ITC Limited

ITC - Financial Snapshot

Rs. crores
1997 2004 CAGR %
Gross Turnover (Ext.) 5863 11815 11
Net Turnover (Ext.) 2912 6470 12
PBIT 707 2344 19
PBT 587 2319 22
PAT 347 1593 24
Capital Employed 2085 6619 18
EPS (Rs.) 14 64 24
Book Value per share (Rs.) 55 259 25
Op. Profit Margin (%) 24 36
Net Profit Margin (%) 12 25
Return on Capital Employed (%) 34 35
Total Shareholders Return (%) 23
(Rs. 1 crore = Rs. 10 million)
 2003-04 Financials
(Rs. crores)
2003/04 2002/03 Goly (%)
Gross Turnover 11815 11025 7.2
Net Turnover 6470 5866 10.3
Exports 1103 1336 -17.4
PBDIT 2585 2323 11.3
PBIT 2344 2086 12.4
PBT 2319 2056 12.8
PAT 1593 1371 16.2
Capital Employed 6619 5546 19.3
(Rs. 1 crore = Rs. 10 million)
 Segment Revenues 2003/04
Rs. crs.
Full Year
2003-04 2002-03 Goly
1. Segment Revenue
a) FMCG - Cigarettes 9230.27 8764.00 5.3
- Others 304.16 109.20 178.5
Total FMCG 9534.43 8873.20 7.5
b) Hotels 257.53 193.40 33.2
c) Agri Business 1708.76 1658.14 3.1
d) Paperboards, Paper & Packaging 1253.28 1162.87 7.8

Total 12754.00 11887.61 7.3

Less : Inter segment revenue 938.96 862.73 8.8

Gross sales / income from operns. 11815.04 11024.88 7.2

(Rs. 1 crore = Rs. 10 million)

 Segment Results 2003/04
Rs. crs.
2003-04 2002-03 Goly
2. Segment Results

a) FMCG - Cigarettes 2033.34 1923.53 5.7

- Others (174.35) (122.44) (42.4)
Total FMCG 1858.99 1801.09 3.2
b) Hotels 32.51 10.09 222.2
c) Agri Business 89.80 84.02 6.9
d) Paperboards, Paper & Packaging 229.85 226.28 1.6
Total 2211.15 2121.48 4.2

Less : i) Interest (Net) 24.79 29.84 (16.9)

ii) Other un-allocable expenditure net of (132.70) 35.45 (474.3)
un-allocable income

Total Profit Before Tax 2319.06 2056.19 12.8

(Rs. 1 crore = Rs. 10 million)
 Segment Capital Employed March ‘04
Rs. crs.
2003-04 2002-03 Goly
3. Capital Employed

a) FMCG - Cigarettes * 1572.50 1621.58 (3.0)

- Others 212.10 80.41 163.8
Total FMCG 1784.60 1701.99 4.9
b) Hotels 978.68 943.09 3.8
c) Agri Business 476.90 410.88 16.1
d) Paperboards, Paper & Packaging 1468.89 1260.91 16.5

Total Segment Capital Employed 4709.07 4316.87 9.1

* Luxury Tax Provision not incl. 1366 970.00 40.8

(Rs. 1 crore = Rs. 10 million)
 Key Financials - Q2 FY ‘05
Rs. Crs
Q2 Q2
Goly (%)
Last Year Actuals
2856 Gross Turnover External 3219 12.7
1536 Net Turnover External 1738 13.1
688 PBDIT 768 11.6
628 PBIT 698 11.1
624 PBT 688 10.2
428 PAT 486 13.5
6257 Capital Employed 7540 20.5
4295 Operating Cap.Employed 4562 6.2
17.29 EPS 19.61 13.4
(Rs. 1 crore = Rs. 10 million)
 Key Financials - H1 FY ’05
H1 Last H1 2004
Year Actuals Goly (%)
5611 Gross Turnover External 6455 15.0
2965 Net Turnover External 3513 18.5
1357 PBDIT 1523 12.3
1238 PBIT 1385 11.9
1228 PBT 1362 10.9
825 PAT 948 14.9
6257 Capital Employed 7540 20.5
4295 Operating Cap.Employed 4562 6.2
33.33 EPS 38.25 14.8
(Rs. 1 crore = Rs. 10 million)
 Segment Revenues - H1 FY ‘05
Rs. crs.
Growth
04/05 30.09.2003
30.09.2004 03/04 Amt %
1. Segment Revenue
a) FMCG - Cigarettes 5079 4575 504 11
- Others 237 127 111 87
Total FMCG 5317 4702 615 13
b) Hotels 131 107 24 23
c) Agri Business 862 734 128 17
d) Paperboards, Paper & Packaging 763 604 159 26
Total 7073 6147 926 15
Less : Inter-segment revenue 617 535 82 15
Gross sales / Income from operations 6455 5611 844 15

