| ITC Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities of ITC Limited (ITC).
The ratings continue to reflect the company’s excellent business risk profile due to its presence in diverse businesses, a dominant position in the Indian cigarette market and strong sustainable profitability. The ratings also factor in ITC’s exceptionally strong financial risk profile. These rating strengths are partially offset by exposure to risks inherent in the various businesses. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of ITC and its subsidiaries, step-down subsidiaries, associates and joint ventures (JVs) because of significant business and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
A strong brand, wide product portfolio, established distribution network and robust research and development capability have enabled the company to consolidate its position as the leader in the Indian cigarettes market. The strong brand loyalty of cigarette smokers is reflected in sustained market share and profitability over the years, notwithstanding the increase in duties. ITC’s cigarettes are also exported to the Middle East.
ITC has evolved from a pure tobacco company into a well-diversified business conglomerate, with a strong presence in paperboards, printing and packaging, agricultural commodities, hotels, branded packaged foods, personal care products, stationery, safety matches, agarbatti (incense sticks) and other fast-moving consumer goods (FMCGs). It has also added chocolates, ghee, dairy and frozen food products to its branded packaged foods segment.
Healthy internal cash accrual, low debt and robust liquidity have strengthened the financial risk profile. For fiscal 2022, the consolidated operating margin was 34.1% (34.6% in fiscal 2021). Debt was minimal at ~Rs 6 crore, against large tangible networth of over Rs 60,000 crore as on March 31, 2022. Liquidity was exceptionally strong because of cash and liquid investments (bonds, debentures, mutual funds and bank deposits) of over Rs 29,000 crore as on March 31, 2022.
Weakness:
Regulatory risks in the cigarette business include increase in taxes, and there are competitive pressures in the FMCG segment. These risks are partially offset by the company’s focus on building cost efficiency and strong backward integration in the cigarette business through the leaf tobacco and packaging businesses, and in the agricultural commodity and packaged food business through the robust supply chain and agri-farm network. |
Liquidity: Superior Liquidity is driven by superior cash surplus of over Rs 29,000 crore and cash accrual of over Rs 3,400 crore as on March 31, 2022 after payment of ~ Rs 13,788 crore of dividend. Long-term debt is also negligible. Cash accrual should be sufficient to finance capex and working capital requirement over the medium term. |
Outlook: Stable CRISIL Ratings believes ITC will maintain its robust financial risk profile and strong market position in the various segments in which it operates, over the medium term. |
Rating Sensitivity factors Downward factors
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About the Company ITC operates in a variety of business segments, including cigarettes, paperboards, printing and packaging, agricultural commodities, hotels, branded packaged foods, personal care products, stationery, safety matches, agarbatti and other FMCGs. However, cigarette manufacturing and sales remain its largest economic activity in revenue terms. |
Key Financial Indicators
*based on abridged financials |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable between cash credit limit, working capital demand loan, export packing credit (rupee and foreign currency), inland bill discounting, short-term line of credit, packaging credit, and forwarding credit. |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Long Term Bank Facility* | 1 | Axis Bank Limited | CRISIL AAA/Stable |
| Long Term Bank Facility* | 5 | Citibank N. A. | CRISIL AAA/Stable |
| Long Term Bank Facility* | 50 | HDFC Bank Limited | CRISIL AAA/Stable |
| Long Term Bank Facility* | 5 | ICICI Bank Limited | CRISIL AAA/Stable |
| Long Term Bank Facility* | 1 | Kotak Mahindra Bank Limited | CRISIL AAA/Stable |
| Long Term Bank Facility* | 18 | Standard Chartered Bank Limited | CRISIL AAA/Stable |
| Long Term Bank Facility* | 50 | State Bank of India | CRISIL AAA/Stable |
| Long Term Bank Facility* | 10 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL AAA/Stable |
| Short Term Bank Facility** | 184 | Axis Bank Limited | CRISIL A1+ |
| Short Term Bank Facility** | 180 | Citibank N. A. | CRISIL A1+ |
| Short Term Bank Facility** | 314 | HDFC Bank Limited | CRISIL A1+ |
| Short Term Bank Facility** | 185 | ICICI Bank Limited | CRISIL A1+ |
| Short Term Bank Facility** | 2 | Kotak Mahindra Bank Limited | CRISIL A1+ |
| Short Term Bank Facility** | 420 | Standard Chartered Bank Limited | CRISIL A1+ |
| Short Term Bank Facility** | 150 | State Bank of India | CRISIL A1+ |
| Short Term Bank Facility** | 175 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL A1+ |
**Interchangeable between letter of credit and bank guarantee.
Criteria Details
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