Is it Worth Investing in ITC Share for Long Term?

19 Feb 2021by Pradeep U

Is it Worth Investing in ITC Share for Long Term?

When it comes to wealth creation stories from stock markets the most common ones, we hear time and again are those of Wipro, MRF, TCS, Eicher Motors, Maruti Suzuki, and Page Industries.

These stories talk about how an investment of just Rs. 10,000 turned in crores, thereby creating huge fortunes for patient investors who held on to them despite several market ups and downs.

Call it ignorance or lack of knowledge, the stock of ITC is one such stock that has perhaps not received the kind of attention, it actually deserves in these wealth creation stories.

Before we proceed with the answer to the question “Is it worth investing in ITC share for the long term?” let’s take a look at its history and how it has created a lot of wealth for patient long-term investors.

ITC's history of wealth creation

Twenty years back on 1st Feb 2001, the closing price of ITC stock was Rs. 12. Today the stock is trading at around Rs. 220 levels. So Rs. 10,000 invested in the stock of ITC on 1st Feb 2001 would be worth Rs. 1,83,000 today.

What? Just Rs. 1,83, 000.... Where is the wealth creation story like Wipro, MRF, TCS, Eicher Motors, Maruti Suzuki, and Page Industries which turned a few thousand into crores?

Wait there is more than what meets the eye.

Let’s take an example of an investor who had purchased 100 shares of ITC in 2001.

After a 1:2 bonus issue in June 2006, the number of shares would have gone up to 150. In Sep 2006 post a 10:1 stock split, the investor holding 150 shares of ITC would have 1500 shares in his account.

Post a 1:1 bonus issue in June 2010, the number of shares would have gone up to 3000. In Aug 2010 after a 2:1 stock split, the investor holding 3000 shares of ITC would have 4500 shares in his account.

After a 1:2 bonus issue in May 2016, the number of shares in his demat account would have increased to 6750. Again, there was a 3:2 stock split in Jul 2016. As of result, the quantity of ITC shares held by the investor swelled to 10,125.

At the current price of Rs. 220 the total value of the investment would be Rs. 22,27,500. Here we have used an example of just 100 shares purchased initially. Imagine the kind of gains the investor would have made if the quantity was higher.

Now that we have seen the ITC stock’s history of wealth creation, let’s look at the most important questions a lot of investors are asking:

Is ITC a multibagger stock?

Is it worth investing in ITC stock for the long term?

Is ITC the best FMCG stock for investment?

To know the answer let’s take a look at the stock of ITC from a fundamental perspective.

Diversified business

Cigarettes

ITC is the undisputed market leader in this segment and offers over 14 brands. Some of its popular brands include Classic, Wills, and Scissors. The company also offers a hand-rolled cigars under the brand name Armenteros, in the domestic market which is sold exclusively at select hotels and fine dining restaurants.

FMCG

ITC is a leading player in the FMCG segment in India. Some of ITC's brands with significant market share and huge popularity among consumers include Aashirvaad, Sunfeast, Bingo!, YiPPee!, Candyman, mint-o, and Kitchens of India in the Branded Packaged Foods space.

Personal care products segment

In the Personal Care Products segment, ITC’s popular brands include Essenza Di Wills, Fiama, Vivel, and Superia in the; Classmate and Paperkraft in Education & Stationery products;

Dhoop and agarbatti

Dhoop and agarbatti marketed by ITC under the brand name Mangaldeep are the best-selling and second best-selling brands in their respective segments in the country.

Education and stationery

In the education and stationery business segment, ITC offers products under 2 brands, named Paperkraft and Classmate. While its Paperkraft brand caters to the premium segment, the Classmate brand offers value for money products such as ball pens, gel pens, roller pens, mechanical pencils, geometry boxes, erasers, sharpeners, rulers, crayons, crayons, sketch pens, and oil pastels.

Safety matches

ITC's range of products in this segment with different product features caters to different consumer segments. Some of ITC’s popular brands in this segment include Aim, Ship, and Homelite.

Paperboards and Specialty Papers