ITC was fueled to a 52-week high of Rs 735 early today on reports that a key Indian state was planning on a total ban on pan masala and guthka.

The scrip of the largest Indian cigarettes maker slipped from that high later to Rs 729.40. That was still higher than yesterday's close by 2.19%. By 10:30 IST, volumes on the counter neared one lakh shares . ITC has now risen 21% from Rs 602 on 25 March 2003.

Reports suggest that the Maharashtra government is planning on measures involving jail sentences of six months to three years for people in possession of or consuming gutkha and paan masala. Thus, Maharashtra will become the only state to impose a total ban on the possession and consumption of gutkha and paan masala.

The measure is seen as a boost for consumption of cigarettes as consumers of the banned products may switch to smoking to quench pangs for intoxication.

But analysts say that this may not entirely be the case. Gutkha and paan masala chewers are mainly found in the lower strata of society and a ban on these products will not see consumers switching to cigarettes. They have, in any case, the option of consuming other forms of tobacco or shifting to beedis.

Yet analysts aver that ITC, in particular, has excellent growth prospects.

Meanwhile, there's speculation over whether new legislation can actually be enforced by the state machiery. Also, despite the recent legislation against cigarette smoking, reports suggest that the demand for cigarettes has actually increased.

The government's legislation against cigarette advertisements and sponsorships of cultural and sports events by cigarette companies may even prove beneficial to ITC, some analysts believe, as the company used to spend inordinately high amounts on these activities. Also, the legislations will restrict promotions of foreign brands in India. Foreign cigarette makers were in fact looking at India as a major market for expansion of late.

Late last month, ITC announced impressive quarterly as well as full year's results. For FY 2002-03, ITC registered a net profit growth of 15% at Rs 1,371.35 crore on an increase in net top line by 16% to Rs 5,865.78 crore.

Around 75% of the total revenues last fiscal was from the cigarette business. Agri business was placed second, contributing 14% to the total revenues.

Paper and packaging and the hotel business, contributed 10% and 2% respectively, while the other businesses (like branded garments, greeting cards and packaged foods) shared the rest. Contribution from these other businesses was at Rs 109.2 crore.

For the fourth quarter ended 31 March 2003, ITC posted a 13% growth in bottom line to Rs 323.42 crore on a 10% growth in top line to Rs 1,519.86 crore. Analysts had projected the company's Q4 sales at between Rs 1,437.5 crore and Rs 1,521 crore, a growth of 4% to 10%.

They had forecast the company's net profit in the range of Rs 324 crore to Rs 364 crore, a rise of 13% to 27%. Hence, while the top line was at the higher limit of expectations, the bottom line was in the lower range.

The board of directors of ITC recommended a dividend of Rs 15 per equity share for the financial year ended 31 March 2003, which will be paid on or after 28 July 2003 to those shareholders entitled to it.

ITC has recently diversified into lifestyle and food ventures. There are also rumours that the company is now planning to open up lifestyle franchises abroad. ITC has also forayed into other businesses like atta (flour), biscuits and confectionery. Recently, the company merged ITC Bhadrachalam Paperboards with itself.

ITC is a 32% subsidiary of British American Tobacco (BAT) plc, the world's largest tobacco company. Local institutions and the public hold 48% and 14% stake in ITC, respectively.