ITC Ltd
Directors Reports
&
Management Discussion and Analysis
For the Financial Year Ended 31st March, 2019
SOCIO-ECONOMIC ENVIRONMENT
After two successive years of robust expansion, global economic growth softened to 3.6%
in 2018, representing a marked slowdown compared to the 3.9% growth anticipated at the
beginning of the year. While the US economy grew by 2.9% against 2.2% in 2017, sharp
declines were witnessed in the Euro area (2.4% to 1.8%) and Japan (1.9% to 0.8%). Growth
in Emerging Market economies also decelerated from 4.8% to 4.5% with both China (6.8% to
6.6%) and India slowing down. Going forward, global growth in 2019 is projected to decline
further to 3.3% in the base case with risks to the downside emanating from political
uncertainties, rising trade tensions, escalating protectionism and tighter financial
conditions.
The US economy is projected to witness a sharp decline in growth to 2.3% in 2019 due to
unwinding of the fiscal stimulus and lower government expenditure. Growth in Emerging
Markets & Developing Economies is also likely to decelerate marginally to 4.4% in
2019. The Chinese economy is expected to slow down further to 6.3% in 2019 largely due to
regulatory tightening to rein in debt.
2018-19 turned out to be another challenging year for the Indian economy. Despite a
relatively soft base, GDP growth declined to 7.0% (as per 2nd Advance Estimates) compared
to 7.2% in 2017-18 and 7.3% anticipated at the beginning of the year. On the supply side,
the Agriculture and Services sectors underperformed while Government Final Consumption
Expenditure decelerated (off a relatively high base) on the demand side. Private Capital
Expenditure remained sluggish as evident from the decline in new project announcements.
The much anticipated pick-up in Private Final Consumption Expenditure (PFCE) also remained
elusive - attributable largely to distress in the agrarian sector, low rate of rural wage
growth, subdued urban consumer sentiment and tight liquidity conditions. PFCE growth, in
fact, decelerated in the second half of the year and particularly in the last 3-4 months
as borne out by most major FMCG companies reporting slowdown in sales growth.
On the positive side, inflation stayed well within RBI's comfort zone prompting a 50
bps policy rate cut in recent months while the external account stabilised in the second
half of the year with the normalisation of crude oil prices from a peak of US$ 86 per
barrel and a pick-up in capital inflows especially from foreign portfolio investors.
Capital markets stayed buoyant with the Sensex advancing by 17% during the year. Tax
revenues also witnessed robust growth during the year.
The key monitorables in the near term include volatility in crude oil prices, concerns
over fiscal deficit, progress of the monsoon in 2019 and a slowdown in global growth.
While India remains one of the fastest growing major economies in the world, the pace
of economic growth in recent years has remained below the country's potential. With
structural drivers of growth firmly in place – favourable demographics, rapid
urbanisation,
With structural drivers of growth firmly in place – favourable demographics, rapid
urbanisation, accelerated digitalisation and connectivity, and improvement in
infrastructure - the pace of economic growth is expected to pick-up over time.
accelerated digitalisation and connectivity, and improvement in infrastructure - the
pace of economic growth is expected to pick-up over time. Implementation of key reforms
such as Goods and Services Tax, direct benefit transfer schemes, Insolvency and Bankruptcy
Code among others augur well for the growth prospects of the economy in the medium to
long-term.
The successful implementation of structural initiatives identified by the Government
towards improving the ease of doing business and fostering greater levels of value
addition within the country would be crucial to boost the performance of the Indian
economy and realise its full potential.
