ITC today announced a 1:2 bonus (one share for every two held) and split its stock to face value of Re 1 from Rs 10. The board, which met here today, also decided to increase the authorised share capital of the tobacco-to-hotels major to Rs 500 crore from Rs 300 crore. The market was expecting the bonus and stock split and prices were already on a high in anticipation. So the announcements did not kick off a major rally, instead the scrip fell by Rs 3.10 or 0.20 per cent on the National Stock Exchange. Around 8,58,540 ITC shares were traded on the bourse today.

This is the sixth bonus issue from the company, the last being in 1994 when one share was issued for each held. The proposals will come up for shareholders' approval at the annual general meeting on July 9.

The announcements were in line with market expectations. "We were hoping for a 1:2 bonus," brokers said. "The ITC story is strong. We expect a good growth going forward, even in areas like textiles and food, which have been laggards so far," they added. The stock split will increase trading volume on the bourses, as the shares will now be more affordable to retail investors. The ITC counter has witnessed strong buying of late.

Over the past two months, the share has steadily risen from Rs 1,300 to around Rs 1550, backed by the good news on the excise litigation front. After a protracted legal battle, the Centre had dropped the Rs 453-crore tax claim on ITC, while the company agreed not to claim the Rs 350 crore it had already deposited with the government. During the last fiscal, the company posted good numbers with a 17.6 per cent rise in net sales turnover and a 15.3 per cent increase in net profit (before exceptional item).

The expanded equity base will also help the company raise debt to fund its ambitious expansion plan. The company has decided to pump in Rs 14,000 crore across all business segments over a period of five years. ITC is present in the FMCG segment (tobacco and others), hotels, paperboards, paper and packaging and agri business. The investment plan is aggressive given ITC's capital expenditure, which was Rs 3,000 crore in the last five years.

The investment will help position each of the businesses in the ITC portfolio as a leader in its respective market. ITC will look at both organic growth and strategic investments, including acquisitions, in India and abroad. Most of the investment will be used to upgrade technology in the tobacco business and create production facilities for the food and garments businesses.