ET Intelligence Group: ITC is one inventory that hasn’t did not disappoint the bulls in addition to bears on the Road through the present pandemic — and its fourth quarter efficiency is unexceptional. Whereas it missed the Road estimates attributable to decline in revenues throughout all segments, the efficiency of its FMCG section has kindled hopes of an improved present within the latter a part of the 12 months.
Among the many final of the FMCG companies to announce its March quarter outcomes, ITC posted a 6 per cent decline in gross sales with all segments posting a drop in revenues. The cigarettes enterprise was badly hit. It misplaced volumes attributable to enhance in taxation and the lockdown, which impacted gross sales and distribution. Cigarette quantity is estimated to drop by 10-12 per cent – larger than what analysts had pencilled in.
Within the present quarter, ITC has been aggressive in its FMCG enterprise – launching sanitisers and hand washes, leveraging its intensive distribution community and buying a key regional spice model. Nonetheless, it has misplaced round 40 days of cigarette gross sales because of the lockdown. Its accommodations and paper segments, too, are more likely to be impacted because of the lack of enterprise.
At a time when money is probably the most valued asset in India Inc, ITC has nil debt and a money pile of over Rs 20,000 crore. For FY20, it generated free money flows of Rs 11,693 crore – 30 per cent larger than the year-ago degree and by far the best within the FMCG business. ITC can use such money flows to pay good-looking dividends, make strategic acquisitions, announce a buyback or declare a bonus challenge. It paid out 80 per cent of its internet revenue as dividend in FY20. Little surprise then that ITC is more likely to be a dividend inventory for now – with a chance of FMCG propelling its efficiency.
Even because the FMCG holds a promise of higher prospects, the challenges to the cigarette enterprise, its money cow, are pressing within the type of elevated rules and taxation and considerations of the ESG-conscious traders. And that’s the quandary for traders – for some the fast challenges are greater to surmount and for others the promise of progress is extra interesting.