(Rs. 1 crore = Rs. 10 million)

 Segment Results- H1 FY ‘05
Rs. crs.
Growth
04/05 30.09.2003
30.09.2004 03/04 Amt %

2. Segment Results
a) FMCG - Cigarettes 1167 1059 108 10
- Others (86) (76) (10) (13)
Total FMCG 1081 983 98 10
b) Hotels 17 2 15 612
c) Agri Business 73 67 6 8
d) Paperboards, Paper & Packaging 150 114 35 31
Total 1321 1167 154 13
(Rs. 1 crore = Rs. 10 million)
 Capital Employed-H1 FY ‘05
Rs. crs.
Growth
04/05 30.09.2003
30.09.2004 03/04 Amt %

3. Capital Employed
a) FMCG - Cigarettes 1240 1275 (35) (3)
- Others 238 157 81 52
Total FMCG 1478 1432 46 3
b) Hotels 993 967 26 3
c) Agri Business 495 317 179 56
d) Paperboards, Paper & Packaging 1579 1301 278 21
Total Segment Capital Employed 4545 4016 529 13

(Rs. 1 crore = Rs. 10 million)

 ITC
One of India’s most valuable corporations
 Included in the ‘Forbes A-list’* featuring 400 of the
World’s “best big companies”
 Among top in :
Sustained value creation
Operating profits
Cash Profits
 High rating for Corporate Governance
 First company in India to be CG rated

* Sales or Market Cap. of US$ 5 billion or more

 ITC - Business Portfolio

ITC

FMCG Paperboard Agri Business

Cigarettes Hotels Paper & Leaf Tobacco
* Other FMCG Packaging Agri Commodities

* Focus area for future growth

Strategy of Organisation to manage diversity
of Portfolio
Formal 3-tiered governance structure:
 Board of Directors :
Comprising executive (4) and non-executive directors (8)
Strategic supervision

 Corporate Management Committee :

Comprising executive directors and senior managers
Strategic management

 CEO & Divisional Management Committee :

Executive management
 Corporate Strategies
 Sustain multiple drivers of growth, matching internal
capabilities with emerging market opportunities
 Pursue World class competitiveness in all businesses and
across the entire value chain
 Best-in-class in terms of:
 Internal Vitality
 Market Standing
 Profitability
 Strategy of Organisation and Governance processes
geared to manage multiple businesses
 Blend core competencies and leverage ITC umbrella
strengths to create new avenues of growth
FMCG - Cigarettes
 ITC’s Cigarettes Business
 Market leadership
 Powerful brands across segments
 Leadership in all segments - geographic & price
 Extensive distribution network
 Over 900 wholesale dealers serving more than 1 million
retail outlets
 World-class state-of-the-art technology and
products
 Investment - Rs.11 billion in six years
 Exciting long term growth potential
 Cigarettes: Growth potential
 Cigarettes account for only 14% of tobacco consumed in
India unlike world pattern of 85% due to prolonged
punitive taxation
 Cigarettes (14% of tobacco consumption) contribute nearly
85% of Revenue to the Exchequer from tobacco sector
 Of the 58% of adult Indian males who consume tobacco,
barely 15% can afford cigarettes
 Biri : Cigarettes ratio = 10 : 1
 Annual per capita adult cigarette consumption in India is
one tenth world average : 117
 Future growth depends on relative rates of growth of per
capita income and moderation in taxes
 Annual Per Capita Adult Cigarette Consumption

