Equi

tyResear
chRepor
t
ofI
TCLtd.

SWEETYKUMARI SAH
ND
MBA2 SEMESTER
18FMPCSKNBO3015
[
ICFAI
UNI
VERSI
TYSI
KKI
M]

Submi
ttedt
o:Mr.Somnath
Chakrabor
ty
PREFACE
Itisa gr eatoppor
tuni
tyforme t o have the SummerI nt
ernshi
p
Programme( SI
P)underMr.S.Chakr
abortysirin“I
CFAIUniver
sit
y”.I
n
accompli
shmentoft hi
sSIP Iam submitti
ng thi
sr epor
ton “Equit
y
ResearchReportonI
TCLtd.
”.

Thisrepor
tprovi
desanopportuni
tytodemons t
rateapplicat
ionofour
knowledge,ski
lland c
ompetencyrequi
red duri
ng t hi
ss ession.Thi
s
proj
ectrepor
thelpsmetodedicat
eourski
llstoanalyzethepr oblem t
o
suggestal
ter
nati
vesol
uti
onsandtoeval
uatethempr operl
y.

Ihavemadeever
ypos
sibl
eat
temptt
opr
epar
ethi
srepor
taner
rorf
ree
proj
ect
.

ACKNOWLEDGEMNET
Iwouldl
ike t
o expr
essmydeepestappr
eci
ati
on t
o al
lthos
e who
pr
ovi
dedmethepossi
bil
it
ytoc
ompl
etet
hisr
eport
.

As pec i
algrat
itudeIgivetoourfac
ultyguide,
Mr.S.Chakrabor
ty,whose
contributi
onins timulat
ingsugges
t i
onsandencouragementaswel las
providingnec essaryinf
ormati
onr egar
dingtheproject
,helpedmet o
coordinatemypr oject
.

Appreci
ati
onandcredi
tals
ogoest
omyc lass
matesi
ndevel
opi
ngthe
proj
ectandtothepeopl
ewhohavewi
ll
inglyhel
pedmeoutwit
hthei
r
abil
it
ies
.
 TABLEOFCONTENTS

SL. TI
TLE
NO.
1. Busi
nessOver vi
ew
2. Fi
nanci
alStatement:
 Profi
t&Los sStat
ement
 BalanceSheet
 RatioAnalysi
s
3. Fi
nalDi
scussion
 I
TCLTD.

ITCheadquarter
edi nKol
kata,WestBengal
.Establi
shedin1910ast he
‘
ImperialTobacco CompanyofI ndi
aLimited’
.I n 1970 the c
ompany
renamedast he‘I
ndiaTobaccoCompanyLi mited’andl aterto‘
I.
T.
C.
Limit
ed’in1974.

I
TCLt
d.:Bus
ines
sOver
view

ITCLt disoneoft hel eadingc onglomer atesc ompanyofI ndi

a,wi t
h
businessinterest
sincigarettes&t obac c
o,pac kagi
ng, agri
-busi
ness,
food,
hotels,l
ifestyl
eretail
ing,pers onalc are,paper&s t
ationeryandbranded
apparels.ITChasadi versi
fiedpr esencei nFMCG,Hot els
,Packaging,
Paperboar ds& Spec i
altyPaper sand Agr i
-Bus i
ness.Int hec i
garett
e
segment ,thec ompanyenj oysmor ethan80% mar ketsharebyvaluein
Indi
a.
 FI
NANCI
ALSTATEMENTS(
Cons
oli
dat
ed)

Theseallfinanci
als t
atementisconsol
idat
edandt heyares howingt he
inc
omes tatement, bal
ancesheet
,rati
oanalys
isandc as
hf l
owr ati
o.This
wholedocumenti smadef orequi
tyresearc
hreportforthecompanyand
basedonannualr eport
softhecompany.I nt
hisreportwewi llanalyze
thefi
nancialris
koft hecompany.Thatmeans,i
sitprofi
tabl
et oinvestin
Anal
yti
calI
ncomeSt
atement

2015 2016 2017 2018 2019

1 NetRevenuefromOperat
ion/Sal
es(
Revenue 38834.
81 39427.
02 58731.
52 47688.
55 49862.
11
f
romoper at
ions-
Exc
iseDuty)

