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Financial Results for the Quarter and Year ended 31st March, 2018
16 May 2018

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Financial Results for the Quarter and Year ended 31st March, 2018


  • Post-tax profit for the quarter up 9.9%.
  • Gross Sales Value (GSV) and Post-tax profit for the year up 4.5% and 10.0% respectively amidst a sharp slowdown in the economy, steep increase in tax incidence on cigarettes, subdued demand conditions in the FMCG industry, shortage of tobacco crop in Andhra Pradesh and lack of trading opportunities in the Agri Business.
  • Board recommends Dividend of Rs. 5.15 per share for FY18. 

Financial year ended 31st March 2018 :

  • FMCG-Cigarettes performance reflects the severe pressure on legal cigarette industry volumes due to steep escalation of tax incidence under the GST regime even as illegal trade grows unabated.
  • Comparable revenue growth in FMCG-Others Segment, based on GSV (which includes adjustments only for taxes that are excluded from reported Gross Revenue), stood at 11.3%; this was achieved amidst a challenging operating environment led by Branded Packaged Foods, Personal Care and Education and Stationery Products Businesses with most major categories enhancing their market standing.
    • The Company sustained its position as one of the fastest growing branded packaged foods businesses in the country.
    • Segment Results registered robust growth driven by enhanced scale, product mix enrichment and cost management initiatives notwithstanding higher investments in brand building and gestation costs of new categories.
  • Hotels Segment Revenue up 5.6% driven by improvement in ARRs and robust growth in F&B sales. Segment Results up 26% on the back of higher room rates and operating leverage. Steady progress in the construction of ITC Hotels at Hyderabad, Kolkata, Ahmedabad and WelcomHotels in Guntur and Bhubaneswar.
  • Agri Business performance reflects shortage and adverse quality of Andhra leaf tobacco crop, limited trading opportunities in agri commodities such as wheat, soya, coffee and high base effect (imported wheat trading opportunity in 2016-17 did not persist). Segment Results impacted by lower scale, increase in leaf price and lower export incentives.
  • Paperboards, Paper & Packaging Segment impacted by slowdown in the FMCG & legal cigarette industry, cheap imports and unabsorbed capacity in domestic paperboard industry. Healthy growth in Segment Results driven by richer product mix, higher in-house pulp utilisation and benign input prices.

Quarter ended 31st March 2018

  • Muted growth of 3.6% in GSV  due to decline in Agri Business revenue; GSV excluding Agri Business  up 5.7% driven mainly by FMCG-Others and Hotels; Post-tax profit  up 9.9%. 
  • FMCG-Others comparable revenue growth (based on GSV) stood at 10% during the quarter on a relatively firm base driven by Bingo! snacks, Sunfeast biscuits, B Natural juices, Engage deos, Fiama & Vivel personal wash, Savlon handwash and Classmate notebooks.    

Financial Performance

The  Company delivered a resilient performance during the year which was a  particularly challenging one due to a sharp slowdown in the economy, steep  escalation in tax incidence on cigarettes under the GST regime, subdued demand  conditions in the FMCG industry and supply chain disruptions caused during the  transition to GST. The non-cigarette FMCG segment also had to contend with  gestation costs relating to new products/categories and the ongoing  restructuring of the retail footprint/trade terms in the Lifestyle Retailing  Business. Shortage of leaf tobacco in Andhra Pradesh due to lower crop output  on account of drought in 2016 and adverse crop quality, relative strength of  the Indian Rupee vis-à-vis currencies of competing origins and limited trading  opportunities in other agri-commodities weighed on the performance of the Agri  Business. While there was an improvement in room rates, performance of the  Hotels Business remained subdued during the year due to the overhang of excess  room inventory in key cities and the impact of ban on sale of liquor at outlets  in close proximity to highways in the first half of the year. The Paperboards,  Paper and Packaging Business was also impacted by unabsorbed capacity in the  value added paperboards segment, cheap imports and slowdown in end user  industries such FMCG, liquor and pharmaceuticals.

Progressive  stability of the transformative GST regime, signs of an incipient economic  recovery and expectations of normal monsoons augur well for the Company's  businesses going forward.

Consequent  to the introduction of Goods and Services Tax (GST) with effect from 1st July  2017, Central Excise [other than National Calamity Contingent Duty (NCCD) on  cigarettes], Value Added Tax (VAT) etc. have been replaced by GST.  In accordance with Indian Accounting Standard  - 18 on Revenue and Schedule III of the Companies Act, 2013, GST, GST  Compensation Cess, VAT, etc. are excluded and NCCD is not excluded from Gross  Revenue from sale of products and services for applicable periods. In view of  the aforesaid restructuring of indirect taxes, Gross Revenue from sale of  products and services and Excise Duty for the quarter and year ended 31st  March, 2018 are not comparable with the previous periods.

