The global economy remained on a decelerating trend in 2016 growing by 3.1% compared to 3.4% in 2015 (as per latest IMF estimates). This marks the slowest pace of expansion since the global financial crisis Snapshot of Economic Performance in 2009 and the 5th successive year that the global economy has grown at a rate lower than its long-term average of 3.6% p.a. The anticipated pickup in global growth (3.4%) at the beginning of the year did not fructify mainly due to slower growth in the Advanced Economies which grew by 1.7% in 2016 against 2.1% in 2015. Within the Advanced Economies, the US posted a muted growth of 1.6% led by downward adjustments in inventories and contraction in Private Investments, particularly during the first half of the year. The Euro Area also recorded tepid growth, expanding by 1.7% during the year compared to 2.0% in 2015. Emerging Market & Developing Economies witnessed a growth of 4.1% in 2016 against 4.2% in 2015, with Brazil and Russia recording a reduced pace of contraction which was offset by slower growth in the emerging European economies and further slowdown in the Chinese economy from 6.9% in 2015 to 6.7% in 2016.

In spite of the lacklustre performance during the year as aforestated, green shoots of economic recovery became visible in the latter half of the year. It is anticipated that the global economy will perform better and grow by 3.4% in 2017 and improve further to 3.6% in 2018, on the back of synchronised growth momentum in Advanced as well as Emerging Economies. After years of persistently low inflation (even deflation), 2017 is expected to be a year of reflation. Stronger growth momentum, better prospects for oil and other commodities, and the US Dollar's appreciation against other major currencies could cause inflation to return in most major economies.

The Indian economy witnessed another challenging year, with Real GDP growth pegged at 7.1% representing a sharp slowdown over 2015-16 (7.9%). Further, looking beyond the reported numbers, a wide range of economic indicators suggest tepid performance across private investments, consumption and manufacturing activity which have contracted significantly. The anticipated pickup in consumption and private investments remained elusive.

Private Investments are estimated to have grown by a mere 0.6% in 2016-17 a 5-year low. Indian industry continues to be adversely impacted by low capacity utilisation and stretched balance sheets. Growth in Private Final Consumption Expenditure (PFCE) is estimated at 7.2% for 2016-17 (compared to 7.3% in 2015-16) aided by a rebound in Agriculture on the back of a good monsoon after two consecutive years of sub-par rainfall, partial implementation of recommendations of 7th Pay Commission and 'One Rank One Pension' (OROP) scheme. However, proxy indicators such as subdued performance of two-wheeler sales, weak power demand, decline in cement and oil volumes and a marked deceleration in corporate sales growth, point to persistent weakness in Private Consumption.

The performance of the Industry sector also remained muted as reflected by the Index of Industrial Production (IIP) which grew by just 0.4% during the period April 2016 to February 2017 as against 2.6% in the same period last year. Further, IIP (Manufacturing sector) witnessed a de-growth of 0.3% during the period April 2016 to February 2017 (compared to growth of 2.3% in the same period last year).

On the positive side, India remains the fastest growing major economy in the world. During the year, there was significant improvement on the 'twin deficit' front. Fiscal Deficit is estimated to be contained within target at 3.5% of GDP in 2016-17 (against 3.9% in 2015-16) aided by buoyant tax collections and decline in oil subsidies. The Current Account Deficit was also contained within 1.0% of GDP in spite of an increase in oil prices during the year.

Inflation remained largely within the comfort zone of the RBI during the year. Wholesale Price Index (WPI) for 2016-17 increased to 3.7% from (-) 2.5% in 2015-16, which was mainly attributable to the base effect of low fuel and commodity prices. Consumer Price Index (CPI) for 2016-17 declined to 4.5% against 4.9% in 2015-16 with Core CPI remaining stable at 4.7% in 2016-17 (4.6% in 2015-16). This prompted the RBI to reduce policy interest rates by 50 bps during the year.

Driven by the foreign capital flow into the country, in the form of Foreign Institutional Investments and Foreign Direct Investment, Sensex advanced 17% (after declining by 9% in 2015-16), reflecting the optimism on improvement in the business environment, expected progress on the reforms agenda and anticipated acceleration in future corporate earnings. The pace of growth is expected to gather momentum in the medium term on the back of favourable global economic tailwinds, implementation of key policy reforms such as Goods and Services Tax (GST) and pickup in private investment.

