ITC Limited One of India’s Most Admired and Valuable Companies ITC Performance Track Record
Rs. cr.
18-yr Cagr 1995-96 2013-14 95-96 to 13-14
Net Revenue 2,536 32,883 15.3% PBDIT 584 13,562 19.1% PBIT 536 12,662 19.2% PBT 452 12,659 20.3% PAT 261 8,785 21.6% Capital Employed 1,886 27,626 16.1% ROCE % 28.4 45.8 Market Capitalisation 5,571 280708 24.3% Total Shareholder Returns % 25.9 Market Cap and TSR based on FY-end prices
Sensex (CAGR 95-96 to 13-14) : 11.1%
2 Consistency of Performance
Consistent performance over 18 year, 10 year, 5 year and 3 year horizons . In terms of Revenue, Profits, TSR Vs. Sensex
95-96 to 03-04 to 08-09 to 10-11 to CAGR 13-14 13-14 13-14 13-14 18 years 10 years 5 years 3 years NTO 15.3% 17.7% 16.1% 15.8% PAT 21.6% 18.6% 21.9% 20.8% TSR 25.9% 28.7% 33.7% 26.4% Sensex 11.1% 14.9% 18.2% 4.8% TSR and Sensex returns based on Mar-end of each FY
3 ITC’s ranking Amongst all listed private sector cos.
PBT: No. 6 PAT: No. 5 Market Capitalisation: No. 3
Note: Based on Published Results for FY14, Market Capitalisation based on 30th Jun 2014 4 ITC is the only Indian Company to be ranked amongst the Top 10 global FMCG companies in value creation during the period 2008-12
(Boston Consulting)
5 One of India’s most valuable and admired companies
. One of the foremost in the private sector in terms of :
– Sustained value creation (BT-Stern Stewart survey)
– Operating profits
– Cash Profits
. Only Indian FMCG Company to feature in Forbes 2000 List
– A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value
. Also ranked amongst the Top 10 global FMCG companies in terms of value creation during the period 2005-2009 by Boston Consulting Group. Is the only Indian company to feature consistently amongst the Top 10 global FMCG companies.
6 Awards & Accolades (1)
Harvard Business Review ranked Chairman Y C ITC Chairman Y C Deveshwar as Deveshwar was the 7th Best Performing CEO in conferred the the World Padma Bhushan by the Government of India (2011)
ITC conferred the prestigious ‘World ITC Grand Chola, Business and the world’s largest Development LEED Platinum Award 2012’ rated hotel in the at the Rio+20 New Construction UN Summit for category, launched its Social and in September 2012 Farm Forestry Initiatives
7 Awards & Accolades (2)
AIM Asian CSR Rainforest Alliance Businessworld Award by the awarded ITC's FICCI CSR Asian Forum Bhadrachalam Unit, award in Large on Corporate the Forest Enterprise Social Stewardship category Responsibility Council Forest Management certification
ITC Hotels awarded the Best Overall Corporate ‘Most Trusted Social Responsibility Hotel brand’ in Performance : Institute the Public of Public Enterprise Choice Honours category at the Times Travel Honours
8 Accolades & Awards (3)
• e-Choupal initiative wins global recognition: – World Development Report 2008 published by World Bank – Stockholm Challenge Award 2006 in the Economic Development category which recognises initiatives that leverage Information Technology to improve living conditions and foster economic growth in all parts of the world.
– First Indian Company and second in the world to win the Development Gateway Award 2005 for its trail-blazing e- Choupal initiative
– Corporate Social Responsibility Award from The Energy and Resources Institute (TERI)
– World Business Award 2004: International Chamber of Commerce & the HRH Prince of Wales & International Business forum
– Harvard University case study
– Applauded by the then President of India Dr APJ Kalam in his “special address during the national symposium to commemorate 60th year of Independence”
9 Accolades & Awards – 2013/14
• ITC was ranked 3rd among 40 leading companies in the Nielsen Corporate Image Monitor 2013- 14, and was featured among the top 5 most admired companies in India. ITC was also perceived to be the ‘Company most active in CSR’ for the third year in a row.
• ITC voted among the top two “Buzziest Brands” in the “Corporate” category by “afaqs”, one of the world’s largest marketing and advertising portals.
