What is the market smoking on ITC? Why the stock appears to be completely ignored by investors? Explained

ITC Ltd has faced a prolonged period of underperformance, with its stock price declining by approximately 37% over the last three years. This disconnect has occurred despite the company's strong presence in the non-tobacco FMCG and hotels sectors, which have shown consistent growth. Investors have historically been hesitant to invest in the firm due to its dominant tobacco business, which carries regulatory and reputational risks that overshadow its other operations.

Market analysts, including those at Kotak, believe the company is on the cusp of a significant turnaround. They point to the increasing profitability of ITC's non-tobacco segments, which could eventually offset the challenges of its traditional cigarette business. For investors, this creates a scenario where the market may be undervaluing the company's potential, making it a stock to watch closely as the company executes its strategic shift.

Moving forward, the key factor to monitor will be the pace of growth in ITC's non-tobacco businesses. If these segments continue to expand and contribute more to the company's overall revenue, it could help bridge the valuation gap. Investors should also keep an eye on regulatory developments and management commentary regarding the long-term strategy for the tobacco division.