ITC Limited has surpassed British American Tobacco (BAT) to become the third most valuable tobacco business in the world, marking a significant shift in the market.
The shift comes after a decline in the price of BAT shares, which highlights the active business diversification activities of ITC.
ITC becomes 3rd most valuable tobacco business
A Journey Through History
- During the year 1910, the Imperial Tobacco Company of India Ltd., which was a subsidiary of the British parent company, came into being in a humble office located on Radha Bazar Lane in the heart of Calcutta.
- The company moved its office to the location that is now known as Virginia House after purchasing a parcel of land on Chowringhee in the year 1926.
Development of the ITC
The company went through a series of name changes and eventually became known as India Tobacco Company Limited in 1970 and then I.T.C. Limited in 1974. This occurred as the ownership of the business steadily migrated to Indian hands.
The Involvement of BATP
- BAT Plc, which was established in 1902 as a result of a partnership between American Tobacco Company Ltd. and Imperial Tobacco Company Ltd., currently owns a significant 29.04% interest in ITC, which is currently valued at $19.9 billion.
- BAT’s options are restricted by FDI rules in India, despite the fact that the company is considered to be a business that engages in foreign direct investment.
The rise in market capitalization and expansion of ITC
- The most recent trading day revealed that ITC has a market value of $68.6 billion, surpassing the market capitalization of BAT, which is now at $64.9 billion.
- There has been a spectacular rising trend in the shares of ITC, with the company increasing 34.7% in one year and an astonishing 125.5% in three years.
Strategy for Diversification
- ITC’s diversification from tobacco to fast-moving consumer goods (FMCG), hotels, papers, and agricultural items has generated trust among investors.
- In spite of the fact that it only accounts for 37% of ITC’s gross sales at the moment, the tobacco business continues to be a big contributor, accounting for 78% of the company’s profit before taxes.
Problems Facing BAT and the Shift in the Industry
- BAT had a decline as its shares reached multi-year lows, falling by ten percent following a write-down of the value of some US cigarette brands that totaled thirty-one and a half billion dollars.
- This decision highlights a global trend among tobacco firms, which is to place an emphasis on non-combustible goods such as vapes in order to accommodate severe health regulations and changing consumer tastes.
- By the year 2035, BAT intends to have non-combustible items account for fifty percent of its total income.
