31% Rise In Itc Net Disappoints Market

Tobacco major ITC Ltd disappointed the markets yesterday by announcing an increase of 31.24 per cent in its net profit for the year ended March 31, 1997, against an expected rise of about 60 per cent. The companys board of directors also approved a capital expenditure of over Rs 1,900 crore, to be invested by the company over a period of five years.

Unveiling its unaudited financial results for 1996-97, ITC said its net profit had risen from Rs 261.08 crore in 1995-96 to Rs 342.64 crore in 1996-97. Market sentiments apart, this is a commendable turnaround, considering the companys net profit actually fell by 0.21 per cent in 1995-96.

 

Profit before tax rose 28.75 per cent from Rs 452.23 crore in fiscal 1996 to Rs 582.25 crore in fiscal 1997, against an increase of 12.56 per cent in the previous year. Gross turnover was up 14.1 per cent from Rs 5,115.35 crore for 1995-96 to Rs 5,862.76 crore for fiscal 1997. In the previous year, gross turnover had increased by 12.53 per cent. Gross income rose 14.73 per cent to Rs 5,952.37 crore in 1996-97 and net income nearly 15 per cent to Rs 2,998.97 crore.

The stock markets responded gloomily after the results were announced. At the Calcutta Stock Exchange, the stock opened at Rs 448 and reached a high of Rs 453.20 before closing at Rs 437.60, a fall of 1.91 per cent from the previous days close. Brokers said the scrip price may head further south as market expectations about ITCs net profit were much higher than the announced results. The ITC scrip was reported to have fallen by Rs 8-Rs 9 in Mumbai after the results were announced.

Leading Calcutta stockbroker Mahesh Bajaj said market expectations regarding a possible low-premium rights issue were also belied as the ITC results made no mention of any such issue. However, the resilience of the company would not allow the price to go much below the present levels, said brokers.

ITCs export turnover has increased by less than two per cent from Rs 622 crore in 1995-96 to Rs 633 crore in fiscal 1997, underscoring the fact that the company is moving away from its foreign exchange obsession. However, the companys Indian Leaf Tobacco Development Divisions exports have risen by 70 per cent to Rs 256 crore in 1996-97.

Duties have gone up nearly 15 per cent from Rs 2,579.63 crore in 1995-96 to Rs 2,953.40 crore in 1996-97. On the expenditure side, total expenditure has gone up 10.33 per cent to Rs 2,233.61 crore. Depreciation has increased by over 32 per cent to Rs 63.03 crore in 1996-97.

Interest costs have risen substantially by 43.12 per cent to Rs 120.08 crore in 1996-97 while provision for taxation has also increased significantly by 25.35 per cent to Rs 239.60 crore.

An ITC statement said the companys core business beat the record sales achieved in the previous year. During 1996-97, the company introduced an extension of its flagship Wills brand, naming the new product Wills Natural Lights Filter Kings. Another introduction was the Classic Ultra Milds in the normal 20s and Flat 10s in the market for milder cigarettes.

Interestingly, the statement did not mention ITCs financial services activities at all, although it talked about the satisfactory performance of Maurya Sheraton, the flagship of the companys hotel division. The release said ITC Hotels will continue with its expansion plans in Mumbai, Calcutta and Jaisalmer.