Enhancing agricultural productivity and value addition to international standards while
simultaneously improving market linkages remain critical for the growth of the
agricultural sector and significantly increasing farmers' income. It is pertinent to note
that substantial quantum of food is wasted along the chain in India, depending on the
inherent perishability of the crop and the season. Higher level of food processing in the
economy can create a much larger pull for quality agri-commodities, thereby reducing farm
wastages and raising farm incomes. This calls for investment in product-specific
climate-controlled infrastructure as well as in branded products that benefit large agri
value chains. Corporate participation is essential not only to invest in requisite
infrastructure, but also to provide assured market linkages to farmers. A big thrust on
India's Food Processing sector can lead to significant job creation, enhance rural incomes
and help manage food inflation. Similarly, the Agro-forestry sector, as a source of raw
material for wood-based industry, is woefully constrained by policies that not only
prevent job creation in India but also promote avoidable imports. By providing crucial
policy support, the entire wood-based value chain can substantially support rural
livelihoods and create new opportunities for farmers and skilled artisans that add value
to wood. Supportive policies in the area of agro-forestry would go a long way in creating
sustainable livelihoods while simultaneously augmenting the nation's environmental
capital.
In line with the Government's vision of significantly enhancing farmer income,
recognising the potential multiplier effect on the economy, your Company has implemented a
pilot ‘Baareh Mahine Hariyali' programme in certain districts of Uttar Pradesh
(Allahabad, Chandauli, Ghazipur and Varanasi) and Bihar (Munger). The programme focuses on
specific interventions such as crop intensification, income diversification, capability
building with appropriate market linkages leveraging your Company's e-Choupal network and
Choupal Pradarshan Khets (demonstration farms). Your Company is also working towards
developing village level institutions and fostering micro-entrepreneurship by promoting
custom hiring centres for farm mechanisation, post-harvest product management
infrastructure and community managed seed banks for self-reliance in quality seed
material. Your Company promotes environmentally sustainable farm practices including zero
till sowing, micro-irrigation and watershed development. Your Company is also partnering
with the NITI Aayog to boost agricultural and allied activities in 27 districts under the
Aspirational Districts programme with a view to scaling up your Company's contribution to
the national goal of enhancing farmer incomes. Under this initiative, over two lakh
farmers
In line with the Government's vision of significantly enhancing farmer income,
recognising the potential multiplier effect on the economy, your Company has implemented a
pilot ‘Baareh Mahine Hariyali' programme to build capacity of farmers in certain
districts of Uttar Pradesh and Bihar.
have been trained in package of practices appropriate for the dominant crop of the
region.
Given India's disproportionately low share of global natural resources relative to its
large population and where millions continue to live in abject poverty, the focus both at
the national and corporate level should be on fashioning strategies that foster
sustainable, equitable and inclusive growth. Differentiated and preferential incentives,
in the form of fiscal or financial benefits to companies that adopt sustainable business
practices would act as a force multiplier in achieving this critical national goal. It is
your Company's belief that businesses can bring about transformational change by pursuing
innovative business models that synergise the creation of sustainable livelihoods and the
preservation of natural capital with enhancing shareholder value. This ‘Triple Bottom
Line' approach to creating larger ‘stakeholder value', as opposed to merely focusing
on uni-dimensional ‘shareholder value' creation, is the driving force that defines
your Company's sustainability vision and its growth path into the future.
Your Company is a global exemplar in
‘Triple Bottom Line' performance and is the only enterprise in the world of
comparable dimensions to have achieved and sustained the three key global indices of
environmental sustainability of being ‘water positive' (for 17 years), ‘carbon
positive' (for 14 years), and ‘solid waste recycling positive' (for 12 years). The
focus on creating unique business models that generate substantial livelihoods across the
value chains has led to your Company's Businesses supporting six million sustainable
livelihoods, many of whom belong to the weakest in society. The following sections outline
your Company's progress in pursuit of the ‘Triple Bottom Line'.
FINANCIAL PERFORMANCE
Your Company delivered another year of resilient performance despite a challenging
operating environment. The Cigarettes Business, impacted by steep increase in taxes under
the GST regime, sharpened focus on delivering world-class products through continuous
innovation along with best-in-class execution thereby consolidating its market standing.
