Top value investors Prashant Jain, Rajeev Thakkar take opposing views on ITC

MUMBAI: On even the best of days, ITC divides the opinions of investors. By any metric, it is the most talked about stock in the Indian equity landscape and generates fervent views from market participants, the likes of which were assumed to be restricted to political issues.

Among domestic institutional investors and analysts, however, ITC has remained a favourite value stock. Such is the cult status of the stock among value-oriented fund managers that having some shares of the cigarette-to-biscuits company in their portfolio is seen as a badge of honour.

In this context, the views of two of the most respected value investors in India — HDFC Mutual Fund’s CIO Prashant Jain and PPFAS Mutual Fund’s CIO Rajeev Thakkar — is worth a close look. Both have become famous for their near-religious devotion to the art of value investing in its most traditional sense. Yet, their respective fund houses’ views on ITC appear to be remarkably different.


Since the end of February, both the veteran fund managers have taken a divergent view on the fast-moving consumer goods company. Jain’s HDFC Mutual Fund has sold ITC stocks every month, while Thakkar’s PPFAS Mutual Fund has bought the scrip consistently in that period, data compiled by East India Securities showed.

For the purpose of analysis, shares of ITC held in arbitrage funds were excluded.


HDFC MF’s selling spree in ITC, however, precedes the current six-month streak. After accumulating more than 130 million shares of ITC in April 2019 to April 2020, Jain has sold more than 84 million shares of the company between May 2020 and last month, barring a few months of buying in between.

For HDFC Mutual Fund, trimming their allocation in ITC is akin to taking it on the chin as the price of the stock fell from an average of Rs 250 during the phase of accumulation in April 2019-April 2020 to an average of Rs 198 during the phase of drawdown in May 2020 to August 2021.

For Thakkar, ITC was an opportunity born out of the pandemic crash of March 2020. In that month, PPFAS Mutual Fund entered ITC by purchasing 7 million shares. Since then, it has added the stock roughly every month to raise its holding to 57 million shares as of August. “We are recent buyers in ITC, after the change in ITC's capital allocation strategy. It's not that ITC is a terrible company in terms of fundamentals, but because the stock price has gone down, people have started to beat it,” Thakker had said last year, explaining why his fund bought the stock.

In the past three years, shares of ITC have sunk 30 per cent, while the Nifty 100 has risen 52 per cent and the Nifty FMCG index has climbed 32 per cent at the same time.

Thakker said many of the wrongs done by ITC in terms of capital allocation over the past decade were getting corrected by the management, as was evident in its promise to curtail capital investment in the hotel business and boost shareholder payout via dividends.

Much of the analyst community, too, remains gung-ho on the stock. Out of the 29 analysts that cover the stock, 16 have a buy call, five have an outperform or equivalent call and seven have a hold or equivalent recommendation. The average price target of the 29 analysts for ITC is currently at Rs 254, implying gains of up to 19 per cent.

Brokerage firm CLSA Global Markets recently reiterated its buy rating on the stock as it suggested that accidents related to capital allocation were unlikely in the future and that the non-cigarette FMCG business was on track for an annualised growth of over 30 per cent. “After the fictional character of Dr. Evil, ITC seems to be the most evil thing in the world, going by the comments and questions we keep getting,” Thakker had said in October last year.

Whether ITC will ever repay Thakker’s faith remains to be seen. But the divergence in the views of the two celebrated value investors in the company typifies the trials and tribulations in being a participant in the ITC journey.