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


From the above article, hope this is indeed true.

Stability in taxes and stringent action by the government on illicit and smuggled cigarettes helped expand the size of the duty-paid cigarette market. There was no steep increase in taxes on cigarettes since July 2017. The government increased taxes in the latest budget, but the net impact of it is less than 1%.

ITC Ltd - which accounts for three out of every four cigarettes sold legally and is a proxy for the category - said in February that the stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, continued to enable volume recovery for the legal cigarette industry from illicit trade. This has led to higher demand for Indian tobacco and bolstering revenue to the exchequer from the sector, the company had said.

I wish this is permanent and not a temporary respite, as they are more or less the bread and butter of the company, which no one has any complaints about, unlike the FMCG vertical.


ITC has been pushing the Infotech business strongly at a time when IT spending is being cut.






ITC plans Rs 3,000 crore yearly growth push link

ITC Ltd chairman and managing director Sanjiv Puri said the company will accelerate investments, which had slowed during the pandemic, with a corpus of around Rs 3,000 crore annually for the next few years, primarily for building manufacturing capacities and accelerating growth.

He also expects the fast-moving consumer goods FMCG industry to bounce back by volume sales growth from the next fiscal year led by rural demand, with early signs of recovery already visible. He said the revival will be accelerated, with inflation cooling and product prices correcting.

Demerging Hotels Business
“The government has done a remarkable job in controlling inflation and managing macros, compared to what’s happening elsewhere in the world,” Puri told ET in an interview.

The chief of one of the country’s largest conglomerates said ITC’s plans to create an “alternate structure” for the hotel business will be undertaken in the “next couple of quarters,” with the industry’s performance improving in the recent past. This means demerging the hotels business, a plan that had been delayed since the sector was badly hit by Covid.

“While we are pursuing an asset-right strategy for our hotels business,” the focus is more on management contracts. “Investments will continue in expanding our manufacturing footprint for FMCG, paper and paperboards businesses, especially for expansion of sustainable packaging solutions, renovation, upgrade of technology and assets across businesses,” Puri said.

Some of ITC’s investment plans include an integrated consumer goods factory in Odisha, a nicotine derivatives plant for exports in Karnataka, a personal care products facility in West Bengal, a moulded fibre products unit in Madhya Pradesh, and two integrated consumer goods and logistics facilities in Uttar Pradesh and Madhya Pradesh.

ITC, number 2 in hotels after the Tata-owned IHCL, said demand for domestic tourism is strong now, with all segments reporting robust growth. “It is expected that the growth in demand will be ahead of supply growth (of rooms)… Given the industry’s improved performance in recent quarters, it would be reasonable to expect that this (demerger of the hotels business) will be taken forward suitably in the next couple of quarters,” said Puri.

ITC’s hotel business revenue in the December quarter was up by over 50% compared with the same period pre-Covid, while earnings before interest, taxes, depreciation and amortisation (Ebitda) was more than Rs 67 crore.

FMCG on Track
The CMD of the cigarettes-to-cookies conglomerate, which faces the highest exposure to agriculture within the consumer products market in terms of sales as well as sourcing, said green shoots in rural demand are visible but will only be sustainable depending on realisation from the current harvest.

He said rural income has three components — a third each comes from crops, farm labour and non-farm areas.

“As per official data, rural wages have been increasing at a steady rate, which is a positive indicator,” said Puri. “If realisation from crops is good, then two-thirds of the rural income will be positive. The third peg should witness improvement because of the government’s focus on public investments like infrastructure.”

Purchases of daily groceries and essentials rose 2.4% in October-December, halting a five-quarter run of declines in the FMCG segment. The quantity of FMCG bought, or volumes, went up 1.3% in rural markets and 3.6% in cities from a year earlier, when both had fallen, according to data from Kantar Worldpanel.

As inflation softens, benefits will get passed on to consumers, said Puri. For instance, wheat prices have started to reduce due to government interventions. Inflation based on the Consumer Price Index (CPI) eased to 6.44% in February, from 6.52% in January, data released on March 13 showed.

“While the spike in commodity prices has abated, costs remain higher than pre-Covid levels and inflation continues to be a monitorable as it depends on several external factors. It’s partly transitory and partly structural because of several factors, including the impact of climate change,” Puri said.

