ITC Limited

ITC Ltd
 Buy
Annual Report Analysis ITC Ltd Target Price
20thJuly 2023 Cigarettes, FMCG 540

Another Robust Year; Maintain BUY (CMP as of July 19, 2023)

Summary CMP (Rs) 478
ITC reported healthy performance across all segments despite a challenging operating environment Upside /Downside (%) 13%
characterized by weak consumer demandand unprecedented commodity inflation fueled by geopolitical
High/Low (Rs) 480/293
tensions and supply chain disruptions. However, the companywas able to mitigate the unprecedented
increase in key inputprices through targeted cost management actions across the value chain as well as Market cap (Cr) 596564
premiumization, product mix enrichment, prudent pricing, and fiscal incentives. In addition, the Avg. daily vol. (6m) Shrs. 1,24,02,920
company's overall profitability benefited from stable cigarette volumes. 1246
No. of shares (Cr)
Key Highlights
Shareholding (%)
 Financial Performance:Despite numerous challenges,ITC reported healthy numbers in FY23 with
revenue of Rs 65,273 Cr, registering an impressive growth of ~17% YoY.The company’s Gross Dec-22 Mar-23 Jun-23
Margins improved 290bps YoY at 55.8% despite unprecedented RM inflation. This profitability
growth was led by price hikes, improved product mix, and better sourcing of key raw materials. The Promoter 0.0 0.0 0.0
company’s EBITDA margins, too, remained resilient on account of strong operating leverage and FIIs 43.0 43.4 43.6
cost-efficiency measures undertaken by the company during the year.In absolute terms, the
company’s EBITDA grew by 27% YoY to Rs 23,944Cr.PAT also grew by 24% YoY to Rs18,753Cr MFs / UTI 9.7 9.5 9.2
(with PAT margins of 28.7%).Rural demand remained subdued as high inflation continued to affect Banks / FIs 7.9 7.9 7.9
rural purchasing power. However, with inflation easing off, consumer sentiment is gradually
improving. Others 39.4 39.3 39.3
 Operational review:The company’s cigarette volume in FY23 maintained its strong momentum, at
~17% YoY. Moreover, Discretionary/Out-of-Home categories recorded strong growth surpassing Financial & Valuations
pre-pandemic levels, driven by a progressive improvement in mobility. FMCG EBIT margins
Y/E Mar (RsBn) FY24E FY25E FY26E
reached an all-time high of 7.2%, led by premiumisation, price hikes, supply chain agility, and cost
savings. The hotel segment witnessed notable recovery driven by domestic leisure, wedding,and, Net Sales 72,161 79,127 86,860
business travel. Paperboards, Paper & Packaging segment, too, recorded an impressive revenue EBITDA 27,413 30,475 33,452
and EBITgrowth of 19% and 35% respectively. Contributing factors were the recovery in demand in
Net Profit 21,488 23,919 26,304
most end-use segments, higher realisations, a better product mix and improved exports.The
company’s Agri-Business segment,however, witnessed pressure in H2FY23 on account of the ban EPS (Rs) 17.3 19.2 21.2
on exports of wheat and rice. PER (x) 27.6 24.8 22.6
 Key Competitive Strengths: a)Strong footing of the Cigarettes business with resilient demand; b) EV/EBITDA (x) 20.9 18.7 16.8
Diversified FMCG business with a focus on the core business while addressing the adjacencies; c)
P/BV (x) 8.2 7.5 6.8
Strong distribution reach
 Growth drivers:a) Focus on de-risking the business model by reducing dependence on the core
ROE (%) 29.7 30.3 30.0
cigarette business (affected by regulatory and tax hurdles) while scaling up the FMCG business; b)
ITC’s Hotel business is at an inflexion point with a stable demand outlook; further asset right
strategy will drive overall profitability for Hotel business, c) PLI-linked incentives to help grow Agri ESG Disclosure Score**
business & drive exports; d) High dividend yield and reasonable valuations compared to peers
Score
 Key Strategies moving forward:a) Possible demerger of the Hotel business and asset-right
strategyof the hotel businessto reduce the drag on the margins, b) Expanding cigarettes market Environmental 61.91
share on back of stable cigarette taxation, c) Augmenting distribution network in the FMCG Social 38.81
business coupled with improving margin trend, d) Exploring growth through the M&A route and, f)
Focusing on cost efficiency to protect margins and drive growth Governance 89.86

Outlook & Recommendation Total ESG Score 63.57

We believe the narrative around ITC is getting stronger as all its businesses are on the right track. Sector Average 44.87
Keyattributes of this narrative are – 1) Stable cigarette volume growth led by market share gains and Source: Bloomberg, Scale 0.1-100
new product launches; 2) FMCG business reaching the inflexion point with improving EBIT margins, **Note: This score measures the amount of ESG data a company reports publicly
and does not measure the company's performance on any data point. All scores are
which is being driven by – the ramp-up in the outlet coverage, effective implementation of the
based on 2022 disclosures
localisation strategy, premiumisation, leveraging technology on demand and supply side, and
moderating raw material input cost;3) Strong and stable growth in hotels as travel, wedding, and
Relative performance
corporate activities pick up, moreover recent comment on possible demerger of hotels business will
boost profitability for ITC; 4) Steady and decent performance in paperboard and agribusiness 175
witnessed in FY23. Furthermore, reasonable valuation provides a huge margin of safety compared to
other FMCG and discretionary peers. we recommend a BUY rating on the stock with a revised TP
of Rs540/share, implying an upside potential of 13% from the CMP. 125

Key Risks: a) Regulatory announcements to curb cigarette consumption through tax hikes; b)
RMInflation; prolonged demand recovery. 75

Key Financials (Consolidated) 25

Y/E Mar, Rs Cr FY22 FY23E FY24E FY25E Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22
Net Sales 55,697 67,703 72,655 78,036 ITC BSE Sensex
EBIDTA 18,934 23,141 25,577 27,475
Net Profit 15,058 18,393 20,464 21,998 Source: ACE Equity, Axis Securities

EPS, Rs 12.3 15.0 16.7 17.9

PER, x 28.1 23.0 20.7 19.2 PreeyamTolia
EV/EBIDTA, x 21.5 17.7 15.9 14.7 Research Analyst
email: preeyam.tolia@axissecurities.in
P/BV, x 6.9 6.6 6.2 5.8
ROE, % 24.5 28.5 29.9 30.0 SuhaneeShome
Debt/Equity (%) 0.0 0.0 0.0 0.0 Research Associate
Source: company, Axis Research email: suhanee.shome@axissecurities.in

1
Company Overview
ITC Limited – an Indian conglomerate company headquartered in Kolkata, has a diversified presence across
industries such as Cigarettes, FMCG, Hotels, Packaging &Paperboards, Agri business, andSoftware. The
company is the market leader in the domestic cigarette and PPP segments. The company is also the second-
largest hotel chain by revenue and profitability with a strong room inventory.

