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ITC Hotels on Track for Independent Listing, Boosting Value for Shareholders

ITC, a company that runs hotels and tobacco businesses, has recently shifted its focus towards diversification, innovation, and cost-cutting initiatives. As a result, many analysts are optimistic about its future, seeing strong potential for growth across all of its businesses.

While rural demand remains low, consumption in urban areas is booming, especially in the premium segment. This trend is good news for ITC’s FMCG business, which has a strong portfolio of premium brands.

The company’s non-cigarette business has been doing particularly well, with a 14% revenue CAGR and a 20% PAT CAGR over the past five years.

This growth is due to ITC’s strategic expansion into new markets and the launch of products that cater to local preferences.

However, the cigarette segment is facing challenges from moderate tax hikes and competition from other players, leading to a decline in cigarette volumes to levels last seen in FY13. Despite this, analysts are hopeful for future growth if tax stability can be achieved.

ITC’s hotel segment is another bright spot, with a focus on sustainability and luxury.

ITC Hotels has a strong loyalty program and plans to launch an even stronger version soon. The company is targeting the opening of 35 managed hotels and is exploring ways to add 300 more rooms through greenfield and brownfield projects.

With an expected 45-50% of its business coming from upper hotels, this segment is well-positioned for independent listing, further unlocking shareholder value.

Growth potential in coming years

ITC sees significant future growth potential in new value-added opportunities within its agricultural businesses, particularly in the area of nicotine and derivatives.
Additionally, its new food-tech venture is expected to revolutionize the fresh food space by building digital-first brands and businesses.

ITC is committed to optimizing costs and enhancing productivity. Strategic initiatives like the implementation of Integrated Consumer Market Logistics , vertical integration, import substitution, digitalization, and utilization of renewable energy sources are expected to significantly contribute to improved efficiency and cost reductions.

Should you invest in ITC?

Many leading brokerages are bullish on ITC’s stock for its strong fundamentals, diversified business model, and promising growth prospects across its various segments. Their target prices range from Rs 493 to Rs 530.

ITC’s strategic focus on diversification, innovation, and cost-cutting has positioned the company for long-term success. With a robust non-cigarette business, a thriving hotel segment, and exciting new ventures in food-tech and nicotine derivatives, ITC is well-equipped to navigate market challenges and deliver consistent growth for its investors.