| VISION, VALUES AND
VITALITY - PILLARS OF TRANSFORMATION The
potential of an enterprise for wealth creation is set apart by the distinctive amalgam of
its Vision, Values and Vitality. It represents a mix of constancy and change; of a
timeless core and constantly evolving strategies and processes built around the core.
The effectiveness of interplay between these complementary elements determines the extent
to which latent potential is realised. The enlargement of enterprise potential therefore
requires Vision, Values and Vitality to be continuously recharged through practice and
insight, revalidated for relevance and tested for appropriateness to the evolving
competitive context. It is the role of leadership to nurture a unique combination of the
3Vs towards ensuring that the enterprise sustains superior wealth generating capacity in
an environment of escalating competitive pressures. Such leadership, in a multi-business
context like that of your Company, needs to extend beyond the corporate level to the
strategic business units and their constituents. Distributed leadership then engenders
transformation by enhancing adaptive capability and sharpening responsiveness to change.
In line with this thought, I will proceed to illustrate the unique blend of Vision, Values
and Vitality that has powered the transformation of your Company.
Vision
A compelling Vision creates and forges
corporate identity. It imparts a larger purpose and meaning to individual endeavour. It is
aspirational, unifying and motivational. Envisioning a larger societal purpose has always
been a hallmark of ITC, described by me in the past as "a commitment beyond the
market". We articulated a Vision appropriate to the Indian context, tailored around
the deep rural linkages that characterise your Company's value chain relationships. This
compelling Vision of enlarging its contribution to the Indian society has powered your
Company over the past decade. Such a Vision is manifest in multiple forms,
significantly reshaping ITC's profile. The Vision requires each of ITC's businesses to
attain leadership on the strength of international competitiveness. Simultaneously, it has
driven your Company to also consciously contribute to enhancing the competitiveness of the
larger value chains beyond its own operations. This broader commitment has led to the
creation of unique business models that synergise long term shareholder value enhancement
with fulfillment of the larger societal purpose. It has expanded corporate consciousness
in the practice of trusteeship to ensure sustainable wealth creation through contribution
to the 'Triple Bottom Line'. Above all, this superordinate purpose of creating growing
value for the Indian society has inspired your Company's human resource and aligned their
collective endeavour to provide unity of purpose across the organisation.
Values
Values refer to the institutional standards of behaviour that
strengthen commitment to the Vision, and guide strategy formulation and purposive action.
The core Values of your Company are shaped around the belief that enterprises exist to
serve society. In terms of this belief, profit is a means rather than an end in itself, a
compensation to owners of capital linked to the effectiveness of contribution to society
and the essential ingredient to sustain such enlarged societal contribution. Thus your
Company has embraced an extended role of trusteeship that reaches beyond the assets
reflected in the balance sheet to encompass societal assets. An unwavering commitment to
integrity, ethical conduct, meritocracy, teamwork and abiding concern for stakeholders are
at the heart of your Company's value system. The defining trait of ITC however, is
its deeply 'Indian' character that aligns corporate strategy to national priorities. Such
a character flows from the Indianness of its soul rather than the origin of its capital.
As a premier 'Indian' enterprise, ITC consciously engages across the value chains towards
maximising benefit for the Indian society. Such a combination of Values determines
choice of corporate strategy, orients such strategy in favour of Indian value chains
wherever feasible, and engages the organisation willingly in confronting the larger
societal challenges of inclusive and sustainable growth. Your Company's abiding commitment
to society provides depth of moral content and infuses energy across the enterprise, thus
elevating collective corporate effort to the fervour of a mission for the ultimate benefit
of all stakeholders, including you, the shareholders.
Vitality
A compelling Vision and strong Values by themselves could not have radically transformed
your Company without the Vitality that enables robust strategy formulation and world-class
strategy execution. Vitality in ITC is manifest in many ways including the
strengthening competitive capability, the deepening consumer insight, the breakthrough
innovations in products and processes, the ability to rapidly absorb knowledge and harness
technology, the widening bandwidth of distributed leadership, a growing nimbleness to
proactively manage change and adaptiveness to continuously leverage market opportunities.
ITC's robust strategy of organisation, climate of professionalism and time-tested caring
culture constitute the framework for effectively channelising corporate Vitality.
The inspiration, courage and commitment derived from the
Vision and Values have led to growing Vitality. Such Vitality in turn has led to enhanced
market standing and profitability in addition to enlarged contribution across the Triple
Bottom Line. A clutch of global honours and recognition for your Company in the last
several years testifies to the quality of transformation achieved.