Amidst a subdued demand environment, the non-cigarette FMCG segment grew ahead of industry
recording robust growth in revenue and significant improvement in profitability despite
heightened competitive intensity, elevated input costs, gestation costs of new
products/categories and manufacturing facilities, and ongoing restructuring of Lifestyle
Retailing Business. The Hotels Business delivered robust performance driven by improvement
in RevPar and addition of two world-class properties to its portfolio. The Paperboards,
Paper and Packaging segment had a stellar year recording strong growth in revenue and
profits on the back of capacity addition, product mix enrichment, strategic investments in
pulp import substitution, process innovation and a cost-competitive fibre chain. While the
Agri Business posted healthy growth in revenue, leaf cost escalation pertaining to the
Andhra 2017 crop and business mix weighed on margins.
On a comparable basis, Gross Sales Value (net of rebates/discounts)1 for the year stood
at Rs. 75309.36 crores, representing a growth of 12.3% over 2017-18 driven mainly by Agri
Business, Branded Packaged
1 Gross Sales Value includes GST, GST Compensation Cess, Service Tax, VAT,
Luxury Tax etc., as applicable for the reported periods.
It is your Company's belief that businesses can bring about transformational change by
pursuing innovative business models that synergise the creation of sustainable livelihoods
and the preservation of natural capital with enhancing shareholder value.
Foods, Education & Stationery Products Business, Hotels and Paperboards. Excluding
Exceptional items, Profit Before Tax and Profit After Tax grew by 12.2% and 13.8%
respectively.
Profit After Tax at Rs. 12464.32 crores registered growth of 11.1% over the previous
year. Total Comprehensive Income for the year stood at Rs. 12826.88 crores (previous year
Rs. 11605.59 crores). Earnings Per Share for the year stood at Rs. 10.19 (previous year
Rs. 9.22). Cash generated from operations aggregated Rs. 17234.93 crores.
The Directors are pleased to recommend an Ordinary Dividend of Rs. 5.75 per share
(previous year Ordinary Dividend of Rs. 5.15 per share) for the year ended 31st March,
2019. Total cash outflow in this regard will be Rs. 8497.59 crores including Dividend
Distribution Tax of Rs. 1448.88 crores.
VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER
( Rs. in Crores)
Over the last five years, the Value-Added by your Company, i.e. the value created by
the economic activities of your Company and its employees, aggregated around Rs. 220000
crores of which over Rs. 160000 crores accrued to the Exchequer.
Including the share of dividends paid and retained earnings attributable to government
owned institutions, your Company's contribution to the Central and State Governments
represented about 80% of its Value-Added during the year.
Your Company remains amongst the Top 3 Indian corporates in the private sector in terms
of Contribution to Exchequer.
FOREIGN EXCHANGE EARNINGS
Your Company continues to view foreign exchange earnings as a priority. All Businesses
in the ITC portfolio are mandated to engage with overseas markets with a view to testing
and demonstrating international competitiveness and seeking profitable opportunities for
growth. Foreign exchange earnings of the ITC Group over the last ten years aggregated
nearly US$ 7.2 billion, of which agri exports constituted 56%. Earnings from agri exports,
which effectively link small farmers with international markets, are an indicator of your
Company's contribution to the rural economy.
During the financial year 2018-19, your Company and its subsidiaries earned Rs. 4673
crores in foreign exchange. The direct foreign exchange earned by your Company amounted to
Rs. 3828 crores, mainly on account of exports of agri-commodities. Your Company's
expenditure in foreign currency aggregated Rs. 2373 crores, comprising purchase of raw
materials, spares and other expenses of Rs. 1947 crores and import of capital goods at Rs.
426 crores.
Including the share of dividends paid and retained earnings attributable to government
owned institutions, your Company's contribution to the Central and State Governments
represented about 80% of its Value-Added during the year. ITC remains amongst the Top 3
Indian corporates in the private sector in terms of Contribution to Exchequer.
