Sustain ITC's position as one of India's most valuable and admired corporations through world-class performance, creating growing value for the Indian economy and the Company's stakeholders.
To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value.
Answer: ITC's 'Strategy of Organisation' is crafted in a manner that enables focus on each business while harnessing the diversity of the portfolio to create unique sources of competitive advantage. Please refer to the following link http://www.itcportal.com/about-itc/values/corporate-governance-structure.aspx for details of ITC's Governance Structure.
Answer: ITC has been a consistent performer in terms of shareholder value creation. During the period 2008-09 to 2018-19, Total Shareholder Returns have clocked compound annual growth rate of 20.3% significantly outperforming the Sensex (14.8%).
Answer: The Company posted a steady performance during the quarter amidst a particularly challenging operating environment as aforestated. Gross Revenue for the quarter stood at Rs. 11912.16 crores, representing a growth of 5.0%, driven mainly by Hotels, Agri Business and FMCG-Others (excluding the Lifestyle Retailing Business). Profit after Tax at Rs. 4141.93 grew by 29.1%. Total Comprehensive Income stood at Rs. 3777.71 crores (previous year Rs. 3637.01 crores). Earnings Per Share for the quarter stood at Rs. 3.37.
Answer: On a comparable basis, increase in Other Expenditure is ~4% which is mainly attributable to enhanced scale of operations, higher spends on Advertisement and Trade Developments activities.
Answer: In respect of FMCG-Others segment, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), for Q3 FY20 is at ~Rs. 256 Crores representing a growth of ~48% despite stepped up investments in brand building, gestation and start-up cost of new categories/new facilities.
Answer: The Company has adopted Ind AS 116 "Leases" effective 1st April 2019, as notified by the Ministry of Corporate Affairs (MCA) vide Companies (Indian Accounting Standard), Amendment Rules, 2019, using the modified retrospective method. The adoption of this Standard did not have any material impact on the profit for the quarter ended 30th June 2019.
Answer: The Company has exercised the option permitted under Section 115BAA of the Income-tax Act, 1961 as introduced by The Taxation Laws (Amendment) Act, 2019. Accordingly, the Deferred Tax Liabilities (net) as at 31st March, 2019 (arising mainly on account of the Company's continued focus on 'Make in India' investments across sectors) and the estimate of tax expense for the year ending 31st March, 2020 have been re-measured. The resultant impact is being recognised over the quarters of the financial year.
Answer: The Branded Packaged Foods Businesses represent the largest component of this segment, accounting for ~75% of Segment Revenue. The Personal Care Business and Education and Stationery Products Business cumulatively account for ~15% of Segment Revenue.
Answer: With aspirations to become the No.1 FMCG player in India, the Company continuously evaluates opportunities to grow in the FMCG space.
The choice of category is guided by its growth prospects, profitability profile and the ability of the Company to effectively leverage its institutional strengths with a view to achieving leadership status within a reasonable time frame. Synergies with existing categories in terms of overlap of distribution reach, brand extension possibility, procurement efficiencies etc. are considered while choosing new categories.
The Company is in the process of scaling up its presence in Dairy & Beverages, Chocolates, Coffee and Frozen Snacks in the Branded Packaged Foods business and Liquids & Home Care in the Personal Care Products Business.
Answer: The Branded Packaged Foods Businesses of the Company comprise 'Staples & Meals', 'Snacks', 'Dairy & Beverages', 'Biscuits & Cakes' and 'Chocolates, Coffee & Confectionery'. These Businesses have evolved over a period of time and are currently at different stages of their lifecycles. As such, the revenue dimensions, cost structures and profitability profiles of each of these businesses are distinct from the other. For example, EBIT margin is in the high single digit range for the Staples business (first full year of launch: 2002/03) while the same is in the mid-single digit range for the Snack Foods business (first full year of launch: 2007/08) representing upfront investments towards category development and brand building.
Overall, each category is striving towards achieving best-in-class margins within a reasonable period of time.
Answer: The Personal Care Products Business presently comprise 'Personal Wash & Hygiene', 'Fragrances', 'Home Care', 'Skin Care', 'Health' and 'Talc' categories. The Company continues to make significant investments in this Business primarily in the area of brand building, R&D and product development towards competing effectively with incumbent players comprising firmly entrenched MNCs and domestic companies.
Presently, each category is operating at industry benchmarked gross margins. With enhanced scale and consumer connect, each category is expected to earn best-in-class EBIT margins progressively over the medium-term.
Answer: ITC's endeavour is to become the No.1 FMCG player in India driven by the existing portfolio as well as entry into new categories. In this regard, the Company is aiming for revenue of Rs. 100,000 Crores from the new FMCG businesses by the year 2030.