3000

2500

2000

1500

1000

500

0
Japan

India
USA

B’desh
China

Pakistan
Nepal
UK

Source : Tobacco Institute of India

Hotels & Tourism
 Hotels & Tourism industry

 Foreign arrivals into India - 3 million appx. vs

31 million in China
 The two nations were on par 2 decades ago at
750,000 arrivals
 Today, Beijing alone has as many hotel rooms
as the whole of India
 India’s luxury rooms availability lower than
even smaller East Asian countries
 Luxury hotel rooms - East Asia

80000
70000
60000
50000
40000
30000
20000
10000
0
Bangkok

India
Singapore
HongKong

Malaysia

Source: Compendium of Tourism statistics, WTO

 Indian hotel industry

 Current supply - 80,000 rooms of which 5 Star

category accounts for less than 30%
 To support GDP growth of 6% p.a., Indian room
capacity needs to double in five years
 Present mismatch between supply and demand
expected to persist over the short term
 As infrastructure for trade & commerce improves -
growing potential for leisure tourism
 ITC’s hotel business
 One of three chains in India
 Immediate strategy to establish presence in key business
locations to complete the chain expected to be achieved by
end 2004
 Revenue leadership in most locations
 Leverage unique service proposition and
international alliance with Sheraton
 Large tax advantages on investments on ITC
Balance Sheet
 Attractive medium / long term prospects
 Amalgamation
• Board meeting on 25th August 2004 approved
scheme of amalgamation for merger of ITC
Hotels and Ansal Hotels with ITC
• Merger ratios:
– 3 shares of ITC for 25 shares of ITC Hotels
– 1 share of ITC for every 150 shares of Ansal
Hotels
• Proposed date of merger: 1st April 2004,
subject to High Court/other approvals
 ITC’s Hotel Properties & Projects
• Maurya Sheraton, New Delhi
• ITC Ltd • ITC One, New Delhi
• Grand Maratha, Mumbai
• Sonar Bangla, Kolkata
• Grand Central, Mumbai
(Project)
• Ansal Hotels Ltd. (81.5%)

• ITC Hotels Ltd • Windsor Manor, Bangalore

• Rajputana Palace, Jaipur
• Mughal, Agra (Licensed)
• Chola, Chennai (Licensed)
• Park, Chennai (Managed)
• Vadodara (Licensed)
Other Hotel Properties - ITC Hotels Ltd.

• Srinivasa Resorts • Kakatiya, Hyderabad

– (68% shareholding)
• Bay Island Hotels • Bay Island, Port Blair
– (100% shareholding)

• Fortune Park Hotels • Manages mid-segment

hotels
– (100% shareholding)
• Marudhar Hotels • Manages Heritage hotels
– (50% shareholding)
Paperboards, Paper
&
Packaging
 Indian paperboard market

 Annual paperboard demand - 0.90 million

tonnes
 Fragmented capacity & obsolete technology
 Low per capita usage at 0.75 kg - 1/7th global
average
 Indian paperboard market growing at 6 -7% p.a.
 Value Added Coated board - the fastest growing
segment (20% p.a.) in India driven by the
growing sophistication of the consumer
 Paperboard Demand Projections - Asia

 Asian region demand (excluding Japan) growing

by 0.5 million tonnes per annum
 This region expected to be a net importer by 2005
 Significant export opportunities for high quality
Indian manufacturers
 ITC paperboards exports - Rs. 1 billion
 ITC’s Paperboards Business
 Market leader in growth segment - value added coated boards
 World-class contemporary technology
 Elemental Chlorine Free (ECF) Pulp Mill commissioned – only
one of its kind in India meeting world-class environmental
standards
 Internationally competitive quality and cost
 Social farm forestry in mill command area to improve access to
cost effective fibre & to attain self-sufficiency
 Biotech research based high yielding Clones – Effectiveness
tested in about 24,000 hectares
 Pulping capacity enhanced by 100,000 MT to strengthen
competitiveness
 ITC’s Paper & Packaging businesses

 Capacity expansion in recycled segment

 Acquisition of Kovai Unit in March 2004: +65000 TPA
 Another 75000 TPA to be commissioned by Q3 2004