PROFITS, DIVIDENDS AND RETAINED EARNINGS
( Rs. in Crores)
| PROFITS |
2019 |
2018 |
| a) Profit Before Tax@ |
18444.16 |
16851.70 |
| b) Tax Expense |
|
|
| – Current Tax |
5849.24 |
5599.83 |
| – Deferred Tax |
130.60 |
28.62 |
| c) Profit for the year@ |
12464.32 |
11223.25 |
| d) Other Comprehensive Income |
362.56 |
382.34 |
| e) Total Comprehensive Income |
12826.88 |
11605.59 |
| STATEMENT OF |
|
|
| RETAINED EARNINGS |
|
|
| a) At the beginning of the year |
21991.24 |
17576.81 |
| b) Add: Profit for the year |
12464.32 |
11223.25 |
| c) Add: Other Comprehensive Income |
5.59 |
52.78 |
| (net of tax) |
|
|
| d) Add: Transfer from share option on |
3.88 |
18.65 |
| exercise and lapse |
|
|
| e) Less: Dividend |
|
|
| – Ordinary Dividend of |
6285.21 |
5770.01 |
| Rs. 5.15 (2018: Rs. 4.75) |
|
|
| per share |
|
|
| – Income Tax on |
1201.69 |
1110.24 |
| Dividend paid |
|
|
| f) At the end of the year |
26978.13 |
21991.24 |
@ Previous year includes Exceptional items representing provisions for earlier
years in respect of Tamil Nadu entry tax that were written back based on a favourable
order of the Honourable Supreme Court.
FMCG Cigarettes
A punitive and discriminatory taxation and regulatory regime, together with sharp
increase in illegal trade in recent years, continue to pose significant operating
challenges to the legal cigarette industry in the country.
Contrary to indications from the Government that the transition to GST would be based
on principles of maintaining revenue neutrality, tax incidence on cigarettes has risen
sharply under the GST regime and the discrimination vis--vis other tobacco products
continues. The legal cigarette industry, already reeling under the cumulative impact of
steep increase in taxation over the previous five years in the pre-GST regime and intense
regulatory pressures, was further impacted by a sharp increase of 13% in tax incidence on
cigarettes (19% increase for the king-size filter segment) under the GST regime. Coupled
with the increase in Excise Duty rates announced in the Union Budget 2017, this resulted
in an incremental tax incidence of over 20% on cigarettes, post implementation of GST.
It is pertinent to note that the tax incidence on cigarettes has nearly trebled (on a
comparable basis) between 2011-12 and 2017-18 and taxes on cigarettes are effectively
about 55 times higher than taxes on other tobacco products on a per kg basis.
Excessive taxation has made legal, duty-paid cigarettes in India amongst the costliest
in the world in terms of per capita affordability.
A punitive and discriminatory taxation and regulatory regime, together with sharp
increase in illegal trade in recent years, continue to pose significant operating
challenges to the legal cigarette industry in the country.
The high rates of tax on cigarettes provide attractive tax arbitrage opportunities for
illicit trade allowing sale of these cigarettes to consumers at prices much lower than
those of duty-paid domestic cigarettes. This has encouraged mushrooming of unscrupulous
operators who indulge in clandestine manufacturing of cigarettes across the country and
also provided a huge impetus to large-scale smuggling of international brands into the
country. Seizure of large quantum of smuggled cigarettes by enforcement agencies across
the country over the recent years confirm the growing menace of illegal cigarette trade in
the country. While the legitimate cigarette industry has declined steadily since 2010-11
at a compound annual rate of over 4% p.a., illegal cigarette volumes in contrast have
grown at nearly 5% p.a. during the same period, making India one of the fastest growing
illegal cigarette markets in the world. It may be noted that, according to Euromonitor
International, India is now the 4th largest illegal cigarette market in the world.
Due to the high rates of taxes on legal cigarettes and the consequent shift to illegal
cigarettes and other forms of tobacco consumption, duty-paid cigarettes constitute only
10% of total tobacco consumption in India and per capita consumption of cigarettes in
India is among the lowest in the world.