• The ITC Green Centre at Manesar was awarded the 5 Star rating by the Bureau of Energy Efficiency, Government of India.
• ITC Hotels was recognised as the Most Respected Company in the Hospitality category by the Business World Magazine.
• ITC’s Paperboards and Specialty Papers Business has been conferred the Green Product of the Year award at the India Green Business Summit 2014.
• ITC’s Agri Business has bagged the Rural Marketing Association of India (RMAI) Flame Award 2013 in the category of excellence in Brand Promotion.
10 ITC’s Vision
11 ITC’s Vision
. Make a significant and growing contribution towards : • mitigating societal challenges • enhancing shareholder rewards
By • creating multiple drivers of growth while sustaining leadership in tobacco, and
• focusing on Triple Bottom Line Performance Enlarge contribution to the Nation’s - Financial capital - Environmental capital - Social capital
12 Key Corporate Strategies
. Focus on the chosen business portfolio – FMCG; Hotels; Paperboards, Paper & Packaging; Agri Business, Information Technology
. Blend diverse core competencies residing in various businesses to enhance the competitive power of the portfolio
. Position each business to attain leadership on the strength of world class standards in quality and costs
. Craft appropriate strategy of organisation and governance process to : – Enable focus on each business and – Harness diversity of portfolio to create unique sources of competitive advantage
13 ITC Business Portfolio FMCG Cigarettes Foods Personal Care Lifestyle Retailing
Education & Stationery Safety Matches & Incense Sticks
Information Hotels Paperboards, Paper & Packaging Agri Business Technology
14 Strategy of Organisation
Board of Directors
Strategic Supervision
Corporate Management Enabling Focus Committee Harnessing Diversity Strategic Management
Divisional Management Committees Executive Management
15 ITC’s Cigarettes Business
. Market leadership
. Leadership across all segments - geographic & price
. Extensive FMCG distribution network – Direct servicing of 1,00,000 markets & 2 million retail outlets
. State-of-the-art technology and world class products
16 Cigarette Industry in India
. Cigarettes account for less than 12% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation – Cigarettes (<12% of tobacco consumption in India) contribute the bulk of Revenue to the Exchequer from tobacco sector
. 48% of adult Indian males consume tobacco. Only 10% of adult Indian males smoke cigarettes as compared to 16% who smoke biris and 33% who use
smokeless tobacco (Source: Global Adult Tobacco Survey India 2010)
. Annual per capita adult cigarette consumption in India is appx. one ninth of world average
17 Per Capita Consumption of Tobacco in India (gms per year)
1256 1145
743
438 461 468
China USA Pakistan Nepal India World
Source:World Cigarettes – ERC Statistics, Tob Board & Industry Estimates – gms/Yr Per Capita consumption is ~60% of World Average
18 Per Capita Cigarette Consumption – per annum
2786 No. of cigarettes per capita per annum
1841 1711
1028
468 420 154 96
Russian Federation Japan China USA Pakistan Nepal Bangladesh India
Source: The Tobacco Atlas - 4th Edition (American Cancer Society), 2012
• Although India accounts for 17% of world population, it’s share of world cigarette consumption is just 1.8%
• Per Capita consumption in India ~11% of World average Rapid scale up of FMCG businesses…
Rs. crs 8122
7012
5545
4482 3642 3014 2511 1704 1013 563
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
20 Creating world-class brands for Indian Consumers
21 Branded Packaged Foods
Biscuits, Staples, Snacks, Noodles & Pasta, Confectionery & Ready to Eat
22 Branded Packaged Foods
. Amongst one of the fastest growing Foods business in the country – Bakery and Confectionery Foods - Biscuits, Confectionery – Snack Foods - Savoury Snacks, Noodles and Pasta – Staples, Spices and Ready to Eat Foods - Atta, Salt, Spices, Ready to Eat (RTE)
. Driven by strong brands- – Aashirvaad – Staples (Wheat flour, Salt, Atta (wheat flour) - #1 in Branded Spices), Ready to Eat – Ready Meals, Instant packaged Atta among national players Mixes – Sunfeast – Biscuits Biscuits - #3 All India – Sunfeast Yippee – Noodles and Pasta Noodles - #2 All India
– Bingo! – Potato Chips – Yumitos, Finger Savoury Snacks - #2 All India Snacks – Mad Angles, Tedhe Medhe, Tangles, Galata Masti Confectionery - #3 in Sugar Confectionery – mint-o & Candyman – Confectionery
Ready-to-Eat - Leveraging expertise of – Kitchens of India – Ready Meals, Premium Hotels business. Premium conserves, chutneys & cooking sauces Conserves/Chutneys– first in India
23 Education & Stationery
. Products – Notebooks – Writing Instruments (Pen, Pencils etc) – Scholastic products
. Brands – Classmate – Paperkraft
24 Education & Stationery Products Business
. Leverages print and paper know-how to address suitable opportunities in the stationery market.
