Why are ITC Shares Prices Falling? Reasons You Need to Know

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News of the Demerger of ITC Hotels from ITC group business is widespread everywhere. I  think it is an indication for value creation in long term investment. Then why did the stock value go down?

We cannot assume anything initially but one thing is clear that it’s a positive step from medium to long term. On Monday, July 24 ITC Shares Prices fell to 3.87% and closed at Rs. 470.90. This step in this regard is clearly positive because it was a low return ratio business for ITC group.

In these cases people mostly go on the basis of prevalent news in the market. It is heard that management tie-ups and investors were waiting from the last two years or two and half years for this move to be taken and they are extremely happy to see that finally it happened.

ITC Shares Prices Updated News

It took 20% capital expenditure in the last few years as per the analysis and the entities which are left from ITC group will be more focused on essentially Cigarettes, FMCG, Paperboards Specialty papers, Packaging, Agriculture Business, Information Technology.

So, Now ITC group has become a more focused entity apart from Hotels. People who are more interested in ITC Hotels business will be benefited from this move. So, a trivial  sell on this controversial news can be seen.

It is envisaged that this step is right in terms of value unlocking and it will be a profitable deal if booking happens from an investor’s concern. The news channels said that ITC will take the ownership of 40% and 60% ownership will be in the hands of shareholders in Hotel Business. 

We should not jump to the conclusion immediately, rather we have to wait for the lucidity in this case from the management ends. 

Decision of Annual General Meeting (AGM)

In the forthcoming AGM, an Annual General Meeting (AGM) in which all the directors of the company present an annual report regarding performance and strategy of the company for the shareholders of the company that will be scheduled on august 14, and ITC will give the detailed information regarding this demerger and as we know Hotel Business is considered as mini bull and paper business has never had good at revenue generation as per the analysis. So, what else is left for the shareholders?

Right now the FMCG business is holding a large market value as we can see that the volume growth of tobacco business is not bad and also seeing growth in market share from the illicit market. Lately in an annual report, a lot of analysis has been done and shared.

So, it would be relevant to impose a tax policy by the government of India on cigarette business. Tobacco, Cigarettes and FMCG business have a mammoth contribution to the Sum of the Parts Analysis (SOTP) and economy. So, we are seeing this step from a positive point of view.

Estimated 20% of the business of Cigarettes and tobacco is considered illicit. So, as per the rational tax policy we can expect more profit on market share’s gain for ITC group.

The ITC group is anticipating 9% growth in Cigarette and tobacco business which is ahead of the other companies For instance, HUL with growth of 3%. So, this is the  right decision which the company took.