FY23 Performance Round-up

The company reported netrevenueof Rs 65,272 Crin FY23, registering an excellent growth of17% YoY.Its
EBITDA increased by 27% YoY to Rs 23,944 Cr and Profit Before Tax stood at Rs 24,677 Cr, up24% YoY. The
company’s Profit After Tax stood at Rs 18,753 Cr, up 24% YoY.Its total dividend for FY23 stood at Rs
15.5/share as against Rs 11/share in the previous year.

 Robust Cigarette Performance: Est. cigarette volume growth stood at ~17% YoY, while cigarette
revenue grew by 20% YoY, primarily led by market share gains from illicit trade, focused market
intervention, and new product launches.

 Resilient FMCG Segment: Despite a subdued demand environment, the company’s FMCG segment
(ex-cigarettes)revenue grew 20% YoY,led by broad-based growth across categories, distribution
expansion, and price hikes.Segmental EBIT for the year grew strong by 49% to Rs 1,374 Cr with
margins being improved 140bps to 7.2% on account of driving premiumisation, price hikes, supply
chain agility and various cost savings initiatives. Segment ROCE stood at 14%, up 400bps YoY.

 Hotels segment achieves 2x YoY revenue growth: The company’s Hotels segment posted a 2x YoY
revenue growth (1.4x from the pre-pandemic level).Its EBIT margins stood at an all-time high of 21%
on account of higher realisation per room on the back of a strong rebound in the tourism industry and
operating leverage benefit.

 Strong growth in Paperboards, Paper & Packaging segments: The Paperboards, Paper &
Packaging segment, too, recorded strong growth of 19% YoY despite a high base of the last year.
This was on account of robust growth across the end-user segment in H1FY23, segment EBIT grew
at 35% YoY. EBIT margins stood at 25.3%, an improvement of 300bps YoY which was led by
strategic investments in areas such as pulp import substitution and proactive capacity augmentation
in the Value Added Paperboards segment. This enabled margin expansion amidst commodity price
escalation.

 Agri Business sees 12% revenue growth: The Agri Businesssaw revenue growth of 12%.
However,restrictions imposed on wheat and rice exports impacted the revenue growth in H2FY23,
however, its EBIT grew 29% YoY on account of higher realisation from leaf tobacco esports and
value-added products.

2
Segmental Performance

FMCG CIGARETTES – (37% of revenue; 76% of EBIT)

Estimated cigar volume growth stood at ~17% YoY, while cigar sales increased 20% YoY, primarily due to market
share gains in illicit trade, targeted market interventions, and new product introductions. Over the years, the entire legal
cigarette industry has struggled with the loss of market share and volume due to the discriminatory and punitive
taxation of cigarettes by the illicit trade. However, stable taxation in recent years has led to a recovery in market share
and volume of illicit trade.

In FY23, ITC introduced several differentiated variants-Classic Connect, Gold Flake Indie Mint, Gold Flake Kings
Mixpod, Classic Alphatec, Gold Flake Smart Mintz, Wills Fab, and Lucky Strike-to improve its product offering and
market position. The company has also increased its presence in airport duty-free outlets.

Exhibit 1: Cigarette volume and EBIT growth on an improving trend

20 17 25.0% 20.6%
15
16.9%
15
10 15.0% 9.1%
5 6.6%
5 5.0% 2.1%
-
(5) (1) -5.0%
(3)
(10)
(15) -15.0%
(14) -14.4%
(20)
FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23

Cigarette volume gr (%) Cigarette EBIT gr (%)

Source: Company, Axis Securities

3
FMCG – OTHERS (25% of Revenue; 6% of EBIT)

Despite a subdued demand environment, the company’s FMCG segment (ex-cigarettes) revenue grew by 20% YoY led
by broad-based growth across categories, distribution expansion, and price hikes. Segmental EBIT for the year
reported a robust growth of 49% to Rs 1,374 Cr and margins improved by 140bps to 7.2% on account of driving
premiumisation, price hikes, supply chain agility, and various cost savings initiatives. Segment ROCE stood at 14%, up
400bps YoY.

 ITC’s FMCG business reached an annual consumer spend of Rs 29,000 Cr.

 During FY23, the FMCG industry witnessed steep inflation and consumption demand remained
subdued, especially in rural markets and for certain discretionary categories in urban markets. Further
adding to the woes, input costs remained elevated which impacted the overall profitability and
margins for the sector.
 However, ITC’s FMCG segment outpaced the market in both urban and rural on account of improved
distribution reach and focused market execution through differentiated and regional offerings.
 The health & Hygiene and personal care portfolio witnessed a moderation in demand on account of a
high base of the last year and a subdued demand environment.
 ITC’s Sixth Sense – The marketing command centre and consumer data hub (AI-powered hyper-
personalised platform – similar to HUL’s WIMI) is being extensively utilised to gain market insights
and consumer behaviour to launch differentiated and regional products. Through this initiative, ITC
launched 90 new products across target markets in FY23.
 In order to scale the FMCG business faster, the company is strategically choosing categories of the
future with low household penetration levels and is launching products through brand extensions.
Recent examples are – Aashirvvad to Dairy, RTE, Salt & Spices, Vermicelli; Sunfeast to Dairy
Beverages and cakes; Bingo to Namkeems; ITC Master Chef to frozen snacks and cooking paste;
Class Mate to writing instruments; Savlon to Sanitisers, Wipes and Disinfectant sprays.
 Businesses continue to expand its exports footprints with a total reach now stands at 60
countries.Moreover, the recent announcement of the PLI scheme provided further filip to export
products across Biscuits & Cakes, Snacks, Dairy and RTE categories.

Branded Packaged Foods

 Encouraged by the GOI initiative to promote millet, ITC has launched a range of millet-based
products, including staple foods, biscuits, and confectionery.

