ITC stock cools off; IndusInd resumes uptrend on ‘speculative’ merger talks

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NEW DELHI: Shares of ITC saw profit booking, but other cigarette makers continue to rise for fourth straight session on Friday, boosted by a less-than-expected hike in excise duty proposed for FY18. Shares of IndusInd Bank, on the other hand, continued to climb on its possible buyout of Bharat Financial Inclusion.

ITC declined nearly 1 per cent to Rs 271.95 after rising 7 per cent in the past three trading sessions. Excise duty on cigarettes of all lengths saw a 6 per cent hike in the Union Budget 2017, which was the lowest excise hike on cigarettes in the past five years.

Of central interest now is clarity on cess rates under the imminent GST regime, ICICI Securities said in a note.

“We expect ITC and VST to report EPS CAGRs of 15.9 per cent and 17.2 per cent, respectively over FY16-FY19. These two stocks offer one of the best FCF yields amongst FMCG companies under our coverage. With expectation of tax neutrality to be maintained under GST regime, resulting in single-digit volume growth for the industry, we expect the valuation multiples to expand. We reiterate our BUY rating on both ITC and VST,” the brokerage said.

VST Industries and other cigarette stocks such as Golden Tobacco and Godfrey Phillips were trading up to 4 per cent higher for the day.

IndusInd Bank, meanwhile, rose 1.65 per cent to Rs 1304.70. There are reports that the Hinduja group-controlled IndusInd Bank is in preliminary talks to explore a buyout of Bharat Financial Inclusion (formerly SKS Microfinance), the country's second-largest micro lender in terms of loans outstanding, three sources close to the matter told ET.

The company, however, called the reports speculative.
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