Here's why ITC shares are witnessing a slow down

ITC, the Indian conglomerate spread across domains like tobacco, hospitality, FMCG, and paper, has witnessed a drop of 10% in the last month. Even though the FMCG business steams ahead, its tobacco segment faces headwinds as reports of a major shareholder selling out have emerged.

Cigarettes are the core business of ITC, contributing a majority of its revenue. Four out of five cigarettes sold lawfully in India come from ITC. However, the company has experienced a decline in volumes in recent quarters.

The December quarter FY24 witnessed a 2% decline in volume, affecting the crucial mass segment in particular. Furthermore, British American Tobacco (BAT), which owns 29.03% of ITC, intends to raise to ₹21,000 crore by selling between 3.5 and 4% of its stake. The balance sheet of BAT could benefit from this, but the additional supply can put short-term pressure on the price of ITC's stock. Yet, given ITC's significant FMCG footprint and future expansion, long-term investors anticipate possible purchasing opportunities.

The FMCG division of ITC, which includes food, personal care, and stationery, is proving to be a powerful driver. With brands like Aashirvaad, Sunfeast, and Classmate, this market has consistently grown in sales. FMCG items contributed to the overall 5% annual increase at ₹12,757 crore in the December quarter.

ITC's stock price rose in July 2023 at ₹499.70, but it has since underperformed, falling nearly 20% from its most recent peak.