JOIN USITC shares tank 3% over worries that Covid-19 curbs may hit cigarette business
Shares of cigarettes-to-hotel conglomerate ITC Ltd fell nearly 3 per cent on Wednesday after the company warned that lockdown restrictions could cause disruptions in its supply chain in the near future.
For fast-moving consumer goods companies (FMCG) such as ITC, selling everything from instant foods, snacks, groceries to cigarettes, supply chain is a key part of operations, allowing them to hawk their wares across the country. A hit to the supply chain would possibly dent volumes and sales.
ITC's warning on Tuesday came as its money-making cigarette business barely staged a recovery from last year's nationwide lockdown, with March quarter revenue rising 14 per cent to Rs 5,850 crore.
Cigarette volumes were slightly short of pre-Covid-19 levels towards the end of the year, according to analysts at Antique Stock Broking.
"ITC's cigarette division posted a strong outperformance versus peers during the year indicating market share gains. However, fresh restrictions in urban and rural markets may delay cigarette volume recovery going ahead."
A record surge in coronavirus infections in April and May drove many Indian states to reintroduce limited lockdowns.
ITC reported 1 per cent drop in March quarter profit due to tax expenses, while revenue jumped 24 per cent.
The owner of several brands, including Sunfeast, Savlon and Aashirvaad, said its overall business saw strong recovery in discretionary and out of home products.
Analysts at Prabhudas Lilladher, however, said the lockdowns were temporary hiccups and expect a smart pickup post the first quarter.
ITC shares, which have gained 3 per cent so far this year as of last close, were down 2 per cent at Rs 211 as on 1112 IST.