ITC no longer among India’s 10 most-valued companies

ITC on Monday lost its spot in the list of India's 10 most-valued companies in terms of market capitalisation after the government in Budget proposed to raise excise duty on tobacco and cigarettes.

ITC Ltd on Monday lost its place in the list of the country’s 10 most-valued companies in terms of market capitalisation after the government proposed a hike in tax on tobacco and cigarettes.

Investors have lost over ₹33,000 crore in market capitalisation in the last two trading sessions with the stock falling over 9.4%, its biggest two-day fall in 18 months. It was at a nearly four-year low after a slew of cut in earnings and the stock’s target price has been cut.

The stock traded at ₹210.00, down 4%, while the benchmark Sensex was at 39,978.48 points, up 0.6%

With a market cap of ₹2.57 trillion, ITC now ranks eleventh, and has been replaced in the top 10 by Bharti Airtel Ltd and State Bank of India with market cap of ₹2.74 trillion and ₹2.68 trillion, respectively.

“The tax increase in the Union Budget comes as a negative surprise and is likely to affect earnings growth in the near term. Based on our workings, the hike in cigarette duties is likely to result in a weighted average consumer price increase of 6-7% for ITC, with price increases being higher at ~8% in 64mm cigarettes,” said Emkay Research in a note to its investors.

The brokerage firm has maintained its ‘hold’ rating on the stock and revised its target price to ₹245 from ₹274 a share.

Finance minister Nirmala Sitharaman, in the Union Budget for 2020-21, proposed a roughly 10% hike in excise duty on cigarettes across lengths.

Brokerages have cut FY21-22 estimates by 4-6% on the stock. Analysts said the valuations have corrected but earnings visibility remains weak given the further increase in cigarette taxes.

“Though the stock is trading at a steep discount to other FMCG peers, we believe that the stock would remain under pressure. Consequently, we are downgrading the stock to ‘Reduce’ with TP of ₹238,” said Dolat Analysis, in a note to its investors.

Brokerage firm SBI Capital has maintained its hold ratings and cut its target price to ₹235 from ₹265 earlier.

Currently, ITC has 29 buy ratings, eight hold ratings, and one sell rating, according to Bloomberg.

Currently, Reliance Industries Ltd is the country’s most valued company with a market cap of ₹8.77 trillion, followed by Tata Consultancy Services Ltd ( ₹8.12 trillion) and HDFC Bank Ltd ( ₹6.57 trillion).

Hindustan Unilever Ltd is number four ( ₹4.49 trillion), followed by HDFC Ltd ( ₹3.92 trillion), Infosys Ltd ( ₹3.32 trillion), ICICI Bank Ltd ( ₹3.26 trillion), Kotak Mahindra Bank Ltd ( ₹3.15 trillion), Bharti Airtel Ltd ( ₹2.74 trillion) and State Bank of India ( ₹2.68 trillion).