Look who's invested in ITC

Wednesday 31 October 2012

Insurance companies, Indian government are the mainstay of the tobacco-driven company

It is fairly well known that ITC Limited, India’s biggest blue-chip company, earns its bread and butter from selling tobacco products like cigarettes and cigars. Its revenue for 2011-12 is a mammoth Rs 36,000 crore (US $7.2 billion) and net profit, Rs 6,162 crore ($1.23 billion). 

The share of business from cigarettes in total revenue was Rs 22,248 crore ($4.49 billion) or 62 per cent, with remaining being accounted by the food, hotels, agribusiness and paper boards segments. 

The operating profit of cigarettes business was Rs 6,907 crore (US $1.38 billion) or 80 per cent of the total (Rs 8,571 crore), with marginal losses in other segments such as the food business. This clearly shows that ITC’s cigarettes business is what drives profits in the company.  

What is most-interesting is the list of top 10 public shareholders of this tobacco-driven company—the insurance companies and the government of India. As of the quarter ended September 2012, the Life Insurance Corporation (LIC), other insurance companies and government's Unit Trust of India held a staggering 31.52 per cent equity (through owning shares) of the company (see table).  

Top public shareholders of ITC Limited (as on September 2012)
No. Name of the Shareholder Total Shares held Shares as % of Total No. of Shares
1 Tobacco Manufacturers India Ltd 1,985,564,880 25.27
2 Life Insurance Corporation of India 934,915,387 11.9
3 Specified Undertaking Of the Unit Trust Of India 896,722,590 11.41
4 Myddleton Investment Company Ltd 324,207,960 4.13
5 New India Assurance Company Ltd 162,994,072 2.07
6 General Insurance Corporation of India 144,502,551 1.84
7 Oriental Insurance Company Ltd 129,112,513 1.64
8 National Insurance Company Ltd 123,182,220 1.57
9 Rothmans International Enterprises Ltd 103,303,260 1.31
10 ICICI Prudential Life Insurance Company Ltd 85,591,413 1.09
  Total 4,890,096,846 62.24
Source: Moneycontrol.com

Entities holding stake in a company’s shares expect to profit from its business in the future. So, while the government-owned LIC, which deals with life insurance, held a 11.9 per cent stake in ITC , its private counterpart, ICICI Prudential, owned a 1.09 per cent stake. On the other hand, the Unit Trust of India, a government-owned mutual fund, held a massive 11.41 per cent equity stake. 

The Oxford Dictionary defines ‘insurance’ as “arrange for compensation in the event of damage to or loss of (property), or injury to or the death of (someone), in exchange for regular payments to a company”. If insurance companies and the government are mandated to deal with welfare of their clients and citizens respectively, one wonders why are they investing so heavily in this company. 

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  • Involvement of state-owned

    Involvement of state-owned corporations in cigarette manufacturing company may be legal but not ethical. ITC may influence the government to protect its business interests, it's a complex web of involvement.

    But then what to do? The governments are addicted to the revenues which are generated by liquor and tobacco.

    Clarification needed:

    It's (ITC's) revenue for 2011-12 is a mammoth Rs 36,000 crore (US $7.2 billion) and net profit, Rs 6,162 crore ($1.23 billion).
    The share of cigarettesÔÇÖ business in net profit was Rs 6,907 crore (US $1.38 billion)"

    Total net profit 6,162 crores
    Cigarettes net profit: 6,907 crores
    How is that so? Can you explain me please...

    Posted by: Anonymous | 6 years ago | Reply
  • Thanks for the comment. The

    Thanks for the comment. The figures are re-explained in the corrected article.

    Posted by: Umashankar S | 2 years ago | Reply
  • Looks like ITC are hand in

    Looks like ITC are hand in glove with the Tobacco retailers ... I mean getting a premium brand at a premium of 15 to 20 RS above the MRP is bizarre.,.. And that too as if these cigarette sellers are doing you a great favour ....... Come the budget every year and this is a regular feature .... And no vendor can really do that unless it has the blessings of ITC ..... This is just corporate bullying ....

    Posted by: Anonymous | 6 years ago | Reply
  • who are the owner or parters of tobacco manufactures ltd.

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