In order to fulfill the Vision of making a substantial and
enduring contribution to the Indian society, your Company consciously chose the more
challenging strategy of pursuing multiple drivers of growth, against conventional wisdom.
Your Company is engaged in managing diversity by creating synergies and special strengths
based on cultivating a network of inter-dependencies within the organisation. ITC's
strategy of organisation based on the governance principle of distributed leadership,
seeks to derive the benefits of focus for each business while creatively deploying its
diverse pool of core competencies to generate distinctive sources of sustainable
competitive advantages. Such effective management of diversity further hones the
adaptive capabilities of the organisation towards sustaining long term growth and value
creation.
BUSINESS PORTFOLIO: STRATEGIC
PROGRESS
The strategic progress in each of the
businesses in your Company's portfolio is, I am sure, a source of satisfaction to
shareholders. Your Company has made substantial investments in technology, processes and
systems, innovation and brand building towards acquiring international competitiveness in
terms of quality and cost in each of its businesses. It is a measure of the
continued trust reposed in your Company by consumers that ITC's brands today account for
three of the top five FMCG brands in the country. Shedding undue preoccupation
with tactical results, your Company committed to the Hotels business with substantial
investment even during a prolonged period of downturn in the industry. The rewards of such
commitment are evident today in the rapid strides being made towards attaining leadership
position by the ITC Welcomgroup chain. Over the past three years alone, Segment Revenues
have nearly quadrupled while Segment Results have grown substantially by over 25 times.
Such performance, apart from reflecting world-class hoteliering capability, also reflects
the realisation of intended synergies of the amalgamation of ITC Hotels Limited and Ansal
Hotels Limited with your Company. A robust platform has thus been shaped for
embarking on the next phase of aggressive expansion that would unveil, at first pass, the
finest hotels in Bengaluru and Chennai.
The transformation of the Paperboards business is another
demonstration of long term value creation born out of deep commitment. Substantial
investment across the value chain, coupled with leveraging special insights as a converter
and consumer of high quality packaging, has enabled the turnaround and growth of this
business into a position of undisputed leadership in the Indian paperboard market. The
strengthening competitive capability of your Company's Paperboards business has provided
the impetus to embark on an ambitious expansion plan to service the growing demand for
high quality pulp-based products, including a range of coated and uncoated papers.
Your Company's Agri Business, engaged in innovatively
leveraging digital technology to create value for the Indian farmer, continued to
strengthen its position in domestic and global markets as a leading supplier of high
quality, identity-preserved agri commodities. This business is rapidly developing into a
reliable partner for two-way flow of goods and services in and out of rural markets.
Towards achieving this long term goal, the digital infrastructure of the ITC e-choupal is
being supplemented with a phased rollout of physical infrastructure called ITC Choupal
Saagars to serve as hubs for clusters of villages. While 10 Choupal Saagars are already
operational, 9 more are in an advanced stage of completion. The rural retailing initiative
will be scaled up by another 40 Choupal Saagars in the next 12 to 18 months. This hub and
spoke model is being energised at the village level through sanchalaks and samyojaks drawn
from the farming community, who represent the extended enterprise. The innovative
combination of digital, physical and human assets constitutes the basis for your Company's
deeper engagement with the rural economy through the progressive development of low cost,
broadband fulfillment capability.
New Growth Drivers
Your Company is also engaged in blending the multiple competencies residing in its various
businesses to create new growth drivers in a bid to secure the future. Competencies are
recognised, not by products or physical assets, but by the underlying skills that create
value. To illustrate, the Packaged Foods business draws upon the unique sourcing
capability of the ITC e-choupal, the cuisine expertise of ITC Welcomgroup, the innovation
capacity resident in the ITC R&D Centre and the traditional strengths of branding,
trade marketing and distribution to provide distinctive sources of competitive advantage
in the marketplace. Conceived on the strength of your Company's deep rural linkages, the
Packaged Foods business marks a comprehensive presence across the seed to stomach value
chain. Within barely four years of launch, your Company straddles a wide spectrum of value
added food products comprising: Staples such as atta, spices and cooking pastes, Snack
Foods such as biscuits and pasta, Confectionery and Ready-to-eat foods. The Foods
portfolio now comprises 5 brands - Aashirvaad, Sunfeast, Candyman, Mint-O and Kitchens of
India - and over 100 distinct products.
