ITC's Conglomerate Structure Hides Its Peer-Beating Digital Build

Among FMCG stocks, a near-doubling of digital penetration in five years is the kind of operational shift that anchors investor narrative, and stretches valuation multiples. At ITC, around 31% of sales in the branded foods, personal care, and incense sticks and matches portfolio move through digital and modern trade channels. The figure was 17% in 2019-20.

The stock, however, trades at a trailing price-earnings multiple of about 18 to 19. Hindustan Unilever, Nestlé India and Britannia trade in the high forties to mid-fifties. It could be argued that ITC's digital performance sits two layers deep in the disclosures, inside a segment of one business group. 

The valuation, thus, reflects what is visible and not what is buried. Another explanation could be that a part of the gap is the cigarette overhang — regulatory risk, ESG screens, and the February 2026 excise hike that inflated 2025-26 cigarette gross revenue.

A more plausible explanation for the peer valuation gap is ITC's conglomerate structure. Investors who want a focused consumer franchise will not pay for one bundled with paperboards, agri commodities and a digital pivot they cannot model.

ITC’s consolidated revenue of ₹899 billion in 2025-26 from continuing operations is spread across cigarettes, branded FMCG, agri business, paperboards and packaging, and a residual category covering IT services and fresh foods.

The hotels demerger, effective January 2025, removed one non-FMCG layer, but agri business at ₹208 billion revenue in 2025-26 and paperboards and packaging at ₹88 billion, remain both cyclical and capable of headline drag.

The consumer story struggles to surface because the standalone cigarette segment profit, of about ₹211 billion, up 5.1% year-on-year, accounted for roughly 78% of consolidated segment profit.  FMCG-Others, the segment housing the digital build, generated EBITDA of about ₹24 billion, less than a tenth of the group profit. That specific segment's revenue grew to ₹243 billion, EBITDA rose 11.5%, and margin recovered from the 2024-25 trough of 9.8%. Revenue in the Jan-Mar quarter of 2025-26 rose 15.4% year-on-year. 

The build underneath is substantial. The UNNATI eB2B platform now covers about 800,000 outlets, within a broader network of around 7 million. The company has tied up with the Open Network for Digital Commerce to onboard traditional retailers. Machine learning models drive outlet-level SKU recommendations. Quick commerce and social commerce partnerships have moved from pilot to scale. A direct-to-consumer ITC e-Store is operational. None of this, however, is reported as a separate line.

The acquired Digital-First & Organic portfolio — Yoga Bar, Mother Sparsh, Prasuma, 24 Mantra Organic — grew around 60% year-on-year in the December 2025 quarter and had an annualised sales run-rate of roughly ₹11 billion. ITC's FoodTech platform clocked about ₹1.5 billion in sales over the nine months to December 2025, double the prior year. Immaterial against group revenue, but big in growth terms.

Peer disclosure sharpens the contrast. Britannia reported e-commerce salience of 6% of domestic business in FY26, which it argued is closer to 12% after stripping out price points unsuited to the channel; quick commerce delivered about 70% of that. Hindustan Unilever flagged digitally captured demand above 30% but without a comparable time series. Nestlé India's e-commerce contribution moved from 1.3% in 2018 to 6.7% in 2023.

Even allowing for the caveat that ITC's 31% rolls UNNATI, e-commerce, quick commerce and modern trade together while peers report e-commerce-only, ITC's +14 percentage point expansion runs ahead of Nestlé India's +5.4 pp and Britannia's +4 pp over comparable windows.

What ITC does not disclose is the argument settler: how the 31% splits across its component channels, and how many of UNNATI's 800,000 outlets are net additions rather than existing general trade points that have been digitised. Without that, analysts persuaded of the story cannot put it in a model, and the market cannot put it in a multiple.

Conglomerate discounts in India are usually explained through capital allocation. ITC suggests a different mechanism. A consumer business is moving inside a holding structure that reports in aggregate. If investors are unwilling to pay for it, it’s because the disclosures are difficult to see.

(This column reflects the author's personal views and is based on publicly available information. It is intended for general commentary and analytical purposes only and should not be construed as investment advice.)