Over the medium term, the Company seeks to grow revenues of each category within the FMCG-Others segment at a rate which is ahead of industry.
Answer: ITC examines prospects for inorganic growth that arise from time to time not only in this business segment but also in the other businesses. The Company continues to evaluate opportunities to grow its businesses through Acquisitions and Joint Ventures and is guided by considerations such as strategic fit, valuation, financial viability, ease of integration etc.
The Company's 'Savlon' and 'Shower to Shower' brands, acquired earlier, have been leveraged to strengthen its position in the personal care space by expanding its existing product portfolio and gaining access to newer consumer segments and markets. The offerings have garnered significant consumer franchise and are well poised for rapid growth.
'Charmis' brand acquired by the Company in FY18 has been leveraged to re-launch moisturising skin creams with a fresh look & enhanced sensorial experience supported by a focussed campaign showcasing the brand's core value proposition - 'it is the goodness within that glows on the face'.
In FY19, Personal Care Products Business forayed into the floor cleaner segment under the 'Nimyle' brand. The range of herbal floor cleaners was extended to new markets even as it recorded robust growth in existing markets. Plans are on the anvil to scale up the brand's presence across target markets.
Answer: The FMCG-Others Segment delivered a resilient performance during the quarter which witnessed a slowdown in overall growth rates both in urban and rural markets. Categories with relatively higher rural salience remain the most impacted. The Company continues to mitigate the impact of the slowdown through several proactive measures such as enhancing direct reach, introducing targeted relevant offers for value seeking consumers, investing in fast growing channels and extending credit judiciously to select trade partners.
Segment Revenue grew by 6.1% on a comparable basis (excluding the Lifestyle Retailing Business) with most major categories recording steady growth. Segment EBITDA grew by 48% to Rs. 256 crores, with margins expanding by ~230 bps, despite stepped up marketing investments, gestation and start-up costs of new categories / new facilities and uptick in input costs.
The Branded Packaged Foods Businesses delivered a steady performance during the quarter, anchored on innovative product launches and impactful communication campaigns in conventional and digital media.
- In the Staples, Snacks and Meals Business, 'Aashirvaad' atta continued to post robust growth, consolidating its leadership position across markets. Premium atta portfolio comprising Aashirvaad Select, Aashirvaad Multigrain & Aashirvaad Sugar Release Control recorded strong growth. In the Snacks category, the Tedhe Medhe range was augmented with the launch of two innovative variants – 'Herby Spin' and 'Chatpata Swing'. Shortage of potato due to extensive crop damage in parts of Karnataka and Maharashtra caused by excessive rainfall adversely impacted Bingo! potato chips sales. In the Instant Noodles category, the Business introduced 'YiPPee! Quik Mealz Khow Suey', a delicious bowl of noodles designed for on-the-go consumption.
- In the Biscuits and Cakes Business, the recently launched Bounce Cake variants continued to receive excellent response from consumers. During the quarter, the portfolio was augmented with the launch of 'Sunfeast' Bounce Loops in three exciting flavours – Vanilla, Chocolate and Jam. Available in select markets, Bounce Loops is an innovative offering with a delicious open cream layer sprinkled with sparkles on the top.
- In the Confectionery Business, higher salience of multi-unit packs contributed to portfolio premiumisation. The recently launched 'Candyman' Fantastik, a crispy wafer roll filled with luscious choco crème, continues to make rapid strides and garner increasing consumer traction across launch markets.
The Branded Packaged Foods Businesses continued to scale up presence in emerging categories through differentiated offerings such as 'B Natural' Mixed Fruit with Fruit inclusions in transparent bottle format and assortment of 'Fabelle' chocolates crafted specially for the gifting season.
The Personal Care Products Business continued to focus on product mix enrichment led by sustained growth in the Liquids (Handwash and Bodywash) and Floor Cleaner segments. Savlon Handwash is gaining traction and is consolidating its market standing in both value and volume terms. The quarter witnessed a spate of innovative product launches by the Business. The Deodorants product portfolio was expanded with the launch of two refreshing variants for Women under the 'Engage' brand – Engage W5 and Engage W6. The 'Dermafique' range of skin care products was strengthened with the launch of new variants – Soleil Defense Gel Crème & All Matte (best used for sun protection) and Biphasic Micellar Kajal Cleanser.
The Branded Packaged Foods and Personal Care Products Businesses continued to focus on deepening consumer engagement through innovative brand campaigns across key brands in conventional and social media platforms. The Businesses continue to leverage state-of-the-art integrated consumer goods manufacturing and logistics facilities (ICMLs) to service proximal markets in a highly efficient and responsive manner.