 Staples – (1) Aashirvaad Salt continued to see strong growth in all markets thanks to a differentiated
product offering. the ‘Crystal Salt’ launched in South Korea rose to the No. 2 brand within two years of
its launch. (2) The ‘Sunrise’ brand strengthened its market position in the core market of West Bengal
and expanded its gains in markets in the East and Northeast to consolidate its position as one of the
leading Spices brands in the region. (3) The Biscuits category witnessed strong growth during the
year, driven by robust core portfolio growth, expansion of innovations and NPD – launch of ‘Sunfeast
Supermilk’ and ‘Sunfeast Thin Arrowroot’ in select markets. ITC is the market leader (~26% market
share) in the cream biscuit segment, despite being a late entrant. (4) 'YiPPee!’ witnessed strong
growth during the year, supported by prudent pricing actions and targeted investments in the brand. It
introduced ‘Quik Mealz’ in a differentiated ‘noodles in a bowl’ format. (5) ‘Aashirvaad Svasti’, a dairy
product, is witnessing strong growth and is currently available in Bihar, West Bengal and Jharkhand
markets. (6) ITC's beverage portfolio - B Natural (juices) and Sunfeast and Dark Fantasy (dairy
beverages) - has expanded its presence in the D2C, travel and QSR segments, resulting in strong
growth. (7) Coffee To expand its coffee portfolio, ITC launched Sunfeast Beaten Caffe in powder form
(previously it was only available in ready-to-use paste form). We believe this product can seriously
compete with Nestle and HUL in the overall instant coffee segment.

4
Personal care – The surge in overall CPI inflation and hyperinflation in raw material prices impacted the overall
FMCG sector. However, the company’s focus on driving premiumisation, NPD and agility in mitigating the
commodity pressure had a limited impact.

 Personal wash – (1) ‘Fiama’ registered strong growth led by brand building exercise, increase
distribution reach and growth across channels. Fiama gel bar format witnessed significant market
share gains during the year.(2) In Vivel, The premium ‘VedVidya’ range was launched in three
variants – ‘Nargis & Kumkumadi Oil’, ‘Nagarmotha & Bahumanjari oil’, ‘Chandan & Badamam Oil’.
 Skincare – (1) ‘Dermafique’ introduced an AI-powered smart-skin advisor to provide personalised
skin health analysis and provide a solution suited to unique skin needs. (2) To further strengthen its
presence in the D2C segment, the company acquired a minority stake in ‘Mylo’ – a digital startup
which offers science-based solutions in the mother and baby care segment.
 The company is setting up a state-of-the-art Personal Care and HomeCare products manufacturing
unit in Uluberia, in line with its strategy of building in-house manufacturing capabilities for products
with unique formulations, enhancing supply chain agility and responsiveness and reducing the
distance to market.
 Savlon witnessed a moderation in demand with the waning of the pandemic and high base.

Other Key highlights

 The educational and stationery industry experienced a strong recovery as classes in educational
institutions gradually resumed and demand returned to pre-pandemic levels. On the supply side,
however, the industry had to contend with unprecedented inflationary pressures

 ITC has commissioned a new ICML (Integrated Consumer Goods Manufacturing and Logistics facility)
in Khordha, Odisha. ICMLs are centers located near major demand centers that enable the company to
better respond to the market, deliver fresher goods, and minimize transportation distances, thereby
reducing service costs and streamlining operations. Following the commissioning of the Odisha facility,
ITC has 11 ICML centers across India. Please note that Britannia followed a similar strategy a few
years ago by setting up production facilities close to demand centers. Over the years, this
helped the company improve its margins on a tonnage basis by significantly reducing the cost
per kilometre due to less distance to market and less product breakage (reduction of multiple
touch points).

 Revival in notebooks and stationery segment: industry recorded a strong recovery with the progressive
resumption of physical classes at educational institutions and demand recovering to pre-pandemic
levels. However, on the supply side, the industry had to contend with unprecedented inflationary
pressures

Distribution reach on an expansion spree:

 The E-commerce channel accounts for 10% of overall FMCG sales for the company and it has grown 5x
from pre-pandemic levels

 The company’s total reach is 7 million outlets, while direct reach is ~2.3 million outlets. This was further
strengthened during the year with the addition of new stores and outlets to direct reach. Market
coverage has increased two-fold from pre-epidemic levels.

 To further strengthen its direct reach in rural, the company undertook various market-specific
interventions such as the expansion of its rural stockist's network, up 1.2x YoY and collaborating with
rural-focused eB2B players. Furthermore, it also leveraged its deep connection with rural entrepreneurs
in key geographies to build local connections and carry extensive consumer engagement activities
(similar to HUL’s Shakti Amma initiative) which enhanced the distribution reach of the company in rural
markets.

5
Exhibit 2: FMCG and revenue and EBIT on rising trend

20,000 19,123 8.0 7.2

18,000 5.7 5.8

6.0
15,994
16,000 14,728
4.0 3.3
14,000 12,844 2.5
12,505
2.0 1.4
12,000 11,329

10,000 0.0
FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23

FMCG - others (Rs cr) FMCG - EBIT Margins (%)

Source: Company, Axis Securities

6
Building digital apparatus for the Future

 ITC’s TM&D (Trade Marketing & Distribution) vertical leverage cutting-edge digital technologies to drive
productivity, improve market servicing, draw actionable insights, augment sales force capability and
deepen connections with retailers.

 UNNATI – similar to HUL’s Shikhar app, ITC’s UNNATI is eB2B platform which facilitates sharp and
direct engagement with retailers with superior analytics and personalised recommendations based on
consumer purchase insights.

 TM&D has partnered with ONDC to help small retailers ride the digitization wave.

 ITC e-Shop is a D2C platform operational in more than 24,000 pin codes. In addition, ITC has leveraged
ONDC to develop new customer leads

 Based on insights from various digital platforms, ITC launched 90 new products in target markets and
expanded the distribution reach of several existing products in its portfolio.

Exhibit 3: Building digital assets for the future

Source: Company, Axis Securities

7
HOTELS – (3% of revenue; ~2% of EBIT)

The hotel segment revenue grew 2x on YoY (1.4 times pre-pendemic levels), while EBIT margins reached an all-time
high of 21% due to higher revenue per room and strong operating leverage. This was on account of the strong recovery
in the tourism industry.