On  a comparable basis, Gross Sales Value (net of rebates/discounts) stood at Rs.  67081.92 crores, representing a growth of 4.5% driven mainly by the Branded  Packaged Foods, Personal Care and the Education and Stationery Products  Businesses offset by decline in Agri Business revenue due to the reasons as  aforestated. Profit Before Depreciation, Interest and Tax (excl. Exceptional  items) at Rs. 15540.98 cr. and Profit Before Tax (excl. Exceptional items) grew  by 6.6% and 6.0% respectively.

Exceptional  items during the year represent provisions for earlier years of Rs. 412.90 cr.  (Rs. 270.00 cr. post tax) in respect of Tamil Nadu entry tax that have been  written back, based on a favourable order of the Hon'ble Supreme Court.

Including  Exceptional items, Profit Before Tax at Rs. 16851.70 crores and Profit After  Tax at Rs. 11223.25 crores registered growth of 8.7% and 10.0% respectively  during the year. Total Comprehensive Income for the year stood at Rs. 11605.59  crores (previous year Rs. 10277.90 crores). Earnings Per Share for the year  stood at Rs. 9.22 (previous year Rs. 8.43). Cash generated from operations  aggregated Rs. 18370.41 crores, compared to Rs. 15214.98 crores in the previous year.

Gross  Sales Value for the quarter ended March 2018 stood at Rs. 17933.48 crores.  Gross Sale Value excluding Agri Business, grew by 5.7% driven by FMCG Others  and Hotels. Agri Business growth was impacted on account of a high base  (imported wheat trading), limited trading opportunities in agri commodities  such as wheat, soya, coffee and lower leaf exports during the quarter. Profit  Before Tax at Rs. 4333.28 crores and Profit After Tax at Rs. 2932.71 crores  registered growth of 7.1% and 9.9% respectively during the quarter.

The Directors are pleased to recommend an Ordinary Dividend of Rs. 5.15  per share (previous year Ordinary Dividend of Rs. 4.75 per share) for the year  ended 31st March, 2018. Total cash outflow in this regard will be Rs. 7577.15  crores including Dividend Distribution Tax of Rs. 1291.94 crores. 

FMCG-Others | Branded Packaged Foods | Personal Care Products | Cigarettes
Incense Sticks (Agarbattis) and Safety Matches | Paperboards, Paper & Packaging | Hotels
Education & Stationery Products | Lifestyle Retailing Business | Agri Business


The FMCG industry faced another challenging year with demand  conditions remaining sluggish for the fifth year in a row. The slowdown in the  broader economy - as reflected by the marked deceleration in nominal GDP and  private consumption expenditure growth - headwinds in rural demand and supply  chain disruptions during the transition to the GST regime were manifest in the  Company's operating segments in the FMCG space. The year also witnessed  commodity prices settling at an elevated level, exerting pressure on margins.

Despite the challenging conditions prevailing during the  year, the Company's FMCG-Others Businesses Segment Revenue at Rs. 11329 crores  grew ahead of industry and recorded an increase of 11.3% (on a comparable  basis) on a relatively firm base. While the second half of 2016-17 witnessed  reduced consumer offtake and trade pipelines in the wake of adverse liquidity  conditions, it is pertinent to note that the Company's FMCG-Others businesses  were relatively less impacted.

Most major categories enhanced their market standing during  the year. While Bingo! snacks, Aashirvaad atta and Dark Fantasy Choco Fills  premium cream biscuits were the key drivers of growth in the Branded Packaged  Foods Businesses, Engage deodorants, Vivel/Fiama soaps & shower gels and  Savlon handwash fuelled strong growth in the Personal Care Business. The  Education and Stationery Products Business posted a robust performance during  the year led by Classmate notebooks, which consolidated its leadership position  in the industry. However, the performance of the Lifestyle Retailing Business  remained sluggish mainly on account of an early and prolonged 'end-of-season  sale' in the wake of disruption to the trade during transition to GST and  ongoing structural interventions to enhance operating efficiencies. Segment  Results for the year improved to Rs. 164 crores from Rs. 28 crores in 2016-17  driven by enhanced scale, product mix enrichment and strategic cost management  initiatives after absorbing the impact of sustained investment in brand  building, gestation costs of new categories viz. Juices, Dairy, Chocolates and  Coffee and costs associated with the ongoing structural interventions in the  Lifestyle Retailing Business.

