Since 1910

Recommendation – Strong Buy

A project by Santosh Lal

ITC has come a long way in last 10 years. The prices have rose significantly and

picked up a steady pace. ITC’s growth has been remarkable in these years. Starting

from just a closing price of Rs.34.71 / share in 2004, it reached Rs. 309.10 / share

in the year 2013.

Graphically presenting, the data clearly shows that the company has a bullish trait

Share Price 347.20

Total Market Capital Rs. 2,747 48 cr. ( $ 45.79 billion)

Shares Issued 7913252114

P/E Ratio 36.97

52 weeks high 380.00

52 Weeks low 281.15

Net sales and Net Profit chart of ITC (since 2008)

year high low Closing (as on march 31st) 2004 39.51 20.63 34.71

2005 47.23 24.40 44.79 2006 100.00 44.07 97.48 2007 106.35 70.08 75.20

2008 119.70 73.08 103.18 2009 116.20 66.03 92.40

2010 136.35 88.80 131.58 2011 184.70 126.93 181.45

2012 227.75 177.80 226.85 2013 310.75 223.30 309.10

Balance sheet of ITC Ltd.

Particulars Mar'13 Mar'12

Liabilities 12 Months 12 Months

Share Capital 790.18 781.84

Reserves & Surplus 21497.67 17957.00

Net Worth 22287.85 18791.89

Secured Loan .00 1.77

Unsecured Loan 66.40 77.32

TOTAL LIABILITIES 22354.25 18870.98

Gross Block 16679.17 13926.34

(-) Acc. Depreciation 5469.83 4819.66

Net Block 11209.34 9053.63

Capital Work in Progress 1487.79 2572.06

Investments 7060.29 6316.59

Inventories 6600.20 5637.83

Sundry Debtors 1163.34 986.02

Cash and Bank 3615.00 2818.93

Loans and Advances 2881.47 1952.54

Total Current Assets 14260.01 11395.32

Current Liabilities 6404.43 6108.60

Provisions 5258.75 4411.07

Total Current Liabilities 11663.18 10519.67

NET CURRENT ASSETS 2596.83 875.65

Misc. Expenses .00 .00

TOTAL ASSETS 22354.25 18870.98

( In Rs. Cr)

Comparative balance sheet

Particulars Amt (2013) Amt. (2012 Change % Net worth

22287.85 18791.89 119 Total Liability

22354.25 18870.98 118 Net Block

11209.34 9053.63 123 Current assets

14260.01 11395.32 125 Current liability

11663.18 10519.67 111 Total Assets

22354.25 18870.98 118

DuPont Analysis

Particulars HUL ITC Net profit 3,796.67 7,418.39 Net sales 25,810.21 29,901.27

Net assets 2,674.02 22354.25

Net equity 216.25 790.18

PAT/ Equity (ROE) = PAT/Net sales X Net sales/ Net assets X net assets/ total equity

For HUL = 3797 / 25810 x 25810/2674 x 2674 / 216

= 0 .15 x 9.65 x 12.38

= 18

For ITC = 7418/ 29901 x 29901/ 22354 x 22354/ 790

= 0.25 x 1.34 x 28.30

= 9.48

Analysis : All ratios of ITC are greater than HUL but net sales / net assets is much lower

so ITC needs to increase both its sales and assets

SHARE HOLDING PATTERN OF ITC

1. Institution

2. Non- institution

CATEGORY OF SHAREHOLDER

NO. OF SHAREHOLDERS

TOTAL NO OF SHARES

TOTAL SHARES IN DEMATERIALISED FORM

BODIES CORPORATE 4,094 369,492,872 368,368,022 INDIVIDUALS

INDIVIDUAL SHAREHOLDERS HOLDING NOMINAL SHARE CAPITAL UPTO RS 1 LAC

450,604 686,042,457 555,990,828

INDIVIDUAL SHAREHOLDERS HOLDING NOMINAL SHARE CAPITAL IN EXCESS OF RS 1 LAC

688 137,936,153 120,641,873

QUALIFIED FOREIGN INVESTORS

1 100 100

FOREIGN CORPORATE BODIES

6 2,413,229,356 153,256

FOREIGN NATIONALS 12 533,023 88,783

TRUSTS 68 9,089,096 9,089,096

CATEGORY OF SHAREHOLDER

NO. OF SHAREHOLDERS

TOTAL NO OF SHARES

TOTAL SHARES IN DEMATERIALISED FORM

MUTUAL FUNDS/ UTI 329 1,059,175,356 1,058,644,506 FINANCIAL INSTITUTIONS / BANKS

5,656,383 5,100,633

INSURANCE COMPANIES 62 1,659,923,091 1,659,859,611 FOREIGN INSTITUTIONAL INVESTORS (FII)