Exhibit 4: Hotel revenue and EBIT on an improving trend

542
3,000 600
2,585
2,500 400
140 178 158
2,000 1,837 200
1,665
1,418 -
1,500 1,285

1,000 (200)
628 (183)
(400)
500
(600)
0 (535)
FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23

Hotels - Revenue (Rs cr) Hotels - EBIT (Rs Cr)

Source: Company, Axis Securities

 The global Travel & Tourism industry, which had been severely impacted in the last two years due to the
pandemic, witnessed a strong rebound in FY23.
 ITC opened 12 new properties across various brands in FY23 and currently has 120 properties and
11,500 rooms across ‘ITC Hotels’ in the Luxury segment, ‘Welcomhotel’ in the Premium segment,
‘Fortune’ in the Mid-market to Upscale segment and ‘WelcomHeritage’ in the Leisure & Heritage
segment. Moreover, it launched two new brands in the previous year - ‘Mementos’ in the Luxury
Lifestyle segment and ‘Storii’ in the Premium segment, targeting new-age travellers looking for varied
experiences.
 ITC’s ‘asset-right’ strategy envisages a substantial part of incremental room additions, going forward,
to accrue through management contracts. The business is witnessing growing interest amongst
property owners to partner with its iconic brands, resulting in a healthy generation of leads and a
pipeline of management contracts. The business revenues are likely to scale up rapidly through this
route.

8
Paperboards, Paper &Packaging – (12% Of Revenue; 10% Of EBIT)

 The Paperboards, Paper & Packaging segment also recorded strong growth of 19% YoY due to robust growth in the end-use
segment in H1FY23. The segment's EBIT grew by 35% YoY while EBIT margins were 25.3%.The YoY improvement was led by
investments in areas such as the substitution of pulp imports and proactive capacity expansion in the value-added paperboards
enablingmargin expansion amid the escalation of raw material prices.
 Demand for Paper & Paperboards grew by about 6-7% in FY23, driven by robust growth in most end-use segments. However, it
saw a slowdown in H2FY23, primarily due to inventory adjustments among export customers and a relatively lower offtake by
domestic customers towards the end of the year.
 Key input costs remained high as global pulp prices experienced an unprecedented spike in H1FY23 due to global supply chain
disruptions, geopolitical tensions, adverse weather events, and higher electricity and chemical costs. However, pulp prices
softened in the H2FY23 due to subdued demand in China, recessionary conditions in Europe, and the ongoing normalisation of
the supply chain.
 In FY23, ITC established a wholly-owned subsidiary, ITC Fibre Innovations Limited, to enter the fast-growing premium Moulded
Fibre Products (MFP) space. Construction of a state-of-the-art MFP manufacturing facility in Badiyakhedi, Madhya Pradesh, is
underway.

Exhibit 5: Robust growth across segments

10,000 26.0 25.3

9,081
25.0
24.0
8,000 7,642
23.0 22.2
22.0 21.1 21.4
5,860 6,107
6,000 5,619 21.0
5,250 19.9 19.6
20.0
19.0
4,000 18.0
FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23

Paper Boards & Packaging - Revenue (Rs cr) PB&P - EBIT Margins (%)

Source: Company, Axis Securities

Agri Business – (24% of revenue; 6% of EBIT)

The Agri Business saw revenue growth of 12%, but restrictions on exports of wheat and rice impacted sales growth in
H2FY23. However, EBIT increased 29% YoY on account of higher revenues from exports of tobacco leaf and value-
added products.
 Tobacco – lower Flue Cured Virginia (FCV) from major supply origins such as Brazil provided an opportunity
to enhance share in exports
 Other Agri commodities - The operating environment was rendered challengingduring the year against the
backdrop of severeinflationary headwinds and concerns aboutfood securitythat emerged due to geopolitical
tensions and erraticweather patterns.

ITC Infotech India Limited

Total Income grew by 16.6% to Rs 3,363 Cr YoY. This was driven by the increasing traction in the company's strategic
accounts as well as revenues from the DxP Services line. Profit Before Tax stood at Rs 530 Cr (it was Rs 720 Cr in the
previous year) and Net Profit stood at Rs 405 Cr (previous year: Rs 541 Cr), down 25% owing to costs associated with
the Strategic Partner Agreement with PTC Inc - resource augmentation, steep escalation in manpower costs, and
accelerated investments in capability building in strategic focus areas and infrastructure.

Capex for the next 3 years: As highlighted last year, the company’s annualized Capex per year will be Rs 3,000 Cr
with majority allocation towards FMCG (35-40%), Paperboard (25-30%) and Hotels getting only 10% of the same.

9
Key Competitive Strengths
 The strong footing of the Cigarette business with resilient demand – ITC continues to remain a
market leader in the legal Cigarette industry with a diversified product portfolio. It continues to fortify
the product portfolio through innovation, democratising premiumisation across segments and
enhancing product availability backed by superior on-ground execution. FY23also witnessed
innovative launches.
 Diversified FMCG business with a focus on the core business while addressing the
adjacencies – ITC’s FMCG brands have achieved impressive market standing in a relatively short
period. As per Nielsen, Aashirvaad is No. 1 in Branded atta, Bingo! is No. 1 in the Bridges segment of
Snack Foods (No.2 overall in Snacks & Potato Chips), Sunfeast is No. 1 in the Cream Biscuits
segment, Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in Noodles, Engage is No. 2 in
Deodorants and Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment). Many of these
categoriesare largely characterised by low household penetration levels and/or low per capita
consumption thus offering significant headroom for long-term growth.

 Distribution network - ITC has a reach of 7 Mm outlets. It is also focusing on micro markets through
regional customization. To further strengthen its direct reach in rural, the company undertook various
market-specific interventions such as the expansion of its rural stockists' network, up 1.2x over FY22
and collaborating with rural-focused eB2B players.Furthermore, it also leveraged its deep connection
with rural entrepreneurs in key geographies to build local connect and carry extensive consumer
engagement activities (similar to HUL’s Shakti Amma initiative) which enhanced the distribution reach
of the company in rural markets.

10
Key Growth Drivers

 Cigarettes Volume recovery to sustain – Over the years, discriminatory and punitive taxation on
cigarettes has led the entire legal cigarette industry to grapple with the loss in market share and
volumes from illicit trade. However, stable taxation in the last couple of years has resulted in market
share and volume recovery from the illicit trade. We now expect 4%-5% volume growth over the next
couple of years, led by new product launches and focus on ground execution, coupled with tax
incidence expected to remain benign.

 FMCG margins to scale up due to revival in mobility – We expect FMCG EBIT margins to inch
upto 8-9% going ahead as operating leverage kicks in with demand revival and strong cost-cutting
initiatives. Besides, marginsare likely to improve going forward as the full effect of lower raw material
prices is yet to be reflected.

 Demerger of Hotel business – As per media reports, ITC is looking to finalise the demerging of the
Hotel Business, as the business and tourism industry improved post-pandemic.Furthermore, ITC’s
asset right strategy is leading to lesser stress on the balance sheet of the company which in turn is
leading to better margins and return profile. Demerging of Hotel Business will be led to further value
unlocking which will benefit the shareholder in the longer run.

