Itc: Hopes Go Up In Smoke

However, the expectations from marketmen and analysts seemed to be have been quite optimistic because they had anticipated the net profit at around Rs 420 crore. If this profit figure had to be achieved, the company would have had to show more than 100 per cent growth in the second half of the year. However, net profit in the second half was lower than the first half at Rs 161.85 crore compared with the first half figure of Rs 180.80 crore.

Leaving apart the market sentiment, the performance of the company has been excellent. Gross sales of the company grew by 14.75 per cent to Rs 5,952.87 crore against a growth rate of 12.5 per cent in 1995-96. Operating profit margin has improved significantly from 20.16 per cent to 23.22 per cent.

 

Exports in the current year showed a marginal growth of 1.76 per cent to Rs 633 crore out of which Rs 256 crore has come from the Indian Leaf Tobacco Development division. Other income of the company increased by 23.58 per cent to Rs 89.61 crore.

However, interest burden of the company increased drastically by 43.12 per cent to Rs 120.08 crore. Depreciation of the company increased by 32.02 per cent to Rs 63.03 crore. Tax liability increased by 25.34 per cent to Rs 239.6 crore. However, ITC would benefit a lot from the recently passed union budget due to reduction in corporate tax. Adding to this, the budget has also not increased any duty on cigarettes of the size the company produces. ITC has not accepted the any legal liability for the claims of ITC Global Holdings of Singapore. The company also believes that the counter claim made by the Chithalias are baseless. The only concern for the scrip sentiment in the current year will be the proposed merger of the ailing ITC Classic Finance, as has been mooted by the financial institutions.

The company also expects to come out of all the legal tangles in the current year. Analysts opine that 1997-98 would be an excellent year for ITC. They expect the performance to be at its all-time high. The current price of Rs 416 gives a PE multiple of 30.