The Education and Stationery Products Business strengthened its leadership position in the Notebooks category leveraging a pipeline of innovative products of superior quality and enhanced consumer connect. During the quarter, the Paperkraft portfolio was augmented with the launch of Paperkraft Gift Series, a gift pack comprising a premium executive notebook and a stylish matte black pen. Available in four vibrant colours, the Paperkraft gift series promises consumers with a perfect alternative for the gifting season. New version of the website classmateshop.com was activated with enhanced user experience.
In the Incense Sticks (Agarbatti) and Safety Matches Business, 'Mangaldeep' agarbattis continue to delight consumers, providing innovative and specially crafted fragrances. During the quarter, the Business launched 'Mangaldeep Lo Smoke Agarbattis', a first-of-its-kind agarbatti powered with 'Lo Smoke Technology' that releases 80% lesser smoke as compared to normal agarbattis. In addition, the Business introduced several unique product offerings – Marigold Agarbatti, Treya Dhoop and Pushpanjali Dhoop. 'Mangaldeep Temple' range of dual fragranced agarbattis, launched in the previous quarter with 'Mangaldeep Temple - Lord Jagannath's Favourite Fragrances', was augmented with a new offering dedicated to Baba Vishwanath Temple, Varanasi. Manufactured by local rural women-based self-help groups, the new variants endeavour to help consumers experience the divinity of the temples in their homes.
Please refer to the FMCG - Others section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Answer: The Company continues to make investments in Integrated Consumer Manufacturing Facilities (ICMLs) towards augmenting the manufacturing and sourcing footprint across categories with a view to improving market responsiveness, leveraging fiscal incentives and reducing the cost of servicing proximal markets. These ICMLs are expected to set new benchmarks leveraging scale over a period of time and improving cost efficiencies while ensuring best-in-class product quality. Significant progress was made during the quarter towards constructing state-of-the-art ICMLs at Odisha and Hyderabad towards supporting the rapid scale-up plans in the FMCG Businesses.
Answer: The Business sustained its leadership position in the industry through its unwavering focus on nurturing a portfolio of world-class brands anchored on superior consumer insights, a robust innovation pipeline and superior product development capabilities. The Business continues to introduce new variants and augment its product portfolio, catering to continuously evolving consumer preferences. Key market interventions in recent months include the launch of innovative and differentiated offerings such as Gold Flake Indie Mint, Gold Flake Neo and Classic Rich & Smooth in the premium end, deployment of focused offers under the 'American Club', 'Wave', 'Player's Gold Leaf', 'Pall Mall' and 'Flake' trademarks in strategic markets.
Performance during the quarter reflects the persistent weakness in the overall demand environment, especially in rural markets and wholesale channel, tight market liquidity conditions and the increasing salience of illicit trade especially at the premium end.
Extremely stringent regulations along with a punitive and discriminatory taxation regime on cigarettes in recent years have had numerous negative, albeit unintended repercussions. These include:
- decline in legal cigarette volumes in favour of lightly taxed and tax-evaded tobacco products, resulting in sub-optimisation of the revenue potential of the tobacco sector and significant loss to the Exchequer. It is estimated that on account of illegal cigarettes alone, the revenue loss to the Government is more than Rs. 13000 crores per annum.
- further fillip to the growth of illegal cigarettes in the absence of statutory pictorial and textual warnings on smuggled international brands. As a result, despite accounting for less than 1/10th of the tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5ths of the revenue generated from the tobacco sector.
- widespread availability of illegal cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices.
- a large component of tobacco consumption in the country, aggregating around 68% remaining outside the tax net.
- persistent negative impact on the livelihood of tobacco farmers and others dependent on tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicate that on account of agro-climatic conditions, there is no equally remunerative alternate crop that can be grown in the FCV tobacco growing regions of the country.
It may be recalled that tax incidence on cigarettes increased by over 20% in 2017-18, representing the combined impact of transition to GST and increase in Excise Duty announced in the Union Budget 2017. While stability in taxes since the introduction of GST in July 2017 has provided some relief to the legal cigarette industry, volumes remain significantly below June 2014 levels. Moderation in taxes is critical for addressing the interests of all the stakeholders of this industry, including the tobacco farmers, the Exchequer and the consumers. As in the past, the Company continues to make representations to policy makers for equitable, non-discriminatory, pragmatic, evidence based regulations and taxation policies that balance the economic imperatives of the country and the tobacco control objectives, cognising for the unique tobacco consumption pattern in India.