The disparity in taxation on tobacco products has caused a progressive migration from
consumption of duty-paid cigarettes to other lightly taxed/ tax-evaded forms of tobacco
products, comprising illegal cigarettes and bidi, chewing tobacco, gutkha, zarda, snuff,
etc. As a consequence, while the share of legal cigarettes in total tobacco consumption in
the country has declined considerably over the years, aggregate tobacco consumption has
increased over the same period. As a result, despite accounting for merely 10% of the
tobacco consumed in the country, duty-paid cigarettes contribute more than 86% of the
revenue generated from the tobacco sector. It is estimated that on account of illegal
cigarettes alone, the revenue loss to the Government is more than Rs. 13000 crores per
annum. In respect of the other tobacco products also, the revenue losses are significant
since about 68% 2 of the tobacco consumed in the country remains outside the tax net.
The cost disadvantage faced by duty-paid cigarettes as compared to illegal cigarettes
is exacerbated by the fact that duty-paid cigarettes comply fully with provisions of
applicable Indian legislation like The Cigarettes and Other Tobacco Products (Prohibition
of Advertisement and Regulation of Trade and Commerce, Production, Supply and
Distribution) Act, 2003 (COTPA) and bear the statutorily mandated pictorial and textual
warnings covering 85% of the surface area of the packet (one of the largest in the world).
On the other hand, the smuggled illegal cigarettes do not bear any such pictorial or
textual warnings or bear much smaller pictorial warnings as per the tobacco laws of the
countries from where these cigarettes are sourced. As reported in prior years, findings
from research conducted by IMRB International, an independent market research
organisation, show
2 Report on the impact of current tax framework on the tobacco sector in India and
suggestions for its improvement - 2014, by ASSOCHAM and KPMG.
It is estimated that on account of illegal cigarettes alone, the revenue loss to the
Government is more than Rs. 13000 crores per annum. About 68% of the tobacco consumed in
the country remains outside the tax net.
that the lack of pictorial warnings on packets of smuggled cigarettes or their
diminutive size creates a perception in the consumer's mind that smuggled cigarettes are
‘safer' than domestic duty-paid cigarettes that carry the 85% pictorial warnings.
Along with low prices to consumers (enabled through tax evasion), this has opened the
floodgates for contraband cigarettes.
It is pertinent to note that several other major tobacco producing countries, including
the USA have framed regulatory frameworks for tobacco taking into consideration the
economic interests of their tobacco farmers in deciding whether or not to adopt large or
excessive pictorial warnings. The inadvertent and unforeseen consequence of the stringent
Indian tobacco regulations is one of continuing losses to the Indian tobacco farmer with
corresponding gains to tobacco farmers in the countries that have opted for moderate and
equitable tobacco regulations. These developments have had a devastating impact on the
Indian tobacco farmer and the 46 million livelihoods dependent on the tobacco value chain.
As reported last year, your Company and several other stakeholders had challenged the
validity of the pictorial warnings. The Karnataka High Court, by its judgement in December
2017 held the 85% pictorial warnings with extremely gruesome imagery to be factually
incorrect and unconstitutional. Upon a Special Leave Petition filed by the Government, the
Honourable Supreme Court has stayed the Order of the High Court. Pending the final hearing
of this matter, the regime of the extremely repugnant 85% pictorial warnings continues. In
fact, new pictorial warnings with even more gruesome images have been introduced from 1st
September 2018.
In India, cigarettes are manufactured largely using flavourful Flue Cured Virginia
Tobacco (FCV) which is grown in the states of Andhra Pradesh, Telangana and Karnataka. FCV
tobaccos are also traded internationally and India is an exporter of this commodity. Since
smuggled international brands of cigarettes do not use Indian tobaccos, in addition to
revenue losses, the growth of the illegal cigarette trade has also resulted in a drop in
demand for Indian FCV tobaccos in the domestic market. This decline in domestic demand,
together with lack of export opportunities (favourable prices of competing origins and
lower Indian crop) has adversely impacted earnings of the Indian tobacco farmer. It is
estimated that in the four years since 2013-14, Indian tobacco farmers have suffered a
cumulative drop in earnings of over Rs. 4000 crores3. Ensuring stability in domestic
demand will aid in cushioning the impact of any volatility in the international markets.
