London-based BAT is quite a renowned company across the world for selling cigarettes, tobacco, and other nicotine products.
In a significant development in the market shift, ITC Ltd has emerged as the third most valuable tobacco company globally. The company surpassed British American Tobacco (BAT) to bag the particular spot after a sell-off in BAT shares. This highlighted the ITC’s dynamic business diversification.
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London-based BAT is quite a renowned company across the world for selling cigarettes, tobacco, and other nicotine products. The company, in the past week, sold off its shares and that brought its market cap below ITC to $64 billion.
The stock of the company fell sharply after it noted that it would take a hit of around $31.5 billion. In addition to that, the company acknowledged that its traditional combustible market will not survive for a long time.
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It is pertinent to note that the traditional business of tobacco companies has witnessed a dramatic downfall in the aftermath of the evolving stricter regulations and growing awareness of health risks.
Coming back to the ITC, the company’s majority of the profits come from the cigarette segment. Other segments that contribute to the company’s profits are hotels, FMCG, and paper products businesses. In the second quarter, cigarette revenues for the company grew 10% on year to Rs 7,658 crore and generated over 46% of the total revenue of ITC. The particular segment remained the largest contributor as it shared 75% of profits in the quarter.
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On the other hand, the company’s operating profit rose 8% YoY on a high base. In addition to that, it is said to have strengthened its market position through a focused portfolio along with market interventions and swift execution in the business. Till now, the shares of the Nifty company have increased by 35%. There is a 15% gain in the benchmark 50-share index of the company.
The tobacco business constitutes around 37% of the gross revenue of ITC. Despite this, it remains a significant contributor to the company as it constitutes 78% of the company’s profit before tax.