 ITC’s packaging SBU -India’s largest converter of

paperboard into high quality printed packaging
 Leading supplier to Indian FMCG segment
Agri Businesses
- Leaf Tobacco
- Agri Commodities
 Indian Leaf Tobacco industry
 India - the second largest producer of tobacco
 But, Indian exports constitutes mere 0.7% of the value of
world trade in tobacco
 Upgradation of tobacco consumption from other formats
to cigarettes will enable:
 growing domestic base
 larger opportunities for value added exports
 ITC - India’s largest buyer, processor, consumer &
exporter of cigarette tobaccos
 ITC’s Agri Commodity Exports

 Farm linkages in 14 states covering Soya, Wheat,

Rice, Marine products, Edible nuts, Coffee
 Unique CRM programme in commodity exports
 Leveraging IT for the transformational ‘e-Choupal’
initiative
 Rural India’s largest Internet-based intervention
 Over 22000 villages linked through 4700 e-Choupals
servicing more than 2.8 million farmers
 First rural mall christened ‘Choupal Sagar’ opened in M.P
 Distinctive sourcing capability for ITC’s Foods
business
 e-Choupal - Recognition

• World Business Award – ICC-UNDP

• Enterprise Business Transformation Award
-Wharton Infosys
• Harvard Business School – case study
• Showcased at ICT4D, Geneva – UN
 ITC’s strategic thrust

 Cost effective extension services to enhance farm

productivity and quality, and better align farm produce
with requirements of the market, both domestic and
international
 Enhances competitiveness of ITC agri sourcing
 Create e-infrastructure to serve as transaction backbone
 Provides ITC two-way fulfilment capability in and out of rural
markets for a range of goods and services
 Rural marketing initiatives being scaled up progressively
Future Growth & Value Capture

New FMCG Initiatives

 Strategic Rationale

 Blend multiple competencies residing within the ITC Group

to create new avenues of growth
 Best fit between internal capabilities and emerging market
opportunities
 Each segment enhances the depth and width of ITC’s FMCG
distribution capability
 Business model retains critical elements of value chains
within ITC with other elements outsourced
 Contributing to the competitiveness of SMEs
 FMCG Business Initiatives
Branded Packaged Foods
 Leverages:
 Unique Agri sourcing skills
 ITC Welcomgroup’s specialist cuisine & bakery knowledge
 FMCG distribution synergies
 ITC Group R&D centre,Bangalore
 4 chosen categories:
 Staples
 Aashirvaad Atta & Salt
 Biscuits
 Sunfeast
 Confectionery
 Candyman, mint-o
 Ready to Eat
 Kitchens of India, Aashirvaad ReadyMeals
 FMCG Business Initiatives
Branded Packaged Foods

• Aashirvaad Atta - current market leader amongst national

branded players; leverages the e-choupal network for cost-quality
optimisation and region specific offerings
• Sunfeast Biscuits - Differentiated & innovative products ; very
encouraging response in launch markets ;distributed & outsourced
supply chain being ramped up
• Number of innovative products in the pipeline leveraging the
capabilities of the ITC Group R&D centre
 FMCG Business Initiatives
Lifestyle Retailing
 Leverages trade mark and services expertise of hotels
 Relaxed wear market growth > 25% p.a
 Upmarket product range available in exclusive Wills
Lifestyle stores and multi-branded outlets/ large format
retail stores across the country
 State-of-the-art Master Facility aids speed of execution
 Outsourced JIT plant for ‘quick response’ manufacturing
 Product and brand range being expanded
 ‘Wills’ range expanded to Formals and Social evening wear segments
 Strong distribution network in place for the mid-market brand
‘John Players’
 FMCG Business Initiatives
Greetings & Gifts

 Leverages print and paper know-how

 An emerging market in India - growth driven by
increasing cross-cultural exposure
 ITC’s ‘Expressions’ range commenced with greeting
cards; now widened to include stationery & gift wraps
 Serves to expand the width of ITC’s FMCG distribution
capability with negligible incremental investment
 FMCG Business Initiatives
Safety Matches

 Current consumer spend estimated at Rs.1250 crores

p.a. for 24 billion match boxes
 Fragmented supply base arising from policy of
reservation for small scale industry
 ITC markets its brands with value added products
across each price point
 Support SMEs with complementary marketing strengths
 ‘AIM’ – India’s largest selling Safety Matches brand
 FMCG Business Initiatives
Incense sticks (Agarbattis)
 Current consumer spend estimated at over Rs.900
crores p.a.
 Fragmented supply base arising from policy of
reservation for small scale industry
 ITC markets its brands with value added products
across each price point
 Support cottage sector with complementary marketing
strengths
 All India roll out of ‘Mangaldeep’ umbrella brand under
way
 FMCG business initiatives…….

