ITC LimitedOne of India’s Most Valuable Corporations: ITC Limited One of India’s Most Valuable Corporations


Performance Track Record- Snapshot: Performance Track Record- Snapshot Total Shareholder Returns: 25% Rs. 1 crore= Rs. 10 million


Slide3: Key Financials:2006/07


Slide4: Segment Revenues: FY 06/07


Slide5: Segment Results: FY 06/07


Slide6: Segment Capital Employed: FY 06/07


ITC - Key Financials – Q2 07/08: ITC - Key Financials – Q2 07/08


ITC - Key Financials – H1 07/08: ITC - Key Financials – H1 07/08


Segment Revenues: Q2 07/08: Segment Revenues: Q2 07/08


Segment Results: Q2 07/08: Segment Results: Q2 07/08


Segment Revenues: H1 07/08: Segment Revenues: H1 07/08


Segment Results: H1 07/08: Segment Results: H1 07/08


Segment Capital Employed: Segment Capital Employed


ITC One of India’s most valuable corporations: One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004 Featuring 400 of the World’s ‘best big companies’ with M-cap. > 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 world’s 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. 12 among Indian listed Private Sector Companies by market cap. (@23/10/07) No. 1 in FMCG Sector Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey 2006) ITC One of India’s most valuable corporations


Accolades & Awards (1): Accolades & Awards (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 2005 Golden Peacock Award for Excellence in Corporate Governance 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 Bhadrachalam paperboard unit : adjudged ‘Greenest paper mill in India’ by The Centre for Science & Environment; won the Greentech Environment Excellence Gold Award ‘John Players’ adjudged the ‘Most Admired Shirt Brand of the Year’ at the Lycra® Images Fashion Awards (LIFA) awards in Jan’06 SAM/SPG Sustainability Leadership Award conferred at the International Sustainability Leadership Symposium, Zurich Business Leadership Award for the Best Food Company, organised by NDTV Profit


Accolades & Awards (2): Accolades & Awards (2) e-Choupal initiative continues to win global recognition: 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 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 2004: International Chamber of Commerce & the HRH Prince of Wales & International Business forum Harvard University case study Recognised in World Development Report 2008 published by World Bank


ITC - Business Portfolio: ITC - Business Portfolio ITC FMCG: Cigarettes Other FMCG Hotels Agri Business Leaf Tobacco Agri Commodities Paperboard Paper & Packaging


Slide18: 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 Divisional Chief Executive & Divisional Management Committee : Executive management


Slide19: 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 Corporate Strategies


FMCG - Cigarettes: FMCG - Cigarettes


ITC’s Cigarettes Business: ITC’s Cigarettes Business Market leadership Powerful brands across segments Leadership in all segments - geographic & price Extensive FMCG distribution network Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products Investment - Rs.10 billion in six years Exciting long term growth potential


Cigarettes: Growth potential: Cigarettes: Growth potential Cigarettes account for only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation Cigarettes (15% 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


Slide23: Source : Based on Cigarette consumption data(2003) from “World Cigarettes”,ERC Group plc.


Hotels & Tourism: Hotels & Tourism


Hotels & Tourism industry: Hotels & Tourism industry Foreign arrivals into India: 4.4 million appx. Vs. 35 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 Source: Compendium of Tourism statistics, WTO


Indian hotel industry: Indian hotel industry Current supply – appx. 110,000 rooms of which 5 Star category accounts for appx. 30% India needs an additional 50,000 rooms in the next 2/3 years to service projected tourist arrivals Present mismatch between supply and demand expected to persist over the short term As infrastructure for trade & commerce improves - growing potential for leisure tourism


Economic impact of the Travel & Tourism Sector: Economic impact of the Travel & Tourism Sector Full potential yet to be harnessed in the Indian context


ITC’s Hotel Business: ITC’s Hotel Business ITC-Welcomgroup : a leading hotel chain 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 Capacity expansion underway at Bangalore and Chennai; plans for other locations also being progressed Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @ 45%) amongst the 3 leading chains Leverages unique service proposition and international alliance with Starwood Hotels & Resorts ‘Luxury Collection’ / ‘Sheraton’


ITC’s Hotel Business: ITC’s Hotel Business Manages 18 full service mid-market properties (2650 rooms) under the Fortune Hotels brand 100% subsidiary company : Fortune Park Hotels Ltd. Also operates 51 properties under the ‘WelcomHeritage’ brand Maharaja Heritage Resorts Ltd. 50% JV with Marudhar Hotels (P) Ltd.


Paperboards, Paper&Packaging: Paperboards, Paper & Packaging


Indian paperboard market: Indian paperboard market Annual paperboard demand – appx. 1.1 million tonnes Fragmented capacity & obsolete technology Low per capita usage at around 6 kgs p.a. (world average – over 50 kgs p.a.) Indian paperboard market growing at 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: Paperboard Demand Projections - Asia Asian region demand (excluding Japan) growing by 0.5 million tonnes per annum Significant export opportunities for high quality Indian manufacturers ITC paperboards exports - Rs. 2 billion appx.


