ITC profit rises, but export curbs hit revenue

ITC profit rises, but export curbs hit revenue

ITC has posted a 17.6% year-on-year jump in its net profit for the quarter ended June at ₹4,902.7 crore even as its board approved allotment of one share of its soon-to-be demerged hotel business for every 10 shares held in the company.

The Kolkata-based conglomerate on Monday said its gross revenue for the first quarter declined 7.3% on year at ₹16,842.9 crore due to government restrictions on wheat exports.

Excluding the agricultural business, there was a 10.6% growth in revenue year on year for the period under review, it said.

ITC board approved the demerger share entitlement ratio of 10:1 for the proposed ITC Hotels. In an investor note, the company said the share entitlement ratio is a function of the share capital of the two companies and has no bearing on the market capitalisation of ITC Hotels. It said ITC Hotels will be listed in about 15 months.

ITC said its shareholders will hold 100% of the ultimate beneficial economic interest in the hotels business with direct holding of about 60% and indirect holding of about 40% through ITC. It said the demerger would unlock value of the hotels business for existing shareholders of ITC through “independent market driven valuation of their shares” in ITC Hotels which will be listed.

Amnish Aggarwal, head of research at Prabhudas Lilladher, said the share swap ratio is of little significance as shareholders of ITC will get 60% of shares of ITC Hotels. “So, higher the share swap ratio, more will be the number of shares and less will be the price,” Aggarwal said. “The major aspect is that the enterprise value of the business is the actual number. In a scenario that ITC would have given a 1:1 swap ratio, while the number of shares would have been higher, value per share would have been very low – may be ₹12-15 as per street estimates,” he added.

For the June quarter, ITC’s cigarette, hotels and fast-moving consumer goods (FMCG) business comprising packaged food, personal care, agarbatti and stationery products grew overall sales.

In the flagship cigarettes business, ITC reported a 10.9% year-on-year jump in net segment revenue and 11.2% growth in segment profit before interest and taxes (PBIT). Analysts said the cigarette business volume stayed on a positive trajectory last quarter, growing by 9-10%.

ITC’s non-cigarette FMCG business reported 16.1% growth in segment revenue to ₹5,166 crore, thereby crossing the ₹5,000 crore revenue mark in a quarter for the first time, while segment Ebitda (earnings before interest, taxes, depreciation and amortisation) margin expanded 325 basis points to 11%. A basis point is 0.01 percentage point. The segment Ebitda was at ₹570 crore.

The company said there was strong growth in staples, biscuits, noodles, beverages, dairy, agarbatti and premium soaps, while the education and stationery products business continued to witness strong traction.

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