. An emerging (currently `12000 cr. Stationery) market in India - growth driven by increasing cross-cultural exposure, government spending on education
. Classmate and Paperkraft continue to gain consumer franchise – Classmate : Market leader in Notebooks segment
25 Personal Care Products
Brands: • Essenza Di Wills • Fiama Di Wills • Vivel • Superia • Engage
Product portfolio: • Personal Wash (Soaps, Shower Gel)
• Deodorants
• Skin Care (Skin Cream, Face Wash etc.)
• Hair Care (Shampoo, Conditioner)
• Talc
26 Personal Care Products
. Current market size estimated at over ` 57000 crores . Portfolio approach straddling all consumer segments with 4 umbrella brands – Essenza Di Wills – Fiama Di Wills – Vivel – Superia
. Recently launched ‘Engage’ brand in the fast growing deodorants segment well received
. Laboratoire Naturel – A state-of-the-art consumer and product interaction centre – leveraged to launch unique and differentiated products
. Products continue to receive encouraging consumer response
27 Lifestyle Retailing
• Enhanced lustre & premiumness to brand ‘Wills’ to a position of eminence
• Offering a Lifestyle proposition with portfolio straddling multiple genres - Wills Lifestyle - a fashion destination, offers a choice of super-premium formals, designer, work, relaxed & evening wear and fashion accessories - John Players embodies the spirit of the modern youth that is playful, fashionable and cool
28 Lifestyle Retailing
. Upmarket product range available in exclusive Wills Lifestyle stores (92) across 40 cities and more than 700 ‘shop-in-shops’ in leading departmental stores and multi- brand outlets.
. Strong distribution network in place for the mid-market brand ‘John Players’
– availability in more than 400 Exclusive Branded outlets, 1600 multi branded outlets and departmental stores
. ‘Club ITC’ – a pan-ITC consumer loyalty programme – with over 1.8 Lakh members, serves as a platform for creating superior bonding with premium consumers and leverages synergies between Wills Lifestyle and ITC Hotels
29 Safety Matches & Incense sticks (Agarbattis)
. Current Safety Matches & Incense sticks industry consumer spend estimated at ~ ` 6,700 crores
. ‘AIM’ – India’s largest selling Safety Matches brand
. ‘Mangaldeep’ : India’s second largest selling Incense sticks brand
. ITC markets its brands with value-added products across price points
. ITC’s Matches & Incense sticks businesses provide livelihood opportunities to more than 18000 people
30 ITC Hotels
• No. 2 in Size
• No. 1 in Profitability Margin
31 Hotels & Tourism industry
. Foreign arrivals into India: ~6.6 million Vs. ~57.7 million in China – The two nations were on par 2 decades ago . 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 . Huge potential driven by India’s diversity and economic growth
80000 70000 60000 50000 40000 30000 20000 10000 0 Hong Kong Bangkok Singapore Malaysia India
Source: Compendium of Tourism statistics, WTO 32 Indian Hotel Industry
. Current supply – ~183,000 rooms of which 5 Star category represents nearly 50,000 of total inventory
. India needs an additional 50,000 rooms in the next 3/5 years to service projected tourist arrivals
. Present high levels of room inventory in key Indian cities leading to a relatively weak pricing scenario to persist over the short term
. As infrastructure for trade & commerce improves - potential for leisure tourism to grow
33 ITC Hotels
. 100 properties across 70 locations – 4 Brands – ITC Hotels, WelcomHotel, Fortune & WelcomHeritage 20 Five-Star Deluxe/ Five-Star Properties with over 4500 rooms 43 Fortune Hotels with nearly 3600 rooms 37 WelcomHeritage Properties with over 900 rooms
. Added four new hotels under Management Contract at New Delhi, Chandigarh, Kollam and Kozhikode in 2013/14. . ‘ITC Hotels’ rated as greenest luxury hotel chain in the world – ITC Grand Chola - First 5 Star 'Green Rating for Integrated Habitat Assessment' (GRIHA) rated luxury hotel by the Ministry of New and Renewable Energy. . Projects underway at Kolkata, Classic Golf Resort (near Gurgaon) and Hyderabad. 34 ITC Hotels: World’s Greenest Luxury Hotel Chain
All ITC Luxury Hotels LEED Platinum certified
“Responsible Luxury” ethos weaved into the Brand Identity Paperboards & Packaging Business
• No. 1 in Size
• No. 1 in Profitability
• No. 1 in Environmental Performance
36 Indian Paperboard market
. Annual paperboard demand over 2 million tonnes
. Low per capita usage of paper at around 9 kgs p.a. (world average – over 55 kgs p.a.)
