Yesterday, was smoking but today, first it struggled to breach Rs 240 and is now back around Rs 230 levels. It is now clear that the markets see it as a value play.
Gurmeet Chadha: ITC, one of the most reasonable consumer conglomerates in India, has been an enigma. In FY19-20, cigarettes were 85% of the EBIT. They still are at about 82%. While the FMCG business is shaping up well, they have an added advantage in terms of sourcing. But still the margins are in single digit.
I think there are two-three triggers here. One trigger is, can they climb up this ESG ladder in terms of the perception that is playing a big role in a lot of these companies which are into tobacco, liquor, coal and dirty fuels?
Second, can the FMCG EBIT contribution go up materially? While they are doing well in paper, in exports as well as packaging material, the contribution is still small; 82% is still from cigarette business.
Third, can there be a possible demerger so that at about 17-18 times with 6% dividend yield, it continues to remain a value play but for a broader unlocking to happen, we need a bigger contribution from FMCG. So some kind of a demerger and more steps to climb the ESG ladder.