During the year, capacity utilisation was progressively scaled up at the  Uluberia, Mysuru and Guwahati units that commenced operations in the second  half of FY17. The Company commissioned two world-class Integrated Consumer  Goods Manufacturing and Logistics Units (ICMLs) at Panchla, West Bengal and  Kapurthala, Punjab.  Significant progress  was also made in constructing several other state-of-the-art owned ICMLs across  regions to secure capacity and enable the FMCG businesses to rapidly scale up  in line with long-term demand forecast.  


Branded Packaged Foods

Against the backdrop of a challenging operating environment as  aforestated and heightened competitive intensity, the Company sustained its  position as one of the fastest growing branded packaged foods businesses in the  country leveraging a robust portfolio of brands, a range of distinctive  products customised to address regional tastes and preferences along with an  efficient supply chain and distribution network that ensures benchmark levels  of visibility, availability and freshness of products in the market. The  Business implemented several initiatives encompassing cost management, supply  chain optimisation, smart procurement and recipe optimisation which helped in  mitigating the escalation in input costs and enhancing profitability.

In the Staples Business, 'Aashirvaad' atta posted healthy  growth and fortified its leadership position in the market. This was achieved  despite increasing competitive pressures triggered by the imposition of 5% GST  on branded atta (compared to nil VAT in most States under the erstwhile tax  regime) while non-branded atta (incl. branded atta on which actionable claim or  enforceable right has been foregone voluntarily) remained at nil duty. During  the year, the Business also had to contend with a concerted attack on  Aashirvaad atta on social media with rumour mongers circulating malicious videos  and falsely alleging that Aashirvaad atta contains plastic. The Business  launched a 360 degree campaign to reassure consumers and dispel the baseless  rumours surrounding Aashirvaad atta. The communication clearly highlighted that  as per FSSAI standards, atta must contain not less than 6% of wheat protein on  a dry weight basis and that elasticity is a natural property of the protein  without which it is not possible to bind the atta. Simultaneously, complaints  were filed with the Police authorities and injunction orders restraining  circulation of such videos on social media were also obtained from the civil  court. These interventions helped in effectively mitigating the short-term  impact of the malicious videos on sales momentum, with the brand staging progressive  recovery subsequently. Powered by the trust reposed by over 2.5 crore  households, the Company is confident of sustaining Aashirvaad's position as  India's No. 1 atta brand going forward.

Supported  by its new positioning, 'Created by Sun and Sea - pure just like nature  intended it to be' and new pack design, Aashirvaad Salt posted robust  performance during the year. In the branded Spices category, the Aashirvaad  range of spices registered steady volume growth. In line with its commitment to  deliver products with the highest quality and safety standards to Indian  consumers, the Business continued to reinforce the value proposition of the  recently launched ITC Master Chef 'Super Safe Spices', which are tested for  over 470 pesticide residues in accordance with European standards as compared  to only nine required under Indian regulations. 

In the Snacks and Meals Business, the 'Bingo!' range of  snacks recorded robust growth during the year driven by Tedhe Medhe and potato  chips. The Business achieved market leadership on an All-India basis in the  Bridges segment driven by a robust portfolio of products under the Tedhe Medhe,  Mad Angles and Tangles sub-brands. The potato chips portfolio recorded impressive  market share gains and emerged as the leader in the South markets leveraging an  optimised portfolio, revamped pack and fresh communication. During the year,  the Business forayed into the extruded snacks segment with the launch of 'No  Rulz' - a first-of-its-kind offer comprising four different shapes of the  product in a single pack. The product has received excellent response and  continues to gain traction with consumers. During the year, the Bingo! range  was augmented with the launch of several variants customised for regional taste  palates, viz. Mad Angles Kolkata Kasundi, Tedhe Medhe Lime Chatpata, Tomato  Masti and Pudina Twist.

In the Instant Noodles category, YiPPee! noodles sustained  its robust growth momentum during the year despite increasing competitive  intensity including from several regional discount players. The year also saw  the launch of 'Mood Masala' - an innovative variant comprising two masala mix  sachets in a pack providing the consumer the option to add masala to 'match his  mood'. Mood Masala received encouraging consumer response, further  strengthening the brand imagery of YiPPee! amongst tweens and young adults.