 ITC Infotech business exhibiting notable potential - ITC’s aggressive expansion in IT business
and impressive growth in this evergreen sector has opened new doors for its business expansion and
could offer a multi-decadal opportunity for growth.

 PLI-linked incentives to help grow Agri business & drive exports – The government’s scheme for
the food processing industrywith an estimated outlay of Rs 10,900 Cr is expected to boost farmer
incomes, investments, and agri exports. In this regard, ITC has made significant investments in food
processing and remains focused on establishing itself as the leading player in the value-added
agriculture and branded packaged foods industries.

11
Research &Development

ITC’s state-of-the-art ITC Life Sciences and Technology Centre (LSTC) in Bengaluru is at the core of driving
science-led product innovation to support and build the company’s portfolio of world-class brands. The LSTC
team comprising over 400 highly-qualified scientists with over 800 patent applications filed have a mandate to
work on future-ready science platforms, design differentiated products to address unique needs, and deliver
superior benefits to Indian consumers.

R&D expenditure – FY23

FY22 FY23 % growth

R&D expenditure - Capital 20 10 -52%

R&D expenditure - Revenue 144 161 12%

Total R&D 164 171 4%

12
Sustainability: ESG score
 Building Climate Resilience - Moving towards a net-zero economy, ITC has been pursuing a low-
carbon growth strategy through extensive decarbonisation programmes across its value chain. These
include increasing the share of renewable energy, continuous reduction of specific energy,
construction of green buildings, greening logistics and optimising ‘distance-to-market’, and promoting
regenerative agriculture practices in agri value chains.

 Decarbonisation - ITC is a pioneer in the Green Building movement, with 38 buildings having
received Platinum certification by USGBC (U.S. Green Building Council)/IGBC (Indian Green Building
Council). In 2020, the best practices on carbon management in hotels resulted in ITC Windsor in
Bengaluru becoming the first hotel in the world to be LEED® Zero Carbon certified. Since then, 11
additional ITC Hotels have been certified as LEED Zero Carbon. Furthermore, Company’s Sankhya
data center in Bengaluru became the first data center in the world to be awarded the LEED Zero
Carbon certification.

 Water Security for All - ITC has implemented an integrated water stewardship programme that
includes both demand-side and supply-side management initiatives. The interventions encompass
water conservation and harvesting initiatives at its Units as well as efforts towards addressing the
water security needs of all stakeholders at the local watershed level. This programme covers over
1.47Mn acres of land, creating a total rainwater harvesting potential which was nearly 3 times the net
water consumed by its operations in FY23.

 Next Generation Agriculture - ITC has commenced implementation of a Super App called ITC-
MAARS or Metamarket for Advanced Agriculture and Rural Services to bring the power of such
cutting-edge digital technologies to farmers, that will progressively empower over 10 Mn farmers. This
is aimed to offer a range of digital hyperlocal services, AI-based personalised advisories, as well as
online marketplaces, which can be delivered by tech companies and private sector platforms with
effective aggregation by FPOs on the ground to take agriculture to the next horizon

13
Risks & Mitigation
 Increasing complexity of operations in the context of a highly diversified business portfolio – The
governance framework of the company enables each business to focus on its operating segments while
harnessing the diversity of the company’s businesses to create unique sources of competitive advantage.

 Heightened competitive intensity –To address this risk, ITC is focusing on a) Purposeful innovation for
impactful business outcomes powered by focused R&D platforms nurtured by LSTC and robust product
development processes at the Business level (b) Continual premiumisation of portfolio with an enhanced
focus on value-added products (c) Multi-channel go-to-market model; focused investments in augmenting
capability in emerging channels such as e-Commerce, Modern Trade, Food Services, On-the-Go among
others

 Attracting and retaining the best talent in a competitive market –The company is building a robust
talent pipeline across responsibility levels through requisite quality in key roles, depth of bench and reliable
succession plans to mitigate this risk.

 Employee relations/disputes impacting operations and productivity – The company ensures wages
based on region-cum industry benchmarks, the competitive context of the business and a reasonable
portion of it aligned to performance

 Climate Change and Sustainability Risks – The company is enabling sustainable management of waste
and operationalise Reduce-Reuse-Recycle waste-management model

 Impact of high taxation and stringent regulations on the legal cigarette industry in India –
Engagement with policymakers for equitable, non-discriminatory, pragmatic, evidence-based regulations
and taxation policies that balance the economic imperatives of the country and tobacco control objectives,
having regard to the unique tobacco consumption pattern in India; highlighting the growing threat of illegal
and smuggled cigarettes.

14
Key Subsidiary Performance Analysis
Particulars FY22 FY23 Change % Comments/Analysis

Revenues

ITC Infotech India Limited 2,316 2,673 NA

15.4%

Surya Nepal Private Limited 2,773 3,152 NA

13.7%

TechnicoAgri Sciences Limited 261 264 NA

1.1%

Net Worth

ITC Infotech India Limited 777 1,426 NA

83.5%

Surya Nepal Private Limited 767 795 NA

3.7%

TechnicoAgri Sciences Limited 103 144 NA

39.8%

PAT/PBT

ITC Infotech India Limited 518 353 NA

-31.8%

Surya Nepal Private Limited 628 680 NA

8.3%

TechnicoAgri Sciences Limited 43 41 NA

-3.8%

Source: Company; Axis Securities

Profitability Analysis

Comments/Analysis
Particulars FY22 FY23 Change %

Sales 55,697 65,273 17.2% Broad-based growth across segments led to strong revenue growth

Better sourcing led to minimal impact on RM cost compared to other FMCG

Raw Materials 26,233 28,880 10.1%
peers
Gross Profits grew with prudent product mix optimization and increased
Gross Profits 29,464 36,393 23.5%
realization of cigarettes

Operating Expenses 11,175 13,219 18.3%

Interest 42 42 -0.5%

EBIT rose on account of improvement in gross profits, improved product

EBIT 17,282 22,282 28.9%
mix,and cost rationalization measures undertaken during the year.

PAT 15,058 18,753 24.5% Strong PAT growth led to better performance across a line item

EPS 12 15 22.2%

Source: Company; Axis Securities

15
 Growth Indicators

Change
Particulars FY22 FY23 Comments/Analysis
%

Revenue 55,697 65,273 17.19% Broad-based growth across segments led to strong revenue growth

EBITDA increased owing to improvement in the Gross Profit and optimal

EBITDA 18,934 23,944 26.46%
product mix.