2 Ot
herI
ncome 1256.
51 1548.
73 1761.
53 1831.
86 2173.
79

3 Tot
alI
ncome(
1+2) 40091.
32 40975.
75 60493.
05 49520.
41 52035.
9

4 Oper
ati
ngc
ost 25661.
15 25484.
1 28520.
49 28202.
26 31342.
93

5 Oper
atingpr
ofi
t/Ear
ningbef
oreI
nter
est& 14430.
17 15491.
65 31972.
56 21318.
15 20692.
97
Tax(
3-4)

6 Fi
nanc
eCos
t/I
nter
est 68.
12 58.
47 24.
3 89.
91 45.
42

7 Pr
ofi
tbef
oreTax(
5-6) 14362.
05 15433.
18 31948.
26 21228.
24 20647.
55

8 Tax(
Cur
rentt
ax+Def
err
edTax
) 4596.
42 5371.
96 5549.
09 5916.
43 6313.
92

9 NetI
ncome/
Prof
itaf
terTax(
7-8) 9765.
63 10061.
22 26399.
17 15311.
81 14333.
63

10 Pr
efer
enc
eDi
vidend 0 0 0 0 0

11 Equi
tyDi
vidend 5009.
7 6840.
12 6840.
12 6840.
12 8498

t
hiscompany?Fi
rstwewi
lls
eeeac
h andever
yper
spec
tiveoft
he
s
tatement
s.

Pr
ofi
t&Los
sSt
atement
Intheabovei ncomes t
atementisshowingthat,theyar enotc ons
tant
.
Becausefrom 2015t o2017i t’
sincr
easi
ngandi n2018i twasbi tl
ower
butin2019i tisincreasesthanprevi
ousyear.Forinstance,wec ansee
thatProfi
taftertaxorNeti ncome,i
nthepr eviousyearsfrom 2015to
2017itwas9765. 63,100161.22and26399.17r espect
ively.Butin2018
and2019i twasdr as
ticall
ybecameloweri.
e.15311.81and14333. 63and
theperfor
manc eisnotgoodenough.
 Bal
anc
eSheet

As
set
s

2014 2015 2016 2017 2018 2019

Non-
Cur
rentas
set
s

1 Goodwi
ll
,Br
and,
Lic
enc
e(i
ntangi
bleas
set
s) 407.
05 684.
60 670.
77 676.
9 669.
01 758.
69

2 NetBl
ock(
Proper
ty,
Plant&Equi
pment
s) 12550.
33 14647.
33 14756.
72 15262.
27 15863.
68 18625.
74

3 Capi
talWor
kinPr
ogr
ess 3081.
29 2671.
55 3084.
37 3684.
2 5499.
6 4126.
18

4 I
nves
tment
s 798.
52 807.
68 4556.
45 6803.
24 13240.
86 11695.
99

5 LongTer
mLoansandAdvanc
es 1428.
92 1565.
47 2341.
28 8.
34

6 Ot
herNon-
Cur
rentas
set
s(ot
her
s) 1.
24 1.
24 1.
24 4292.
63 3865.
39 4748.
3

7 Cur
rentt
axas
set
s(Def
err
edTax) 35.
52 38.
57 41.
75 44.
95 47.
98 59.
37

8 I
ncomeTaxAs
set
s(Net
) 61.
56 28.
53

Tot
alN-
CA 18302.
87 20416.
44 25452.
58 30764.
19 39248.
08 40051.
14

Cur
rentAs
set
s

9 6485.
5 6135.
09 6605.
66 10332.
39 10569.
07 13347.
5

Cur
rentI
nves
tment

10 I
nvent
ori
es/
Stoc
ks 8255.
24 8586.
87 9156.
41 8671.
1 7495.
09 7859.
56

11 Debt
ors
/Tr
ader
ecei
vabl
es 2439.
21 1982.
07 1919.
84 2474.
29 2682.
29 4035.
28

12 Shor
tTer
mLoansAndAdvanc
es 816.
2 568.
67 557.
46 6.
78 5.
84 6.
75

13 Bi
ologi
calas
set
sot
hert
hanbear
erpl
ant
s 70.
05 89.
44 84.
41

14 Cas
h&Cas
hequi
val
ent
s(bankbal
anc
e) 3490.
19 7896.
22 7012.
92 333.
07 153.
07 317.
81

15 Ot
herCur
rentas
set
s 1094.
72 405.
43 558.
91 657.
07 1299.
45 2261.
74

17 As
set
shel
dfors
ale

18 Ot
herbankbal
anc
es 2634.
33 2746.
53 3834.
22

Tot
alCA 22581.
06 25574.
35 25811.
2 25179.
08 25040.
78 31747.
27

Tot
alAs
set
s 40883.
93 66,
407.
23 76716.
36 86707.
46 103536.
9 71798.
41

Aver
ageTot
alAs
set
s 53645.
58 71561.
8 81711.
91 95122.
2 87667.
68
 Li
abi
li
ti
es