The Confections Business scaled up operations and improved  its market standing during the year. In the Biscuits category, the Business  continued to focus on premiumising its product portfolio, enhancing brand  affinity, strengthening the supply chain and expanding distribution reach.  Consistent and impactful communication, coupled with focused marketing inputs  helped improve penetration and brand health metrics. Dark Fantasy Choco Fills  sustained its clear market leadership position in the super-premium creams  segment across the country. Brand architecture in the biscuits category was  optimised with the migration of Delishus & Yumfills under the Mom's Magic  and Dark Fantasy brands respectively. The Business augmented its product  portfolio in the health segment with the launch of 'Protein Power', a unique  variant based on roasted Bengal gram flour and Digestive five grains biscuits  under the Farmlite brand. The Mom's Magic range was expanded with the addition  of 'Fruit & Milk' variant. In the Confectionery category, in line with its  strategy of premiumising the portfolio, the Business launched several unique  offers in the 'Re. 1 & above' price points including Cola Josh, Crunchy and Clear Candy under the Candyman brand, Jelimals Sour Slides and two exciting  variants under the mint-O brand. These products have received encouraging  consumer response.

In the Dairy & Beverages Business, the B Natural range of  juices continues to gain traction amongst target consumers aided by a  clutter-breaking media campaign, on-ground trial generation initiatives and  visibility & availability enhancement drives. The journey towards making  juices concentrate-free, which commenced last year with the launch of 'B  Natural 100% Pomegranate Juice', continues with the entire range of B Natural  juices being migrated to the 'not from concentrate' platform. This  first-of-its-kind initiative in India, was anchored on the twin resolve to  provide consumers a more nutritive and natural tasting experience and promote  the use of fruit pulp procured from Indian farmers, thereby supporting the  Indian farm and food processing sector. The Business also introduced 'Bael' and  'Phalsa' variants during the year catering to regional tastes and preferences  which were well received by consumers. In the Dairy segment, 'Aashirvaad  Svasti' Ghee was extended to Delhi NCR markets during the year, garnering  increasing consumer franchise. During the year, the Business also forayed into  the Pouch Milk segment under the 'Aashirvaad Svasti' brand in select markets in  Bihar in the vicinity of the Munger dairy plant.

In the Chocolates category, the 'Fabelle' range of luxury chocolates was  scaled up during the year with a view to redefining the luxury chocolate  segment in India. The range is available in eight Fabelle Chocolate Boutiques  located within ITC hotels and several outlets in premium malls and food stores.  Product portfolio was augmented with the launch of two delectable variants of  centre-filled chocolate bars - 'Hazelnut Mousse', & 'Dark Choco Mousse'  which have received excellent response from discerning consumers. Towards  deepening engagement with consumers, the Business launched a unique experience  platform during the year christened - 'Fabelle Societe de Chocolat' - across  Fabelle boutiques with Ms. Billie McKay, winner of MasterChef Australia 2015,  as the mentor. 'Sunbean' gourmet coffee, launched across all ITC Hotels last  year, continues to receive excellent response from discerning consumers and  plans are on the anvil to scale up presence in the ensuing years. 


Personal Care Products

The Personal Care Products Business delivered a robust  performance and enhanced its market standing during the year against a backdrop  of significant disruption to trade and supply chain following the roll out of  GST. This was driven largely by sustained focus on innovation, product mix  enrichment, expansion of distribution reach, proactive cost management and  enhancing supply chain responsiveness.

The Business continued to focus on innovation and delight  consumers by launching a range of exciting offerings during the year. In the  Fragrance category, the recently launched highly innovative pocket perfumes -  'Engage ON' and 'Engage ON+' - designed to drive on-the-go consumption,  garnered robust consumer traction. The Business also launched a Sport range of  deodorants with long lasting fragrance and a selection of premium Eau de Parfum  for both men and women. In the Personal Wash category, the Business introduced  a unique Gel Crème range under the 'Fiama' brand combining the best of gel and  cream for both soap and liquid bathing products, and Vivel Lotus Oil - a unique  offering enriched with Lotus Oil and Vitamin E for soft glowing skin. 'Savlon'  handwash continued to gain ground with the launch of a small pack at an  attractive price point. These new innovations received excellent response from  consumers during the year and were supported with refreshing communication and  engaging consumer activations.

'Engage' recorded impressive gains in the Fragrance category,  consolidating its leadership position in the women's segment and No. 2 position  overall. The roll out of innovative pocket perfumes, Sport range of deodorants  and the Eau de Parfums range have helped the brand grow its consumer equity  significantly among both men and women besides premiumising the portfolio.  'Savlon' handwash recorded significant gains during the year across brand health  metrics and emerged as the fastest growing brand in the market. In the bodywash  segment, the 'Fiama' range of shower gels continued to garner increasing  consumer franchise and is the fastest growing and the second largest brand  nationally. The Business also launched moisturising skin creams under the  recently acquired 'Charmis' brand and plans are afoot to strengthen the  skincare portfolio in the near to medium term.



