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Financial Results for the Quarter ended 30th September, 2016
26 Oct 2016

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Financial Results for the Quarter ended 30th September, 2016



Revenue from Operations up 7.8%

Net Profit up 10.5%

  • Healthy growth in revenue and profit amidst a challenging operating environment.
  • FMCG-Cigarettes Segment continues to be impacted due to severe pressure on legal Cigarette industry even as illegal trade grows unabated resulting in significant revenue loss to the exchequer.
  • FMCG-Others Segment Revenue up 13.3% amidst a persistently sluggish demand environment. Continued improvement in Segment Results despite significant increase in input cost, gestation cost of new categories and sustained investment in brand building.
  • Fabelle range of luxury chocolates well received. 'Fabelle Chocolate Boutique' extended to ITC Maurya, ITC Sonar and ITC Grand Chola during the quarter in addition to the one in ITC Gardenia launched earlier.
  • Paperboards, Paper and Packaging Segment Revenue impacted by subdued demand in FMCG & legal Cigarette industry, zero duty imports under Free Trade Agreement with ASEAN countries and cheap imports from China. Improvement in profitability driven by richer mix and benign input cost.

FMCG | Cigarettes | Hotels
  Agri Business | Paperboards, Paper & Packaging

The Company delivered another  quarter of steady performance despite a challenging operating environment  marked by continuing pressure on legal Cigarette industry volumes, increase in  input cost and subdued demand conditions prevailing in the FMCG industry.  Operating conditions in the Hotels and Paperboards, Paper and Packaging segment  also remained subdued. Revenue from Operations for the quarter stood at Rs.  13491.37 crores representing a growth of 7.8%. Profit Before Tax at Rs. 3826.22  crores and Net Profit at Rs. 2500.03 crores registered a growth of 9.1% and  10.5% respectively during the quarter. Earnings Per Share for the quarter stood  at Rs. 2.07.

Total Comprehensive Income  (TCI) for the quarter stood at Rs. 2474.84 crores representing a growth of  10.2%.

Financial  results for the Quarter and Half year ended 30th September, 2016 have been prepared  in accordance with Indian Accounting Standards (Ind-AS). Results for Quarter  and Half year ended 30th September, 2015 and year ended 31st March 2016 have  been recast in accordance with Ind-AS to facilitate comparison.


Segment Revenue recorded a  robust growth of 13.3% during the quarter amidst weak demand conditions, with  most major categories recording improvement in market standing. Segment Results  improved over the corresponding period in the previous year driven by enhanced  scale and enriched mix offsetting the impact of a significant increase in input  cost, continuing investment in brand building and consumer/trade promotion  activities. Segment Results also include the gestation cost relating to new  categories viz. Juices, Chocolates, Dairy and Health & Hygiene segment in  the Personal Care Products Business.

The Branded Packaged Foods  Businesses posted healthy growth in revenue led by Noodles, Staples, Snacks  and Biscuits categories despite sluggish demand conditions prevailing in the  industry.

- In the Staples, Snacks and Meals Business,  'Aashirvaad' atta continued to perform well consolidating its leadership  position across markets. 'Aashirvaad Sugar Release Control Atta', launched  during the preceding quarter, gained good consumer traction. 

The 'Bingo!' range of snack  foods recorded healthy growth driven by the 'Tedhe Medhe' and 'Mad Angles'  sub-brands. 'Bingo! Yumitos Original Style' potato chips was extended to target  markets during the quarter and posted impressive growth in sales. The 'Tedhe  Medhe Achaari Masti', 'Tangles Masala Cheese' and 'Yumitos Dilli Masala'  variants, which were added recently to the product portfolio, continued to garner  increasing consumer franchise.

In the Instant Noodles  category, 'YiPPee!' continued to perform well in the market leveraging its  superior value proposition anchored on best-in-class product quality, safety  and taste. Product portfolio was augmented during the quarter with the launch  of 'YiPPee! Power Up Masala' - Atta Noodles. The product has received  encouraging consumer response.

- In the Confections Business, the 'Sunfeast Mom's  Magic' range of premium cookies sustained its rapid growth momentum driven by  superior product attributes and investment in brand building. The recently  launched 'Sunfeast Farmlite Digestive All Good' cookies - a 'No maida and No  added sugar' biscuit made from Aashirvaad whole wheat atta - continues to  gather momentum in the market. The Business leveraged its biscuits  manufacturing facility at Mangaldoi, Assam (set up through a joint venture  company viz., North East Nutrients Private Ltd.) to enhance its market standing  significantly in the fast growing north-eastern market. Portfolio  premiumisation continued in the Confectionery category with the share of 'Re.1  and above' products further increasing during the quarter. The recently  launched 'Candyman Jellicious Jelimals' has been well received by consumers and  is being rolled out to target markets.