Please refer to the FMCG - Cigarettes section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Answer: The Government of India, vide an act dated 05 December 2019 has prohibited Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement of Electronic Cigarettes imposing stringent punishment.
Answer: The Business posted a strong performance during the quarter with Segment Revenue and Segment EBITDA growing by 22.2% and 40.1% respectively. There was all-round improvement, with both existing and new properties recording robust increase in RevPAR and F&B sales. Higher room rates and operating leverage aided margin expansion.
The Business commissioned Welcomhotel Amritsar, a 101-room luxury property, exuding the charm of Amritsar's spiritual beauty and vibrant lifestyle. New properties in the ITC Hotels portfolio viz. ITC Kohenur, ITC Grand Goa and ITC Royal Bengal continued to receive excellent response from discerning guests, raising the bar of service excellence. The Kolkata complex comprising ITC Royal Bengal and ITC Sonar houses 15 signature F&B outlets with access to over 100,000 sq.ft. of banqueting space, making it the most sought after F&B and banqueting destination in the city.
The Business continues to receive industry recognition, winning 4 prestigious Travel + Leisure magazine awards during the quarter. ITC Hotels was acknowledged as the 'Best Luxury Hotel Chain' in the country, ITC Grand Goa as the 'Best Wedding Venue (Domestic)', ITC Royal Bengal as the 'Best New Hotel (Domestic)' and Club ITC as the 'Best Hotel Loyalty Programme'.
The Business also made steady progress during the quarter in the construction of an ITC Hotel in Ahmedabad and Welcomhotels in Guntur & Bhubaneswar.
Please refer to the Hotels section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Answer: Segment Revenue grew by 8.8% as the Business leveraged trading opportunities, especially in Oilseeds, Pulses & Coffee and scaled up its portfolio of value-added products. Subdued demand for leaf tobacco in international markets, relatively steeper depreciation in currencies of competing origins and adverse business mix weighed on Segment Results.
The deep rural linkages and agri-commodity sourcing expertise resident in the Agri Business, including value-addition through identity preservation, traceability and certification are a critical source of competitive advantage for the Company. The Business stepped up strategic sourcing of agri commodities in the current quarter to support the growing requirements of the Branded Packaged Foods Businesses. Milk sourcing network in West Bengal continues to be scaled up to support the growing franchise of the Aashirvaad Svasti range of dairy products. The Business continues to focus on strengthening its portfolio of value-added products to cater to the specific requirements of the food service channel.
Please refer to the Agri Business section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Answer: Performance of the Paperboards, Paper & Packaging Segment continued to be impacted by the subdued demand environment prevailing in the FMCG and liquor industry. While the Paperboards Business witnessed volume growth in Value Added Paperboard segment, a sharp correction in global pulp prices exerted pressure on realisations. The Business continues to make structural interventions in the areas of strategic cost management, improvement in operational efficiencies and import substitution towards enhancing its market standing and competitive advantage.
The Business continues to work towards designing packaging in a way that it reduces the environmental impact arising out of post-consumer packaging waste without affecting integrity of the product. This is being done in a structured manner by optimising design, identifying alternative packaging material with lower environmental impact and suitable end-of-life solutions for packaging waste, further reinforcing ITC's commitment on sustainable development. The Paperboards Business continues to pursue several innovative interventions in the area of sustainable packaging including the recently launched Omegabev and Omegabarr (virgin fibre based boards with a bio-based barrier coating, which are fully biodegradable under suitable composting conditions). These products have received encouraging initial response.
During the quarter, the Packaging and Printing Business was recognised as the 'PrintWeek Printing Company of the Year 2019' and 'Green Company of the Year' for its operational excellence and creative packaging solutions. The Business continues to be acknowledged as a key associate by several large FMCG companies in the country for providing superior packaging solutions.
Please refer to the Paperboards, Paper & Packaging section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Answer: The Company's Capex during the last financial year is tabulated below:
Answer: The Company's capex plans are directed primarily towards capacity gearing, productivity enhancement, ensuring the highest standards in quality and environment, health & safety, and R&D.
One of the key elements of the capex plan going forward is to invest in setting up state-of-the-art owned integrated consumer goods manufacturing and logistics facilities across regions in line with long-term demand forecasts. Currently, over 15 projects are underway and in various stages of development - from land acquisition/site development to construction of buildings and other infrastructure.
The Hotels Business made steady progress during the quarter in the construction of an ITC Hotel in Ahmedabad and WelcomHotels in Guntur & Bhubaneswar. Most of the planned investments in the current capex cycle would have been completed with the commissioning of these hotels. Going forward, the Company shall enhance the scale of the Business by adopting an 'asset-right' strategy that envisages building world-class tourism assets for the nation and growing the footprint of managed properties by leveraging its hotel management expertise.