1 Equi
tyShar
eCapi
tal 795.
32 801.
55 804.
72 1214.
74 1220.
43 1225.
86

2 Res
ervesandSur
plus
/Ot
herEqui
ty 26441.
64 30933.
94 33159.
69 45198.
19 51289.
68 57915.
01

3 Equi
ty/
NetWor
th(
1+2) 27236.
96 31735.
49 33964.
41 46412.
93 52510.
11 59140.
87

4 Mi
nor
ityI
nter
est(
Non-
cont
rol
li
ngi
nter
est
) 203.
03 225.
11 262.
33 294.
74 334.
47 343.
47

NonCur
rentLi
abi
li
ti
es

5 Longt
ermdebt
/li
abi
li
ty 76.
4 60.
68 42.
81 18.
4 11.
5 8.
15

6 Longt
erml
iabi
li
ty-
Non-
int
eres
tbear
ing 174.
49 166.
83 186.
93 199.
63 217.
42 235.
36

7 Def
err
edTaxLi
abi
li
ti
es 1306.
99 1642.
77 1862.
21 1878.
77 1923.
02 2052.
06

8 Ot
hernon-
cur
rentl
iabi
li
ti
es 17.
79 42.
19 6.
51

9 Tot
alN-
CL 28997.
87 33830.
88 36318.
69 48822.
26 55038.
71 61786.
42

Cur
rentLi
abi
li
ti
es

10 Shor
tter
mloans(
Shor
tTer
mBor
rowi
ngs
) 150.
24 195.
39 43.
95 19.
11 17.
35 1.
86

11 Tr
adepayabl
es/
Credi
tor
s 2106.
25 2020.
47 2404.
2 2659.
33 3496.
18 3509.
58

12 Bi
ll
spayabl
e

13 Pr
ovi
si
ons(
shor
tter
m) 5956.
47 6162.
01 8388.
85 61.
16 63.
8 51.
38

14 Ot
herCur
rentLi
abi
li
ti
es 3673.
1 3782.
04 4108.
09 3327.
46 4610.
39 4838.
32

15 Ot
herf
inanc
iall
iabi
li
ti
es 903.
25 993.
87 1187.
16

16 Cur
rentt
axl
iabi
li
ti
es 150.
7 68.
56 423.
69

11886.
06 14945.
09 7121.
01 9250.
15 10011.
99

Tot
alCL 12159.
91

Tot
alLi
abi
li
ti
es 69881.
8 79821.
67 87582.
47 104765.
5 119327.
6 71798.
41

Fac
eval
ue 1 1 1 1 1 1

No.
ofs
har
esi
ssueds
ubs
cri
bed&pai
d-up 795.
32 801.
55 804.
72 1214.
74 1220.
43 1225.
86
Aver
ageTot
alEqui
ty 29486.
23 32849.
95 40188.
67 49461.
52 55825.
49
 2014 2015 2016 2017 2018 2019