. Indian paperboard market growing at 6% p.a.
. Value-added Paperboards- the fastest growing segment (12% p.a.) in India driven by : . Increasing demand for branded packaged products . Rising Income table and growing consumer base . Increasing proliferation of organised retail
37 ITC’s Paperboards, Paper & Packaging businesses
. Market leader in growth segment – Value-Added Paperboards . World-class contemporary technology – Ozone bleached Pulp Mill fully operational – one of its kind in Asia meeting world-class environmental standards – Fully integrated with in-house pulping capacity at ~3 lakh MT . 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 approx. 165000 hectares . Newly commissioned 1 lakh MT per annum Paperboard machine running well . ITC’s packaging SBU - India’s largest converter of Paperboard into high quality printed packaging – Provides superior packaging solutions to the cigarettes and new FMCG businesses – Leading supplier to Indian FMCG industry – Fully integrated packaging unit at Haridwar operationalised and running well
38 Agri Business
• No. 1 in Leaf Tobacco
• No. 2 in Agri commodities
• Pioneer in rural transformation
39 Indian Leaf Tobacco industry
. India – the second largest producer of tobacco
. However, India’s share is only at 8% of world tobacco trade
. ITC – India’s largest buyer, processor, consumer & exporter of cigarette tobaccos – 5th largest leaf tobacco exporter in the world
. Pioneering cultivation of flavourful Flue-cured and superior Burley tobaccos in India
. Robust growth in exports in recent years with improvement in realizations
40 ITC’s Agri Commodity Business
. Distinctive sourcing capability for ITC’s Foods businesses . Farm linkages in 17 States covering Wheat, Soya, Potato, Coffee etc. . Unique Customer Relationship Management programme for commodity customers in both domestic and international markets . Leveraging Information Technology for the transformational ‘e-Choupal’ initiative – Rural India’s largest Internet-based intervention – Over 35000 villages linked through around 6100 e-Choupals servicing around 4 million farmers e-choupal: Strategic Thrust . Procurement: cost & quality optimisation – strategic sourcing support to the Foods business (support creation of verticals in wheat, potato etc.) – cost-effective sourcing for exports/domestic external business . Rural retail – 24 Choupal Saagars operational
41 ITC - Key Financials – 2013/14
Rs. Cr.