Given the macro-economic scenario, the Company delivered a steady performance during the year in the backdrop of a persistently sluggish demand environment, continuing pressure on the legal cigarette industry due to the cumulative impact of steep increase in taxation and regulatory pressures, sharp hike in input costs and gestation costs relating to new products/ categories especially in the non-cigarette FMCG segment. The operating environment was rendered particularly challenging in the second half of the year with the currency crunch impacting the incipient recovery in demand. The business environment in the Hotels industry also remained subdued, with only a marginal improvement in room rates reflecting the overhang of excess room inventory in key markets. The Paperboards, Paper and Packaging segment also had to contend with a weak demand and pricing environment.

Despite the challenging business environment as aforestated, Gross Revenue from sale of products and services stood at 55001.69 crores and grew by 6.6% primarily driven by an 8.0% growth in the non-cigarette FMCG segment, 10.8% growth in Agri Business and 5.1% growth in the Cigarettes segment. Profit Before Tax registered a growth of 7.4% to 15502.96 crores while Profit After Tax at 10200.90 crores increased by 9.4%. Total Comprehensive Income for the year stood at 10277.90 crores (previous year 9261.79 crores). Earnings Per Share for the year stood at 8.43 per share (previous year 7.74 per share). Cash flows from Operations aggregated 15214.98 crores, compared to 14039.64 crores in the previous year.

For the year ended March 31, 2017, the Board of Directors have recommended an Ordinary Dividend of 4.75 per share (previous year Ordinary Dividend of 4.33 per share and Special Dividend of 1.33 per share; adjusted for Bonus Issue). Total cash outflow in this regard will be 6944.65 crores including Dividend Distribution Tax of 1174.64 crores.

  • Total Assets and Returns

    Despite the extremely challenging business environment during the year under review, ITC continued to make significant investments in the Indian economy across its business domains. This included investments in manufacturing facilities towards sustaining its competitive advantage, which included state-of-the-art, on-line quality oversight systems and cutting-edge technology for innovative packaging.

    Apart from the above, Company continued to invest towards enhancing brand salience and consumer connect, while simultaneously implementing strategic cost management measures across the value chain. Several initiatives were also implemented during the year towards leveraging the rapidly growing e-commerce channel with a view to enhancing the reach of the Company's products and harnessing digital and social media platforms for deeper consumer engagement. Substantial investments are also being made in Research & Development with focus on consumer insight discovery to develop and launch disruptive and breakthrough products in the market place.

    ITC's diversified portfolio of businesses, spanning FMCG, Paperboards & Packaging, Agri Business and Hotels enables it to have significant presence in all the three sectors of the economy, namely, agriculture, manufacturing and services, providing the Company the unique opportunity to contribute meaningfully to the growth and development of the country.

    Hence, while the net capital employed* has expanded at a compound rate of 14% over the previous five years to reach 40,278 crores as on March 31, 2017, returns on net capital employed (Profit before interest and taxes) have increased during this period from 17,160 crores to 23,810 crores, a compound rate of 9%.

  • Market Capitalisation & Earnings Per Share

    ITC is one of India's most admired and valuable corporations and has consistently featured over the last twenty years, amongst the top 10 private sector companies in terms of market capitalisation and profits. Over the last 21 years, the Company has created multiple drivers of growth by developing a portfolio of world-class businesses across all sectors of the national economy spanning agriculture, manufacturing and services; placing the Company amongst the foremost in the country in terms of efficiency of servicing financial capital.

  • Analysis of Value-Added

    The Value-Added by the Company, i.e. the value created by the economic activities of the Company and its employees, grew by 6% over last year to 43,568 crores. The Company's Contribution to Exchequer during the year stood at 32,075 crores representing 74% of the total value addition made by the Company.

  • Contribution to the National Exchequer

    The Company remains amongst the Top 3 Indian corporates in the private sector in terms of Contribution to Exchequer.

  • Dividend

    For the year ended March 31, 2017, the Board of Directors have recommended an Ordinary Dividend of 4.75 per share (previous year Ordinary Dividend of 4.33 per share and Special Dividend of 1.33 per share; adjusted for Bonus Issue).

  • Local Based Suppliers

    The Hon'ble Prime Minister's vision to build a dynamic, progressive and self-reliant India through impactful programmes such as the Make in India, Skill India, Digital India and Swachh Bharat resonates deeply with the Company's efforts to create a national institution of pride. The Company actively encourages competency development among local vendors and its vendor base including numerous medium and small scale enterprises that are proximate to its manufacturing locations. More than 87% of raw materials and stores & spares have been locally procured during the year.

