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ITC Limited

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Title: ITC Limited


1
ITC Limited
2
ITC - Financial Snapshot
Market capitalisation _at_ 31/10/2005 Rs. 45200
crs. (US 10 bln.)
3
2004-05 Financials
(Rs. 1 crore Rs. 10 million)
4
Segment Revenues 2004/05
(Rs. 1 crore Rs. 10 million)
5
Segment Results 2004/05
(Rs. 1 crore Rs. 10 million)
6
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)
7
ITC Q2 05/06 - Key Financials
8
ITC H1 05/06 - Key Financials
9
Segment Revenue Q2/H1 2005/06
10
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
11
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
12
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

13
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

14
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

15
ITC - Business Portfolio
ITC
FMCG Cigarettes Other FMCG
Paperboard Paper Packaging
Agri Business Leaf Tobacco Agri Commodities
Hotels
Focus area for future growth
16
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

17
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

18
FMCG - Cigarettes
19
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

20
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

21
Source Based on Cigarette consumption
data(2003) from World Cigarettes,ERC Group plc.
22
Hotels Tourism
23
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

24
Luxury hotel rooms - East Asia
Source Compendium of Tourism statistics, WTO
25
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

26
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

27
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

28
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)

29
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

30
Paperboards, PaperPackaging
31
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

32
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

33
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

34
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

35
Agri Businesses- Leaf Tobacco- Agri Commodities
36
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

37
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

38
e-Choupal - Recognition
  • World Business Award ICC-UNDP
  • Enterprise Business Transformation Award -Wharton
    Infosys
  • Harvard Business School case study
  • Showcased at ICT4D, Geneva UN

39
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

40
Future Growth Value Capture
  • New FMCG Initiatives

41
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

42
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

43
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

44
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

45
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

46
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.

47
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

48
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

49
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
50
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.
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