The stock of tobacco major ITC has come down by 9 per cent to Rs1,081 on March 18, 2004 on BSE, from its 52 week high of Rs1,185 on March 8, 2004. But this 10-day aberration apart, the stock had surged 21.6 per cent from a low of Rs974.50 on February 5, 2004. Some analysts believe that investors moving out of Hindustan Lever may have helped the ITC stock in recent times.

ITC : Cigarettes and hotel businesses continue to be the mainstay

By Atul Sathe

The stock of tobacco major ITC (increasingly being projected as a diversified conglomerate) has come down by 9 per cent to Rs1,081 on March 18, 2004, on BSE, from its 52-week high of Rs1,185 on March 8, 2004. But this 10-day aberration apart, the stock has surged 21.6 per cent from a low of Rs974.50 on February 5, 2004.

Moreover, during the last one year, the stock has risen 80 per cent from a 52-week low of Rs.602.20 on March 25, 2003. Some analysts believe that investors moving out of Hindustan Lever may have helped the ITC stock in recent times.

Tobacco business is still considered to be ITC's bread and butter segment, although it has diversified into other sectors like retailing, biscuits, greeting cards, stationery, confectionery, incense sticks, hospitality, paper and agribusiness.

The company has extended its range in cigarettes with new brand launches like Insignia, Wills Silk Cut and Star. The non-core business of ITC is expected to grow further.

The company's corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. It is currently focused on four business groups, viz. FMCG, hotels, paperboards, paper & packaging and agribusiness. It adds that its organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

For the first nine months ended December 2003, ITC registered a 15 per cent growth in the net profit to Rs.1,205 crore on a top line growth of 6 per cent to Rs.4,588 crore. The cigarette business posted an 8 per cent growth in net profit to Rs.1,569 crore on the back of a 4.7 per cent growth in revenue to Rs6,878 crore. Other FMCG businesses registered a topline growth, however there has been a negative growth in the bottomline in this segment.

The company registered an 18 per cent growth in the net profit to Rs.381 crore (Rs 323 crore) during the quarter to December 2003. This was on a topline growth of 11 per cent to Rs 1,623 crore. Most business segments have contributed to the topline and bottomline gwoth except the ones like other FMCG products and agribusiness.

The agribusiness registered a loss during the quarter to the tune of Rs1.18 crore, while non-cigarette FMCG business also entered deeper into red with a loss of Rs 38 crore.

In the paper business, it has been focusing on the paper board segment. In the December 2003 quarter it entered into an agreement with Bilt Industrial Packaging for purchase of its paperboards business consisting the manufacturing facility at Thekkampatty in Coimbatore district, for Rs 233 crore, payable over five years.

In hotels, the December 2003 quarter revenues hit Rs71 crore, a growth of 31 per cent on the same period of the previous year. The profits in this segment also soared by 98 per cent to Rs 11 crore. The hotel industry is doing well with greater occupancy rates and average room rates. This is being seen as a rub-off effect of the general feel-good factor.

In the rural and agribusiness segment, the company is continuously trying out new things. The international business division (IBD) of the company plans to invest in Madhya Pradesh to open rural shopping-cum-information centres. With the demand for organic products on the rise in the export markets, ITC's IBD, which is the largest exporter of rice, coffee, soyameal and frozen shrimps, is entering organic cultivation of spices like turmeric and chillies. It continues to build its IT-backed rural distribution infrastructure in support of its FMCG growth strategy.