Investing in India: Should you buy ITC?

Indian cigarette maker ITC is one of India's great success stories. And now it's diversifying its business with an aggressive expansion plan into other growth sectors. But could it overreach itself? And should you buy this stock now amid market volatility?

ITC is the largest consumer goods company in India. Until a few years back, it derived more than 90% of its revenues from the sale of cigarettes and tobacco. But this is no longer the case.

Sure, ITC's cigarettes business is still the company's cash cow: indeed, the business generated Rs 57.6bn at an operating level in 2011 for the company. But rather than distributing excess cash as dividends, ITC has chosen to invest in the Indian growth story. Today, ITC's other businesses includes processed foods, apparel, hotels, paper and paperboards, and agri trading.

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