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Financial Results for the Quarter ended 31st December, 2016
27 Jan 2017

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Financial Results for the Quarter ended 31st December, 2016



Revenue from Operations up 4.5%

Net Profit up 5.7%

  • FMCG-Others Segment Revenue up 3.4% amidst lower consumer offtake and reduction of trade pipelines in the wake of cash crunch during the quarter. Segment Results reflect the impact of disruption in sales momentum due to adverse liquidity conditions in trade channel, sharp escalation in input cost, gestation cost of new categories and sustained investment in brand building.
  • Legal cigarette industry volumes remain under severe pressure even as illegal trade grows unabated.
  • Hotels Segment Revenue up 7% aided by higher Average Room Rate and robust growth in Food & Beverage revenue.
  • 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 benign input costs and richer product mix.
  • King Maker Marketing, Inc. USA (KMM) ceased to be a subsidiary of the Company with effect from 16th November, 2016 consequent to divestment of the Company’s entire shareholding in KMM.

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

The  operating environment was extremely challenging during the quarter. FMCG sales  were adversely impacted as a result of lower consumer offtake and reduction in  trade pipelines particularly in the immediate aftermath of the Government’s  decision to withdraw specified high denomination currency notes. While the  impact was felt across all operating segments, sales of biscuits, snacks,  noodles, personal care products and branded apparel were impacted the most in  the initial phase.

The Company  implemented several initiatives towards mitigating the impact including  increasing the service frequency of grocery outlets, enhancing presence in  modern trade outlets, increasing direct servicing of select low population  group markets and extending temporary credit to select customers. These  initiatives, coupled with progressive easing of the liquidity situation, led to  substantial recovery of sales momentum towards the end of the quarter.

The Company  also had to contend with continuing regulatory and taxation pressures on the  Cigarette business, rising input prices in the FMCG businesses and subdued  demand conditions in the Hotels and Paperboards, Paper & Packaging  segments.

The Company delivered steady  performance during the quarter amidst the challenging business context as  aforestated. Revenue from Operations for the quarter stood at Rs. 13470.89  crores representing a growth of 4.5%. Profit Before Tax at Rs. 3954.20 crores and  Net Profit at Rs. 2646.73 crores registered a growth of 2.8% and 5.7%  respectively during the quarter. Earnings Per Share for the quarter stood at  Rs. 2.18. Total comprehensive Income (TCI) for the quarter stood at Rs. 2485.12  crores (for the quarter ended 31st December, 2015: Rs. 2787.07  crores).

Financial  results for the quarter ended 31st December, 2016 have been prepared  in accordance with Indian Accounting Standards (Ind AS). Results for quarter  ended 31st December, 2015 have been recast in accordance with Ind AS  to facilitate comparison.


Segment  Revenue recorded a growth of 3.4% during the quarter against the backdrop of  subdued demand conditions exacerbated by the tight liquidity position. Segment  Results were adversely impacted by temporary disruption in sales momentum;  sharp increase in cost of inputs such as wheat, maida, sugar, cashew, soap  noodles; early ‘end of season sales’ and heavy discounting in the Lifestyle  Retailing Business and sustained investment in brand building 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 steady growth in revenue  despite the challenging operating environment with most major categories  recording improvement in market standing.

- In the Staples, Snacks and Meals Business,  ‘Aashirvaad’ atta recorded healthy growth and consolidated its leadership  position across markets. The ‘Bingo!’ range of snack foods continued to grow  well, driven by the ‘Tedhe Medhe’ variant and ‘Bingo! Yumitos Original Style’  potato chips.

- In the Confections Business, the ‘Sunfeast  Mom’s Magic’ range of premium cookies sustained its robust growth momentum  driven by superior product attributes and continuing investment in brand  building. Portfolio premiumisation continued in the Confectionery category  driven by a higher salience of ‘Re.1 and above’ products in the sales mix. The  recently launched ‘Candyman Jellicious Jelimals’ variant has been well received  by consumers and is now available nationally. During the quarter, the Business  launched an innovative variant in the Jellies segment under the sub-brand  ‘Candyman Jellicious DubbleZ’. The product is available in select markets and  has received encouraging consumer response.

- The Business expanded the footprint of ‘Fabelle  Chocolate Boutiques’ to ITC Grand Central & ITC Maratha in Mumbai and  ITC Windsor in Bengaluru during the quarter. With this, Fabelle Chocolate  boutiques are now operational at 7 luxury ITC Hotels. During the quarter, the  Business launched a range of ‘Fabelle’ gift hampers comprising a special  collection of delectable chocolates. The range received excellent response from  consumers during the festive season.

In November  2016, the Business commissioned a state-of-the-art facility at Uluberia, West  Bengal for in-house manufacturing of atta, potato chips and biscuits. This  facility will enable servicing of proximal markets in an efficient manner by  enhancing product freshness and improving supply chain responsiveness. The  Business continued to leverage the recently established biscuits manufacturing  facility at Mangaldoi, Assam (set up by North East Nutrients Private Ltd. - a  joint venture company) to enhance its market standing significantly in the fast  growing north-eastern market.

The Personal  Care Products Business continued to focus on augmenting its product  portfolio and enriching product mix. Recently launched variants in the Hand  Wash and Antiseptic Liquid categories under the Savlon brand continue to gain  traction amongst consumers.

The  Company made steady progress during the quarter towards setting up  state-of-the-art integrated consumer goods manufacturing facilities at 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 was subdued on account of tight liquidity  conditions prevailing in the market and continued regulatory and taxation  pressures 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 145% 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. Hearings  on the matter are currently underway.

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. It is  pertinent to note 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.

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. 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.

It may be noted 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 laws and regulations 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.

Amidst  the challenging operating environment as aforestated, the Company consolidated  its market leadership through relentless focus on delivering world-class  products, continuous innovation & value addition and best-in-class  execution.


The hospitality sector continues to be adversely impacted by a  weak pricing scenario in the backdrop of excessive room inventory in key  domestic markets and sluggish macroeconomic environment both in India and major  source markets. Despite a challenging operating environment, the Business  recorded a healthy growth in Segment Revenue and Profit during the quarter  driven by improvement in Average Room Rate and robust growth in the Food &  Beverage revenue.

While Segment Results improved significantly as compared to the  corresponding quarter in the previous year, profitability remained relatively  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

Segment  Revenue grew by 12.9% driven by trading opportunities in the domestic wheat  market, external sales of leaf tobacco offset by lower supplies to the  Company’s FMCG businesses (mainly account timing differences in offtake). 

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.   

Paperboards, Paper & Packaging

The  performance of Paperboards, Paper & Packaging Segment continued to be  impacted by sluggish demand conditions prevailing in the FMCG and legal  Cigarette industry. Zero duty imports under ASEAN Free Trade Agreement, cheap  imports from China along with capacity ramp up by other industry players  adversely impacted Segment Revenue during the quarter. Segment Results,  however, improved on the back of benign input costs and  improved mix.

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  shortly. Capacity expansion in the Value Added Paperboards and Décor 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 Kolkata on  27th January 2017, approved the financial results for the quarter  ended 31st December 2016, which are enclosed.

Click here for the Financial Results