ITC shares gain after subsidiary signs deal to buy Pune-based IT firm

Shares of ITC were trading higher on Friday, in an otherwise weak broader market, after its subsidiary signed a deal to acquire Pune-based IT firm for ₹485 crore. ITC Infotech India, a wholly owned subsidiary of the tobacco-to-hotel conglomerate, has entered into a share purchase agreement for the acquisition of 100% of the share capital of Blazeclan Technologies Private Limited, ITC said in an exchange filing on April 18.

Incorporated in May 2010, Blazeclan is a born-in-the-cloud consulting company providing cloud services on AWS, Azure and GCP, and has been recognised as a niche player in the 2023 Gartner Magic Quadrant for Public Cloud IT Transformation Services.

“This acquisition is expected to augment ITC Infotech’s capabilities to service its customers in a multi-cloud and hybrid cloud environment with a focus on the Partner eco-system to accelerate future growth,” the release notes.

The deal is expected that the proposed acquisition will be completed in 6 to 8 weeks, subject to completion of the customary closing conditions.

Reacting to the news, ITC shares rose as much as 1.4% to ₹424.80 on the BSE after a negative start. Early today, the FMCG heavyweight opened lower at ₹417.60 against the previous closing price of ₹418.95 and touched a low of ₹416.30. The stock rebounded over 2% from the day’s low, while its market capitalisation climbed to ₹5.28 lakh crore.

At the current price, shares of ITC trade 15% lower than its 52-week high of ₹499.60 acclaimed on July 24, 2023, while it gained nearly 7% from its 52-week low of ₹397.95 touched on April 20, 2023. The share price of the Kolkata-headquartered has given a muted return of 6.5% in the last year, while it fell nearly 6% in the past six months. The counter lost over 9% in the calendar year, whereas it rose over 3% in a month.

After a rise of over 150% during the year 2022–2023, ITC started correcting from the top of ₹492, Anand Rathi Research said in its recent technical report. “The stock turned from there making a double bottom formation and we are witnessing a fresh breakout on the daily scale. Thus, we advise traders to go long in the stock in the range of ₹435–430 with a stop loss of ₹399 for the upside target of 500 in 3–6 months,” it says in a report released this month.

The brokerage in its report says that ITC, which operates in 5 business segments - FMCG, hotels, paperboards, paper and packaging, and agri, is expected to see strong growth in its hotel vertical in Q1 FY25 in terms of average room rates (ARRs) and occupancy rates due to mega cricket event Indian Premier League (IPL).

The agency in its report says that the major uncertainties hovering around the stock are over, as London-listed BAT, ITC's largest shareholder, sold a 3.5% stake in the company and is unlikely to reduce its stake below 25%. Last month, the British tobacco giant partially sold its stake in the company, bringing down its shareholding to 25.5% from 29%.

“The key positive for the food business is a shift from unbranded to branded products. For the cigarette segment, it continued to launch several differentiated variants to further strengthen the portfolio,” the report noted.

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