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

Q3FY23 business has mutiple slides. However, for me enclosed slide is key highlight. FMCG other business recorded largest ever EBITDA and also EBITDA margin touching double digit in current quarters. Since all segments are done well during current times, I would expect henceforth growth rate in sales to slow down in FY24. I wish I am wrong.

Disclosure: Same as previous post.


Hi @dd1474,
Yes FMCG margin inching toward double digit is big positive. Do you think margin will continue to expand given expectation of cooling off in commodity prices, hence sales growth may slow down but profitably may not?

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Hey, noob question regarding the article about center’s (unlikely) stake sale in ITC.
I want to understand more about how a centre or any large DII (like LIC) selling stake in any company is linked to its share price movement? Also is this movement short term or long term?

  1. Govt or big institution don’t day trade - that many shares are as good as not trading - the remaining shares will find an equilibrium with demand.
  2. They have to go for OFS route, where they have to offer at a discount to current market price.
  3. Once sold, this increased supply of shares will be more than the current demand for this stock driving down the price.


While it would be very difficult to predict how sales and margin would behave in short to medium term, in long term, the trend appears to be improving in EBITDA margin of FMCG other business. Also, the benefit of operating leverage which was on small scale would also now come in play with increasing penetration and premiumisation. In my working on Dabur, I prepared a chart of Distribution reach and NPM% for Dabur. It is very simplistic working and also may not be absolutely correct observation, but the trend appear reasonably clear to me. Enclosing chart as well as link for Dabur threads:

My apology for not being able to provide a precise answer, but I do not have same.

Discl: Same as previous thread.


Given that ITC has hit ATH this week,
Gov considering to offload part of its ITC holding of approx 8% in SUUTI by this fiscal (FY23). Last time, it has sold 2% of holding back in FY17.



Dear Members

Any opinion/thought about the above analysis.

Thank you

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Most of issue about misallocation of capital are already convered on thread. While author is correct about past misallocation, what market would be concerned is not about past mis allocation but future misallocation of capital. When Dividend payout ratio since FY2020 is more than 90%, the management is now left with 10% of net profit at their disposal. Please note that during FY11-FY19 period, dividend payout ratio was 59-60%, so almost 40% of annual profit available to management to be utilised.

In Para, there is comparsion of ITC with Indiabulls/ GE/Enron. Seriously, the company which has consistently paid dividend with growth for last 50 years, increasing from Rs 140 during FY1971 as dividend to Rs 2.38 Lakh (for same invested amout) in FY2019 considered with companies which hardly had any free cashflow !!! Also, there is conflict in the discussion, on one side their complaint that management is not utlising free cashflow properply and misallocating capital and other side, same business is considerd with non-cashflow generating businesses. In language of JagatGuru Shankracharya, “Brahm Satya, Jagat Mytha”, if need to be adapted in stock market, I would adventure to say, “Dividend Satya, Price Mytha” Comparison with GE need to seen in context of free cashflow generation by GE group. With GE Capital being a growth engine, there was virtually no free cashflow in GE book during Jack Welch. Further, the accounting polciies of GE was also world class in manipulation with assumption. Luckily in case of ITC, it also had a finance subsidiary by name ITC Class finance, which got closed in late 1990s/early 2000 lossing small amount in today’s context.

On point of ITC Giving 10 hours of investor presentation, author does missed to mention that ITC AGM also last 2-3 hours where at least 60-70 members do ask management question. While I completely agree with view that there is scope for improvement in corporate governance, but we also need to consider the price.

Further, one more point to consider is profitability of Other FMCG business over the years. It is true, that Pivot brands of ITC like Ashirward is lower margin as compared with other established players, The operating leverage is also appearing playing out in ITC Other FMCG business, with current EBITDA margin touching 10% in Q3FY23 as against loss making in FY2013. So it is not only hope in my view.

I belive most of investors know that profitability of Cigarette is much higher and same being utilised to develop businesses like Other FMCG which would be superior due to health related issue of Cigarette.

Also, I find it simpler to look at capital employed change and get change in allocation of capital then to look only at assets without liablities. Find enclosed segmentwise capital employed details:

Further, above change in capital employed also after 60% Dividend payout. I could not understand not look at only Capital employed and only assets (without considering liabilties which also fund assets) and calculating the figure. The better prespective woule to calculate Capital employed change. Further, one also need to look into Capital employed since FY2019 to FY2022, maximum growth in Other FMCG business with Rs 3,000 Cr being additional capital employed while no major change in other business.

While concerns are valid and known, one also need to take in account price, dividend and management efforts in last 3 years to increase dividend payout. this is my view and it may be completely wrong.

Disclosure: Among top 2 Holding, MY view may be positively biased. Not a SEBI registered advisor, Not suggesting any investment action. I may change my investment position without informing VP forum. I have great track record of being wrong in past


There are no absolutes in the stock market. I have learnt this lesson multiple times in multiple ways :slight_smile:

So painting ITC as an absolute disaster is wrong. At some price, it becomes a great stock, at some price it becomes a bad investment. I think the dividend angle mentioned above is real. I bought a huge chunk of ITC around 200 and have part exited around 380 levels and will continue to hold the rest forever as it’s a great investment at this price point.

As a part-time investor, my mantra for investing has always been “bad times make a good investment”, it is better to buy headline companies like ITC (or other nifty stocks) when they are hopelessly down rather than try to break your head over analyzing a vast conglomerate and ascribe a ‘correct’ price to it.

Disc: long since lower levels, significant part of my portfolio.