 Concurrently, ITC’s IT subsidiary assists in web-

enabling business processes
 CRM initiatives
 ERP transaction processing systems
 SCM including the e-choupal capability
 … hosted on ITC’s Virtual Private Network
 ITC awarded the best IT user in FMCG category
by Nasscom
 Future Positioning of ITC
A leading FMCG player in India

VPN providing SCM, ERP & CRM capability

F M
A e-choupal rural two-way fulfillment A
R capability R
M K
Cigarette Trade Marketing capability E
E
R Expanded FMCG distribution capability T
S S

Branded Greeting Matches

Lifestyle
Foods cards/sta &
retailing
tionery Agarbattis

A basis for strategic partnerships with other FMCG brand owners

 Forward-looking Statements

Statements in this presentation describing the Company’s objectives, future

prospects, estimates, expectations etc. may be “forward looking statements”
within the meaning of applicable securities laws and regulations. Investors
are cautioned that “forward looking statements” are based on certain
assumptions of future events over which the Company exercises no control.
Therefore there can be no guarantee as to their accuracy. These statements
involve a number of risks, uncertainties and other factors that could cause
actual results to differ materially from those that may be projected or implied
by these forward looking statements. Such risks and uncertainties include, but
are not limited to: growth, competition, acquisitions, domestic and
international economic conditions affecting demand, supply and price
conditions in the various businesses in the Company’s portfolio, changes in
Government regulations, tax regimes and other statutes, and the ability to
attract and retain high quality human resource.
 Q1 2004/05 Financials
(Rs. crores)
2004/05 2003/04 Goly (%)
Gross Turnover 3236 2756 17.4
Net Turnover 1775 1429 24.2
Exports 312 207 50.4
PBDIT 755 669 12.9
PBIT 687 610 12.8
PBT 675 604 11.6
PAT 462 397 16.3
Capital Employed 6974 5830 19.6
 Segment Revenue Q1 2004/05
Rs. Crores
Q1
2004-05 2003-04 Goly
Actuals Actuals 2004-05
1. Segment Revenue
a) FMCG - Cigarettes 2538.28 2291.05 10.8
- Others 105.22 51.66 103.7
Total FMCG 2643.50 2342.71 12.8
b) Hotels 62.47 50.07 24.8
c) Agri Business 459.27 331.32 38.6
d) Paperboards, Paper & Packaging 377.33 295.64 27.6

Total 3542.57 3019.74 17.3

Less : Inter segment revenue 306.30 264.12 16.0

Gross sales / income from operations 3236.28 2755.62 17.4

 Segment Results Q1 2004/05
Rs. Crores
Q1
2004-05 2003-04 Goly
2. Segment Results Actuals Actuals 2004-05

a) FMCG - Cigarettes 585.22 535.63 9.3

- Others (39.08) (35.92) (8.8)
Total FMCG 546.14 499.71 9.3
b) Hotels 7.59 0.86 782.8
c) Agri Business 25.57 23.85 7.2
d) Paperboards, Paper & Packaging 81.18 52.75 53.9
Total 660.48 577.16 14.4

Less : i) Interest (Net) 12.92 5.46 136.7

ii) Other un-allocable expenditure net of (26.93) (32.44) (17.0)
un-allocable income

Total Profit Before Tax 674.50 604.14 11.6

 Segment Capital Employed Q1 2004/05
Rs. Crores
Q1
2004-05 2003-04 Goly
3. Capital Employed Actuals Actuals 2004-05

a) FMCG - Cigarettes * 1110.78 1281.43 (13.3)

- Others 227.38 114.45 98.7
Total FMCG 1338.16 1395.88 (4.1)
b) Hotels 983.33 960.36 2.4
c) Agri Business 617.40 467.77 32.0
d) Paperboards, Paper & Packaging 1526.40 1282.82 19.0

Total Segment Capital Employed 4465.29 4106.83 8.7

* Luxury Tax Provision not included 1468 1069 37.3