The fast-moving consumer goods (FMCG) sector in India is on the rise, due to the country’s large population, increasing per capita income, and changing consumption patterns. Earlier, this market was dominated by key players like Hindustan Unilever (HUL) and Nestle, and now the market is seeing the rise in more contenders like ITC, a conglomerate having a diverse product portfolio.
In this blog, we will explore where ITC stands in comparison to other FMCG competitors.
Understanding ITC Limited
ITC Limited was established in 1910 and is among one of the largest conglomerates in India. The company is active in several segments including FMCG, Paperboards & Packaging, Hotels, Agri-Business, etc.
However, ITC is predominantly known for its FMCG segment, and the company offers a wide range of products in this segment, from biscuits, snacks, personal care products, and others. Earlier the majority of the company’s revenue used to come from its tobacco business which has been one of the key sources of its revenue till today.
ITC boasts a diversified business model with a presence in various sectors:
- FMCG (Non-Cigarette): ITC’s foray into packaged foods (Aashirvaad, Sunfeast), personal care (Fiama, Vivel), stationery (Classmate), and apparel has been remarkable.
- Hotels: ITC is a significant player in the hospitality sector as ITC has a luxury hotel chain business.
- Cigarettes: ITC dominates India’s cigarette market and it is the largest contributor to the total sales revenues.
- Paperboards & Packaging: ITC is one of the top paper and packaging companies.
- Agri-Business: The company actively imports and exports agricultural commodities.
Why Should Investors Include ITC in Their Investment Portfolio?
There are several reasons behind the investors’ interest in ITC shares. Some of them are:
1. Stable Revenue Streams
ITC’s FMCG segment offers stable revenue due to the essential nature of its products. This stability can be especially appealing during periods of risk or recession when customers are not cutting back on their purchases of necessities.
2. Strong Brand Portfolio
ITC has a strong brand portfolio of leading brands. For example, Aashirvaad(atta and spices), and Sunfeast (biscuits and snacks) are considered market leaders in their respective categories. This brand strength leads to sustainable consumer traffic and revenues in the long run.
3. Diversification Benefits
ITC operates in different sectors, which provides it a cushion against risks associated with specific sectors during market fluctuations. This reduces the risks compared to direct investment in pure-play FMCG stocks.
4. Consistent Dividend Yields
ITC is known for its attractive dividend yields. For income-focused investors, the company’s dividend payouts can provide a steady income stream, which is appealing in a low-interest-rate environment. Get a bird-eye view of the company’s financials on ITC screener.
5. Growth Potential in FMCG
The FMCG sector in India is projected to grow with increasing urbanization, higher disposable income, and a larger middle-class population. Since ITC is already well-established in the market, it is well-positioned to capitalize on this growth.
The company leverages its extensive distribution network, strong brand-building capabilities, and innovative product offerings to gain market share. This segment has a great prospect for development in the future.
6. ESG Initiatives
ESG – Environmental, Social, and Governance practices have been adopted at ITC which comprises sustainable agriculture, renewable resources, and social development issues. This is quite appealing to ESG-conscious investors.
You can use stock screener to get a deeper understanding of financials, balance sheet, cashflows, share holding pattern, corporate action, peer comparison and more.
The Bottom Line
ITC stands as a unique investment opportunity, combining stable cash flows from tobacco, high growth potential in non-cigarette FMCG, and a commitment to sustainability. While it carries certain risks, it offers diversification, attractive dividends, and the potential for long-term value creation.
Whether to invest in ITC or not is determined by one’s investment objectives, risk appetite, and investment plan.
