forward and no more capex in hotels but they paid ~Rs 516 Crore to acquire ITC Grand Goa Resort and Spa in 2018-19. Maintenance and opex would be on higher side.
Hotel business, IMHO, is brutal. Much like the airline business and is tough to make money. Please look into the other international hotel chains (Hilton, Marriott, Hyatt, etc.) as well as Indian chains (EIH, IHCL, Lemon Tree, etc.) share price over the past 5-10 years and hardly decent returns. Maybe not even cost of capital returns over long term.
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I’m a huge fan of RAW Pressery products, right from 100% fresh juices to protein shakes, it sells like hot cakes in NCR region at least, despite being a premium offering. I’m sure that’s the case in other major cities too. If this deal does go through, you can add RAW to ITC’s foray into dairy segment bringing milk shakes (in addition to BNatural juices) and well, we’re looking at a very strong line-up of quality beverages.
Ashirwaad was launched after General Mills Pilsbury and HUL’s Annapurna … but Ashirwaad is No1 brand today … why because echoupal helps to protect Raw material integrity and create product level differentiation ( from seed to final product ) … Same concept is extended to Juices , Milk Chain , Potato etc …
Distribution chain or backward integrated supply chain - takes time to build and hence it is called a Moat … Money cannot buy this …
Now this is getting extended to multiple niche Ayurvedic herbs , unique spices and more …
Building brands with access to best raw material at lowest cost possible ( because of less intermediaries ) will always be more sustainable in Food business wherein the RM quality and cost are both very important
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Thanks, agree on success of Ashirwaad atta. Patanjali atta is greatly successful in niche areas where it is available. So distribution is definitely a differentiator when compared to Patanjali but not sourcing when you see the cost of product and quality as well as a consumer. Patanjali was just an example where a company in a short span of time can do excellent sourcing. There are numerous examples. I sometimes feel echoupal is a name good to hear and read and even implement but when it comes to its effect on numbers…it seems overrated…at least in 20 years so far…All FMCG firms have excellent connections with farmers…for that matter even a lays have dedicated potato farmers…just that they don’t have a grand name for it yet like echoupal. Pls note I am no expert and willing to know more about this innovation and want to appreciate it more. Thanks
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I will give you few examples then you will understand what Agri supply chain means
echoupal procures over 2 million tons of wheat every year … No one private players procures even 1/10 of this quantity …
There are over 200 varieties of wheat - What Koltatta likes is different from what Hyderabad or New Delhi likes … ITC creates blends of wheat from these 200 varieties so that each area …
ITC creates Wheat Seed Relevant bank so that MP wheat can be grown in Rajasthan so that if there is crop failure in MP still supply chain is not impacted …
Rest all including Patanjali buys wheat from traders at large market like Delhi, Kota , Indore etc which are Mixed wheat without origin so you cannot create unique Atta blends to cater to different tastes …
ITC is one of largest wheat and now Maida supplier , plus one of largest wheat exporter .
In coffee it supplies coffee to international brands like Lavassa , Nescafe and many more …
Similarly it has large Natural Mango and other fruit juice processing centers many of which are certified have organic certification - for export to Europe - It is also one the largest in India
eChoupal has Potato seed plant and is largest supplier of seed in India and it also export the same - It supplies these seed to even lays for their contract farming …
These supply chain generates very high T/o and profits on standalone basis … Look at Agri business Profits and ROCE
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PPFAS justifications on ITC in their AGM. Watch from 50 min to 1:13 min.
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ITC-only part of the 4-hour long unitholder web meet. Highlights below:
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Comparative analysis with other scrips that went through a stagnation/price depreciation phase despite strong fundamentals
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Focus on buying price and duration held by PPFAS
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Also Covered: Possible Government/SUUTI sellout, tobacco revenue share, FMCG performance, capital allocation errors, other businesses.
“PPFAS does not buy into momentum, we prefer to look at fundamentals. For those chasing momentum, there are now momentum funds, they can buy those” – Mr. Rajeev Thakkar
(Total Duration: 23 minutes)
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Dont read too much into the discounts. Premium Biscuits/ cookie industry generally generate really high gross margins.
The discounting serve two purposes
- Market creation - creating first time buyers, remember these products can create a great first impression and once tasted its highly likely that they try these again and eventually create a regular new set of buyers.
- Grow its existing market share - a 5% additional market share can create a disproportionate impact in the bottom line generated from these products.
Always remember - this company is run by the best of talent available in this country and they know what they are doing better than all of us here put together.
Best regards,
AJ
Disclosure: Invested.
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Reading speech looks like of a federal body with mandate to serve the public and not investor. I feel they are still in British Era. No mention of challenges in Cigarette industry, its higly gloss version of any political party manifesto.
Word profit comes 2 , investor BIG zero, Society 5, FMCG 6, shareholder ( wait for your breath) 3 times.
I liked the point about conglomerate discount and BIG shareholder base (more than 1230 Cr shares).
Yes as Dividend paying company it can be liked but getting capital appreciation will be a long haul unless above factors changes.
Regards
Disc : Invested for quite sometime.
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