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CLSA has maintained a �?~buy�?(TM) recommendation on ITC, banking on stable earning growth and attractive valuations with its PE having improved from a low of nearly 10x in 2003 to about 17x.
"ITC's cigarette volumes have remained strong despite two years of heavy tax increases, highlighting its pricing power. With capex peaking in FY09, we expect a 42 percent CAGR in free cashflow (FCF) over FY08-11. The firm's earnings CAGR was 18.4% over the past decade and average variance was only 3ppts. The new smoking ban appears to have had little effect and CLSA does not expect it to have much impact in the medium term. ITC remains net-cash, adding stability to the earnings profile.
CLSA has projected a 15 percent CAGR in the cigarette business EBIT over FY08-11 while the company's overall EBIT will expand faster on the back of a 23 percent EBIT CAGR in other divisions.
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India’s biggest tobacco firm ITC Ltd posted a 4.2% increase in second quarter profit after raising prices of cigarettes earlier this year. Net income rose to Rs803 crore in the three months ended 30 September, from Rs771 crore a year ago, Kolkata-based ITC said in a statement on Friday. . . .
ITC is expanding sales of shampoo, food, clothing and other goods as the Union government increases taxes and restrictions on cigarettes for health reasons. Cigarettes account for about half the company’s revenue.
“Cigarette sales have been robust as there has been a distinct customer shift to higher-priced filter cigarettes after the government raised taxes,” said Abhijeet Kundu, an analyst at Mumbai-based Antique Securities Ltd.
ITC, 32% owned by British American Tobacco Plc., raised prices of the Gold Flake and Classic cigarette brands earlier this year.
A proposal by tobacco giant Japan Tobacco Inc (JTI) to raise its equity in its Indian joint venture has kicked off a major controversy with the country's largest tobacco company ITC Ltd and the health ministry opposing the move and the Prime Minister's Office (PMO) being impelled to intervene.
In June this year JTI submitted a proposal to the Foreign Investment Promotion Board (FIPB) to raise its stake in JT International (India) Ltd, which makes the Camel and Winston cigarette brands, from 50 to 74 per cent. The proposal was endorsed by the ministry of commerce and industry, which argued the policy allowed 100 per cent Foreign Direct Investment (FDI) in the sector subject to industrial licensing and the proposal was not for fresh capacity for cigarette manufacturing.
Meanwhile, the PMO, in a series of letters in July and August, has directed the department of commerce and industry to take action on points raised by the Tobacco Growers Welfare Association of Guntur, which has opposed the increase in FDI, and also instructed the Department of Economic Affairs (DEA) to give its comments on a petition by the Tobacco Institute of India (TII), which represents the interests of domestic tobacco companies and also opposed the JTI proposal.
Cigarette-makers including big boys like ITC and Godfrey Phillips India have put up ‘nosmoking’ boards across all their offices, removed ash trays and sent notifications to every employee that the no-smoking ban is here to stay.
“Whatever is required under the new rules... we have done it,” an ITC spokesperson said from Kolkata. In the past five years, a no-smoking ban is already in force at ITC’s headquarters and its offices, except in certain areas like canteens. With the new rules, the ban has been extended to the entire office, the spokesperson said.
We are a law-abiding company, and will operate as per the law of the land — not just in letter but also in spirit. We are not working or intending to work on any strategy to counter the ban. As notified by the law, all our offices will be made no-smoking from October 2.Unidentified spokesperson of Godfrey Phillips India.
ITC and Indian Hotels Association have moved the Delhi high court challenging the Union government's notification that bans smoking in "public places", including hotels and restaurants, from October 2.
They have argued that the notification makes no distinction between private space and public space.
On Wednesday, ITC fielded senior advocate Soli Sorabjee, who argued that the rule was unjustified as it included private offices like a lawyer's chamber or an artist's studio. "Private office cannot be called a public place as these are not accessible to the general public," Sorabjee told the court.
Sorabjee told the bench headed by Justice Vikramjit Sen that the government had no power to take such a decision as the act under which the notification was issued had already been stayed by the Madras high court.
ITC Ltd, which has approached the Delhi High Court against the Centre's notification banning smoking in private offices, on Wednesday contended that the Government has no power to take such a decision.
Senior Advocate Soli Sorabjee, appearing for the company contended that the Act under which the notification was issued has already been stayed by the Madras High Court.
"When the Act has already been stayed where is the question of framing rules under the law. The government need to have statutory power to frame rules. After the Madras High Court interim order staying the operation of the law, the government has no power under the law," he contended before a Bench headed by Justice Vikramjit Sen.
