ITC Plans to Invest $4.4 Billion in Five Years

ITC Ltd. (ITC), Asia’s second-largest cigarette maker by market value, plans to invest 260 billion rupees ($4.4 billion) to expand its businesses from cigarettes to hotels after sales grew at the slowest pace in four years.

The company, based in Kolkata, will triple investment in its information technology, hotels, paper and consumer goods businesses to 60 billion rupees in the year that started April 1, Chairman Yogesh Chander Deveshwar said yesterday. ITC will use its profit to make the investment, he said.

The company, which is about 30 percent owned by British American Tobacco Plc (BATS), is accelerating investment to boost profit and sales that analysts forecast will expand at the weakest pace in five years in the year ending March 31. Deveshwar is targeting 1 trillion rupees of revenue from its consumer goods businesses by 2030.

“ITC could use the investment to acquire consumer goods brands,” said Naveen Vyas, a Kolkota-based analyst with Microsec Capital Ltd. “The hotel business is highly capital intensive and expansion may require a lot of funds.”

ITC’s shares, which have risen 28 percent this year, rose 2.6 percent to 368.15 rupees in Mumbai yesterday. The stock has the highest weighting in the benchmark S&P BSE Sensex (SENSEX) index.

The company’s sales may rise 15 percent in the year ending March 31, according to an average estimate of 14 analysts compiled by Bloomberg. That’s the slowest pace since 2009. Profit may rise 18 percent, the data show.

“We would have been a company with much higher rate of growth if we could invest as much as we wanted to,” Deveshwar said at a briefing in Kolkata yesterday. “We would like to invest so fast that we get to a stage where we will have to borrow. Unfortunately, we are not able to because of challenges like getting land,” for our projects, he said without elaborating.

The company on July 25 said net income rose 18 percent to 18.9 billion rupees in the three months ended June. This compared with the 19-billion rupee median of 30 analysts’ estimates compiled by Bloomberg.

To contact the reporters on this story: Pradipta Mukherjee in Kolkata at pmukherjee7@bloomberg.net; Adi Narayan in Mumbai at anarayan8@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.