Beauty lies in the eye of beholder…

Most stocks have fans and haters . ITC is fortunate to have both in large nos … That helps balanced investor to steady their views …

ITC is great stock to own at < 16 PE level as it has some very solid time tested cash generating business which will keep dividend flowing …Also unlike its peers it owns many of manufacturing / logistic and employee housing assets … that will make it more inflation proof versus peers

But then ITC also has lot of business which have

  1. Regulatory risk like tobacco ( tax / business risk) , agri business ( stock limits and export ban etc can overnight impact revenues )
  2. Cyclical business like Paper and Hotels

So when PE is high , these Risk can hurt a lot if they manifest …


Agree with your points, just curious was PE high for ITC before? I mean its current PE is around 26. Was it higher than 30 ever before? What has been its low and high range over very long term? Thanks

Regarding ITC, what I have observed that market has been very very efficient in valuing this company based on macros as well as performance of its each business unit.

For Cigarettes division, the scope for tax increase always remain as India is still below recommended WHO limit of 75% tax. India is somewhere near 57%, if I am not wrong.

For FMCG, even Adani is low margin FMCG company and is in existence since many years - since Jan 1999. Tatas also used to be low margin and still lower than top notch FMCG players. Tata Consumer has been constantly increasing margins. This gap is an interesting gap to be filled. Same opportunity lies in ITC imo. Efforts seem to be in right direction. Inflation eats margin and their investments proved that inflation did not reduce the already lower margins even further. This is a positive and increases my conviction on long term performance of this division.

Hotels - Again Tatas are hugely positive on their Hotels business. I was listening to someone from Royal Orchid management (ex IIM A) and he was hugely positive for hotels for next 2-3 years. ITC not being in rush to sell/demerge it in bottom of 2020 inspite of tremendous pressure from investor community etc. again increases my conviction on this division.

Agri - I dont know much about this piece. Someone explained echoupal beutifully in this thread earlier and I think they are good at this division.

IT - Again a piece not know much details or progress on. Can be a dark horse piece going forward.

Even L&T has no owners. They gave a new life to their group via technology. LTIMindtree today is among top 5 tech firm in India. LTTS is niche tech.

Not sure about future of ITC and its each division but have seen only but positive developments since last 2-3 years I have been tracking and owning its shares.

Would be great to know the magnitude of Tax risks & Agri policy risks going ahead as I think that is a real threat to valuations than anything else at the moment.

Disc: Invested & highly biased. Tata Consumer & ITC are my top 2 holdings. Holding both from much lower levels. Not a buy/Sell recommendation and not eligible for any advice. I can be completely wrong in all my assessments.


Sharing some past valuations compiled from different sources. Valuations on PE have varied between 12x to 85x (achieved during 1992 bull market). Since 2000, it has been topping out around 35-40x PE. Just for context, current multiples are below median PE of last 15 years.

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


Market has been efficient 80% of time - valuing ITC with near term visibility ( this is true for most large Cap stocks ) … 20% of time market might overvalue or undervalue ITC … That is what present opportunities .

ITC is semi mutual fund which widely represent rural , urban consumption sectors . It is a good stock to own inspite of Cig hangover …


For any stock, sometimes opportunities arise from valuation perspective as you mentioned and sometimes inspite of being rightly valued…and that’s because of impending positive changes in business fundamentals because market is not sure about those postive changes, and rightly so…because nothing is sure in business and that is the leap of faith one has to sometime take as an investor, depending on conviction level, inspite of accurate valuations… (For example when ITC was trading at around 150 couple of years back with most of its divisions facing stiff challenges)

On lighter note, if it’s just the valuations then probably statisticians/mathematicians would have been top investors…no doubt valuations based entry and exit can help generate good CAGR/profits every year to show, be content with or for income generation for those dependent on investment based income…but real wealth maybe generated by such leap of faith taken at right opportunity and right allocation…I am yet to take one such myself :slightly_smiling_face:

Disc. Invested and biased. Not a buy/sell recommendation. Not eligible for any advice. Views only for academic purposes and I can be completely wrong in all my assessments


Here’s an update to my earlier SOTP valuation of ITC.

A few important points to note:

  1. I expect that the biggest point of difference that most people would have with the valuation would be regarding the multiple chosen for the FMCG business. I believe the number I’ve used is fair for the reasons mentioned above. But if somebody were to ascribe 6x instead of 5x to it, I wouldn’t crib. Considering this, you may consider the fair price as per this SOTP to vary in the range of 340-360.

  2. This is a purely theoretical exercise done by me to satisfy my intellectual curiosity. Neither is this a recommendation to buy/sell and nor does this determine exactly my buy or sell thesis. I may choose to sell basis long term median valuation numbers or technical indicators and yet find doing this exercise useful, as it helps me get a sense of the ground beneath the lofty heights that markets can sometimes take stocks to.

Special thanks to @harsh.beria93 for giving his feedback and helping me fine tune the numbers. Would appreciate any feedback/views from fellow members.

Disc: Invested and biased.


Hey @nirvana_laha , can you help me in understanding the numbers in “Fair Valuation Multiple”.

To what basis, where these number finalised ?

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The logic for using the fair valuation multiples is given in the immediately next column. For example, the tobacco business is benchmarked to the valuation multiples of large tobacco companies of the world such as British American Tobacco and Phillip Morris. Similarly, the FMCG business has been compared with other listed Indian FMCG businesses and I have found it appropriate, at this stage, to be benchmarked against Tata Consumer’s valuation multiples.