Despite 29 per cent jump in PAT, ITC slumps as government increases NCCD

In the third quarter of FY20, ITC reported five per cent YoY growth in the net sales to Rs 11,912.2 crore. The revenue from cigarettes increased by nearly five per cent while, the revenue from other FMCG business grew by around 3.5 per cent. Hotel business reported stellar ~22.2 per cent YoY revenue growth while, revenue from agri-business and paperboards, paper & packaging segment remained largely flat.

EBITDA in Q3FY20 increased by nearly 6.6 per cent YoY to Rs 4,613 crore with a corresponding margin expansion of 0.56 bps while, EBITDA margin for the quarter was at 38.4 per cent.

PAT for the quarter jumped nearly 29 per cent YoY Rs 4,142 crore. This was due to a lower effective tax rate in Q3FY20.

On the other hand, in Union Budget, presented on February 1, 2020, the government has increased the National Calamity Contingent Duty (NCCD) on cigarettes, depending on its size. Thus to offset this, ITC is expected to hike the price of cigarettes.

With this increase in NCCD, the stock of IT on Saturday fell as much as seven per cent and in today’s trading session, the stock fell nearly six per cent to touch an intraday low of Rs 205 apiece.