Shares of ITC have rallied over the past few months and hit an all-time high last month due to the negligible increase in cigarette taxation, recovery of cigarette sales from the illicit and grey market due to stable taxation and prices. Other businesses such as non-cigarette FMCG, hotels, paper and paperboards have performed well. ITC’s market capitalisation has nearly trebled over the past three years, adding Rs 3 lakh crore since March 2020.


ITC Infotech is on a branch opening blitzkrieg. First Brazil, France, Malaysia, Germany and now Mexico.


ITC cigarettes business is hugely affectted by smuggling. Over 7% of branded cigarette in india are smuggled. And the main reason as explained in an earleir article is that MNC cigarette companies have huge capacity which is slowing and india isba big market so when work systematically get goods to free ports like Dubai and Singapore and nearby SA countries like SLK BANG NPL and then have agents summgle these . Huge customs duty evasion is seen.

Once possible step that GOI can do is set up customs duty outpost specifically at these locations . Given the imprived relations on india with these nations i wouls assume its possible .ams only if duty isnpaid upfront should good be allowed to be moved.

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Hello ,

Is there any article to verify the claim of 7% ?

Gudang Garam makes a huge percentage of smuggled cigarettes, I feel ITC should develop its own equivalent flavour.
Trying to make sense in the way Govt operates, and persuade to amend these,
is a herculean task.

If u follow the thread to and earlier date there was that detailed article which explained why the MNC are trying to capture ITC and govt must not sell it’s ITC stake

THERE he explain the amount of smuggling that is going on with MNC support.

Good growth in all segments as expected.

ITC infotech margins affected in line with industry.


Very good interview, their ICML infrastructure is huge and has been built in a very thoughtful manner.

27.06.2023 ET

  • 11 ICML facilities are built for economies of scale and involve high gestation costs
  • The facility shown in the show shipped out 1 lakh tonnes of products last year which can be scaled to 2 lakh tonnes from existing infrastructure. They also have adjacent areas, that one facility can support 3x growth over current built up area
  • These ICML facilities have in-built mandis where farmers come and sell their products directly to ITC
  • All food products are manufactured in an ICML
  • Large part of ICML capex is now over
  • Non-cigarette sales is 66%, EBITDA is 28% and capital employed is 80%

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



cigarette business looks too overvalued???


market share premium, itc has 80% of the market…

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A repeat story. Whether this will happen depends on the agreement between govt of India and BAT. (Major shareholders).

I have held the same view since beginning that a demerger should not happen unless a business segment stands on its legs without support from Tobacco. Lacklustre results post demerger will kill the valuations and erode investor wealth. The asset light model has been implemented only recently and its efficacy is still unknown. Hotels segment results are not competitive with competition like Indian hotels or EIH.

Additionally, ITC has a huge float already. The demerger has to be planned in detail. At the moment, it is more like make hay while the sun shines.

Disclosure: personal views and not a recommendation.


What are the “alternate structures” that they refer to frequently, other than demerger?

A couple of years back price was being used by commentators to justify multiple narratives including ESG, lack of value unlocking etc. At the present juncture, by all appearances there seems to be no pressing need to unlock value. In fact one would think the synergies between hotels and the food business are very strong and need to be maintained.

can you pls elaborate what you mean by above two points…what details in planning do you feel are important for the demerger and also what exactly you mean to refer to with “make hay while the sun shines”… thanks

I think it is highly improbable that they will demerge hotels.
The shareholder-friendly way to go is to spin it off to shareholders; listing a minority stake only fructifies the Holdco/conglomerate discount and doesn’t do much for shareholders.

Once you start doing that (spinoffs - which are great for shareholders) and you open the can of worms, there will be pressure to unwind the entire conglomerate effectively and management will lose control of this mega-cap giant.

This will be great for shareholders, assuming the businesses are at a level of maturity where they don’t depend on tobacco cashflows. However, I don’t think it will happen - they’ve been talking about this for 2 years. If I were to demerge hotels - this is probably the best time to, with EIH and Indian Hotels up > 60% over the last 1Y.