ITC has discontinued ESOP policies and has given a one time hike to employees around 1 year back. This was done to pressures created by BAT
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This is so normal with companies that provides ESOP to its employees… check HDFC also. you will see frequent insider trading… Its because all employees sell/redeem their shares for their personal needs. One shouldn’t read too much into it.
Just for sake of completion I attach the HDFC insider trading
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Totally agree - these guys are managers, not owners…or to put in a different way they don’t have owners mentality…
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Hi Ashwani,Could you let us know source of this info ?
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Being evolved as a well established diversified conglomerate , ITC seems to offer a lot as a potential stock investment. With the credential as a notable dividend player with stronger balance sheet metrics, it has sustained greater financial health over the years. This was primarily due to its ability to churn its resources to good effect to yield optimized operating performance and to generate positive free cash flow over the years on a sustained basis :
A strong distribution channel and better rural penetration across the country coupled with well thought of diversification strategy has helped ITC in reducing its debt to near zero and also to produce improved operating cash levels in sync with the net income over the years as seen in the following chart :
Apart from the free cash accumulated over the years, ITC has generated healthy returns from its investment portfolio as well. This substantial amount of cash & liquid investments will thus play a key role in the company’s strategy towards exploring inorganic growth opportunities wherein inquiries received from market participants are suitably evaluated. This should, therefore, help in laying the foundation for significant scale-up in the non-cigarettes business in the coming years.
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Sit back, relax, and enjoy this deep dive on ITC.
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A brief presentation of all the concerns about ITC over the years, a good quick read to clear all the myths prevailing and get more clarity about it.
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A new commercial launced by ITC on social media, showing availability of their products and advertising itcstore.in
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Good detailed analysis, but one simple question If BAT is so keen to acquire ITC why wait till the Govt disinvestment what prevents it from buying at present value prices
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Here is what is preventing BAT from increasing its stake in ITC…
“BAT is unable to increase its stake in ITC as a result of restrictions on non-Indian companies purchasing further shares in Indian tobacco companies. India closed its doors on new foreign direct investment in cigarettes in 2013. The ban applied to new proposals and existing equity stakes held by overseas companies.”
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There are news reports in today’s ET that government plans to sell its entire stake in ITC to raise funds. How will it impact the stock in long term with respect to majority stake being with public as BTC cannot buy further stake.
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On one hand you will have the overhang of the stake sale removed,that is the bull case.
On the other side the Government which is facing huge revenue shortfall could increase taxes further on cigarettes.
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Sooner or later that had to happen. While there will be knee-jerk reactions in short to medium term by bewildered analysts…I see it as a no event in long term. In short, although a big event to watch out but in essence a no event for business. This is purely my interpretation and not any suggestion. Thanks
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The government is seeking to raise around to Rs 22,000 crore by selling its entire stake in ITC and Axis Bank… Given the current timeline, the government is hoping to complete the transaction by the end of this week or early next week… The transaction will be done through a bulk deal on the Indian bourses… The government held stakes through Specified Undertaking of the Unit Trust of India (SUUTI), which owns 7.94% in ITC and 4.69% in Axis Bank, as on March 31, 2020. Sources said that the various mutual funds and LIC are expected to participate in the proposed share sale.
So, LIC’s stake is expected to increase which may make them similar % stakeholder as BTC.
@Parag_Marar
Appreciate your view point. However, can you please be more elaborate on point of overcrowded? In my limited understanding, when I compare ITC to other FMCG as well as other Cigarette companies, majority of them are trading higher than median (rather at new life high level) Price earning Price bookvalue (PE/PB) ratios while ITC is at lowest decadal PE/PB levels. Just wondering how with such lowest valauation parameter ITC become an overcrowded trade? There is possibility that market see major decline in earning or selling pressure for LIC/SUTTI. While first concern is real issue, second has limited effect on long term performance. Also, despite being FMCG and other business growth driver, core of ITC earning is cigarettes sales which is among the best inelastic products in listed space.
Discl: Added position in ITC yesterday and my view may be biased. Neither a sebi registered advisor and nor recommending any share. ITC and VST industries now account for 10% of my equity portfolio
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Adding on the positive side is the direct-to-consumer selling that the company has started for its FMCG business. This is going to aid FMCG margins in the long run and will help Branded FMCG players compete effectively with small competitors.
Any idea, why ITC announced distributing more than 80% of its profits as dividends? What is the thinking behind that decision?
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I thought, it might be because, they feel the growth has plateaued and that they would distribute dividends so that the stock price is attractive. May be some people need to exit.