The major items of capital expenditure in the Paperboards, Paper and Packaging segment going forward comprise paperboards capacity augmentation/machine rebuild at the Bhadrachalam unit and capacity augmentation in Cartons and Flexibles packaging at the Tiruvottiyur and Haridwar unit.
Overall, the Company estimates capex of around 10,000 Crores over the next 3 years (excluding investments for inorganic growth and acquisition of trademarks, other intellectual property, etc.). However, this would depend on several factors such as pick-up in economic activity and improvement in demand conditions, timely acquisition of land at desirable locations, obtaining approvals from the concerned authorities in a timely manner etc.
Answer: The increase in Segment Capital Employed is primarily on account of capacity augmentation in FMCG Business, ongoing investments in Hotels and stepped up strategic sourcing of agri commodities in the current quarter.
Answer: Dividend paid out by the Company for the last 5 years is given below:
Please refer to the following link for the Dividend Distribution policy of the Company.
Answer: Inspired by the opportunity to sub-serve larger national priorities, the Company redefined its Vision to not only reposition the organisation for extreme competitiveness but also make societal value creation the bedrock of its corporate strategy. This super-ordinate Vision spurred innovative strategies to address some of the most challenging societal issues including widespread poverty, unemployment and environmental degradation. The Company's sustainability strategy aims at creating significant value for the nation through superior 'Triple Bottom Line' performance that builds and enriches the country's economic, environmental and social capital. The sustainability strategy is premised on the belief that the transformational capacity of business can be very effectively leveraged to create significant societal value through a spirit of innovation and enterprise.
It is pertinent to note that ITC has been ranked #1 globally amongst peers (comprising companies with market capitalisation between USD 38 Bln. and USD 51 Bln.) and overall #3 globally on ESG performance in the Food Products industry by Sustainalytics – a renowned global ESG ratings company. ITC has been rated 'AA' by MSCI-ESG - the highest among global tobacco companies.
ITC is a global exemplar in sustainability, the key highlights of which are given below:
ITC has recently launched a first-of-its-kind model for sustainable management of Multi-Layered Plastic packaging waste in Pune in partnership with SWaCH, a leading waste-pickers cooperative and with active patronage and cooperation from the Pune Municipal Corporation. Leveraging the expertise resident in the ITC Life Sciences and Technology Centre, viable options have been found to convert multi layered plastic waste into useful items of consumption. Efforts are underway to scale up this initiative and replicate the model in other parts of the country.
To contribute to the nation's efforts in combating climate change, the Company's strategy of adopting a low-carbon growth path is manifest in its growing renewable energy portfolio, establishment of green buildings, large-scale afforestation programme and achievement of international benchmarks in energy and water consumption. In FY 18-19, about 41% of the Company's total energy requirements were met from renewable energy sources - a creditable performance given its expanding manufacturing base. The Company is well positioned to benefit from energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. As a responsible corporate citizen, the Company has made a commitment to reduce dependence on energy from fossil fuels. Accordingly, all factories incorporate appropriate green features and premium luxury hotels and office complexes continue to be certified at the highest level by either the US Green Building Council, Indian Green Building Council or the Bureau of Energy Efficiency (BEE).
The Company has adopted a comprehensive set of sustainability policies that are being implemented across the organisation in pursuit of its 'Triple Bottom Line' agenda. These policies are aimed at strengthening the mechanisms of engagement with key stakeholders, identification of material sustainability issues and progressively monitoring and mitigating the impacts along the value chain of each Business.
The Company's 16th Sustainability Report, published during the year detailed the progress made across all dimensions of the 'Triple Bottom Line' for the year 2018-19. This report is in conformance with the latest Global Reporting Initiative (GRI) Guidelines - G4 under “In Accordance - Comprehensive” category and is third-party assured at the highest criteria of “reasonable assurance” as per International Standard on Assurance Engagements (ISAE) 3000.
Please refer to the following link
1. 16th Sustainability Report: https://www.itcportal.com/sustainability/sustainability-report-2019/sustainability-report-2019.pdf for Sustainability Report 2019.
2. ITC Sustainability at a glance: https://www.itcportal.mobi/itc-csr-brochure.pdf
In addition, the Business Responsibility Report (BRR), annexed to the Report and Accounts 2019, maps the sustainability performance of the Company against the reporting framework suggested by Securities and Exchange Board of India.
The Company has prepared its Integrated Report for the financial year 2018-19. As a green initiative, the Report has been hosted on the Company's corporate website at https://www.itcportal.com/about-itc/shareholder-value/index.aspx