990 1,527,719,802 1,527,719,802

SUB TOTAL 1505 4,252,748,502 4,251,324,552

CLEARING MEMBERS 379 2,579,324 2,579,324 NON RESIDENT INDIANS (NRI)

8,502 41,601,231 30,942,366

OTHERS 8,967 2,467,032,030 42,852,825

SUB - TOTAL 464,354 3,660,503,612 1,087,853,648

-------------------------------------------------------------------------------------------------

CURRENT SHARE PRICE

CURRENT PRICE: RS. 347.20 (as of 17.3.14 at NSE) and Rs. 347.00 (as of 17.3.14 AT BSE)

BSE:

52 WEEKS LOW: RS. 281.15

52 WEEKS HIGH: RS. 380.00

NSE:

52 WEEKS LOW: Rs. 281.15

52 WEEKS HIGH: Rs. 380.00

-----------------------------------------------------------------------------------------------------------------------------

TOTAL MARKET CAPITAL

$. 45.79 billion

(7913252114 X Rs.347.20*)

* As of 16.3.2014 the rate of ITC’s share being Rs. 347.20 per share at NSE

EARNING PER SHARE (EPS)

EPS: 9.39

(Profit Before Taxes: Rs. 10,684.18 cr. )

PRICE EARNING RATIO

36.97

ITC’s PRICE EARNING RATIO AND THE COMPETITORS IN THAT SEGMENT:-

DIVIDEND HISTORY

The company has a good dividend track report and has consistently declared dividends for the

last 5 years. For the year end March 2013, ITC has declared an equity dividend of 525.00%

amounting to Rs 5.25 per share. At the current share price of Rs 347.20 this result in a dividend

yield of 1.51%.

Date Div announced

Dividend (%)

Remarks

17-05-13 525.00 Rs.5.2500 per share

25-05-12 450.00 Recommended a Special Dividend of Rs. 1.65 per Ordinary Share of Re. 1/- each and a

Dividend of Rs. 2.80 per Ordinary Share of Re.1/- each.

20-05-11 445.00 Special Centenary dividend of Re. 5.50 per Ordinary Share of Re 1/- each and a dividend

of Re. 4.50 per Ordinary Share for the financial year ended March 31, 2010.

21-05-10 1,000.00 --------------------

22-05-09 370.00 --------------------

23-05-08 350.00 --------------------

About ITC

ITC Ltd is one of India’s foremost Pvt. Sector companies. It is highly

diversified and has a large presence in all over India.

Undisputed leader in Indian Tobacco Market with 80% of market

share

Rated among world’s most reputable companies by Forbes magazine

Rated among world’s best big companies and Asia’s Fab 50 by

Business Week magazine.

Highest market capitalization among all the FMCG companies in

India.

Industries ITC is involved in:

Tobacco

Hotels

Paperboards and specialty papers

Packaging

Agri- Business

Packaged food and confectionary

Information Technology

Branded Apparel

Personal care

Stationary

Safety Matches

Other FMCG products

ITC was incorporated on August 24, 1910 under the name Imperial

Tobacco Company of India Ltd. As the company's ownership

progressively Indianised, the name of the company was changed

from Imperial Tobacco Company of India Ltd to India Tobacco

Company Ltd in the year 1970 and then to I.T.C. Ltd in the year 1974.

In recognition of the company's multi-business portfolio

encompassing a wide range of businesses - Cigarettes & Tobacco,

Hotels, Information Technology, Packaging, Paperboards & Specialty

Papers, Agri-business, Foods, Lifestyle Retailing, Education &

Stationery and Personal Care - the full stops in the company's name

were removed effective September 18, 2001. The company now

stands rechristened ITC Ltd.

It is to be noted that ITC’s overall sales of cigarettes has a share of

64% followed by its FMCG sales at 16%. Agri and paper businesses

make up 10% and 7% of overall revenues whereas hotel business is

the smallest segment with a 3% sales share.

FMCG AND CIGARETTE INDUSTRY IN INDIA

FMCG:

The Indian FMCG sector is the fourth largest in the Indian economy and has a market size of

$13.1 billion. This industry primarily includes the production, distribution and marketing of

consumer packaged goods, that is those categories of products which are consumed at regular

intervals. The sector is growing at rapid pace with well-established distribution networks and

intense competition between the organized and unorganized segments. It has a strong and

competitive MNC presence across the entire value chain. The FMCG’s promising market

includes middle class and the rural segments of the Indian population, and give brand makers

the opportunity to convert them to branded products. It includes food and beverage, personal

care, pharmaceuticals, plastic goods, paper and stationery and household products etc.

