The market sees an influx of ITC stock, leading to a potential share price decline amid ongoing challenges. Besides the increased tax on cigarettes, ITC grapples with additional obstacles affecting its performance.
ITC, operating in various sectors like cigarettes, FMCG, and hotels, delivered impressive returns over the past two years, with its stock surging by 52.05% in 2022 and 39.38% in 2023, totaling a remarkable 112% increase. However, 2024 paints a different picture, with ITC shares plummeting by 12% to Rs 407 as of February 12. What's causing this downturn, and how should investors respond?
British American Tobacco, ITC's major shareholder with a 29.03% stake, intends to offload 4.03% of its shares, reducing its ITC ownership to 25%. The move comes amidst declining cigarette sales in key markets like the United States and a substantial $40 billion debt burden. The proposed sale, valued at approximately $2.5 billion, is anticipated to flood the market with ITC shares, potentially depressing the share price.
Additionally, ITC faces impending challenges, including the possibility of increased cigarette taxes following the interim budget presentation on February 1, with the full budget slated for July post Lok Sabha elections.
The anticipated tax hike in the upcoming budget, roughly seven months away, adds to ITC's woes.
In light of these challenges, global stockbroking firm Jefferies downgraded ITC's stock rating to 'HOLD,' while slashing the target price from Rs 520 to Rs 430 per share. Consequently, ITC's share price continues its downward trend.
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