ITC Limited

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ITC Limited
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ITC - Financial Snapshot
Market capitalisation _at_ 31/10/2005 Rs. 45200
crs. (US 10 bln.)
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2004-05 Financials
(Rs. 1 crore Rs. 10 million)
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Segment Revenues 2004/05
(Rs. 1 crore Rs. 10 million)
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Segment Results 2004/05
(Rs. 1 crore Rs. 10 million)
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Segment Capital Employed
Rs. crores
Actuals
Actuals
2003-04
2004-05
Goly ()
Capital Employed
1573
1240
(21.1)
a) FMCG - Cigarettes
212
262
23.7
- Others
1785
1502
(15.8)
Total FMCG
978
1401
43.3
b) Hotels
477
740
55.1
c) Agri Business
1469
1745
18.8
d) Paperboards, Paper Packaging
4709
5388
14.4
Total Segment Capital Employed
(Rs. 1 crore Rs. 10 million)
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ITC Q2 05/06 - Key Financials
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ITC H1 05/06 - Key Financials
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Segment Revenue Q2/H1 2005/06
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Segment Results Q2/H1 2005/06
Agri Business H1 degrowth primarily a/c mix in
leaf tobacco and strategic initiatives cost
export incentives in LY
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Segment Capital EmployedH1 2005/06
Before considering provision of 383 crs
(30.09.04 - Rs. 1572 crs) in respect of disputed
State Taxes LY includes Pre-deposit of Rs. 350
crs. with Excise Authorities in respect of Excise
litigation which since stands resolved
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ITC One of Indias most valuable corporations

• One of the 8 Indian Companies to feature in
  Forbes A-list for 2004
• Featuring 400 of the Worlds best big companies
  with M-cap. gt USD 5 bln. are rated as the most
  attractive companies for investors
• Only Indian FMCG Company to feature in Forbes
  2000 List
• A comprehensive ranking of worlds biggest
  companies measured by a composite of sales,
  profits, assets market value
• Among top in
• Sustained value creation (BT-Stern Stewart
  survey)
• Operating profits
• Cash Profits
• Ranks No. 9 among Indian listed Companies by
  market cap.(_at_31/10/05)
• No. 1 in FMCG Sector 6th amongst Private Sector
• High rating for Corporate Governance
• First company in India to be CG rated

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External recognition (1)

• Golden Peacock Global Award for Corporate Social
  Responsibility in emerging economies for 2005 by
  World Council for Corporate Governance for the
  e-choupal and social farm forestry initiatives
• e-choupal initiative continues to win global
  recognition
• First Indian Company to win the Development
  Gateway Award (2005) for the most exemplary
  contribution in the field of Information
  Communication Technologies (ICT) for development
  during the last 10 years
• World Business Award International Chamber of
  Commerce the HRH Prince of Wales International
  Business forum
• Harvard University case study
• Thought leaders in business strategy
• C K Prahalad, University of Michigan Business
  School,
• Mohanbir Sawhney, Kellog School of Management

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External recognition (2)

• ITC Centre,Gurgaon awarded Platinum Green
  building rating by US Green Building Council
  -Leadership in Energy and Environmental Design
• largest Platinum rated building in the world 7th
  such building in the world
• ITC Welcomgroup Environment champion of the
  Year 2004 (FHRAI)
• Bhadrachalam paperboard unit
• adjudged Greenest paper mill in India by The
  Centre for Science Environment won the
  Greentech Environment Excellence Gold Award
• John Players won the Rising Star of the year
  brand- Images Fashion Award 2004

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ITC - Business Portfolio
ITC
FMCG Cigarettes Other FMCG
Paperboard Paper Packaging
Agri Business Leaf Tobacco Agri Commodities
Hotels
Focus area for future growth
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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

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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

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FMCG - Cigarettes
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ITCs 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

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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 appx. one tenth world average 141
• Future growth depends on relative rates of growth
  of per capita income and moderation in taxes

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Source Based on Cigarette consumption
data(2003) from World Cigarettes,ERC Group plc.
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Hotels Tourism
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Hotels Tourism industry

• Foreign arrivals into India - 3.4 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
• Indias luxury rooms availability lower than even
  smaller East Asian countries

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Luxury hotel rooms - East Asia
Source Compendium of Tourism statistics, WTO
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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

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ITCs hotel business

• One of three chains in India
• Strategy to establish presence in key business
  locations to complete the chain achieved in end
  2004
• Over 5200 rooms under 4 distinct brands
• 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

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Amalgamation

• Merger of ITC Hotels Ltd. and Ansal Hotels Ltd.
  effective from 1st April 2004
• Merger ratios
• 3 shares of ITC for 25 shares of ITC Hotels
• 1 share of ITC for every 150 shares of Ansal
  Hotels
• Post-Merger, ITCs hotel business
• Leading hotel chain in terms of pre-tax profits
• Highest EBITDA margin

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ITCs Hotel Properties Projects