PAT 15,058 18,680 24.06% Higher due to strong recovery across segments

EPS 12 15 23.01% EPS increased in line with PAT growth

Source: Company; Axis Securities

Margins

Particulars FY22 FY23 Change % Comments/Analysis

GPM 52.9% 55.8% 285 bps Better sourcing and higher realisation led to gross margin expansion

EBITDAM 34.0% 36.7% 269 bps Strong operating leverage led to EBITDA margin expansion

PATM 27.0% 28.7% 170 bps

Source: Company; Axis Securities

Exhibit 6: Revenue back on high double digit growth trend

23.5
70,000 25.0
65,000
20.0
60,000 17.2
10.4 15.0
55,000
50,000 10.0
45,000
5.0
40,000 1.6
(0.1) -
35,000 40,255 44,433 45,136 45,112 55,697 65,273
30,000 (5.0)
FY18 FY19 FY20 FY21 FY22 FY23
Revenue (Rs Crs) % growth

Source: Company, Axis Securities

16
Exhibit 7: EBITDA and EBITDA growth trend – Improved product mix, stable cigaratte volumes, cost savings initiatives

26.5
22.0 30.0
24,000 25.0
22,000 11.4 20.0
20,000 15.0
3.5 10.0
18,000 5.0
16,000 -
14,000 (5.0)
(13.3) (10.0)
12,000 15,541 17,306 17,904 15,522 18,934 23,944 (15.0)
10,000 (20.0)
FY18 FY19 FY20 FY21 FY22 FY23

EBITDA (Rs Crs) % growth

Source: Company, Axis Securities

Exhibit 8: Net Profit & PAT GrowthTrend

20,000 24.5 30.0

21.4
18,000 15.5 20.0
11.1
16,000 10.0

14,000 -

12,000 (13.9) (10.0)

11,223 12,464 15,136 15,058 18,753
10,000 13,032 (20.0)
FY18 FY19 FY20 FY21 FY22 FY23

PAT (Rs Crs) % growth

Source: Company, Axis Securities

Exhibit 9: EPS growth, back to Pre-Covid levels

16 22.5 23.0 30.0

15.3 14.9 20.0
12
10.0
8
-
4
(10.0)
(14.6)
9 10 12 11 12 15
0 (20.0)
FY18 FY19 FY20 FY21 FY22 FY23

EPS (Rs) % growth

Source: Company, Axis Securities

17
Financial Ratios

Particulars FY22 FY23 Change % Comments/Analysis

ROE
24.5% 27.6% 311bps Due to higher PAT accruing from strong operational performance

ROCE
24.2% 28.2% 403bps Due to higher EBIT accruing from strong recovery across business segments

Asset Turn
1.9 2.2 0.15 Asset turn was flattish as the asset base grew

Net Debt/Equity
(0.4) (0.4) - NA

ROA
20.6% 23.9% 330bps Due to higher PAT from strong operational performance

Source: Company; Axis Securities

Key Balance Sheet Takeaways

Particulars FY22 FY23 Change (days) Comments/Analysis

Inventory Days Inventory days declined due to faster turns implying better sales efficiency
66 59 (6)

Trade Receivables No change in Debtor Days

13 13 0

Trade Payables Company paid back suppliers faster due to excess cash available
28 24 (3)

Cash Conversion Cycle Overall CCC decreased by 3 days due to a decrease in inventory days
51 48 (3)

Source: Company; Axis Securities

Exhibit 10: Cash Conversion Cycle

70
65
65 60
60 56
54
55 51
50 48

45
40
35
FY18 FY19 FY20 FY21 FY22 FY23

Cash conversion cycle (days)

Source: Company, Axis Securities

18
Commentary on
 Debt Levels:ITC has negligible debt levels and is a net debt-free company

 Gross Block: Gross block rose by 8% YoY, primarily led by maintenance Capex, investment in FMCG and

Paper board business.

 Capex plans:Annualized Capex per year will be Rs 3,000 Cr with majority allocation towards FMCG (35-

40%), Paperboard (25-30%) and Hotels getting only 10% of the same

 Cash and liquidity position:The company’s liquidity position declined from Rs 231 Cr in FY21 to Rs 185 Cr

in FY22on account of an increase in investing activities.

19
Contingent Liability Analysis

Claims against the Group not acknowledged as debts Rs 945 Cr (FY22 - Rs 947 Cr), including interest on claims,
where applicable, estimated to be Rs 292 Cr (FY22 - Rs 295 Cr), These comprise:

 Excise duty, VAT/sales taxes, GST and other indirect taxes claims disputed by the Group relating to

issues of applicability and classification aggregating Rs 605 Cr (FY22 - Rs 617 Cr), including interest on

claims, where applicable, estimated to be Rs 265 Cr (FY22 - Rs 272 Cr), including share of associates Rs

0.12 Cr (FY22 - Rs 0.12 Cr).

 Local Authority taxes/cess/royalty on property, utilities etc. claims disputed by the Group relating to

issues of applicability and determination aggregating Rs 242 Cr (FY22 - Rs 238 Cr), including interest on

claims, where applicable, estimated to be Rs 15 Cr (FY22- Rs 11 Cr) including share of associates Rs 0.03

Cr (FY22 - Rs 0.03 Cr).

 Third-party claims arising from disputes relating to contracts aggregating Rs 32Cr (FY22 - Rs 29Cr),

including interest on claims, where applicable, estimated to be Rs 0.17 Cr (FY22 - Rs 0.10 Cr).

 Other matters aggregating Rs 67Cr (FY22 - Rs 63Cr), including interest on other matters, where applicable,

are estimated to be Rs 11.96 Cr (FY22 - Rs 11.74 Cr).