Education & Stationery Products

The Stationery industry was impacted during the year with the  roll out of GST coinciding with the school opening season and trade operating  with lower inventory levels due to uncertainties around the new tax regime.  Despite these challenging conditions, the Business sustained its leadership  position in the Indian Education and Stationery Products industry anchored on a  portfolio of world-class products and brands. 

The Business continued to leverage its dedicated product development  cell and the Life Sciences & Technology Centre to develop & launch  innovative and superior products in the market. During the year, the product  portfolio was augmented with the launch of several new products including a  spiral range of notebooks under Classmate, Classmate All Purpose Paper,  'Archimedes' premium geometry boxes with 'spur gear' divider and compass for  higher precision and several offerings in the pens, mechanical pencils and  scholastics categories. The Business also scaled up presence in the value  segment of the notebook industry through its brand 'Saathi' with a view to  consolidating its leadership position.   


Lifestyle Retailing Business

Performance of the Lifestyle Retailing Business was adversely  impacted during the year on account of a premature end to the Spring Summer  2017 season triggered by the transition to GST and most players in the industry  announcing an early 'end of season sale' period which was also extended in a  bid to liquidate pre-GST merchandise. On the other hand, e-commerce players  continued with their aggressive push to capture market share amongst value  seeking consumers by offering heavy discounts and launching exclusive labels  and brands. The performance of the Lifestyle Retailing Business was adversely  impacted against the backdrop of the challenging environment as aforestated.

The Business continued to execute the structural  interventions initiated in the previous year across channels and processes  including restructuring the retail foot print, rationalisation of stores,  modifying the design language of its offerings, restructuring of terms of trade  with business partners and sharpening working capital management. The Business  refreshed the offers under Wills Lifestyle and John Players adopting a unique  'Story-based Looks creation' approach. This initiative entailed re-crafting the  merchandise range architecture, channel specific offerings and special focus on  enhancing the portfolio of core merchandise. Distinct & time bound colour  stories were introduced aimed at providing freshness to consumers in the retail  stores on a continual basis.

During the year, the Business enhanced its core portfolio, augmented  marketing activities including windows and visual merchandising, improved  manufacturing productivity and efficacy of replenishment mechanisms. Analytics  based on ERP and point-of-sale systems enabled enhancing consumer experience  besides further strengthening inventory and receivables management.  


Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti category witnessed increase in competitive  intensity during the year with industry players resorting to higher trade  schemes in a bid to garner market share. The continued presence of counterfeit  products and supply chain disruptions due to transition to GST also weighed on  industry performance. Against the backdrop of these challenging conditions,  Mangaldeep sustained its position as the leader in the Dhoop segment and the  second largest brand in the Agarbatti segment. During the year, the Business  strengthened its product portfolio with the launch of several new variants and  enhanced its distribution reach. Investments in media coupled with on-ground  activation activities were made during the year towards enhancing Mangaldeep's  salience as the most preferred brand in the devotional space. Product mix  enrichment and cost optimisation initiatives continued to be the other key  focus areas for the Business.

While demand conditions remained sluggish during the year in the Safety  Matches category, the Business sustained its leadership position by leveraging  a robust portfolio of offerings across market segments and focusing on  enriching its product mix. 


A  punitive and discriminatory taxation and regulatory regime continues to exert  severe pressure on the domestic legal cigarette industry even as illegal  cigarette trade grows unabated.

The  legal cigarette industry, already reeling under the cumulative impact of steep  increase in taxation over the last five years and intense regulatory pressures,  was further impacted by the sharp upward revision in GST Compensation Cess  announced in July 2017. Contrary to indications that the transition to GST  would be based on the principle of maintaining revenue neutrality, tax  incidence on cigarettes rose sharply by 13% with an even steeper increase of  19% for the king-size filter segment under the GST regime. Coupled with the  increase in Excise Duty rates announced in the Union Budget 2017, this resulted  in an incremental tax burden of over 20% on the Cigarette Business post  implementation of GST. 

It  is pertinent to note that the tax incidence on cigarettes, after cognising for  the latest increase in Cess rates, has nearly trebled over the last six years,  on a comparable basis.

The  Cigarette Business also had to contend with additional costs associated with  the transition to GST due to non-availability of Additional Duty Surcharge  credit on transition stocks and the unanticipated revision of GST Compensation  Cess w.e.f. 18th July 2017 which impacted pipeline stocks.

