Investing rationale behind ITC

I invested in ITC in 2020.

My average purchase price was 187 INR.

At that point in time, ITC was a Meme stock. A lot of my friends asked why I invested in ITC when there are greater and more exciting high-growth opportunities in the market.

The popular consensus at that time was that ITC is a dead stock (not a dead company) and the only way the stock price would move was if it demerged all its entities.

While I do agree that ITC will never grow as fast as some other small-cap / mid-cap companies what attracted me were the probability of a risk-free 15 % CAGR return.

Here is what I thought at that time.

  1. At that time, ITC was being valued at 12-15 PE. ITC has historically grown earnings at 9-12 percent CAGR. HUL which had the same growth rate was being valued at 70 PE. It simply did not make sense.

ITC was highly undervalued here.

So over a 10-year period, all I wanted was this.

  • ITC keeps growing earnings at 9 % PA
  • Markets get rational and start valuing ITC at 25 PE.
  • Keep Collecting Dividends every year. With Dividends growing at 9 % CAGR

That would make my investment 4x over a period of 10 years.

4x returns in 10 years with virtually Zero Risk of Capital Loss.

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