India is the 2nd largest tobacco grower in the world. Tobacco occupies a prime place in
the Indian economy on account of its considerable contribution to the agricultural,
industrial and export sectors4. However, the extremely stringent regulations along with
the discriminatory and steep taxation on cigarettes have had numerous negative, albeit
unintended repercussions. These include:
– continuing decline in legal cigarette volumes in favour of lightly taxed and
tax-evaded tobacco products, resulting in sub-optimisation of the revenue potential of the
tobacco sector and significant loss to the Exchequer.
– further fillip to the growth of illegal cigarettes in the absence of statutory
pictorial and textual warnings on smuggled international brands.
– widespread availability of illegal cigarettes and other tobacco products of
dubious quality and hygiene to consumers at extremely affordable prices.
3 Based on statistics published by the Tobacco Board, Ministry of Commerce &
Industry, Gol.
4 Report on Tobacco Control in India, Ministry of Health & Family Welfare,
GoI, 2004 (Jointly supported by Centers for Disease Control and Prevention, USA and the
World Health Organisation).
The inadvertent and unforeseen consequence of the stringent Indian tobacco regulations
is one of continuing losses to the Indian tobacco farmer with corresponding gains to
tobacco farmers in the countries that have opted for moderate and equitable tobacco
regulations.
– a large component of tobacco consumption in the country, aggregating around 68%
remaining outside the tax net.
– persistent negative impact on the livelihood of tobacco farmers and others
dependent on tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicate
that on account of agro-climatic conditions, there is no equally remunerative alternate
crop that can be grown in the FCV tobacco growing regions of the country.
As in the past, your Company continues to represent with policy makers for equitable,
non-discriminatory, pragmatic, evidence based regulations and taxation policies that
balance the economic imperatives of the country and the tobacco control objectives, having
regard to the unique tobacco consumption pattern in India. Due to the cumulative impact of
increase in tax incidence on cigarettes over the last five years, especially the sharp
escalation post transition to the GST regime in 2017-18, legal cigarette industry volumes
remain under severe pressure. While stability in taxes during the year provided some
relief to the legal cigarette industry, it is pertinent to note that the legal cigarette
industry volumes remain significantly below June'14 levels. Moderation in taxes is
critical for addressing the interests of all the stakeholders of this industry, including
the tobacco farmers, the Exchequer and the consumers.
Your Company's unwavering focus on nurturing a portfolio of world-class products,
superior consumer insights and a strategy of continuous innovation and value creation
helped sustain its leadership position in the industry. Deep consumer insights and a
robust innovation pipeline enabled the Business to introduce new variants catering to the
continuously evolving consumer preferences. These include Classic Rich & Smooth,
Classic Verve Low Smell and Gold Flake NEO which have received positive response in the
market.
Similarly, recently introduced brands/variants such as American Club, Player's Gold
Leaf and Wave strengthened their market standing during the year.
As in the past, the research and development initiatives of your Company continue to
add to the country's bank of Intellectual Property Rights (IPR). In addition to grant of
several patents in previous years, your Company has been granted two more patents during
the year in respect of cigarettes.
On the supply-chain side, the Business continued to modernise its manufacturing
facilities by inducting contemporary technologies to secure higher levels of productivity
and product excellence. Cutting-edge technologies such as Industry 4.0 and Data Science
were deployed towards driving operational excellence. These interventions are poised to
bring about a digital transformation in manufacturing processes and enhance the Business'
competitive advantage. Continuing the journey of benchmarking the manufacturing processes
against industry best practices, the Saharanpur unit was recognised as ‘Future Ready
Factory - Platinum Rating: FMCG Sector, Mega Large Business' under the aegis of IMEA
(India Manufacturing Excellence Awards – a highly acclaimed and robust on-site
assessment program) by Frost & Sullivan. Various other manufacturing initiatives and
projects were adjudged winners in the Frost & Sullivan's ‘Project Evaluation and
Recognition Program (PERP) 2018' under Quality Enterprise Leadership and Cost Leadership
in Manufacturing Sector. Upgradation and digitisation of on-line, real time quality
assurance systems and induction of state-of-the-art technology for several product and
packaging variants were carried out during the year. These initiatives, coupled with
in-house design and development expertise and innovation capabilities, have further
improved the speed-to-market for new launches and augmented the innovation pipeline of the
Your Company's unwavering focus on nurturing a portfolio of world-class products,
superior consumer insights and a strategy of continuous innovation and value creation
helped sustain its leadership position in the industry.