In a testimony to the growing consumer franchise
and market standing, Aashirvaad and Sunfeast already feature among the most trusted food
brands in a survey by the Economic Times Brand Equity. Aashirvaad atta continues
to cement its position as the clear leader among national branded players. Kitchens of
India has also recently earned the sobriquet of 'Superbrand'. A beginning has also been
made towards marketing ITC's world-class packaged food products in overseas markets under
the Kitchens of India brand.
Your Company's other growth drivers in the FMCG space have
similarly leveraged resident competencies to forge strengthening positions in the
marketplace. The Greeting Cards and Stationery business supplements ITC's presence in the
tree-to-text book value chain with a slew of value added products. The Lifestyle Retailing
business leverages the goodwill of your company's valuable trademarks towards harnessing
the significant market opportunity afforded to India post the dismantling of the
Multi-Fibre Agreement regime. Wills Lifestyle, another Superbrand in the FMCG stable, is
well on the way to becoming the most preferred retail brand. John Players, catering to the
mid-market segment, has earned high industry recognition, winning the 'Most Admired Shirt
Brand of the Year' award at the Images Fashion Awards 2005. Products of daily relevance to
rural markets such as safety matches, incense sticks and iodised salt support the
viability of the rural fulfillment channel, while presenting attractive market
opportunities.
While the synergising of in-house skills is
contributing to the rapid growth of the new FMCG businesses, such growth in turn has also
spurred new opportunities for the other businesses. The addition of spices in the
Foods portfolio and the demand for traceability-led products to meet emerging consumer
needs in domestic and overseas markets has led to the development and pilot marketing of
organic agri inputs for farmers. Your Company's Agri Business is now engaged in enlarging
the scope of organic agri-input options towards offering a total solution package for
farmers, addressing crop protection and crop quality requirements.
Each of these FMCG businesses also contributes to enhancing
the depth and breadth of your Company's trade marketing and distribution capability. The
efficacy of such fulfillment also stands enhanced through the extensive use of Information
Technology across the supply chain, drawing upon in-house skills. ITC's IT-backed
distribution highway today ensures direct servicing of over 85,000 markets of varying
population strata, covering nearly 2 million retail outlets. Further, the Wills Lifestyle
and John Players ranges are retailed to customers through nearly 270 Exclusive Brand
Outlets and shop-in-shops, and over 1500 multi-brand outlets.
Deep domain knowledge, together with diversity of services,
growing global delivery footprint, and world-class infrastructure and processes constitute
a robust platform for your Company's Information Technology subsidiary to strengthen its
market standing in the IT services and IT enabled services segments.
The substantial progress made in strategy implementation
and the resultant financial performance have earned the right for your Company to further
aspire to make a larger contribution to the Indian society.
CONTRIBUTION ACROSS THE
TRIPLE BOTTOM LINE
Your Company's inspiring Vision enables
harmonisation of shareholder value creation with enlarging contribution across the Triple
Bottom Line. Indeed, the creative energies of leadership are directed at crafting and
honing business models that enmesh these goals in a synergistic manner. Just as your
Company's businesses have contributed to strengthening its financial value creating
ability, their impact on enhancing economic, social and ecological capital is also growing
in magnitude and significance. It is my firm belief that the pursuit of such an approach
by the corporate sector can further strengthen the foundation of a fruitful public-private
partnership in the achievement of inclusive and sustainable growth, particularly if
innovative ways could be found to incentivise wider corporate involvement in addressing
social and developmental priorities.
Incentivising CSR: Mobilising
Consumer Support
Detractors of Corporate Social Responsibility seem to lend
conceptual credence to the relative inaction of corporates by viewing CSR as a needless
drag on the owners of capital. It is often argued that initiatives towards enhancing
social and environmental capital are best left to other segments of society. The absence
of direct financial reward further disincentivises corporate responses to developmental
challenges and thus limits the scope and impact of CSR.
In an emerging economy like India's, with the large
challenges of inclusiveness and ecological fragility threatening to undermine the
sustainability of economic growth, no single organ of society possesses the resources to
address these serious issues. The most crucial resource required to address the various
developmental issues is not so much financial as organisational. Although such resources
rest in abundance with the corporate sector, in the absence of incentives, the
organisational capability of the corporate sector tends to be deployed almost exclusively
towards addressing the needs of shareholders through financial performance.
Powerful incentives will emerge when an enlightened
civil society comprising customers, investors, job seekers and policy makers finds the
mechanisms to reward enterprises that integrate social and environmental concerns into
their business models. Financial reward arising from the exercise of preference
by civil society in favour of responsible corporates can trigger substantial corporate
participation in CSR activities. There is already evidence of such a trend emerging in
developed markets. As Indian businesses progressively integrate with the global market,
the need for responsible business conduct will become an imperative for global
competitiveness.
