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While ITC Ltd. efforts on the overall ESG (environmental, social, and corporate governance) front are truly commendable, the concern over its cigarettes business from an ESG perspective remains at play – as more funds turn ESG-compliant (both globally and in India), affecting the valuations of global cigarette companies, including ITC.
Even if ongoing growth and profitability improvement in ‘Other FMCG’ leads to a 50% Ebit growth compound annual growth rate over FY20–23E, the cigarettes business’ contribution to overall Ebit just barely reduces from 85% in FY20 to 82% in FY23E.
Hence, this does not really move the needle from a cigarettes dependency perspective.
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