ITC’s Paperboards Business: ITC’s 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 nearly 68,000 hectares Fully integrated operations with in-house pulping capacity at appx. 1.10 lac MT Expansion programme underway; source of sustainable competitive advantage


ITC’s Paperboards & Packaging businesses: ITC’s Paperboards & Packaging businesses Capacity expansion projects underway 120000 TPA Pulp Mill 100000 TPA paper machine (to support Stationery business growth plans) ITC’s packaging SBU -India’s largest converter of paperboard into high quality printed packaging Leading supplier to Indian FMCG segment Provides superior packaging solutions to the cigarettes and new FMCG businesses


Agri Businesses- Leaf Tobacco- Agri Commodities: Agri Businesses - Leaf Tobacco - Agri Commodities


Indian Leaf Tobacco industry: Indian Leaf Tobacco industry India – the third largest producer of tobacco However, India’s share is only 7% in world tobacco trade 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 Pioneering cultivation of flavourful Flue-cured, superior Burley and Oriental tobaccos in India


ITC’s Agri Commodity Business: ITC’s Agri Commodity Business Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Coffee etc. Unique CRM programme in commodity exports Leveraging IT for the transformational ‘e-Choupal’ initiative Rural India’s largest Internet-based intervention Over 38000 villages linked through around 6400 e-Choupals servicing over 3.5 million farmers Distinctive sourcing capability for ITC’s Foods business


e-Choupal - Recognition: e-Choupal - Recognition Stockholm Challenge Award 2006 – Economic Development Category World Business Award – ICC-UNDP Enterprise Business Transformation Award -Wharton Infosys Harvard Business School – case study Showcased at ICT4D*, Geneva – UN * Information and Communication Technologies for Development


e-choupal:Strategic Thrust: e-choupal:Strategic Thrust Procurement: cost & quality optimisation strategic sourcing support to the Foods business (support creation of verticals in wheat, soya, corn, potato etc.) cost-effective sourcing for exports/domestic external business Rural Distribution ‘last mile connectivity’: 100 partnering companies diverse range of goods/services : FMCG, consumer durables,agri-inputs, paid extension services etc. Financial Services insurance (focus: weather) credit (focus: Kisan credit card scheme) Rural retail 18 Choupal Saagars operational Rapid expansion planned in identified rural markets and Tier 3 & 4 towns (pop 2.5 to 10 lacs)


Future Growth & Value Capture: Future Growth & Value Capture New FMCG Initiatives


Strategic Rationale: 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 InitiativesBranded Packaged Foods: FMCG Business Initiatives Branded Packaged Foods Leverages: Unique Agri sourcing skills ITC Welcomgroup’s specialist cuisine & bakery knowledge FMCG distribution synergies ITC R&D Centre, Bangalore 4 chosen categories: Staples Aashirvaad Atta, Salt, Spices Biscuits Sunfeast Salty Snacks Potato chips,Bridge products : Bingo! Confectionery Candyman, Mint-o Ready to Eat Kitchens of India, Aashirvaad ReadyMeals, Aashirvaad Instant Mix, Sunfeast Pasta


FMCG Business InitiativesBranded Packaged Foods: 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; continues to build consumer franchise; distributed & outsourced supply chain being ramped up Number of innovative products in the pipeline leveraging the capabilities of the ITC R&D Centre


FMCG Business InitiativesLifestyle Retailing: 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 Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’ relaxed wear and ‘Wills Clublife’ evening wear Strong distribution network in place for the mid-market brand ‘John Players’


FMCG Business InitiativesGreetings, Gifting & Stationery: FMCG Business Initiatives Greetings, Gifting & Stationery 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 & gifting Robust distribution network in place to scale up the Stationery business significantly ‘Classmate’ brand already the most widely distributed brand in India Serves to expand the width of ITC’s FMCG distribution capability with negligible incremental investment


FMCG Business InitiativesSafety Matches: FMCG Business Initiatives Safety 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’ – India’s largest selling Safety Matches brand Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as at 31/03/07: 94.25%) Key brands: Homelites, Ship, Cheetah Fight etc.


FMCG Business InitiativesIncense sticks (Agarbattis): FMCG Business Initiatives Incense 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


FMCG business initiatives…….: 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: Future Positioning of ITC A leading FMCG player in India F A R M E R S M A R K E T S Cigarette Trade Marketing capability Branded Foods Expanded FMCG distribution capability e-choupal rural two-way fulfillment capability A basis for strategic partnerships with other FMCG brand owners VPN providing SCM, ERP & CRM capability Lifestyle retailing Greeting cards/stationery Matches & Agarbattis


Forward-looking Statements: 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.