ABSTRACT
On October 1, 2019, Debashis Banerjee, an analyst at one of the leading Investment Management firms in India, was busy working on his analysis of ITC. He had been assigned a task to perform a detailed financial analysis of ITC to help his firm decide whether ITC was a “value buy” opportunity or a “value trap.” Despite having stellar performance on both the financial and market front (Exhibit 50.1), ITC had been struggling to hold its ground and underperformed the market for nearly two years. While implementation of GST and Environment, Social and Governance (ESG) concerns were presented as explanations for such underperformance, Debashis thought there was something beyond the popular narrative. He agreed that there had been growing concern surrounding ESG among global institutional investors; however, ITC, except its flagship Cigarettes business, which falls under the sin goods category, was doing an excellent job on the ESG front. As far as taxes were concerned, being there in the business of sin goods, it was always there on the receiving end of the government's stick in the form of higher taxes in every year's budget, and yet it delivered excellent performance over the years. ITC's Long-Term Financial and Market Performance (Rs Crore)
|
2008–09 |
2018–19 |
10-Year CAGR 08–09 to 18–19 |
|
|---|---|---|---|
|
Net Revenue |
15,612 |
44,415 |
11.00% |
|
PBT |
4,826 |
18,444 |
14.30% |
|
PAT |
3,264 |
12,464 |
14.30% |
|
Capital Employed |
14,780 |
60,005 |
15.00% |
|
Segment RoCE |
39.70% |
70.30% |
|
|
Market Capitalisation |
69,751 |
3,63,714 |
18.00% |
|
Total Shareholder Returns |
20.30% |
||
|
Sensex (CAGR 08–09 to 18–19) |
14.80% |
