ITC advanced further today on sustained buying support, especially from FIIs.

The scrip of the cigarette major was up by 3.21% at Rs 716 on the BSE in afternoon trades, recovering from its low of Rs 641. A substantial volume of over 1.76 lakh shares was recorded on the counter by 12:25 IST. The ITC scrip has risen by 19% to its current level from Rs 602 on 25 March 2003.

Today's rally on the ITC counter was due to good buying support from institutions, especially foreign institutional investors (FIIs). As per market buzz, Morgan Stanley was said to be active on the counter.

The strong support for the ITC scrip was attributed by dealers to the company's excellent growth prospects and announcement of a good dividend for FY 2002-03.

Also, despite the recent legislations against cigarette smoking, reports suggest that the demand for cigarettes has actually increased.

The government's legislations against cigarette advertisements and sponsorships of cultural and sports events by cigarette companies may even prove beneficial to ITC, some analysts believe, as the company used to spend inordinately high amounts on these activities.

Also, the legislations will restrict promotions of foreign brands in India. Foreign cigarette makers were in fact looking at India as a major market for expansion of late.

Late last month, ITC announced  impressive quarterly as well as full year results. For FY 2002-03, ITC registered a net profit growth of 15% at Rs 1,371.35 crore on a increase in net top line by 16% to Rs 5,865.78 crore.

Around 75% of the total revenues last fiscal was from the cigarette business. Agri business was placed second, contributing 14% to the total revenues. Paper and packaging and the hotel business, each contributed 10% and 2% respectively, while the other businesses (like branded garments, greeting cards and packaged foods) shared the rest.

Contribution from these other businesses was at Rs 109.2 crore.

For the fourth quarter ended March 2003, ITC posted a 13% growth in its bottom line to Rs 323.42 crore on a 10% growth in top line to Rs 1,519.86 crore.

Analysts had projected the company's Q4 sales somewhere between Rs 1,437.5 crore and Rs 1,521 crore, a growth of 4% to 10%.

They had forecast the company's net profit in the range of Rs 324 crore to Rs 364 crore, a rise of 13% to 27%. Hence while the top line was at the higher limit of their expectations, the bottom line was in the lower range.

The board of directors of ITC recommended a dividend of Rs 15 per equity share for the financial year ended March 2003, which will be paid on or after 28 July 2003 to those shareholders entitled to it.

Meanwhile, ITC has diversified into lifestyle and food ventures. There are also rumours that the company is now planning to open up lifestyle franchises abroad. ITC has also forayed into other businesses like atta (flour), biscuits and confectionery. Recently, the company merged ITC Bhadrachalam Paperboards with itself.

Analysts said it is the core cigarette business that will lead ITC's growth in the near future. But the lifestyle and food segments are also considered to be of high potential. The company has recently hiked the prices of certain cigarette brands.

The Union Budget for 2003-04 has also proved favourable to the cigarette sector (in an indirect way), by not going in for the customary hike in excise duty on tobacco products. ITC is a dominant player in the cigarette segment, with a 66% market share.

ITC is the 32% subsidiary of British American Tobacco (BAT) plc, the world's largest tobacco company. Local institutions and the public hold 48% and 14% stake in ITC respectively.