ITC shares suffer as second wave curbs likely to hit cigarette business


Shares of cigarettes-to-hotel conglomerate ITC Ltd fell nearly 3% on Wednesday, after the company warned that lockdown restrictions could cause disruptions in its supply chain in the near future.

For fast-moving consumer goods companies (FMCG) such as ITC, selling everything from instant foods, snacks, groceries to cigarettes, supply chain is a key part of operations, allowing them to hawk their wares across the country. A hit to the supply chain would possibly dent volumes and sales.

ITC’s warning on Tuesday came as its money-making cigarette business barely staged a recovery from last year’s nationwide lockdown, with March quarter revenue rising 14% to 58.50 billion rupees ($799.10 million).

Cigarette volumes were slightly short of pre-Covid-19 levels towards the end of the year, according to analysts at Antique Stock Broking.

“ITC’s cigarette division posted a strong outperformance versus peers during the year indicating market share gains. However, fresh restrictions in urban and rural markets may delay cigarette volume recovery going ahead.”

A record surge in coronavirus infections in April and May drove many Indian states to reintroduce limited lockdowns.

ITC reported 1% drop in March quarter profit due to tax expenses, while revenue jumped 24%.

The owner of several brands, including Sunfeast, Savlon and Aashirvaad, said its overall business saw strong recovery in discretionary and out of home products.

Analysts at Prabhudas Lilladher, however, said the lockdowns were temporary hiccups and expect a smart pickup post the first quarter.

ITC shares, which have gained 3% so far this year as of last close, were down 2% at 211 rupees as on 0542 GMT.



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