ITC's cigarette biz stubs post-Budget fears; margin climbs to 27.67% in FY09

ITC, the largest tobacco company of India, has stubbed the fears of decelerated growth provoked by the increase in excise levies declared in the Union Budget for 2010-11. ITC's cigarette-making business actually registered a growth in margin: from 22% in FY04 to 27.67% in FY09. The growth comes in the face of an increase in excise duty of 18 % on 60-70 mm cigarettes; and of 11% on other denominations. During the period in consideration, the compounded annual growth rate (CAGR) of the cigarette business continued to hover over the 10% level. ITC's CAGR number acquits itself well in the context of the growth of the overall FMCG industry. So, it appears that ITC has calibrated the transfer of tax burden to consumers with a great deal of assurance.

At any rate, it must be said that the cigarette business was not the only growth agent that boosted ITC's topline. Other offerings accounted for around 49% of the company's net turnover, in FY09. The company's interests span such areas as FMCG (Bingo, Sunfeast, Ashirwad and Fiama Di Wills); hotels (ITC Hotel and WelcomHotel); and paperboards ” in which the company is the market leader.

ITC's non-cigarette FMCG segment alone has posted a CAGR of 74% over the past seven years.