2013-14 2012-13 Goly %
Gross Turnover 46713 41810 11.7 Net Turnover 32883 29606 11.1 PBDIT 13562 11566 17.3 PBIT 12662 10771 17.6 PBT 12659 10684 18.5 PAT 8785 7418 18.4
42 Segment Revenue - 2013/14
Rs. Cr. Full Year GOLY(%) 2013-14 2012-13 % Segment Revenue (Net)
a) FMCG - Cigarettes 15456 13970 10.6 - Others 8099 6983 16.0 Total FMCG 23555 20953 12.4 b) Hotels 1133 1074 5.5 c) Agri Business 7752 7201 7.7 d) Paperboards, Paper & Packaging 4861 4237 14.7 Total 37301 33464 11.5 Less : Inter segment revenue 4418 3859 14.5 Net sales / income from operations 32883 29606 11.1
43 Segment Results - 2013/14
Rs. Cr. Full Year GOLY(%) 2013-14 2012-13 Segment Results a) FMCG - Cigarettes 9858 8326 18.4 - Liab. no longer reqd. written 158 0 FMCG - Cigarettes 10016 8326 20.3 - Others 22 (81) Total FMCG 10038 8245 21.7 b) Hotels 140 138 1.5 c) Agri Business 835 731 14.2 d) Paperboards, Paper & Packaging 892 964 (7.4) Total 11905 10078 18.1 Less: i) Finance Costs 38 86 (56.4) Liab. no longer reqd. written back (35) 0 Finance Costs 3 86 (96.6) ii) Other Unallocable Exp/(Inc.) - Net (757) (693) 9.3 Profit Before Tax 12659 10684 18.5
44 Segment Capital Employed - 2013/14
Rs. Cr. FY14 2013-14 2012-13 Capital Employed a) FMCG - Cigarettes 5705 4953 - Others 3384 2532 Total FMCG 9089 7485 b) Hotels 3625 3460 c) Agri Business 2052 1257 d) Paperboards, Paper & Packaging 5319 4958 Total Segment Capital Employed 20086 17160
45 ITC - Key Financials – Q1 2014/15
Rs. Cr.
Q1 14/15 Q1 13/14 Goly %
Net Revenue 9164 7339 24.9 PBDIT 3512 2994 17.3 PBIT 3281 2779 18.0 PBT 3266 2762 18.2 PAT 2186 1891 15.6
46 Segment Revenue - Q1 2014/15
Rs.` Crs. Cr. Q4 Q1 GOLY(%) 2013-14 2014-15 2013-14 Segment Revenue (Net)
4079 a) FMCG - Cigarettes 42013537 18.8 2315 - Others 19351745 10.9 6393 Total FMCG 61365282 16.2 321 b) Hotels 249250 (0.5) 2004 c) Agri Business 32962189 50.6 1261 d) Paperboards, Paper & Packaging 12881163 10.8 9979 Total 109698884 23.5 834 Less : Inter segment revenue 18041546 16.8 9145 Net sales / income from operations 91647339 24.9
47 Segment Results - Q1 2014/15
Rs.` Cr.Crs. Q4 Q1 GOLY(%) 2013-14 2014-15 2013-14 Segment Results 2552 a) FMCG - Cigarettes 2722 2242 21.4 43 - Others (16) (19) 17.6 2595 Total FMCG 2706 2223 21.7 60 b) Hotels (12) 9 NA 145 c) Agri Business 202 199 1.6 188 d) Paperboards, Paper & Packaging 275 252 9.3 2989 Total 3171 2683 18.2 10 Less: i) Finance Costs 15 17 (10.6) (244) ii) Other Unallocable Exp/(Inc.) - Net (109) (97) 13.3 3223 Profit Before Tax 3266 2762 18.2
48 ITC’s Economic Contribution to the Nation
10 year Value addition ~ Rs. 1.9 lakh crore (US$ 39 billion) – ~75% of value addition accrued to the Exchequer • Among the top tax payers in the nation (Private sector) • Excise payments represent ~ 7% of India’s total Excise collection
Foreign exchange earnings in the last 10 years: USD 6 bln – Of which agri exports constituted ~60%
49 Social Performance
. Direct employment ITC Group : 30,000
. Supported creation of 6 million sustainable livelihoods
. e-choupal: world’s largest rural digital infrastructure serving around 4 million farmers
. Social and Farm forestry initiative has greened nearly 164,500 hectares & provided over 73 million person-days of employment among tribals & marginal farmers
. Significant thrust on social sector investments – Natural resource management – Sustainable livelihoods – Community development programmes in the economic vicinity of operating locations
50 Environmental Performance
. Carbon positive enterprise – 9 years in a row
– Sequestering one and half times the amount of CO2 that the company emits
. Water positive - 12 years in a row – Creating twice the rainwater harvesting potential than ITC’s net water consumption
. Solid waste recycling positive – 7 years in a row
. Over 38% of total energy consumed is from renewable sources
Only Company in the world of comparable dimensions to have achieved the global environmental distinction of being Carbon positive, Water positive and Solid waste recycling positive
51 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 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.
52