Related Party Transaction (Generally in excess of 10% of the total transaction value of
the same type)

All Related Party Transactions that were entered into during the financial year were in the ordinary course of the
business and on the arm’s length basis

Particulars FY22 FY23 Comments/Analysis

Sale of Goods /Services

British American Tobacco (GLP) Limited 985 1,352
The sales to related parties are in the ordinary course of business
JSC British American Tobacco - SPb 447
British American Shared Services (GSD) 100 219
Purchase of Goods /Services
ITC Essentra Limited 280 438 In the ordinary course of business
International Travel House 33 87
Investment in Subsidiaries /Associate
In the ordinary course of business
Delectable Technologies Pvt Ltd 2 2
Rent Received
In the ordinary course of business
International Travel House 1 1
Dividend Income
In the ordinary course of business
ITC Essentra Limited 16 18
Dividend Payments
Tobacco Manufacturers (India) Limited 3,276 3,648 In the ordinary course of business
Myddleton Investment companyLimited 534 596
Advances Received during the year
British American Tobacco (GLP) Limited 1494 1153 In the ordinary course of business
JSC British American Tobacco - SPb 651

20
Key Cash Flow Takeaways

Exhibit 11: FCF – Lower Capex coupled with strong performance across business segments is driving FCF for the company

17,000 16,102

15,000
13,133
13,000 11,693
11,000 10,103 9,915
8,990
9,000
7,000
5,000
FY18 FY19 FY20 FY21 FY22 FY23

FCF (Rs Crs)

Source: Company, Axis Securities

Exhibit 12: FCF – ‘Asset right’ strategy in the Hotel business leading to lower Capex requirements for the company

3,000 2,769
2,619
2,500
2,140
2,000 1,812 1,858
1,582
1,500

1,000
FY18 FY19 FY20 FY21 FY22 FY23

CAPEX (Rs Crs)

Source: Company, Axis Securities

21
Financials (Standalone)
Profit & Loss (Rs Cr)
Y/E Mar FY23 FY24E FY25E FY26E
Net sales 65,273 72,161 79,127 86,860
Growth, % 17 11 10 10
Other operating income 770 847 932 1,025
Total income 66,043 73,009 80,059 87,886
Raw material expenses -28,880 -31,191 -33,686 -36,886
Employee expenses -3,569 -3,926 -4,319 -4,751
Other Operating expenses -9,649 -10,478 -11,579 -12,797
EBITDA (Core) 23,944 27,413 30,475 33,452
Growth, % 26.5 14.5 11.2 9.8
Margin, % 36.7 38.0 38.5 38.5
Depreciation -1,663 -1,788 -1,918 -2,051
EBIT 22,282 25,626 28,557 31,400
Growth, % 28.9 15.0 11.4 10.0
Margin, % 34.1 35.5 36.1 36.2
Interest paid -42 -42 -43 -43
Other Income 2,438 2,803 3,084 3,392
Non-recurring Items 73 0 0 0
Pre-tax profit 24,750 28,387 31,598 34,749
Tax provided -5,997 -6,898 -7,679 -8,445
Profit after tax 18,753 21,488 23,919 26,304
Others (Minorities, Associates) 0 0 0 0
Unadj. shares (Cr) 1,243 1,243 1,243 1,243
Wtdavg shares (Cr) 1,243 1,243 1,243 1,243
Source: Company, Axis Securities

Balance sheet (Rs Cr)

Y/E Mar, Rscr FY23 FY24E FY25E FY26E
Cash & bank 3,831 4,806 9,766 17,122
Marketable securities at cost 16,357 16,357 16,357 16,357
Debtors 2,321 4,943 5,420 5,949
Inventory 10,594 11,712 12,842 14,098
Loans & advances 6 6 6 6
Other current assets 2,094 2,094 2,094 2,094
Total current assets 35,203 39,917 46,485 55,626
Investments 16,364 16,364 16,364 16,364
Gross fixed assets 34,261 36,761 39,361 41,961
Less: Depreciation -10,087 -11,875 -13,793 -15,844
Add: Capital WIP 1,697 1,697 1,697 1,697
Net fixed assets 25,871 26,583 27,265 27,813
Non-current assets 4,824 4,824 4,824 4,824
Total assets 82,262 87,688 94,937 1,04,627

Current liabilities 11,639 12,105 12,577 13,100

Provisions 978 999 1,021 1,045
Total current liabilities 12,617 13,105 13,597 14,144
Non-current liabilities 2,050 2,050 2,050 2,050
Total liabilities 14,668 15,155 15,648 16,195
Paid-up capital 1,243 1,243 1,243 1,243
Reserves & surplus 66,351 71,290 78,047 87,189
Shareholders’ equity 67,594 72,533 79,290 88,432
Total equity & liabilities 82,262 87,688 94,937 1,04,627
Source: Company, Axis Securities

22
Cash Flow (Rs Cr)
As of 31st Mar FY23 FY24E FY25E FY26E
Pre-tax profit 24,750 28,387 31,598 34,749
Depreciation 1,663 1,788 1,918 2,051
Chg in working capital -796 -3,252 -1,115 -1,238
Total tax paid -5,818 -6,898 -7,679 -8,445
Other operating activities 0 0 0 0
Cash flow from operating activities 19,799 20,024 24,722 27,118
Capital expenditure -1,847 -2,500 -2,600 -2,600
Chg in investments -706 0 0 0
Chg in marketable securities -4,732 0 0 0
Other investing activities 0 0 0 0
Cash flow from investing activities -7,285 -2,500 -2,600 -2,600
Free cash flow 12,514 17,524 22,122 24,518
Equity raised/(repaid) 2,567 0 0 0
Debt raised/(repaid) -1 0 0 0
Dividend (incl. tax) -19,255 -16,549 -17,162 -17,162
Cash flow from financing activities -16,689 -16,549 -17,162 -17,162
Net chg in cash -4,176 975 4,960 7,356
Opening cash balance 3,878 3,831 4,806 9,766
Closing cash balance 3,831 4,806 9,766 17,122
Source: Company, Axis Securities

Ratio Analysis (%)

FY23 FY24E FY25E FY26E
Per Share data
EPS (INR) 15.0 17.3 19.2 21.2
Growth, % 23.0 15.0 11.3 10.0
Book NAV/share (INR) 54.4 58.2 63.4 70.6
FDEPS (INR) 15.0 17.3 19.2 21.2
CEPS (INR) 16.3 18.7 20.8 22.8
CFPS (INR) 15.6 13.9 17.4 19.1
DPS (INR) 15.5 13.5 14.0 14.0
Return ratios
Return on assets (%) 23.9 25.4 26.3 26.6
Return on equity (%) 27.6 29.7 30.3 30.0
Return on capital employed (%) 28.2 29.8 30.8 30.8
Turnover ratios
Asset turnover (x) 2.2 2.3 2.3 2.4
Sales/Total assets (x) 0.8 0.9 0.9 0.9
Sales/Net FA (x) 2.5 2.8 2.9 3.2
Working capital/Sales (x) 0.0 0.1 0.1 0.1
Receivable days 13.0 25.0 25.0 25.0
Inventory days 59.2 59.2 59.2 59.2
Payable days 37.7 38.5 38.8 38.8
Working capital days 14.5 29.7 32.3 34.8
Liquidity ratios
Current ratio (x) 2.8 3.1 3.4 4.0
Quick ratio (x) 2.0 2.2 2.5 2.9
Interest cover (x) 532.9 606.8 669.6 728.9
Net debt/Equity (%) (5.7) (6.3) (11.8) (18.7)
Valuation
PER (x) 31.8 27.6 24.8 22.6
PEG (x) - y-o-y growth 1.4 1.8 2.2 2.3
Price/Book (x) 8.8 8.2 7.5 6.8
EV/Net sales (x) 8.8 7.9 7.2 6.5
EV/EBITDA (x) 24.0 20.9 18.7 16.8
EV/EBIT (x) 25.8 22.4 19.9 17.9
Source: Company, Axis Securities

