CASE STUDY OF ITC

LIMITED
 CASE STUDY OF ITC LIMITED

INTRODUCTION:

of India's foremost private sector companies with a Gross Sales Value of ₹90,104
ITC is one
crores and Net Profit of ₹ 15,058 crores (as on 31.03.2022). ITC has a diversified presence in
FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. ITC's aspiration to
be an exemplar in sustainability practices is manifest in its status as the only company in the
world, of its size and diversity, to be carbon, water and solid waste recycling positive. In addition,
ITC's businesses and value chains create sustainable livelihoods for more than 6 million people, a
majority of whom represent the poorest in rural India.
OUTLINE OF THE CASE:
On February 1, the ITC Limited major cigaratte business got the news tax hike for cigarettes in the
Budget 2023 but still ITC share price reaches all time high. Let's find out what is the reason behind
this situation.
ANALYSIS OF THE CASE:
In the budget week, the ITC share price is trading at the life time high at ₹380, just 3% away from
the ₹400 mark. Let's understand what awkens the sleeping gaint.

Shares of ITC are in focus post-Budget wherein the government announced to hike the National
Calamity Contingent (NCCD) duty on cigarettes after a gap of three years.
The counter had cracked more than 5 per cent as soon as Finance Minister Nirmala Sitharaman on
February 1 announced to hike NCCD duty on cigarettes by 16 per cent. However, it recovered
swiftly to close in green. The scrip has since then advanced more than 10 per cent.

On February 1, the stock hit day's low at Rs 329.10 and reversed loses to close in green at Rs
361.40, gaining 2.57 per cent. On February 2, the stock finished nearly 5 per higher at Rs 378.60
and made a fresh 52-week high of Rs 384.70.
The momentum in the scrip continued on Friday i.e. February 3, ahead of the declaration of Q3
result. The stock finished at Rs 380.70. The Kolkata headquartered company is scheduled to
release its December quarter result today.
Domestic brokerage firm Sharekhan said that the announcement to hike NCCD duty on cigarettes
was marginal at just 2 per cent in the Union Budget 2023. "The recent hike was much lesser than
expected increase in the range of 5-10 per cent," the brokerage firm said in its report, adding that
"there will be no major impact on ITC’s cigarette sales volume".

The NCCD is a part of the total tax levied on cigarettes. The total tax burden is about 52.7 per cent
for cigarettes,. This includes GST, excise duty and NCCD. NCCD is about 10 per cent of the
overall tax.

With the latest hike in NCCD, cigarette companies will have to hike prices by 2-3 percent. The
minimal hike can be easily passed on. Meanwhile, global brokerage firms have tagged Buy rating
on the counter.

ITC shares have yielded a positive return of 15 per cent in 2023 so far. In the past 1 year, the stock
has zoomed a whopping 62 percent.

Q3 Highlights
Profit rises 21% to ₹5,031 crores; Dividend declared at ₹6/share.
Revenue from Operations up 2.3% at ₹16226 crore (YOY)
Cigarette segment revenue rise 16.2% to ₹8085 crore.
Revenue from the remaining FMGC Business rise 18.3% to ₹4848 crore, aided by price hikes.
Hotel Business jumped 49.19% to ₹739 crore as travel demand surged.
Paperboards, Paper, and packaging segment revenue increased 12.6% to ₹2,305 crore.
The only segemnt that lagged during the quarter was the Agri business which saw sales drop
by a sharp 31% YOY to ₹3124 crore. Impacted by Restrictions imposed on Wheat and Rice
Exports.
BUDGET FOR AGRI
Nirmala Sitharaman announced to increase Agriculture credit target by more than 11% in FY24 to
₹20 lakh crore.
This is expected to push Agriculture driven stocks, which includes ITC Shares.
OUTCOME OF THE CASE
ITC LIMITED is well diversifies industry such as FMGC business, Hotel, Agriculture,
Paperworks, etc... As per analyses of the case, The Budget 2023 (NNCD) increase in tax on
Cigarettes of 16% has no big impact on the ITC Limited.