Cigarette and tobacco companies have been moving within ten per cent range for the last three months. Cigarette major ITC slipped 4.68 per cent in the last three months, to end the day yesterday at Rs 649.80 on the Bombay Stock Exchange (BSE). On 1 October, 66117 ITC shares were traded, with the intra-day high at Rs 653.50.
Among other cigarette stocks, VST Industries fell 7.40 per cent in the last three months while RBD Industries lost nearly 30 per cent. Godfrey Philips declined 8.86 per cent from the beginning of June to 1 October.
ITC has been on a diversification exercise mainly aimed at de-risking its businesses from its core operation of cigarettes. The company reckons that the cigarettes business will face increasing legislative impediments like the Supreme Court ban on cigarette smoking in public places. Earlier, ITC managed to obtain a stay order on the 20 per cent luxury tax levied by Delhi and other state governments on cigarettes.
ITC is leveraging its competencies by operating premium hotels and diversifying into businesses such as biscuits and confectionery, export-related agri-business, lifestyle retailing, packaged foods, branded staples, information technology and greeting cards. These businesses are meant to act as a hedge against uncertainties of cigarette operations.
For the quarter ended ended 30 June, 2002, ITC registered 15.23 per cent rise in net profit to Rs 343.92 crore compared to Rs 298.44 crore in the corresponding period last year. Net sales increased 21.4 per cent to Rs 1,408.02 crore from Rs 1,159.62 crore in the comparable period last year. The company was also hit by fall in cigarette sales in 2001-02. In that fiscal, sales fell to 60,865 million sticks from 66,478 million sticks in 2000-01.
