PAYOFF TIME FOR ITC

When Sanjiv Puri took over as Chairman and MD of ITC from Y.C. Deveshwar, his mandate was clear — carry forward the vision of transforming the cigarette com-pany into a diversified consumer-centric conglomerate. ITC’s dependence on cigarettes had begun to dent its stock market performance even during Deveshwar’s tenure. In his 21-year stint as Chairman and CEO, ITC entered many consumer categories, including staples, snacks, bis-cuits and personal care. By the time he hung up his boots, the FMCG business was a sizeable ₹10,500 crore.

Under Puri, the FMCG business is now almost ₹15,000 crore. FY21 has been one of the best years for the non-cigarette FMCG business with EBITDA margins at 9 per cent, up 180 basis points over FY20. “Our segment EBITDA margins have improved by 640 basis points between FY17 and FY20. In FY21, ITC’s FMCG revenue grew 16 per cent on a comparable basis, which is nearly double the industry peer group average and all of that is led by organic growth. Almost 75 per cent of our FMCG portfolio has grown by as much as 20 per cent,” says Puri.

Despite disruptions caused by the pandemic, ITC’s revenue grew 3.3 per cent to ₹53,155.12 crore in FY21. Its profit after tax fell 13.3 per cent to ₹13,389.80 crore but is still 40 per cent higher than rival Hindustan Unilever’s (HUL’s) ₹7,963 crore.

However, none of this has rubbed off on the company’s stock market performance. ITC’s stock was at ₹202 on July 2, 2021, down 16 per cent from ₹245 on June 30, 2016. In contrast, stock prices of HUL and Nestle have sky-rocketed and are at ₹2,475 (₹898 five years ago) and ₹17,698 (₹6,488 five years ago), respectively.

Why isn’t ITC able to win attention of investors? “More than 80-85 per cent EBIT still comes from cigarettes. EBIT margins of cigarettes have gone up. Hence, dependence on cigarettes remains high. Therefore, over-all multiples