In addition to being subjected to punitive taxation,  cigarettes continue to be discriminated against in the GST regime. Even as a  uniform GST rate of 28% has been made applicable to all tobacco products, the  discriminatory tax incidence continues on account of differential rates of GST  Compensation Cess. For example, a Specific GST Compensation Cess, at rates  higher than the Central Excise Duty levied on cigarettes in the erstwhile  regime, is levied on cigarettes in addition to an Ad-valorem GST Compensation  Cess of 36% for king-size cigarettes and 5% for the other length segments. In  comparison, no GST Compensation Cess is levied on bidis. Consequently, cigarette  taxes remain, effectively, about 50 times higher than on other tobacco  products.

While  overall tobacco consumption in the country continues to grow, the share of  duty-paid cigarettes has come down substantially over the years and is  estimated to account for around 11% of current tobacco consumption in the  country. Despite accounting for such a low share of overall tobacco consumption  in the country, the legal cigarette industry contributes more than 87% of tax  revenue from the tobacco sector. The other types of tobacco products contribute  barely 13% of tax revenue from the tobacco sector despite accounting for 89% of  total tobacco consumption. It is estimated that the exchequer is losing more  than Rs. 13000 crores revenue annually on account of tax evasion on cigarettes  alone. The loss to the exchequer is even higher when the evaded taxes on other  tobacco products are also considered.

The high rates of tax on cigarettes also provide attractive  tax arbitrage opportunities to unscrupulous players, fanning the growth of  illegal cigarette trade in the country.   While the legitimate cigarette industry has declined steadily since  2010-11 at a compound annual rate of 4.8% p.a., illegal cigarette volumes in  contrast have grown at about 5% p.a. during the same period, making India one  of the fastest growing illegal cigarette markets in the world. It is pertinent  to note that, according to Euromonitor International, India is now the 4th  largest illegal cigarette market in the world.

Another  factor that fuels the growth of smuggled international brands is that such  cigarette packs do not carry the excessively large (85% of the surface area of  both sides of the cigarette package) pictorial warnings with extremely gruesome  and unreasonable images that are prescribed under Indian laws. While the legal  cigarette industry scrupulously complies with the statutory provisions,  smuggled international brands of cigarettes either do not bear any pictorial or  other health warnings or bear warnings of much smaller dimensions, that too  different from what is mandated under Indian law. Findings from research  conducted by IMRB International, an independent organisation, indicate that the  lack of warnings or their diminutive size creates a perception in the  consumer's mind that the smuggled cigarettes are 'safer' than domestic  duty-paid cigarettes that carry the statutory warnings. The attractive tax  arbitrage opportunity for smuggled cigarettes allows unscrupulous players to  make the products available to consumers at a fraction of the price of  duty-paid domestic cigarettes. In fact, the affordability of illegal cigarettes  and the other cheaper tobacco products (by reason of lower tax incidence as  well as evasion of taxes) has been driving the consumption of tobacco from  duty-paid cigarettes to the other forms. 

The  growth of smuggled international brands has also adversely impacted the demand  for domestic Flue Cured Virginia (FCV) tobacco that is used in cigarette  manufacture. The absence of a strong domestic demand base has not only resulted  in loss of income but also exposed the Indian tobacco farmer to the  volatilities of the international market, thereby sub-optimising earnings from  tobacco crop exports as well. These developments have had a devastating impact  on the Indian tobacco farmer and the 47 million livelihoods dependent on the  tobacco value chain. Soft demand for Indian FCV tobacco has prompted the Tobacco  Board of India to reduce the authorised crop size for three successive years  i.e. 2015-16, 2016-17, 2017-18. Further, the unprecedented drought in Andhra  Pradesh in late 2016 played havoc on the actual crop output in 2017 besides  adversely impacting its quality. This, in turn, has also led to lower exports  of tobacco. It is estimated that the cumulative drop in farmer earnings is in  excess of Rs. 3450 crores over the last three years, i.e., an average loss in  earnings of over Rs. 1150 crores per year.

As  reported last year, ITC and several other stakeholders had challenged the  validity of the pictorial warnings. Based on a direction of the Supreme Court,  all litigation on pictorial warnings were tagged together and heard by the High  Court of Karnataka. The High Court, by its judgement in December 2017 held the  85% pictorial warnings with extremely gruesome imagery to be factually  incorrect and unconstitutional. Upon a Special Leave Petition filed by the  Government, the Honourable Supreme Court stayed the Order of the High Court.  Pending the final hearing of this matter, the regime of the extremely repugnant  85% pictorial warnings continues.