Pr
ofi
tabi
li
tyRat
ios

1 Ret
urnonEqui
ty(
RoE) 33.
01% 30.
8% 29.
6% 56.
9% 29.
2% 24.
2%

2 Ret
urnonCapit
al 45.
0% 26.
6% 25.
1% 40.
2% 22.
6% 33.
5%
Employed(
ROCE)

3 Ret
urnonas
set
s(ROA) 31.
9% 21.
7% 20.
2% 36.
9% 20.
6% 28.
8%

4 Operati
ngPr
ofi
t 37.
0% 37.
2% 39.
3% 54.
4% 44.
7% 41.
5%
Margin(
OPM)

5 NetPr
ofi
tMar
gin(
NPM) 25.
5% 25.
1% 25.
5% 44.
9% 32.
1% 28.
7%

6 Ear
ningspers
har
e(EPS) 11.
304406 12.
18343 12.
50276 21.
732362 12.
54624 11.
69271

7 As
set
stur
noverr
ati
o 86.
4% 58.
5% 51.
4% 67.
7% 46.
1% 69.
4%

Lever
ageRat
ios
/Sol
venc
y
Rat
ios

1 Debt
-Equi
tyRat
io 0.
28% 0.
19% 0.
13% 0.
04% 0.
02% 0.
01%

2 Debt
/As
setRat
io 0.
19% 0.
09% 0.
06% 0.
02% 0.
01% 0.
01%

3 I
nter
estc
over
ager
ati
os 2049.
91 21183.
5% 26495.
0% 131574.
3% 23710.
5% 45559.
2%

Li
qui
dit
yRat
ios

1 Cur
rentr
ati
o 190.
0% 210.
3% 172.
7% 353.
6% 270.
7% 317.
1%

2 Quickr
ati
o/Ac
id-
tes
t 120.
5% 139.
7% 111.
4% 231.
8% 189.
7% 238.
6%
rat
io

Di
videndRat
io

1 Di
videndPers
har
e 5.
9999874 6.
250016 8.
5 5.
6309334 5.
60468 6.
932276

2 Di
videndpayoutr
ati
o 53.
1% 51.
3% 68.
0% 25.
9% 44.
7% 59.
3%

Gr
owt
hRat
io

1 NetRevenue 10.
0% 1.
5% 49.
0% -
18.
8% 4.
6%
 Rat
ioAnal
ysi
s

2 Oper
ati
ngPr
ofi
t 10.
5% 7.
4% 106.
4% -
33.
3% -
2.9%

3 NetPr
ofi
t 8.
6% 3.
0% 162.
4% -
42.
0% -
6.4%

The above graph i

sshowi
ng aboutRetur
n on Equi
ty(RoE)ofthe
por
tfoli
o.ReturnonEqui
tys
howsabouttheprof
it
abi
li
tyoft
hecompany
i
nfutureorweathert
hecompanywi
llbeprofi
tabl
einf
utur
eornotand
t
hereturntheygi
ventot
hei
requi
tys
hareholders.

Explaini
ngaboutI TCltd,itisagoodc ompanybutbec aus eofglobal
growth and industry decli
ning thi
sc ompany’sperf
ormanc eisal so
affect
ed.Inpreviousyearsfrom 2014t o2017i twasgrowi ngbutf r
om
2018i ti
sdecli
ning(29.
20%- 24.20%) .Butal
sowec annotignorethatITC
isnotus i
ngitsasset
spr operl
yt ocreateprofi
ts.I
fthecompanywi llnot
gethigherprofi
t,thant heywi l
lnotbeabl etogivegoodr etur
nstot he
equityholder
s.

Returnonass etsshowst hathow profi

tablyandef f
ici
entl
yac ompany
usi
ngorutil
izesitsassetstogener
ati
ngr evenue.ThehighertheRoA,the
better
,bec
aus ethec ompanyisearni
ngmor emoneyonl essinvest
ment.
I
nI TCwecans eethattheRoAi snotconstantit
’sfl
uctuati
ng,thoughin
2017itwashigher,butin2018itwasdec li
ned.

TheOper
ati
ngpr
ofi
tmar
gins
howst
hathow muc
hpr
ofi
tac
ompany
makesons al
esafterpayi
ngt
heoperat
ingexpens
es .Highl
yvar
iabl
e
oper
ati
ngmarginsareapri
mei
ndi
cat
orofbus
inessr
isk.Themoresal
es,
themoreoper
ati
ngprofi
t.

I
nITClt
d,thec
ompany’
sOPMwasnotvar
iabl
efr
om 2014t
o2016andin
2017itwasonpeek,butfr
om 2018itisbec
ominglower(44.
70%-
41.
50%).

TheNPM i si ndic
atest hatwhet herac ompanyi sgener ati
ngenough
prof
itfrom itssales.Ac ompanyc anhavegr owingrevenue,buti fi
ts
operat
ingc ostsarei ncreasi
ngataf ast
err atethanr evenue,it
sNet
prof
itmar ginwi l
lshrink.Int heabovegraphi tisshowingt hatitwas
moreorl esssamegr owt hf r
om 2014to2016,i n2017itwashi gherbut
fr
om 2018i tislower.Thatmeanst hecompanyi snotabletoc ont
roli
ts
operat
ingcostandt hat’swhyt heNPMget sshri
nk.
Earningpers hares howshow muc hmoneyac ompanymakesf oreach
share.I fEPSi si
nc reasi
ngt hatc ompanyhasbec omeablet ogenerat
e
enough neti nc
ome f orequi tys hareholders.The higher,the EPS
indi
cat esmoreval uebec auseinvestorswillpaymor eforacompanywi t
h
higherpr ofi
ts.Inc aseofI TC,thec ompanywasmaki nggoodpr of
itti
ll
2017, butfrom 2018i tisdec r
easing.ThatmeansEPSofbot hyears2018
and2019i sgoingdown. I
tindicat
est heNeti nc
omeofI TCisfal
li
ng.
I
nI TCl t
dthec onditi
onofDebt -equit yrati
oisexc el
lent,becauseit’
s
goingdownever yyear.Becaus
et helowert hedebt-equityrati
otheless
ris
kforthecompany, thatmeanst hec ompanyhasnothi gheramountof
debtoverequity.ThoughI TClt
dper for manceisnotgoodi n2018and
2019butbymeas ur
ingt hi
srat
iowec ans eethatt
hec ompanywi llhave
lessf
inanci
alr
isk.