In line with this thought, your Company is engaged
in taking the lead to involve its consumers as partners in progress by bundling CSR as
part of its unique value proposition. By mobilising support of consumers, CSR can
serve as an additional differentiator for your Company's products and services, thereby
simultaneously serving the cause of shareholders as well as society at large. It is hoped
that your Company's example will serve to encourage others in the corporate sector to
contribute more readily with impactful CSR initiatives. In this context, your Company's
support for the setting up of the CII-ITC Centre of Excellence for Sustainable Development
is a sterling example of incentivising CSR through recognition of excellence in
sustainability practices. The Centre seeks to address the institutional void in developing
the requisite capability among Indian industry. The Centre will endeavour to transform
Indian businesses by providing thought leadership, promoting awareness and building
capacity.
The compelling Vision of enlarging contribution to
society has propelled your Company to engage in its unique endeavours to create benchmark
Triple Bottom Line performance. A growing consumer franchise driven by bundling
CSR will provide additional momentum and render long term sustainability to such endeavours by triggering a broader movement.
I know that shareholders of ITC take justifiable pride in
its unique contribution across the Triple Bottom Line. I will therefore, as a matter of
practice, update you on the progress relating to all three dimensions of value creation.
Creating Economic Multipliers
Your Company's conscious engagement with the entire value
chains of which it is a part is resulting in a growing and pervasive economic impact. Over
the past decade, the value addition by your Company has grown at a compound annual rate of
more than 12% to over Rs. 68,000 crores, representing nearly 1.1% of the value added by
the Industry sector of the economy. Nearly 77% of such value added accrued to the
Exchequer, providing the much needed resources for deployment in developmental priorities.
Foreign exchange earnings of the ITC Group during this period amounted to nearly US$ 2.5
billion, of which earnings from agri exports constituted nearly 65%. These earnings from
linking the Indian farmer with world markets represent well over 2% of the country's agri
exports. Your Company's investments of over Rs.6000 crores towards enhancing the
competitiveness of its businesses support direct employment to the tune of 28,000 across
the Group and indirect employment across the value chains of nearly 5 million people,
whose livelihoods are substantially linked to their association with ITC. Amongst
those associated are a number of enterprises in the small scale and cottage sectors which
continue to benefit from adoption of best practices and access to markets. To illustrate,
the Incense sticks business of your Company sources products from 8 vendors in the cottage
sector, who predominantly employ women. Four of these vendors have earned the ISO 9000
accreditation - a first for this industry. Thus the symbiotic partnership between your
Company and such cottage industry vendors leverages complementary strengths for mutual
benefit, thereby enabling these enterprises to flourish without the need for public
largesse. Your Company's investment plans envisaging Rs.14-15,000 crores over the
next few years would further enlarge ITC's economic contribution.
Contribution to Social and
Ecological Capital
The uniqueness of ITC's contribution to enlarging social
and ecological capital lies in being able to enmesh such contribution into the process of
generating shareholder value through creative business models. I am referring to the
innovative ITC e-choupal business model and the ITC farm and social forestry initiatives.
Apart from crafting such business models, your Company is also engaged in implementing
various other social development initiatives towards making a meaningful contribution in
the economic vicinity of its operating locations.
Empowering the small
farmer
The ITC e-choupal initiative is a powerful illustration of linking business purpose with a
larger societal purpose. I have been briefing you on the progress of this young initiative
from time to time. I will now touch upon its potential to empower the small farmer and
thus engender rural transformation.
The ITC e-choupal leverages the power of the Internet to
empower the small and marginal farmer with a host of services related to know-how, best
practices, timely and relevant weather information, transparent discovery of prices and
much more. This digital infrastructure can also be used for channelising services related
to credit, insurance, health, education and entertainment. It can also serve as a strong
foundation for linking small and marginal farmers to futures markets to facilitate farmer
risk management.
The ITC e-choupal is not just a village digital kiosk with
a human interface. The access to e-choupals, within walking distance from the farm gate,
is supplemented through physical infrastructure - the ITC Choupal Saagar - which functions
as a hub for a cluster of villages within tractorable distance. These made-to-design hubs
also serve as warehouses, and as rural hypermarkets for a variety of goods. In
effect, the e-Choupal infrastructure is potentially an efficient delivery channel for
rural development and an instrument for converting village populations into vibrant
economic organisations.
An environment rife with illiteracy, lack of basic
infrastructure and low incomes renders the rollout of this initiative extremely onerous.
