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ITC aims at Rs 5,000-cr FMCG biz in a decade
The Hindu - 27 Jul 2002

Our Bureau

KOLKATA, July 26

ITC was aiming at an FMCG business of Rs 5,000 crore within the next 10 years at current prices through creation of a superior supply chain.

Addressing a news conference here on Friday, Mr Y.C. Deveshwar, Chairman, said the three new areas of business for the company built around the Internet-based rural intervention were, agri-trading, two-way marketing of products of rural India and fast moving consumer goods (FMCG).

He said the company was now in the process of upgrading its internal IT architecture by creating a Virtual Private Network on which rest its Enterprise Resource Planning, customer relationship management and supply chain management initiatives. He disclosed that the expanded trade marketing capabilities, blended with the state-of-the-art IT transaction backbone and the e-choupal rural network, will provide the basis for a low cost, broadband supply chain fulfilment capability for any consumer product.

He said the ITC share today had enormous potential, and "in the form of e-choupal we have got a good strategy going for the company, which is also in line with national priorities". Calling the IT exercise as part of a big strategy to blend all the core competencies available within the organisation, he said such broadband fulfilment capability was "akin to an FMCG Superhighway which can be used as an effective infrastructural link to align Indian farmers with markets".

Asked what was the business proposition, he said the Superhighway would also serve as a basis for powerful partnerships with other FMCG brand owners who wish to obtain the benefits of such a wide and deep trade marketing and distribution capability.

Over the long term, such strategic partnerships are expected to be the basis for growth in revenues and value for shareholders, he pointed out. In the same vein, he said the rate of new investments in cigarettes and tobacco, which has already witnessed massive investments in the past would slow down.

Pointing that the company was now on average opening four e-choupals every day, he informed that the total investments planned may come to around Rs 100 crore. Some Rs10 crore has already been invested so far (roughly Rs 1 to Rs 1.5 lakh per choupal).

Suggesting that the branded products business would be scaled up gradually, he said a developing country like India cannot afford to throw away its brands created through huge efforts over the years.

Commenting on the core business synergies, he said the amalgamation of the paperboards business with ITC marked a strategic milestone towards enlarging the wealth generating capability of the enterprise.

Such integration, he felt, has created a new opportunity to strengthen the competitiveness of ITC’s pulp, speciality paper and paperboards segments by unlocking the inherent synergies.

The Bhadrachalam Paper Boards’ merger has created cash flows for ITC through the tax breaks. Asked if he may consider doing the same thing with the hotels business, he said it may be possible to look at that, if felt necessary. This may happen with any subsidiary outfit not working well, he clarified.

Not willing to make any clear-cut statement on the UTI affair, he said they (meaning UTI) would do whatever is good for them. He also clarified that the share purchases in EIH Ltd and VST Industries were a "strategic" investment, and not a "tactical" one. On the hotels front, the Chairman said the company was fully committed to complete the hotels chain, as planned.