ITC Ltd on Wednesday approached the Delhi High Court challenging the Central Government's notification that slapped a ban on smoking in all public places and other establishments from October 2.
A Bench comprising of Justice Vikramjit Sen and S L Bhayana deferred the hearing till September 30 after the Central Government contended that a case related to the issue was coming before the Supreme Court September 29.
Besides ITC, two others petitioners, including Indian Hotels Association, have moved separate pleas challenging the May 2008 notification issued by the Health Ministry.
ITC Ltd, India's top cigarette firm, said on Tuesday its information technology arm has acquired U.S-based technology firm Pyxis Solutions for an undisclosed sum.
Last month, ITC Chairman Y.C. Deveshwar said the company was in talks to acquire a U.S.-based information technology firm and the acquisition would be made through ITC Infotech.
India's top cigarette firm, ITC Ltd plans to acquire a U.S.-based information technology firm, chairman Y.C. Deveshwar said at the annual shareholders meeting on Wednesday.
"We are in talks with the company and hope it will materialise soon," Deveshwar said. The acquisition would be made through its technology unit, ITC Infotech, he said.
He did not give further details.
The quantum of Tobacco consumption has not come down despite the Government increasing the tax on cigarettes, Indian Tobacco Company Chairman Y C Deveshwar said on Saturday.
"It is going up in other forms like scented tobacco and Gutkha," he told reporters.
He told newsmen here Tobacco was being sold in so many forms like Gutkha and Paan, which, he claimed, caused oral cancer, and were more dangerous. "Unfortunately all the attention was only towards cigarettes,which were less harmful with filters and all," he claimed
He said government was only losing revenue by increasing the tax on cigarettes, and ITC's share in tobacco business had come down.
ITC Ltd.'s profit fell unexpectedly for the first-time in nine quarters as India's biggest tobacco company said losses widened at its new personal-care products and apparel businesses.
Net income declined to 7.49 billion rupees ($177 million) in the three months ended June 30 from 7.83 billion rupees a year earlier, the Kolkata-based company said in a statement today. That lags behind the 8.51 billion rupee median estimate of nine analysts surveyed by Bloomberg News.
ITC, 32 percent owned by British American Tobacco Plc, is expanding its products to include shampoos, snack foods, clothing and other goods as the Indian government increases taxes and restrictions on cigarettes, which account for about half of its revenue. Costs on promotions and advertisements to sell its soaps and shampoos crimped profit. Profit growth from cigarettes also rose less than expected, analysts said.
ITC Ltd Chairman Y C Deveshwar on wednesday said that owing to the restrictive regulatory environment it is difficult to make the tobacco business grow and for the same reason company has diversified into other new areas.
Deveshwar said that cigarettes, the traditional product from ITC, were being taxed disproportionately at rates higher than other forms of tobacco consumption.
"The cigarette business is operating in a restrictive regulatory regime," Deveshwar said.
He said that there was need to "create other legs of growth for which ITC has ventured out in new areas like FMCG".
India's top tobacco firm ITC Ltd has acquired about 2.3 million shares, or 0.5 percent of the equity, in paper maker Ballarpur Industries Ltd for 56 million rupees, the Times of India reported on Friday.
ITC has interests in paper, through ITC Bhadrachalam Paperboard, which was doing well, the paper said quoting unnamed sources.
Non-cigarette business of diversified conglomerate ITC Ltd contributes nearly 52.4 per cent of the company's net turnover.
In the report of the directors of ITC for the year ended March 31, 2008, it said that the company was uniquely positioned to tap the emerging opportunities in the FMCG sector by blending and synergising the diverse pool of competencies residing in its various businesses.
ITC, which operates in various business areas like branded packaged foods, lifestyle retailing, education and stationery products and personal care products, is upbeat on the future of newly formed business portfolios.
ITC Ltd., India's biggest cigarette maker, rose the most in more than three months after raising prices on some cigarette brands including Classic and Gold Flake.
``Prices have been revised in select brands,'' said Nazeeb Arif, spokesman of ITC. He didn't provide details.
ITC, 32 percent owned by British American Tobacco Plc, gained 11.90 rupees, or 5.7 percent, to 221 rupees at the 3:30 p.m. local time close of trading in Mumbai. This is the company's biggest daily gain since Feb. 13.
``The price hike will help offset the negative impact of the increase in excise duty on non-filter cigarettes,''