If you have ever used household brands like Gold Flake, Classic, India Kings, Ashirwad, Sunfeast, or Yippee noodles, you are likely familiar with the maker behind them, ITC Ltd. Starting out primarily as a tobacco producer, this 116-year-old enterprise has spent decades attempting to cement its footprint across the fast-moving consumer goods sector. However, the broader market appears to have cooled on the stock, pushing the company from its past standing among India's top 10 most valued firms down to the 23rd position. While ITC stock has remained virtually stagnant over the last five years, it continues to boast a robust return on equity of 25.99 percent alongside a relatively low price-to-equity ratio of 17.45x.
Current Share Price and Recent Market Correction
At present, shares of ITC trade near the Rs 264 apiece mark on the Bombay Stock Exchange, carrying a market capitalization of Rs 3.31 lakh crore. This valuation reflects a steep 38 percent correction from its 52-week peak of Rs 426.50 apiece, bringing the equity uncomfortably close to its 52-week trough of Rs 256.25 apiece. On a year-to-date basis, the stock has dropped over 27 percent, while slipping more than 35 percent over the trailing twelve months. Looking at a five-year horizon, the counter has endured a 36 percent decline.
Evolution from Tobacco to Consumer Goods Contender
Over the decades, the corporation expanded its reach to become a prominent contender in the consumer goods arena despite its roots in the tobacco trade. The company's market capitalization, which stood at Rs 5,571 crore back in 1996, crossed the Rs 1 lakh crore milestone in 2005 and pushed past Rs 2 lakh crore by 2012. Up until 2017, ITC held its ground as the largest consumer goods enterprise in the country until Hindustan Unilever surpassed it for the first time in 2018. Even after slipping to the runner-up spot in the sector, the firm managed to retain a spot among the top 10 most valued listed entities, eventually touching an m-cap above Rs 5 lakh crore during 2024.
Valuation Metrics and Market Apathy
Gradually, the company relinquished some of that standing while retaining the title of India's second-largest consumer goods player. Market participants appear to have largely overlooked the equity. Analysts at Kotak Institutional Equities point out that the tobacco business is currently available at approximately 11X 1-year forward earnings per share, indicating that the market anticipates earnings to stagnate indefinitely, undervalues the non-tobacco segments, or maintains broad apathy toward tobacco-related assets.
Understanding 1-Year Forward Earnings Estimates
One-year forward earnings per share refers to the projected profit a company is expected to generate across the upcoming 12-month period, which forms the basis for forward price-to-earnings calculations.
Expected EPS over the next 12 months = Rs 25
The resulting 1-year forward P/E would be calculated as: Rs 500 / Rs 25 = 20x
This indicates that investors are willing to pay 20 times the earnings anticipated from the company over the coming year.
Potential Corporate Split and Previous Restructuring
Returning to the core proposal, analysts suggest that a 16X 2-year forward P/E multiple for the tobacco division remains reasonable. Kotak analysts firmly believe that splitting the tobacco and non-tobacco operations in a 1:2 ratio could unlock substantial hidden value. Corporate restructuring is not entirely unfamiliar to the firm, given that it recently demerged its hospitality division this year. The hotel business was spun off into an independent entity named ITC Hotels Ltd, taking effect from January 6, 2026. Eligible shareholders received one share of the hotel venture for every ten shares held in ITC, while the parent company retained a 40 percent stake and the remaining 60 percent began trading publicly.
Investor Appeal and Segment Growth Projections
Analysts argue that a vertical separation into two distinct legal entities could unlock considerable shareholder value. The tobacco entity would likely attract value-oriented investors seeking reliable growth and high dividend yields, whereas the non-tobacco entity would appeal to growth-focused investors and a wider audience unhindered by environmental, social, and governance concerns tied to tobacco. Overall, analysts model the tobacco segment EBIT to remain flat through the 2026-2029 period, while non-tobacco consumer goods EBIT is projected to compound at a 19 percent annual rate. Consequently, the 12-month target price stands at Rs 360 per share, pointing toward potential upside.
