Valuation gains from non-cigarette businesses likely for ITC's investors

Growing brand size, higher capex and strong distribution network would support the company's other-FMCG business

Stock valuation represented by price-to-earnings multiple of ITC has always remained below some of the major fast-moving consumer goods (FMCG) players, thanks to the company’s excessive dependence on cigarette business, which is highly exposed to regulatory changes. 

However, the company’s increasing focus on non-cigarette business, tilting more towards other-FMCG segment (includes packaged food brands such as Bingo!, Aashirvaad, YiPPee!, Sunfeast, Classmate [education segment], Fiama, and Savlon [personal care], among others), is expected to fuel valuation of ITC. 

According to analysts at Edelweiss Securities, the valuation difference should narrow as ITC scales up its FMCG business.

ITC’s 2018-19 (FY19) annual report indicates its increasing