- The Dairy and Beverages Business scaled up sales of  the 'B Natural' range of juices and also launched 2 exquisitely crafted blends  of gourmet coffee under the 'Sunbean' brand. The brand is currently available  at select ITC Hotels. While 'Sunbean Nicamalai' - a blend of the choicest  coffee beans from Nicaragua and Anamalai in Tamil Nadu - is a fruity-sweet  aromatic coffee with a creamy expression, 'Sunbean Panagiri' - a blend of  select coffee varietals from Panama and Baba Budangiri in Chikkamagaluru,  Karnataka - is an intensely fragrant coffee with a pleasant roasted nutty taste  and a hint of chocolate.

- During the quarter, the Business expanded the footprint of 'Fabelle Chocolate Boutiques' to ITC Sonar, Kolkata, ITC Maurya, New  Delhi and ITC Grand Chola, Chennai in addition to the one at ITC Gardenia  launched earlier. Plans are on the anvil to extend the luxury chocolate  boutiques to select ITC Hotels in the ensuing months. Made from impeccable  single-origin cocoas sourced from the best growing regions in Africa and South  America and combined with unique ingredients, Fabelle has received excellent  consumer response and is redefining the luxury chocolate segment in India.

The Personal Care Products  Business continued to focus on product mix enrichment and augmenting its  product portfolio. Recently launched variants in the Hand Wash and Antiseptic  Liquid categories under the 'Savlon' brand continue to gain traction amongst  consumers. The Deodorants product portfolio stood expanded during the quarter  with the launch of several new variants under the 'Engage' brand.

The Business also launched  several innovative brand campaigns and leveraged social media platforms with a  view to deepening consumer engagement. Marketing interventions centred around  brand Vivel's new tagline - 'Ab Samjhauta Nahin' - have received excellent  response from consumers within a relatively short span of time and is beginning  to expand the brand's appeal by moving beyond product attributes to addressing  gender-typecasting and attitudes towards women, thereby enhancing emotional  connect with consumers.

The Company made steady  progress during the quarter towards setting up state-of-the-art owned  integrated consumer goods manufacturing facilities at Uluberia and Panchla  (West Bengal), Kapurthala (Punjab) and Ambarnath (Maharashtra). Currently, over  20 projects are underway and in various stages of development - from land  acquisition/site development to construction of buildings and other  infrastructure.


The  performance of the Cigarette Business during the quarter remained subdued on  account of continued pressure on the legal Cigarette industry in India.

Over the last 4 years, the  incidence of Excise Duty and VAT on cigarettes, at a per unit level, has gone  up cumulatively by 118% and 142% respectively thereby exerting severe pressure  on legal industry volumes even as illegal trade grows unabated. It is pertinent  to note that steep increases in Excise Duty on cigarettes in recent years have  resulted in widening the differential in Excise Duty rates (on a per kg. of  tobacco basis) between cigarettes and other tobacco products from 29 times in  2005/06 to over 53 times currently. High incidence of taxation and a  discriminatory regulatory regime on cigarettes in India have over the years led  to a significant shift in tobacco consumption to lightly taxed or tax-evaded  tobacco products like bidi, khaini, chewing tobacco, gutkha and illegal  cigarettes which presently constitute over 89% of total tobacco consumption in  the country. Besides adversely impacting the performance of the legal cigarette  industry, this has led to sub-optimisation of the revenue potential from the  tobacco sector.

The operating environment for  the legal Cigarette industry in India was rendered even more challenging in the  wake of a further increase of 10% in Excise Duty announced in the Union Budget  2016 and introduction of the new 85% graphic health warnings (GHW) on cigarette  packages.

On 4th May,  2016, the Honourable Supreme Court directed the Honourable High Court of  Karnataka to hear and dispose of within six weeks, the legal challenge to GHW  pending in several High Courts. The Honourable Supreme Court, however, also  ordered that any stay order granted by any High Court would not be given effect  to till the cases are finally disposed of. The Company is currently manufacturing  cigarettes with 85% warning in compliance with the interim requirements pending  final decision by the Honourable Karnataka High Court on the matter. The matter  has been part heard by the Honourable Karnataka High Court and hearings are  expected to resume shortly.

The Tobacco industry in India  supports the livelihood of over 45 million people including vulnerable sections  of society like farmers, farm labour, rural poor, women, tribals etc. and  contributes around Rs. 30000 crores to the national exchequer apart from  generating valuable foreign exchange earnings of around Rs. 6000 crores.

The proposed GHW is  excessively large, extremely gruesome and unreasonable. There is no evidence to  suggest that cigarette smoking would cause the diseases depicted in the  pictures or that large GHW will lead to reduction in consumption. In fact this  inadequacy of evidence prompted the courts in USA to hold that the US FDA's  proposal for introduction of similar GHW in that country as unconstitutional.  Further, over 100 countries representing 60% of the signatories to the  Framework Convention on Tobacco Control have not adopted GHW. It is pertinent  to note that other major tobacco producing countries have taken a considered  view on the matter and have not adopted over-sized and excessive graphic health  warnings, thus striking a balance between the interests of the consumer and of  their farmers.  It may also be noted that  the global average size for GHW is only about 30% coverage of the principal  display area. Moreover, the top three cigarette consuming countries - USA,  China and Japan - which together account for 51% of global cigarette  consumption have only text based warnings and have not adopted pictorial /  graphic health warnings.

