ITC may see sharp improvement in prospects for paper, hotels biz

Pradeep Rane
24 September 2003

Mumbai: ITC is likely to see a sharp improvement in the prospects for paper and hotels businesses during the current year.

According to analysts, things to watch out for are a rebound in cigarette volumes, greater profitability in hotels and paper, lower incremental capex (and therefore higher dividend payouts) and a more moderate duty structure.

Operationally, ITC continues to deliver consistent performance in its core portfolio of cigarettes. But investments in new businesses are peaking and therefore incremental news flow will not be negative. The analysts are concerned over ITC''s low dividend payouts, diversification and the ongoing litigation with regard to excise.

"We see the pricing power in cigarettes as an adequate ammunition to tackle regular excise increases over the longer term," says a report by ASK Raymond James. On the stock market, ITC has provided strong absolute returns over the past six months, however relative to the Sensex it has been a market performer.

The report said that a substantive part (26 per cent) of the capital employed generates sub-par returns.