ITC sings swadeshi tune, eyes global play
ITC wants to get into every conceivable product category under the fast-moving consumer goods (FMCG), and even plans to take them global, said chairman Y C Deveshwar.
DNA - 27 Jul 2013
That might not happen soon and it is more of a vision of Deveshwar, who is largely credited with steering ITC's successful foray into non-cigarette FMCG businesses.
"Sooner or later, we would be in every aspect of FMCG," Deveshwar told reporters after the annual general meeting on Friday, adding that the gamut of products would mean everything that can be called an FMCG niche, possibly including segments like laundry and oral care.
While ITC entered the FMCG space a little over a decade back with ready-made garments and paper stationery, its new FMCG businesses consist of personal care and toiletries.
The new FMCG business would start earning profits consistently from the next fiscal after breaking even this fiscal, Deveshwar said.
The division made its maiden profit in the fourth quarter (Q4, January-March) of last fiscal (2012-13) earning Rs 12 crore, but in Q1 of this fiscal, it again slipped to losses due to a difficult market conditions.
ITC also wants its home-grown brands to go global some day after it emerges as a market leader in the domestic market.
"Our first task is to dominate the Indian market. Once that is accomplished, we should look at global market. Otherwise, it would remain just day-dreaming."
Creating brands within the country and then taking it to global markets is not only good for the company but also for the economy, particularly one with a high current account deficit (CAD), Deveshwar suggested.
Get a pack of Vivel shampoo or Aashirvaad atta and help cut down country's CAD -- that was Deveshwar's message to his shareholders.
Unlike scores of multinational corporations masquerading as home-grown companies, which make you drink bottled water, eat their noodles or even change your baby's diapers and then spend a good part of their revenues outside the country as royalties to their parents, ITC does not do that, Deveshwar proudly said.
"These foreign brands have so much been a part of the daily lives of Indian households, and for so long, that most people would genuinely think that they are Indian brands. A majority would have no inkling that every purchase would send value out of the country to the foreign owners," he told shareholders.
Deveshwar said there has been extraordinary increase in royalty payments to overseas entities and don't reflect any noteworthy value-addition from technology transfer by the foreign entities.
"There should certainly be no restrictions or governmental intervention in transactions between two unrelated parties carried out purely on a commercial and arms-length basis. However, such limitless freedom can be misused as an instrument of tax avoidance between two related parties and thus pose a significant risk to the Indian exchequer and to the current account balance," said Deveshwar.
While reiterating that ITC aims to become the country's largest FMCG company in near future, he added that his wish might not get fulfilled in his lifetime.
The size of its new FMCG business, which was just Rs 7,000 crore last fiscal might swell to Rs 1 lakh crore by 2025/30, he said.
Even as ITC tastes success in its FMCG business, its investments in new projects have been slow, stuck in procedural delays.
"We have about Rs 26,000 crore worth of investments in about 40 projects which we plan to invest within the next five years; but all of them are suffering delays," he said.
Last fiscal, ITC invested just Rs 2,000 crore in ongoing projects and this year the figure might go up to about Rs 6,000 crore.