The new GHW will encourage  the flow of illegal trade of brands owned by international companies into the  country since such brands are manufactured in many jurisdictions which do not  mandate the printing of graphic health warnings on cigarette packages as  applicable in India. The legal cigarette industry in India will be hard pressed  to counter the menace of illegal cigarettes as they will be perceived by the  consumer to be safer in the absence of the statutorily mandated health  warnings. Coupled with the fact that illegal cigarettes are available at a  fraction of the price of legal cigarettes, the new GHW will provide further  fillip to the growth of illegal cigarettes in the country.

According to an independent  study, India is now the 4th largest market for illegal cigarettes in the world.  In fact, illegal trade comprising smuggled foreign and domestically  manufactured tax-evaded cigarettes is estimated to constitute one-fifth of the  overall cigarette industry in India and is estimated to cost the exchequer a  revenue loss of more than Rs. 9000 crores per annum.

It is pertinent to note that  the Department of Commerce, in its submissions to the Parliamentary Committee  on Subordinate Legislation, has stated that "large warnings will lead to an  increase in overall tobacco consumption and illegal cigarettes; when large  quantities of non-cigarette tobacco products from unorganised sector are sold  loose and / or without any health warnings, it gives an impression of these  products being relatively safer than cigarettes."

As always, the Company  complies fully with all regulations and laws in letter and spirit and continues  to engage with policy-makers for reasonable, pragmatic and evidence based  regulation and taxation policies that balance the health, employment and  economic imperatives of the country.

Despite the challenging  operating environment, the Company continues to consolidate its market  leadership through relentless focus on delivering world-class products,  continuous innovation & value addition and best-in-class execution.


Segment  Revenue during the quarter was flattish in comparison to the corresponding  period in the previous year reflecting the subdued operating conditions in the  Indian hospitality industry, which continues to be impacted by excessive room  inventory in key domestic markets and sluggish macroeconomic environment both  in India and major source markets.

Although  Segment Results improved as compared to the corresponding quarter in the  previous year, the same remained muted due to the challenging business context  as aforestated and gestation costs of the recently commissioned ITC Grand  Bharat, Gurgaon.

Construction  activities at the luxury hotel projects in Kolkata, Hyderabad and Ahmedabad are  progressing satisfactorily.

Agri Business

The Business provides strategic  sourcing support to the Company's Cigarette business and leverages its deep  rural linkages to source superior quality wheat, chip stock potato, spices and  fruit pulp at competitive prices for the Branded Packaged Foods Businesses. The  Business continues to leverage the e-Choupal network to source superior quality  wheat at competitive cost and deliver substantial savings to the system through  efficient logistics management and other cost-optimisation initiatives.

Segment Revenue grew by 2%  over the corresponding period in the previous year on the back of higher  agri-commodity sales in the domestic market offset by lower supplies to the  Company's FMCG businesses (mainly account timing differences in offtake).  Steeper currency depreciation in competing geographies and lower wheat crop  output in India constrained growth in exports.   

Paperboards, Paper & Packaging

Segment Revenue remained  impacted by the subdued demand environment prevailing in the FMCG and legal  Cigarette industry. Zero duty imports under Free Trade Agreement with ASEAN  countries and cheap imports from China along with capacity expansion / ramp-up  by other industry players, continued to adversely impact the Paper and  Paperboard industry. Segment Results, however, improved on the strength of  improved mix and benign input costs.

In an endeavour to reduce its  dependence on imported pulp, the Business is in the process of setting up  India's first Bleached Chemical Thermo Mechanical Pulp mill at its Bhadrachalam  unit. The facility is expected to be commissioned in the second half of the  current financial year. Capacity expansion in the Value Added Paperboards and  D├ęcor segments is also underway.

Contribution to Sustainable  Development

The Company's Social  Investments Programme aims to address the challenges arising out of poverty,  environmental degradation and climate change through a range of activities with  the overarching objective of creating sustainable sources of livelihood for  stakeholders.

The footprint of the  Company's Social Investments Programme can be viewed at a glance in the  following chart:

Intervention AreasUnit of MeasurementCumulative till date
Social and Farm Forestry
Soil and Moisture Conservation Programme
Sustainable Agricultural Practices
       Compost Units


Sustainable Livelihoods Initiative
       Cattle Development Centres
       Animal Husbandry Services

Artificial Inseminations (in lakhs)

Economic Empowerment of Women
      Ultra Poor Women covered
      Self Help Group Members
      Livelihoods created


Primary Education
      Children covered

Number (in lakhs)

Health and Sanitation
      Low Cost Sanitary Units
      Households covered under Solid Waste Management


Vocational Training
      Students Enrolled



The Board of Directors, at its meeting in Gurgaon on 26th October 2016, approved the financial results for the quarter ended 30th September 2016, which are enclosed.

Click here for the Financial Results