I
ftheInterestcoveragerati
oishi
gherthanthecompanywillbeabl
eto
s
ervic
et heirdebt-holder
s.I
nITCltd.t
hec ompanyrecover
edfrom t
he
f
inanci
alri
s kof2018in2019.

Gr
owt
hofI
TCLt
d.:
Thes
earethecas
hfl
owr at
iounderr
ati
oanal
ysi
s,oft
heI
TCl
td.
Theyar
e
measur
edonthebas
isofoper
ati
ngcashfl
ow.
 2015 2016 2017 2018 2019

Cas
hFl
owt
oRevenue 0.
239704 0.
237181 0.
170301 0.
265281 0.
235631

Cas
hRet
urnonAs
set
s 0.
173525 0.
130675 0.
122406 0.
132996 0.
134018

Cas
hRet
urnonEqui
ty 0.
315702 0.
284668 0.
248877 0.
255772 0.
21046

Cas
htoI
ncome 0.
645098 0.
603637 0.
312831 0.
593431 0.
56778

Debtc
over
age 153.
4092 218.
438 505.
9168 1100.
074 1441.
601

I
nter
estc
over
age 136.
654 159.
9338 171.
0624 140.
7057 258.
6757

Underc
ashf
lowr
ati
othes
ethr
eear
emor
eimpor
tantt
oanal
yze.

Aswec ans eethataft

er2015itwasdecreasi
ngbuti n2018i twas
59.
34% andin2019iti
sdec
lini
ng.
ThatmeansITClt
d.hasar
tif
ici
alsal
es
i
nthei
roperati
ngcashfl
ow.
Thesebothdebt-coverageandinter
estcoveragerati
oindi
catesagood
growth,thatmeansI TClt
d.hassuff
ici
entabili
tytorepaythedebtand
theinter
estcostrespecti
vel
y.Aswedi sc
ussed,earl
ierinr
atioanal
ysi
s
t
hatITClt
d.willhavelessfi
nanci
alris
k,bec
aus
etheyhaves
uff
ici
ent
r
esourc
estopaythedebtandint
erest
.

Fi
naldi
scus
sion:

Themos timpor t
antthingisthatit’
snotonl yt hatthec ompanyi snot
doingwel loronl ythecompanyi srespons iblefort helowerperformance
ofthepor tfolio.I
t’sal
soex t
ernalfactorst hataffec tt
heper for
manc eof
company ’ss hares.I t
’saboutmar ketc onditi
onort hei ndustryisnot
growing.Bec auseofvar i
ousfactorst hatper formanc eoft hec ompany
getsaffecteds uchas,Governmentpol ici
es,ec onomi cconditi
onoft he
countryetc.

Themai nreason ofl owerper formanc eoft hepor tfol

ioist hatt he
industr
yisnotgrowi ng.BecauseITCl t
d.isnotabadc ompanyi ntermsof
theirperf
ormance.That ’swhybec auseofc ri
ti
calmar ketconditi
onI TC
ltd.isnotgenerati
ngmuc hr evenueorwec ans ayt hatget t
inglower
performanceofitspor t
foli
oinc ompar i
sontopr eviousyear s
.Theot hers
reasonisthatt
hegl obalgrowthi salsodecli
ning.

Afteranalyz
ingalltheratiosands t
atementwec omet oc onclus
iont hat
i
npr eviousyears2014,2015,2016and2017waspr of
itableyearfort he
company.Buti n2018and2019t hepor t
fol
ioofITCl td.getsdec l
ined.
Because of,aswe ex plained inthe above paragraphs,t he global
decli
ningandi ndustr
ydec lini
ng.Byf i
nanci
alanalysi
swec ans eet hat
thesearenotc onst
ant,i
t’
sf l
uctuat
ing.

As,afinanci
alanal
ystIwoul dr
ecommendthataninves
tors
houldhold
hispos
itioni
nthemar ket
.Ifhewil
lsol
dhi
ssharest
hanhewouldnotget
goodreturn.

ButITCl
td.i
snotabadc
ompanyort
hei
rshar
es.I
TCl
td.i
sadi
ver
sif
ied
busi
ness
.