    The Company's suppliers, both local and international, constitute one of its important stakeholder groups. Vendors/service providers and large outsourced manufacturing facilities are encouraged to adopt management practices detailed under the international standards such as ISO 9001, ISO 14001, OHSAS 18001 and ITC's Corporate Environment, Health and Safety (EHS) Guidelines. In order to strengthen sustainable procurement processes, Policies on 'Responsible Sourcing' and 'Human Rights Consideration of Stakeholders beyond the Workplace' have been adopted to address issues of labour practices, human rights, bribery, corruption, occupational health, safety and environment. Please refer to 'Business Responsibility Report' of the Report and Accounts 2017 (available on for discussion on sustainability of products and services across life-cycle, supply chain and product responsibility etc.

  • Financial Assistance from Government

    The Company had availed the incentives offered by the States of Andhra Pradesh and Tamil Nadu, by way of deferment of Sales Tax, which are repayable over a period ranging from 10 to 14 years. The outstanding amount of such assistance in the form of Deferred Sales Tax due to be repaid by the Paperboards and Specialty Papers Division (PSPD) is given below:

    Other Government grants received in the form of incentives such as Export Promotion Capital Goods, Service Export from India Scheme, Merchandise Export from India Scheme amounted to 127.01 crores (2016 - 71.92 crores).

  • Engaging Talent, Local Hiring and Senior Management

    Human Resource Management systems and processes in the Company are aimed at creating a responsive, market-focused, customer-centric culture and enhancing organisational vitality, so that each business is internationally competitive and equipped to seize emerging market opportunities. The Company believes that the robustness and adaptability of its Human Resource systems and processes are critical for an organisation to remain relevant and competitive in today's highly dynamic and rapidly evolving business landscape.

    The superior capability of the Company's talent pool is premised on a work culture that nurtures quality talent and promotes a conducive work environment that combines the need to focus on performance and results with a caring and compassionate work ethos. Policies on 'Diversity and Equal Opportunity', 'Freedom of Association' and 'Environment, Health and Safety', among others, guide the management approach on specific elements of the Company's work practices. ITC believes that its competitive capability to build futureready businesses and create enduring value for stakeholders is enriched by a dedicated and high-quality human resource pool. It has continuously invested in the human resource capital as seen below:

    The employees are also entitled to retirement benefit schemes which include employee pension, provident fund and gratuity. All statutory payments, as applicable, e.g., Provident Fund and Family Pension contributions, are deposited with the Government in a timely manner.

    The pension plans and other applicable employee benefits obligations are determined and funded in accordance with independent actuarial valuation. The assets of these trust funds are managed in accordance with the prescribed statutory pattern. The assets of the trust funds are well diversified and investments are made with the objective of protecting capital and optimising returns within acceptable risk parameters. The funds are consistently sustained to meet requisite superannuation commitments.

  • Corporate Social Responsibility

    ITC's overarching aspiration to create significant and sustainable societal value is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Towards this end, the Company has adopted a comprehensive CSR policy outlining programmes, and plans to undertake projects and activities to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Schedule VII of the provisions of Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014. The footprint of the Company's Social Investments Programme (SIP) projects is spread over 26 states covering 184 districts.

    The key elements of the Company's CSR interventions are to:

    • Deepen engagement in identified core operational geographies to promote holistic development, designed to respond to the most prominent development challenges of the Company's stakeholder groups.
    • Strengthen capabilities of Non- Government Organisations (NGOs)/ Community Based Organisations (CBOs) in all the project catchments for participatory planning, ownership and sustainability of interventions.
    • Drive the Development agenda in a manner that benefits the poor and marginalised communities in our factory and agri-catchments thereby significantly improving Human Development Indices (HDI).
    • Move beyond mere asset creation to behaviour change through focus on demand generation for all interventions thereby enabling participation, contribution and asset creation for the community.
    • Continue to strive for scale by leveraging government partnerships and accessing the most contemporary knowledge/ technical know-how.

    The Company's stakeholders are confronted with multi-dimensional and inter-related issues, at the core of which is the challenge of securing sustainable livelihoods. Accordingly, interventions under the Company's Social Investments Programme (SIP) are appropriately designed to build their capacities and promote sustainable livelihoods.

    Various CSR activities in which the Company has been engaged during the current year are listed below:

    The expenditure incurred under Section 135 of the Companies Act, 2013 on CSR activities amounted to 275.96 crores (2016 - 247.50 crores).