ITC Q3 FY25 Results: A Closer Look at the Performance of a Diversified Conglomerate

On Thursday, ITC Ltd, a prominent name in India’s corporate landscape, released its financial performance for the third quarter ending December 31, 2024. The results of this diversified conglomerate offer a blend of challenges and notable opportunities across its varied business segments. While the company reported a 7% year-on-year (YoY) decline in consolidated net profit—?4,935 crore compared to ?5,335 crore in the corresponding quarter last year—there are significant success stories in individual segments that position ITC as a resilient player.

This decline in net profit has been attributed to escalating costs and broader economic challenges. Yet, key achievements in the hotels and FMCG businesses, alongside stability in its cigarette segment, highlight ITC's strategic endurance.

Hotels Business Shines Amidst Transformation

Among ITC’s segments, the hotels business outperformed expectations, posting impressive growth numbers that reflect the strength of this division. Achieving a revenue of ?922 crore, the hotels segment recorded a robust 15% YoY growth despite operating on a strong comparative base from last year. This shows the growing demand for premium hospitality experiences in the Indian market.

Even more remarkable is the segment’s profit before tax (PBT), which surged by 43% YoY to ?302 crore. This leap is credited to improved RevPAR (Revenue Per Available Room), meticulous cost management strategies, and bolstered operational efficiencies. These gains led to an EBITDA margin expansion of an astounding 450 basis points YoY.

A pivotal development this quarter was the official demerger of ITC’s hotels business into a standalone entity, ITC Hotels, effective January 1, 2025. This landmark move is expected to unlock significant shareholder value and enable sharper focus on expansion and innovation in the hospitality space. ITC Hotels is now well-positioned to grow as an independent entity while leveraging its legacy as part of the ITC group.

Cigarette Segment: Steady Growth Amid Challenges

ITC’s cigarette segment continues to perform steadily, showcasing an 8% YoY increase in revenue. With robust contributions to the bottom line, the PBT for cigarettes grew by 4% YoY despite facing several headwinds.

The company’s strategic emphasis on diversifying its portfolio, adopting competitive market initiatives, and tackling illicit trade has supported volume-led growth in this segment. Rising leaf tobacco costs posed challenges, but ITC’s agile approach to pricing, cost optimization, and product mix improvements helped mitigate the impact.

To strengthen last-mile execution, ITC also restructured its trade marketing expenditures, ensuring its products remain competitively positioned in one of its most crucial revenue drivers. While the cigarette vertical may face external pressures, its performance underlines its strategic importance within ITC's diversified model.

FMCG and Other Segments

The FMCG business continues to cement ITC’s position as a leader in this sector. For Q3 FY25, this segment posted an 8% YoY revenue growth, taking ITC's overall revenue to ?20,350 crore. Notably, ITC experienced solid traction across categories like personal care, packaged foods, and health & hygiene products.

Excluding its paper business, ITC saw a 5% YoY increase in EBITDA, while the overall figure grew by 3% YoY. These numbers reflect ITC’s ability to innovate and cater to evolving consumer preferences. Technological investments and supply chain efficiencies have also played a key role in sustaining margins in a competitive market.

On shareholder rewards, ITC’s Board declared an interim dividend of ?6.5 per share for FY25, with the record date confirmed as February 12, 2025. This announcement aligns with ITC’s strategy of fostering investor confidence while focusing on operational excellence.

Outlook for the Future

When evaluating ITC’s overall performance, it is evident that the company not only faces challenges but also capitalizes on its diversified portfolio to maintain resilience. The ability of the hotels and FMCG segments to deliver strong numbers even amidst broader market volatility highlights ITC’s strategic leadership.

The demerger of ITC Hotels opens exciting opportunities for the hospitality division to craft its independent narrative. This move is a testament to ITC’s forward-looking approach, ensuring each business operates with focused expertise to unlock maximum value. Meanwhile, ITC’s core businesses—cigarettes, FMCG, and paperboards—will likely continue to drive growth fueled by innovation and efficiency.

Looking ahead, ITC’s drive to leverage data-driven decision-making, sustainability practices, and market positioning place it well for long-term growth. The focus on rewarding shareholders and operational expansions demonstrates ITC’s commitment to balancing profitability with stakeholder value.

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Disclaimer

This article should not be interpreted as investment advice. For any investment decisions, consult a reputable financial advisor. The author and publisher are not responsible for any losses incurred by investors or traders based on the information provided.