Although  India is the 3rd largest tobacco grower in the world, it has put in place  extremely stringent tobacco control laws. For instance, the statutorily  prescribed pictorial warning occupying 85% of both sides of a cigarette pack  ranks India in the 2nd position globally in terms of their stringency.  Unfortunately, these laws have fuelled, albeit unintentionally, the growth of  illegal cigarettes in the country and consequently, impacted adversely on  farmer incomes. In contrast, several major tobacco producing countries,  including the USA, have taken into consideration the interests of their tobacco  farmers in deciding whether or not to adopt large or excessive pictorial  warnings. The Indian tobacco control laws have, thus, had the inadvertent and  unforeseen effect of causing losses to the Indian farmer with corresponding  gains to tobacco farmers in the countries that have opted for moderate and  equitable tobacco control laws.

Despite an extremely challenging operating environment, the  Business consolidated its leadership position in the industry during the year  and continued to improve its standing in key competitive markets across the  country. This demonstrates the resilience of the Company's portfolio of brands,  superior consumer insights and its relentless focus on value creation. Some of  the key interventions during the year include the launch of innovative variants  viz., Classic Double Burst, Gold Flake Mint Switch, Flake Mint Switch, Bristol  Magnum, Navy Cut Century and a new brand, Wave. Additionally, two brands,  American Club and Players, which were launched towards the end of 2016-17 were  strengthened significantly during the year.

Unfortunately, the taxation and regulatory policies of the country are  largely cigarette-centric and based on tobacco consumption patterns prevalent  in developed countries. Such policies are not suitable for India since  duty-paid cigarettes account for only about 11% of tobacco consumption in the  country as compared to the global average of more than 90%. The Company  continues to engage with policy makers for a tobacco taxation and regulatory  policy that is non-discriminatory, helps combat the menace of illegal  cigarettes and addresses the issues of all stakeholders, particularly tobacco  farmers, Exchequer and consumers. Such a policy will not only help maximisation  of the revenue potential of tobacco even in a shrinking basket of tobacco consumption  but also address the tobacco control and health objectives of the Government. 



The operating environment in the  hospitality sector showed signs of improvement with foreign tourist arrivals  crossing the 10 million mark in 2017. While growth in Segment Revenue during  the year was subdued at 5.6% reflecting inter alia the overhang of excess room  inventory and the impact of highway liquor ban, performance during the second  half was significantly better driven by increase in ARR and robust growth in  Food & Beverage revenue. Improvement in room rates and operating leverage  aided faster growth of 26% in Segment Results, notwithstanding the gestation  costs of ITC Grand Bharat and the recently commissioned WelcomHotel Coimbatore.

In view of the long-term potential of  the Indian hospitality sector, the Company remains committed to enhancing 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 Business  made steady progress during the year in the construction of luxury hotels at  Hyderabad, Kolkata and Ahmedabad. Construction of ITC Kohenur in Hyderabad is  nearing completion and is expected to be commissioned in the first quarter of  2018-19. In addition, the Company's wholly-owned subsidiary in Sri Lanka made  steady progress towards setting up a luxury hotel christened 'ITC One' and a  super-premium residential apartment complex, 'Sapphire  Residences - Colombo 1', situated at a  strategic location in Colombo.

As reported earlier, the Company was declared the successful bidder for  a 250-room luxury beach resort located in South Goa operating under the name  Park Hyatt Goa Resort and Spa, following an auction held by IFCI Limited in  February 2015 in terms of the Securitisation and Reconstruction of Financial  Assets and Enforcement of Security Interest Act, 2002. Subsequent to making  full payment of the bid amount, IFCI issued the requisite Sale Certificates in  favour of the Company on 25th February, 2015. However, based on an appeal by  the erstwhile owners, the sale had been struck down by the Honourable Bombay  High Court. The Company and IFCI had contested the said order before the  Honourable Supreme Court. On 19th March, 2018, the Honourable Supreme Court  upheld the sale of the property by IFCI Limited to the Company and directed  that the hotel property be handed over within six months. Accordingly, the  property is expected to be handed over in the coming months. 


Agri Business

Indian  FCV crop output at 212 million kgs., was lower by five million kgs. over the  previous year mainly on account of the Tobacco Board's decision to reduce the  authorised crop size and unprecedented drought in Andhra Pradesh in 2016. This  marked the third successive year of decline representing a cumulative drop of  19% over 2015. Crop output in Andhra Pradesh reduced to 106 million kgs. - the  lowest level in a decade, while quality was also adversely impacted.

Reduction  in crop size over the years, shortage & poor quality of Andhra 2017 crop,  lower export incentives and availability of Chinese inventory at discounted  prices led to significant pressure on Indian tobacco exports.  Sustained pressure on cigarette sales  volumes, both in India and globally, coupled with relative strength of the  Indian Rupee compared to competing country currencies also resulted in reduced  demand for Indian tobaccos. The combination of the factors as aforestated led  to the fourth successive year of decline in Indian tobacco exports to 178  million kgs. - a ten-year low.

