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ITC Boosts Borrowing Limit to INR500 Crore After Dividend & Stock Split

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  Published in Stocks and Investing on Sunday, December 28th 2025 at 5:25 GMT by Goodreturns

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ITC Boosts Financial Flexibility with Increased Borrowing Limit Following Dividend & Stock Split

Indian tobacco giant, ITC Limited (formerly Imperial Tobacco Company), has significantly bolstered its financial flexibility by increasing its borrowing power to ₹500 crore (approximately $61 million USD). This move comes hot on the heels of recent shareholder-friendly actions including a substantial dividend payout and a stock split, signaling confidence in the company's performance and future prospects. The decision was approved by ITC’s board on November 28, 2023, and reflects the company's ongoing strategy to manage its capital structure effectively while pursuing growth opportunities across diverse sectors.

Background: A Year of Shareholder Value & Strategic Moves

The recent increase in borrowing limits isn’t occurring in a vacuum. ITC has been actively rewarding shareholders throughout 2023. The company declared an interim dividend of ₹5 per share, amounting to a total payout of approximately ₹11,486 crore (roughly $1.4 billion USD) – one of the largest ever dividends distributed by an Indian company. This demonstrates ITC’s strong cash generation capabilities and its commitment to returning value to investors. Prior to that, in September 2023, ITC announced a stock split ratio of 1:10. This effectively multiplies the number of outstanding shares tenfold while proportionally reducing the face value of each share. The primary purpose of this split is to make the stock more accessible and attractive to retail investors, potentially increasing liquidity and broadening the shareholder base. As explained in detail by Business Today, a stock split doesn't fundamentally change the company’s underlying value; it simply divides the existing shares into smaller denominations.

Why Increase Borrowing Power Now?

The decision to increase the borrowing limit is strategically timed, following these shareholder-friendly moves and reflecting ITC’s ambitious growth plans. While the dividend payout and stock split represent a distribution of wealth, increasing borrowing power represents an accumulation of financial resources. The company's rationale centers around several key factors:

• Investment in Diverse Businesses: ITC isn’t solely reliant on its traditional cigarette business anymore. It has significantly diversified into areas like Fast-Moving Consumer Goods (FMCG), hotels, paperboards & packaging, agri-business, and information technology. These sectors require substantial capital investment for expansion, acquisitions, and technological upgrades. The increased borrowing limit provides ITC with the financial muscle to pursue these growth opportunities aggressively. Their FMCG business, in particular, is a key area of focus, aiming to compete effectively with multinational giants like HUL (Hindustan Unilever Limited).
• Managing Working Capital: A large company like ITC requires significant working capital – funds needed for day-to-day operations, including inventory management, accounts payable, and payroll. The increased borrowing limit provides a cushion to manage these fluctuating cash flows effectively.
• Taking Advantage of Market Opportunities: In an ever-changing business environment, opportunities can arise unexpectedly. Having readily available credit allows ITC to swiftly capitalize on potential acquisitions, strategic partnerships, or new market entries that align with its long-term objectives.
• Maintaining Financial Flexibility: Even with strong internal cash generation, maintaining a healthy borrowing capacity is crucial for financial resilience. It provides a safety net during economic downturns or unforeseen challenges.

Details of the Borrowing Limit Increase & Current Debt Profile

The board approved increasing the aggregate limit for borrowings to ₹500 crore. This doesn't necessarily mean ITC will immediately borrow this entire amount. It simply establishes the maximum permissible debt level. According to Moneycontrol, as of September 30, 2023, ITC had outstanding borrowings of approximately ₹36,914 crore (roughly $4.5 billion USD). The increase effectively provides additional headroom for future borrowing needs.

Market Reaction & Future Outlook

The market has generally reacted positively to ITC’s actions. While the stock split itself doesn't impact the underlying value, it often generates positive sentiment among retail investors. The dividend payout was widely welcomed as a testament to the company's financial strength. The increased borrowing limit, while seemingly counterintuitive given the current interest rate environment, has been interpreted as a sign of confidence in ITC’s future growth prospects and its ability to manage debt responsibly.

Analysts remain cautiously optimistic about ITC’s performance. While the cigarette business faces regulatory headwinds due to increasing taxes and health concerns, the company's diversification efforts are expected to contribute significantly to revenue growth in the coming years. The increased borrowing power provides a crucial tool for navigating these challenges and capitalizing on emerging opportunities, positioning ITC for continued success in the Indian market and beyond. The long-term strategy remains focused on building a diversified portfolio of businesses that can weather economic fluctuations and deliver sustainable value to shareholders.

Disclaimer: This article is based on publicly available information and should not be considered financial advice. Investors are advised to conduct their own research before making any investment decisions.