BIG REWARD! ITC Allots 30,67,520 Shares To Employees Under Stock Options Scheme

Working at FMCG giant ITC? Then you're in for a treat as the company has issued and allotted a whopping 30,67,520 ordinary shares to its eligible employees under the stock option scheme. ESOPs better known as Employee Stock Option Plans are schemes that allow an employee to own equity shares in a company at a discounted price.

In its regulatory filing on Friday, ITC said, "the Company on 4th August 2023 issued and allotted 30,67,520 Ordinary Shares of 1/- each, upon exercise of 3,06,752 Options by Optionees under the Company's Employee Stock Option Schemes."

Consequently, effective from August 4, 2023, the company's issued and subscribed capital increased to Rs 1246,48,39,501/- divided into 1246,48,39,501 Ordinary Shares of Rs 1/- each.

On Friday, ITC shares closed at Rs 454.90 apiece, down by 0.26% on BSE. The company's market cap was nearly Rs 5.67 lakh crore.

However, in the trading week that ended on August 4th, ITC shares have dipped by at least 2.3% on BSE.

Nevertheless, the stock's half-yearly performance has been robust with a nearly 19% upside on BSE. Year-to-date, the stock has gained by nearly 37%, becoming among the best-performing FMCG stocks compared to peers.

Recently, ITC announced demerger of its hotel business. As per the scheme, ITC will get to hold 40% of the new entity, while the rest of 60% will be directly held by the company's shareholders proportionate to their shareholding in the company. Apart from this, the company will incorporate a new wholly-owned subsidiary as well.

ITC shares will be in focus in the coming days as it will place the demerger proposal for approval by the board in its next meeting scheduled on August 14, 2023.

Amnish Aggarwal - Head of Research, Prabhudas Lilladher believes the demerger of the Hotel business is positive for unlocking shareholder value as 1) it solves capital allocation issue (given hotels business has seen capex of Rs75bn since it was merged into this entity) 2) de-merger will increase ROCE by 19ppt, as Hotels business has ROCE of just ~9.7% with 2.3% contribution to EBIT and 3) lower room additions in the past and low penetration makes outlook positive for the medium term. The near to medium-term outlook for the hotel industry looks favourable with G20, revival in business & foreign tourist travel. Moreover, the new entity will continue to follow an asset-light strategy for the business, while ITC will hold a 40% stake and is open to further partnerships in the separated entity for the long term.

In his note, Aggarwal added, "We believe strong growth momentum in cigarette business and steady margin expansion in FMCG are positives. ITC trades at 25.3x FY25 EPS with ROE/ROCE of 30%+/35%+ and ~80%+ dividend payout. We increase our SOTP based target price to Rs478 (Rs455 earlier, cigarette multiples increased to 22x). Retain 'Accumulate'."

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