ITC Next Gen Multibagger

ITC - A Giant about to get un-shackled

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ITC is going to split into three companies in next 12-18 months.

The three companies which are likely to get formed are:

1. ITC Cig Division
2. ITC Hotel Division
3. ITC Agro & Consumer Division

Fourth division which is Infotech likely to get sold as it is not a focus area for company.

Current market valuation for ITC is Rs . 2.60 L crore and after split or Demerger (in next 1 year), combined valuation of all three newly formed companies is estimated to be approx 5.0 L Crores (this means ITC share brought today at Rs 200-215 level, will have combined value of Rs . 385-405).

Once this Demerger is done, ITC Cig Division share will get highest valuation, followed by ITC FMCG share and followed by ITC Hotel Division.

Bonus also is due in ITC and it is expected that after Demerger process gets completed and selling off of Infotech Division, the money received from sale will be utilised to give haftey dividend (for ITC Cig Share) or even possible bonus.

Currently, ITC share does not get proper valuation simply because 60% of business still comes from Cig division and there are lot of FIIs and large investors, who normally give less valuation to cigerate businesses all across world (due to their ethical philosophy), so once the Demerger occurs, other divisions ( mainly ITC Agro & FMCG business) will get much higher valuation in line with FMCG business and this share value will go much higher. (Tata Chemicals merging it's salt business to Tata Global to form Tata Consumer Products is classical case study for getting such valuation. One can see that one & half year before Tata Chemicals was trading at Rs . 625 levels and Tata Global was at Rs 325 levels. Once consumer business of Tata Chemicals got merged with Tata Global, Tata Chemicals now is trading at Rs . 750-760 levels, while Tata Global Trading at Rs 615-620 levels, thus giving 120% returns to Tata Chemical share holder).

ITC Hotels business manages large amount of top quality hotels in India and abroad and also has huge land bank and this will give rich valuation to ITC Hotel business as well.

Analysts are infact expecting ITC FMCG business to become like Hindustan Unilever in next 6-7 years.

So, Analysts are expecting an ITC share which is trading at Rs . 205-215 levels today to have valuation of Rs . 1500-2000 (combined value of all three demerged shares) by 2026-27.(5-6 yrs from now).

Since Demerger process has just started in ITC and Demerger process takes close to 12-15 months (because of lot of regulatory approvals are needed), for next 8-10 months or even one year, one may not see a huge increase in ITC share price & in fact it may remain in Rs . 215-275 levels even in December 2021, but main game will start after December 2021.

Last quarter for first time in life , ITC uploaded its business performance presentation on their website and gave a real peep into ITC as a Coglomerate.

But, if you have Rs . 25,000-Rs. 30,000 to spare (money which can invest and think lost for some time like you do when you buy LIC Payback policy) & spare it for next 6-7-8 yrs, then invest them in ITC at a share price of Rs . 205-215 levels in coming days (if you get at lower levels close to Rs . 190-195 it is better). You will not only get benefitted but possibly you will celebrate your 60th birthday with a major bang. I will not be surprised if your Rs . 25,000.00 invested in ITC may be valued at Rs . 4.0 - 5.0 L by then. (Your investment will be 18-20 times in next 7 years)

But remember, to get such gains, patience is the key, especially in ITCs case. It is a giant, who takes time to pick up speed, but once it starts running, it will shatter earth & ITC management has just made up mind to let the giant be unshackled and run loose.)


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