-Thus far in calendar year 2023, the share price of ITC has appreciated by 48 per cent, while HUL’s stock price has gained 1.3% and the Sensex 8.8%, respectively.
-ITC will hold a 40% stake in ITC Hotels, and the rest 60%, will be held by the shareholders of the company proportionate to their shareholding
Mumbai / New Delhi, NFAPost: ITC, the cigarettes-to-hotels conglomerate, on Monday, surpassed Hindustan Unilever (HUL) to become the most-valuable fast moving consumer goods (FMCG) stock after a gap of more than four years.
ITC, last week, joined the elite group of companies having market valuation in excess of Rs 6 trillion. After surpassing HUL in market capitalisation (market cap) ranking, ITC entered into top five most valuable companies list with a market cap of Rs 6.14 trillion. With Rs 6.09 trillion market cap HUL slipped to sixth position in the overall ranking, at 09:38 AM, the BSE data shows.
Shares of HUL were down nearly 1% to Rs 2,577.95 in intra-day trade so far, falling 5% in past two days after the FMCG major reported its June quarter results. While, on the other hand the share price of ITC was up 1.3% at Rs 496.40 in intra-day trade today. The stock hit a lifetime high of Rs 497.55 last Friday.
Thus far in the calendar year 2023, the stock price of ITC has appreciated 48 per cent on continued buying by the foreign portfolio investors (FPIs). In comparison, HUL’s share price was up 1.3 per cent, while the S&P BSE Sensex up 8.8% during the period.
Earlier, on May 15, 2019, ITC’s market cap stood at Rs 3.64 trillion, and of HUL at Rs 3.62 trillion, the Capitaline data shows.
ITC is the biggest cigarettes & second largest FMCG company in India with around 80 per cent market share in cigarettes and presence in staples, biscuits, noodles, snacks, chocolate, dairy products & personal care products. The company is also present in paperboard, printing & packaging business, agri and hotels businesses.
FPIs raised their ownership of the company in the most recent quarter, keeping in mind the positive prognosis for earnings growth. At the end of the June 2023 quarter, the total holding of Category-I & II FPIs had increased to 14.51%. They held 14.21 per cent stake in March 2023 quarter, while it was 13.81% in December 2022 quarter and 13.47% at the end of September 2022 quarter.
Meanwhile, analysts at Axis Securities believe the narrative around ITC is getting stronger as all its businesses are on the right track. Key attributes of this narrative are stable cigarette volume growth led by market share gains and new product launches, the FMCG business reaching the inflexion point with improving EBIT margins.
The strong and stable growth in hotels as travel, wedding, and corporate activities pick up, moreover recent comment on possible demerger of hotels business will boost profitability for ITC, according to analysts. They further said, steady and decent performance in paperboard and agribusiness was witnessed in FY23. Furthermore, reasonable valuation provides a huge margin of safety compared to other FMCG and discretionary peers. The brokerage firm recommended a BUY rating on the stock with a revised target price of Rs 540 per share.
ITC approves demerger of hotel business to form new entity ‘ITC Hotels’
FMCG giant ITC has announced that it had received in-principle approval from the board of directors to demerge its hotel business. Under the new arrangement, a new entity called ITC Hotels Ltd will be incorporated as a wholly-owned subsidiary of ITC Ltd.
ITC will hold a 40% stake in ITC Hotels, and the company’s shareholders will hold the remaining 60 per cent proportionate to their shareholding.
“After due consideration, the board accorded its in-principle approval to the demerger of Hotels Business under a scheme of arrangement, with the company holding a stake of about 40 per cent in the new entity and the balance shareholding of about 60% to be held directly by the Company’s shareholders proportionate to their shareholding in the Company,” the company said in a regulatory filing.
“The scheme of arrangement shall be placed for approval of the Board at its next meeting to be convened on 14th August 2023. Appropriate announcements and public disclosures in accordance with the SEBI Listing Regulations and other applicable laws will be made as necessary,” it added.
The application for incorporation of ITC Hotels is in the process of being filed and will be completed once the ministry of corporate affairs approves its incorporation.
The company added that the demerger would help the new entity in attracting “appropriate investors and strategic partners/ collaborations whose investment strategies and risk profiles are aligned more sharply with the hospitality industry”.
“In addition, it will unlock the value of the Hotels Business for the Company’s shareholders by providing them a direct stake in the new entity along with an independent market-driven valuation thereof,” it said.
ITC runs 120 hotels and 11,600 keys across over 70 locations in the country.
