ITC advanced today on sustained buying support, especially from FIIs, following the company's impressive results.

The scrip of the cigarette major was up by 1.87% at Rs 701.50 on the BSE in afternoon trades, recovering from its low of Rs 688. A substantial volume of over 1.5 lakh shares was recorded on the counter by 14:15 IST.

In the last two sessions after the announcement of its results, the ITC stock has risen by 3.55% from Rs 677.40 on 23 May 2003. Earlier, the stock rose by 16.5% from Rs 602 on 25 March 2003.

The strong support for the ITC scrip, especially from foreign institutional investors (FIIs), is due to the company's excellent  growth prospects and announcement of a good dividend for FY 2002-03.

For FY 2002-03, ITC registered a net profit growth of 15% to 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 registered 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 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.

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. Meanwhile, 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 made by foreign brands in India. Foreign cigarette makers were in fact looking at India as a major market for expansion of late.

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.