Despite  such challenging market conditions, the Company consolidated its leadership  position as the largest Indian exporter of unmanufactured tobacco with further  improvement in market standing. This was achieved through new business  development and enhanced value delivery to existing customers by leveraging the  Business's expertise in crop development, superior leaf procurement processes  and world-class processing facilities. The Business continued to provide  strategic sourcing support to the Cigarette Business meeting all requirements  at competitive prices.

During 2017-18, world wheat output increased by eight million  tonnes to about 758 million tonnes mainly due to higher production in Russia.  India also witnessed higher production by six million tonnes which led to  increase in government procurement by eight million tonnes thereby reducing the  surplus available for domestic trade. This led to exports from India being  uncompetitive compared to other origins like Russia and Ukraine. These  circumstances resulted in lack of trading opportunities in wheat during the  year both in the export and domestic markets.

The deep rural linkages and expertise in  agri-commodity sourcing resident in the Agri Business, coupled with  differentiation through value-added services of identity preservation,  traceability and certification is a critical source of competitive advantage  the Company. The Business continues to provide strategic sourcing support to  the Company's Cigarette business and sources identity-preserved specific grades  of superior quality wheat, fruit pulp, spices and frozen shrimps for the  Branded Packaged Foods Businesses.

The year also marked the Company's foray into branded packaged potatoes  and apples under the 'Farmland' brand in select cities for the retail segment.  The product portfolio comprises a range of differentiated offerings such as low  sugar, antioxidant, french fry and baby potatoes, and apples sourced from Jammu  & Kashmir and Himachal Pradesh. The Business also launched 'ITC Master Chef  - Smart Onions', a dehydrated onion product, in select markets for the domestic  food service segment. The product is anchored on delivering the benefits of  convenient and faster cooking with less oil and adheres to global standards in  safety. The aforestated initiatives have met with encouraging response and are  planned to be scaled up going forward. 


Paperboards, Paper & Packaging

The domestic Paperboards, Paper and Packaging industry  remained impacted by sluggish demand conditions prevailing in the FMCG, liquor  and legal cigarette industry. The transition to GST also caused short term  disruptions especially during the first half of the year. This, coupled with  zero duty imports under ASEAN Free Trade Agreement, cheap imports from China  and unabsorbed capacity in the industry weighed on the performance of the  Business. On the positive side, relatively benign input costs, higher substitution  of imported pulp with in-house pulp and continued focus on product mix  enrichment resulted in margin expansion. Consequently, while Segment Revenue  de-grew by 2.1%, Segment Results grew at a faster pace of 7.9% during the year. 

The Business remains the clear leader in  the VAP segment and continues to consolidate its preferred supplier status  amongst leading end-use customers and brands. Further, the expansion project in  the VAP segment at Bhadrachalam unit is nearing completion. The Specialty  Papers portfolio was also expanded with the launch of new grades to service the  needs of customers. The Décor machine at Tribeni unit was completely  refurbished during the year, incorporating latest technology features along  with capacity expansion. The Business sustained its leadership position in the  sale of eco-labelled products, volumes of which grew by appx. 12% during the  year.

The Business continues to make structural interventions in  the areas of strategic cost management and import substitution. These include  augmentation of in-house pulp manufacturing capacity, efficiency improvements  of existing equipment and developing alternative sources of supply for key  inputs on an ongoing basis. Operations of the Bleached Chemical Thermo  Mechanical Pulp mill (BCTMP) at the Bhadrachalam unit stabilised during the  year with progressive improvement in capacity utilisation leading to reduced  dependence on imported pulp and cost savings. During the year, technology  interventions made in the pulp mill resulted in higher pulp production,  improvement in pulp quality and reduction in chemical consumption.

The Packaging and Printing Business further consolidated its position as  a 'one-stop shop for packaging solutions' leveraging the recent investments in  rigid boxes and flexo corrugated packaging lines. With its comprehensive  capability-set across multiple platforms, coupled with in-house cylinder making  and blown film manufacturing lines, the Business continues to provide  innovative solutions to several key customers in India and overseas, catering  to the packaging requirements across several industry segments viz. Food &  Beverage, Personal Care, Home care, Apparel, Consumer Electronics, Pharma,  Liquor and Tobacco. The Business continued to provide strategic support to the  Cigarette and FMCG businesses. 


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 Agriculture  Program

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 Gurugram on 16th May 2018, approved the financial  results for the year ended 31st March 2018, which are enclosed.

Click here for the Financial Results