Despite daunting implementation challenges the potential benefits of this project have
spurred your Company to seek innovative solutions to overcome constraints. This
infrastructure project now comprises about 6000 installations covering nearly 36,000
villages and serving over 3.5 million farmers. Over the next 7-10 years it is your
Company's Vision to create a network of 20,000 e-choupals and over 700 Choupal Saagars
entailing investments of nearly Rs.5000 crores, thereby extending coverage to 100,000
villages - representing one sixth of rural India. This networked rural delivery
system can contribute significantly towards addressing the 'knowledge deficit' highlighted
so forcefully by the National Commission on Farmers. It can also meaningfully complement
the Bharat Nirman initiative of the government, towards truly securing a 'new deal for
rural India'. The transformational impact of this pioneering initiative continues
to earn global and domestic accolades, the most recent of which is the Stockholm Challenge
Award 2006.
Agro forestry led rural
Renaissance
The labour intensity of agro forestry and the availability of the second highest arable
land mass in the world represent two strategic assets that can be leveraged to transform
the competitiveness of the tree-to-textbook value chain. Your Company's presence in this
value chain provides the basis for a significantly enlarged contribution towards raising
living standards in rural hinterlands. I have been briefing you about this special
initiative in some detail in my past speeches.
So far, more than 149 million saplings have been
planted in nearly 41,000 hectares under ITC's farm and social forestry programmes,
providing over 18 million person days of employment. The output of the agro
forestry programmes accounts for over 91% of the pulp wood requirements of your Company's
mill at Bhadrachalam, thus supporting its competitiveness. The growing
competitiveness of your Company's paperboards business provides the impetus for your
Company to scale up the afforestation endeavour to cover over 100,000 hectares by planting
600 million saplings over the next few years, creating in the process over 40 million
person days of employment among the disadvantaged.
Apart from contributing to enrichment of social capital,
the benefits of your Company's agro forestry initiatives extend to conservation of natural
capital as well. Increasing green cover, in situ moisture conservation, groundwater
recharge, significant reduction in soil erosion and enrichment of depleted soils are some
of the direct environmental benefits.
Other Social Initiatives
Your Company's other social initiatives in the vicinity of its operating locations are
centered around three main areas of intervention under 'Mission Sunehra Kal': (a) natural
resource management, which includes wasteland, watershed and agriculture development; (b)
sustainable livelihoods, comprising genetic improvement in livestock and women's economic
empowerment; and (c) community development, with focus on primary education and health and
sanitation.
Contributing to Natural Resource Management
The soil and moisture conservation programme is designed to assist farmers in identified
moisture-stressed districts. Under your Company's water resource management initiative,
over one thousand water harvesting structures provide critical irrigation to nearly 10,300
hectares. Over the next 5-7 years, your Company intends to create nearly 6300
water harvesting structures and thereby extend critical irrigation to more than 50,000
hectares of rainfed arable land.
Creating sustainable rural livelihoods
The sustainable livelihoods initiative of your Company strives to create alternative
employment for surplus labour and decrease pressure on arable land by promoting non-farm
incomes. Among many such activities, the programme for genetic improvement of cattle
through artificial insemination to produce high-yielding crossbred progenies has been
given special emphasis because it reaches out to the most impoverished. Cattle
development centres already cover more than 1,400 villages, providing integrated animal
husbandry services to more than 35,000 milch animals. The initiative for the
economic empowerment of women has also registered significant progress. Todate, over
10,600 women have been organised under 630 self-help groups. More than 4,000
women have been gainfully employed through micro-enterprises or self-employment backed by
income generation loans.
Contributing to rural community development
Your Company's Community Development Programmes seek to contribute to two of India's most
urgent social priorities aligned to the achievement of the Millennium Development Goals -
health and primary education. About 34,000 women-at-risk and children under 5 are
being covered every year under the Mother and Child Health programme. ITC's
education support programmes are aimed at overcoming the lack of economic opportunities
available to the rural poor. As of now, ITC's rural education initiative covers
over 47,000 children through support to government primary schools and 674 Supplementary
Learning Centres.
CONCLUSION
Inspired by Vision, driven by Values, powered by Vitality,
the journey of the past decade has been most rewarding for your Company's world-class
employees and for me, personally. The real transformation lies in their capabilities,
their commitment to stay the course of a challenging strategic path, and their willingness
to go the distance in their quest for enduring value for the nation and for shareholders.
In the unfolding era of new opportunities and new challenges, I seek your support on their
behalf, as always.
Thank you for your attention.
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