ITC stock fails to match peers, management worries

NEW DELHI: One of the biggest conglomerates in India is worried that its share price isn’t going up. ITC (India Tobacco Company) stock has almost stagnated on the exchanges even as stocks of competing firms and benchmark indices are enjoying a bull run.

For example, ITC shares are up by just 3.67% in the last one year while BSE Sensex and NSE Nifty50 have grown by 43% and 45%, respectively. Other FMCG giants such as Unilever (8.88%), Dabur (15.87%), Godrej Consumer Products (39.66%) and Emami (71.10%) have seen their stocks growing at a much faster pace than ITC in the last one year. Even competing tobacco firm Godfrey Phillips India shares have given a better return of 6.25% in the last one year.

This has gotten the top management of the over 110-year-old company worried. ITC chairman Sanjiv Puri on Wednesday admitted the company’s board is concerned about the company’s share price not appreciating despite payout of more than Rs 50,000 crore as dividend in the past five years.

So, what is holding back ITC Shares? Market experts attributed stagnant financial, ESG concern and exposure to Covid-19 businesses as primary reasons that has kept ITC share prices range bound. “We can observe that the company’s sales have not been growing drastically but the company has seen the rise in the expenses which has impacted the bottom line as well as the margins for the company in the recent past.

Total liabilities have also seen a rise despite of the stagnant sales and profit figures. The advantage that company has is its low debt,” said Gaurav Garg, Head of Research at CapitalVia Global Research Limited.

In the last 3 years, ITC’s revenue has grown at a CAGR of just 4.7% while net profit grew by 5.3%, which according to experts are considered as “stagnant”. As more and more investors and funds focus on sustainable business model, experts attribute ITC’s high exposure to cigarette business a key reason for stagnant performance of its share price.