• Maurya Sheraton, New Delhi
• ITC One, New Delhi
• Grand Maratha, Mumbai
• Sonar Bangla, Kolkata
• Grand Central, Mumbai (Commissioned in Jan 05)
• Ansal Hotels Ltd (merged w.e.f. 1/4/04)
• Windsor Manor, Bangalore
• Rajputana Palace, Jaipur
• Mughal, Agra
• Chola, Chennai
• Park, Chennai (Managed)
• Vadodara

• ITC Ltd
• ITC Hotels Ltd
• (merged w.e.f 1/4/04)

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Other Hotel Properties

• Srinivasa Resorts
• (68 shareholding)
• Bay Island Hotels
• (100 shareholding)
• Fortune Park Hotels
• (99.99 shareholding)
• Marudhar Hotels
• (50 shareholding)

• Kakatiya, Hyderabad
• Bay Island, Port Blair
• Manages mid-segment hotels
• Manages Heritage hotels

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Paperboards, PaperPackaging
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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

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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. 1.6 billion

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ITCs Paperboards Business

• Market leader in growth segment - value added
  coated boards
• World-class contemporary technology
• Elemental Chlorine Free (ECF) Pulp Mill fully
  operational 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 30,000 hectares
• Pulping capacity enhanced by 100,000 MT to
  strengthen competitiveness

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ITCs Paperboards Packaging businesses

• Capacity expansion in recycled segment
• Acquisition of Kovai Unit in March 2004 65000
  TPA
• Another 75000 TPA commissioned in Jan. 05
• ITCs packaging SBU -Indias largest converter of
  paperboard into high quality printed packaging
• Leading supplier to Indian FMCG segment

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Agri Businesses- Leaf Tobacco- Agri Commodities
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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 - Indias largest buyer, processor, consumer
  exporter of cigarette tobaccos

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ITCs 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 Indias largest Internet-based intervention
• Over 30000 villages linked through 5200
  e-Choupals servicing over 3 million farmers
• 2 rural malls (Choupal Sagar) operational at
  Sehore MHOW, M.P construction of 10 more
  underway
• Distinctive sourcing capability for ITCs Foods
  business

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e-Choupal - Recognition

• World Business Award ICC-UNDP
• Enterprise Business Transformation Award -Wharton
  Infosys
• Harvard Business School case study
• Showcased at ICT4D, Geneva UN

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ITCs 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

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Future Growth Value Capture

• New FMCG Initiatives

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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
  ITCs FMCG distribution capability
• Business model retains critical elements of value
  chains within ITC with other elements outsourced
• Contributing to the competitiveness of SMEs

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FMCG Business InitiativesBranded Packaged Foods

• Leverages
• Unique Agri sourcing skills
• ITC Welcomgroups specialist cuisine bakery
  knowledge
• FMCG distribution synergies
• ITC Group RD Centre,Bangalore
• 4 chosen categories
• Staples
• Aashirvaad Atta, Salt, Spices
• Snack Foods
• Sunfeast Biscuits
• Confectionery
• Candyman, mint-o
• Ready to Eat
• Kitchens of India, Aashirvaad ReadyMeals,
  Sunfeast Pasta

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FMCG Business InitiativesBranded 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 RD
  centre

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FMCG Business InitiativesLifestyle Retailing

• Leverages trade mark and services expertise of
  hotels
• Relaxed wear market growth gt 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

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FMCG Business InitiativesGreetings, Gifting
Stationery

• Leverages print and paper know-how
• An emerging market in India - growth driven by
  increasing cross-cultural exposure
• ITCs Expressions range commenced with greeting
  cards now widened to include stationery gift
  wraps
• Distribution network being strengthened to scale
  up the Stationery business significantly
• Serves to expand the width of ITCs FMCG
  distribution capability with negligible
  incremental investment

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FMCG Business InitiativesSafety Matches

• Current industry 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 Indias largest selling Safety Matches
  brand
• 74 shareholding acquired in WIMCO Ltd. through
  Russell Credit
• Key brands Homelites, Ship, Cheetah Fight etc.

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FMCG Business InitiativesIncense sticks
(Agarbattis)

• Current industry 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
• Mangaldeep the only National brand in the
  country

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FMCG business initiatives.

• Concurrently, ITCs IT subsidiary assists in
  web-enabling business processes
• CRM initiatives
• ERP transaction processing systems
• SCM including the e-choupal capability
• hosted on ITCs Virtual Private Network
• ITC awarded the best IT user in FMCG category by
  Nasscom

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Future Positioning of ITC A leading FMCG player
in India
VPN providing SCM, ERP CRM capability
M A R K E T S
F A R M E R S
e-choupal rural two-way fulfillment capability
Cigarette Trade Marketing capability
Expanded FMCG distribution capability
Greeting cards/stationery
Branded Foods
Lifestyle retailing
Matches Agarbattis
A basis for strategic partnerships with other
FMCG brand owners
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Forward-looking Statements
Statements in this presentation describing the
Companys 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 Companys
portfolio, changes in Government regulations, tax
regimes and other statutes, and the ability to
attract and retain high quality human resource.