Archive · 7 Sep 2026
Why Investors Are Ignoring ITC Despite Its Diverse Businesses
ITC owns tobacco and several non-tobacco businesses.
Its share price has fallen sharply compared with the broader market.
Investors seem worried that the tobacco business will not grow much.
They also appear to value ITC’s other businesses cautiously.
Kotak Institutional Equities estimates that tobacco-segment profits will stay broadly flat through FY29.
Kotak expects the non-tobacco business to grow more quickly.
Some investors think that business is expensive compared with similar companies.
Kotak argues that faster growth and possible margin improvements could justify the valuation.
This combination of concerns may explain why investors have largely ignored the stock.
ITC shares fell 37% over three years, while the Sensex gained 15%.
The stock lost 37% over the last year, compared with a 6% Sensex decline.
Kotak says the market expects ITC’s tobacco earnings to stagnate at low levels.
Kotak estimates tobacco-segment EBIT will remain flat from FY26 to FY29.
The non-tobacco business trades at a seemingly high valuation but may grow faster than peers.
- Who
- ITC and its investors; Kotak Institutional Equities provided the cited analysis.
- What
- ITC shares have underperformed because the market expects limited tobacco-business earnings growth and questions the valuation of its non-tobacco businesses.
- When
- The article cites performance over the last three years and one year, and a Kotak report dated 3 September.
- Where
- The performance data comes from the Bombay Stock Exchange, while the analysis concerns ITC’s businesses and market valuation.
- Why
- Investors appear concerned about stagnant tobacco earnings and believe the non-tobacco business may be valued highly relative to peers.
Market Concerns
Kotak’s View
Tobacco earnings
Market Concerns
The market appears to expect tobacco-business earnings to stagnate at low levels and views near-term earnings estimates as too aggressive.
Kotak’s View
Kotak considers a 16-times two-year forward P/E multiple reasonable and says the implied profit growth is similar to estimates for major global tobacco companies.
Non-tobacco valuation
Market Concerns
A 30-times two-year forward EV/EBITDA multiple appears high compared with peers after their recent valuation declines.
Kotak’s View
Kotak believes stronger growth, lower market shares in key categories and potential margin expansion could support the higher multiple.
Overall investment appeal
Market Concerns
The stock’s weak performance suggests investors have little enthusiasm for both its tobacco earnings outlook and non-tobacco valuation.
Kotak’s View
Kotak’s ₹360 sum-of-the-parts valuation indicates that the current market price may not fully reflect the value of ITC’s businesses and cash.
- Three-year share performance
- ITC fell 37%, while the Sensex rose 15%.
- One-year share performance
- ITC fell 37%, while the Sensex declined 6%.
- Kotak target value
- Kotak’s 12-month sum-of-the-parts valuation for ITC is ₹360.
- Tobacco valuation
- Kotak’s reverse sum-of-the-parts analysis implies an approximate 11-times one-year forward EPS valuation for the tobacco business.
- Tobacco earnings outlook
- Kotak estimates tobacco-segment EBIT will be flat from FY26 to FY29.
- Non-tobacco earnings outlook
- Kotak estimates non-tobacco FMCG EBIT will grow at a 19% CAGR from FY26 to FY29.
- Kotak valuation components
- The analysis assigns ₹194 to the tobacco businesses, ₹80 to the non-tobacco business and ₹84 to other businesses and cash.