Due to high inflation, muted salary hikes and slowing economy growth urban consumers spent

less in the calendar year 2012. The overall slowdown in the economy has begun to affect the

FMCG sector with companies posting deceleration in volume growth in the recent

quarterly results. But it is predicted that growth will come from rural dwellers that are

expected to see a rise in disposable incomes due to the direct cash transfer scheme, while

urban consumers will continue to be affected by the macroeconomic environment.

Company Market capitalization

ITC 256,769 cr.

HUL 127,144 cr.

Nestle India 49,768 cr.

Godrej consumer products ltd. 28,107 cr.

Dabur India ltd. 27,261 cr.

GlaxoSmithKline consumer healthcare

23,435 cr.

Colgate Palmolive 18,329 cr.

Marico ltd. 13,137 cr.

Emami 10,788 cr.

Procter & Gamble 9,555 cr.

Tobacco:

India is the second largest producer of tobacco in the world and one of the leading tobacco

exporting countries in t he world. Tobacco occupies a prime place in the Indian economy on

account of its considerable contribution to the agricultural, industrial and export sectors.

Although the Indian cigarette market decreased by 1% through 2012, still the country saw a

huge volume sales of 102.1 billion sticks. The decrease was mainly due to the increased excise

tax by central Govt. and high VAT by the state Govt. Over the next five years, retail volume

sales of cigarettes in India are expected to decline marginally, while constant value growth is

expected to increase by 3% by 2017.

The major players in cigarette market in India are ITC Ltd., Godfrey Philips India Ltd and VST

Industries. ITC is the undisputed leader in the industry which holds the largest market share.

80%

11%

8%

1%

Retail volume share

ITC Ltd.

Godfrey Philips India Ltd.

VST Industries

Others

Indian economy

India is a G-20 major economies and ranks 3rd as per PPP and 10th as per nominal

GDP. India’s GDP touched a all time high of 9.3% in 2010 – 11. For the fiscal year

2012 -13 the GDP was 5% and the analysts predict it is set to grow again in near

future. The inflation rate according to CPI is 8.79% and WPI is 5.05%.

India’s economy was based on mixed economy combining both socialism and

capitalism features but in 1991 it adopted liberal and free market principles and

liberalized the economy to international trade. Following this reforms and a strong

focus on development the country economy grew with a rapid pace.

Post independence India was highly dependent on aids from few countries, but

slowly after new reform over a period of time it became less dependent on aids

and especially after the 1991 reforms, India witnessed a high growth and came out

as a major global player. India now stands as the 19th largest exporter in the world.

Agriculture is the main driving force behind Indian economy. Once deficient in

food production, India today is one of the largest producers of crops and now is a

crop surplus nation. The declining poverty rate, overall infrastructural

development and growing capital market is a proof of India’s growth as a major

economy.

India has earned a high reputation in the Information Technology sector. The share

of the Indian IT industry in the country's GDP increased from 4.8% in 2005–06 to

7% in 2008. In 2009, seven Indian firms were listed among the top 15 technology

outsourcing companies in the world. Similarly Indian automobile industry is

witnessing a rapid growth. Many Indian companies manufacture automobiles

indigenously. Companies like TATA, Mahindra & Mahindra and Bajaj has put India

in the global stage in automobile industry. As the third-largest economy in the

world in PPP terms, India is a preferred destination for FDI during the year 2011,

FDI inflow into India stood at $36.5 billion, 51.1% higher than 2010 figure of

$24.15 billion

The main sectors in Indian economy are:

Agriculture

Industry

Textile

Services (includes IT enabled services)

Retail

Mining

Tourism

Energy and Power

Banking and Finance.

--------------------------------------------------------------------------------------------------------------

Analysis

ITC is one of the most stable stock in the market it h as shown a greater return in 5

years. It has reached the level of 300 from the level 40 in 2008-09. It has shown

return of more than 700% in five years. Suppose if someone has bought 1000

shares of ITC in Jan 2009 at the level of 40m and holds the stock for 6 years and

now wants to sell the stock in 2014, he makes a profit of more than 260 per share.

Overall profit of 2,60,000. He invested only 26000 in 2009 and after 5 years gets

back more than 3 lacs’.

ITC has shown a steady growth in 5 years. 2010-11 was the most important phase

in the company history where it traded from the level of 60 – 180. Giving about

200% return in a year. Since then the stock has made new high every year. It has

not shown any kind of gradual decrease within five years. Technically it is bullish

and has the capability to show same kind of growth in coming five years.