23
 ITC Ltd PriceChart and Recommendation History

(Rs)

Date Reco TP Research

04-Feb-22 BUY 280 Result Update
19-May-22 BUY 295 Result Update
02-Aug-22 BUY 340 Result Update
29-Sep-22 BUY 380 AAA
21-Oct-22 BUY 385 Result Update
02-Feb-23 BUY 410 Company Update
06-Feb-23 BUY 460 Result Update
01-Mar-23 BUY 460 Top Picks
01-Apr-23 BUY 460 Top Picks
02-May-23 BUY 470 Top Picks
19-May-23 BUY 480 Result Update
01-Jun-23 BUY 490 Top Picks
01-Jul-23 BUY 495 Top Picks
20-Jul-23 BUY 550 AAA

Source: Axis Securities

24
About the analyst

Analyst: PreeyamTolia

Contact Details: preeyam.tolia@axissecurites.in

Sector:FMCG&Retail

Analyst Bio: PreeyamTolia is MBA Finance and CFA Level 1 and part of the Axis Securities Research
Team.

About the analyst

Analyst: SuhaneeShome

Contact Details: suhanee.shome@axissecurites.in

Sector:FMCG& Retail

Analyst Bio: SuhaneeShome is MBA and part of the Axis Securities Research Team.

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial products. ASL
is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest private sector bank and has its various
subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of
which are available on www.axisbank.com.
2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the
Association of Mutual Funds of India (AMFI) for distribution of financial products and also registered with IRDA as a corporate agent for insurance business
activity.
3. ASL has no material adverse disciplinary history as on the date of publication of this report.
4. I/We, Preeyam Tolia (MBA & CFA L1) and Suhanee Shome (MBA) hereby certify that all of the views expressed in this research report accurately reflect
my/our views about the subject issuer(s) or securities. I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report. I/we or my/our relative or ASL does not have any financial interest in the subject
company. Also I/we or my/our relative or ASL or its Associates may have beneficial ownership of 1% or more in the subject company at the end of the
month immediately preceding the date of publication of the Research Report. Since associates of ASL are engaged in various financial service businesses,
they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. I/we or
my/our relative or ASL or its associate does not have any material conflict of interest. I/we have not served as director / officer, employee etc. in the subject
company in the last 12-month period.Any holding in stock – No
5. ASL has not received any compensation from the subject company in the past twelve months. ASL has not been engaged in market making activity for the
subject company.
6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, ASL or any of its
associates may have:

Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject company of this research report and / or;Managed or
co-managed public offering of the securities from the subject company of this research report and / or;Received compensation for products or services other than investment banking,
merchant banking or stock broking services from the subject company of this research report;ASL or any of its associates have not received compensation or other benefits from the subject
company of this research report or any other third-party in connection with this report.

Term& Conditions:
This report has been prepared by ASL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly
confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form,
without prior written consent of ASL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this
report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not
been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such
information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or
solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all
customers may receive this report at the same time. ASL will not treat recipients as customers by virtue of their receiving this report.

25
 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward looking estimates, valuation or recommendation for the stock

Disclaimer:
Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the
recipient’s specific circumstances. The securities and strategies discussed and opinions expressed, if any, in this report may not be suitable for all investors, who must
make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient.

This report may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this report should make such investigations as
it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this report (including the merits and risks
involved), and should consult its own advisors to determine the merits and risks of such an investment. Certain transactions, including those involving futures, options
and other derivatives as well as non-investment grade securities involve substantial risk and are not suitable for all investors. ASL, its directors, analysts or employees
do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report,
including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income,
etc. Past performance is not necessarily a guide to future performance. Investors are advice necessarily a guide to future performance. Investors are advised to see
Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in
projections. Forward-looking statements are not predictions and may be subject to change without notice.

ASL and its affiliated companies, their directors and employees may; (a) from time to time, have long or short position(s) in, and buy or sell the securities of the
company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities or earn brokerage or other compensation or act as a market maker
in the financial instruments of the company(ies) discussed herein or act as an advisor or investment banker, lender/borrower to such company(ies) or may have any
other potential conflict of interests with respect to any recommendation and other related information and opinions. Each of these entities functions as a separate,
distinct and independent of each other. The recipient should take this into account before interpreting this document.

ASL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this
report should be aware that ASL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based
on any specific merchant banking, investment banking or brokerage service transactions. ASL may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report. The Research reports are also available & published on AxisDirect website.

Neither this report nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the
United States or Canada or distributed or redistributed in Japan or to any resident thereof. If this report is inadvertently sent or has reached any individual in such
country, especially, USA, the same may be ignored and brought to the attention of the sender. This report is not directed or intended for distribution to, or use by, any
person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject ASL to any registration or licensing requirement within such jurisdiction. The securities described herein may or
may not be eligible for sale in all jurisdictions or to certain category of investors.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. The Company reserves the right to make modifications and alternations to this document as may be required from time to time without
any prior notice. The views expressed are those of the analyst(s) and the Company may or may not subscribe to all the views expressed therein.
Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, SEBI Single Reg. No.- NSE, BSE & MSEI – INZ000161633, ARN No. 64610, CDSL-IN-DP-CDSL-693-2013, SEBI-Research Analyst Reg.
No. INH 000000297, SEBI Portfolio Manager Reg. No.- INP000000654, Main/Dealing off.- 1st Floor, I-Rise Building, Q Parc, Loma Park, Thane, Ghansoli, Navi
Mumbai-400701, Regd. off.- Axis House,8th Floor, Wadia International Centre, PandurangBudhkar Marg, Worli, Mumbai – 400 025. Compliance Officer:
AnandShaha, Email: compliance.officer@axisdirect.in, Tel No: 022-49212706

Digitally signed by NEERAJ

NEERAJ CHADAWAR CHADAWAR
Date: 2023.07.20 14:58:07 +05'30'
26