The announcement of the meeting last week sent the company’s stock soaring more than 7 per cent and has led to a build-up of palpable excitement among investors of all shades. The meeting will start at 10:30 am on Tuesday. The company’s top management is expected to give presentations followed by a question and answer session with the analyst community.
The meeting comes in the backdrop of mixed stock market performance and rising investor concern over the company’s growth prospects.
Over the last year, the company has become part of the dinner table conversation across the investment community. Its backers highlight the company’s strong cash position, high dividends, and balance sheet strength. Its detractors point to low growth, low margins, iffy ESG track record and need for restructuring.
In the past few quarters, ITC has steadily made efforts to address some investor concerns with the company’s management promising overhaul of its capital allocation strategy (read the misadventures of the hotel business) and greater payback to investors via dividends.
“In our view, this step by ITC to become more investor-friendly and catch up with best practices of the peer set is welcome. ITC has been proactively taking feedback from investors over the past few years. We appreciate better disclosures in its quarterly reports,” said Abneesh Roy of Edelweiss Securities.
Analysts are likely to be informed of the company’s growth plans in the fast-moving consumer goods business, especially its motivations in the direct-to-consumer space where it recently acquired a 16 per cent stake in Mother Sparsh.
ESG, environment, social and governance-based investing, is likely to be a dominant theme given the company’s efforts to highlight the progress it has made in various ESG parameters and the underrecognition of the investment community of those efforts.
Roy expects the investment community to pepper the company’s management with questions ranging from the underperformance of the FMCG margins to the demerger of its hotel and tech businesses.
More importantly, institutional investors are likely to ask the management of its plans to buttress the stock price through a share buyback plan given that it has already moved towards a low capex strategy in hotels and is only moderately spending on the non-cigarette FMCG business.
The other focus area for analysts would be any intention of the company to demerge its various businesses including non-cigarette FMCG. However, conversation with high-ranking officials at ITC suggests that the company sees benefits of keeping most of its businesses in-house given the synergies instead of hiving them off.
Whether analysts will leave the meeting more confused or more confident about ITC’s prospects, the company has already won half the battle by making the first move towards greater stakeholder participation.