Business. Further, a long-term agreement was concluded successfully with the unionised
workforce at the Saharanpur unit, which will help the Business achieve further
improvements in productivity.
In line with your Company's commitment to the ‘Triple Bottom Line', the Business
has ramped up usage of renewable energy to a record high of 55% of the total energy
consumed. This was achieved through sustained investments in wind, bio-waste and solar
energy sources. Further, all the manufacturing facilities of the Business are IGBC Green
Building certified at the highest ‘Platinum' rating. The Munger unit was honoured
with the ‘National Energy Leader' Award (the highest category of award) at the 19th
National Award for ‘Excellence in Energy Management' organised by Confederation of
Indian Industry (CII) and the ‘Winner Award for Excellence in Energy Conservation' by
CII, Eastern Region. The Munger unit was also the recipient of ‘Environment
Excellence Award' (runner-up prize) by Indian Chamber of Commerce (ICC). The Ranjangaon
unit was recognised with the ‘Shreshtha Suraksha Puraskar' Award by National Safety
Council of India (NSCI) and ‘Safety Innovation Award' by The Institution of Engineers
(India). As a testimony to the success of the investments made in effective capability
building by leveraging digital technology, your Company was adjudged as a winner in the
2018 Frost & Sullivan Project Evaluation and Recognition Program.
‘Electronic Nicotine Delivery Systems' (ENDS) broadly refer to both Electronic
Vaping Devices (EVD), commonly called ‘e-cigarettes' as well as ‘electronic Heat
Not Burn (eHNB)' products. As many as 27 countries including Singapore, Australia,
Thailand, Taiwan, UAE, Brazil and Argentina have prohibited ENDS. In India, 12 States have
prohibited or restricted this category. Regulatory issues are also being contested in
Indian courts. Your Company's EON brand in the EVD segment is being marketed in select
states. Your Company is closely following the regulatory developments, while initiating
appropriate investments, enhancing capability and gearing up to be in a state of readiness
in this emerging segment.
The operating environment for the legal cigarette industry is likely to remain
challenging in view of the high levels of taxation and illegal trade, and disproportionate
regulatory pressures. Notwithstanding these challenges, your Company remains confident of
fortifying its market standing in the legal cigarette industry leveraging its superior
strategies, execution excellence, investments in cutting-edge technology and a future
ready product portfolio.
FMCG - Others
After continued sluggishness over the last two years, there was anticipation of
significant pick-up in the FMCG industry. However, after a promising first half, growth in
the second half of the year and particularly in the last 3-4 months was muted due to tight
liquidity conditions and sluggish rural demand. Notwithstanding these short-term
pressures, the structural drivers of long-term growth such as rising disposable incomes
& consumer awareness, low levels of penetration of consumer goods, favourable
demographics and increasing urbanisation amongst others, remain firmly in place which
augurs well for the FMCG industry.
Despite the challenging conditions prevailing during the year, your Company's
FMCG-Others Segment Revenue at Rs. 12505.28 crores grew ahead of industry and recorded an
increase of 12% (on a comparable basis and excluding the impact of ongoing restructuring
in Lifestyle Retailing Business). Most major categories enhanced their market standing
during the year. While ‘Bingo!' snacks, ‘Aashirvaad' atta,
The structural drivers of long-term growth such as rising disposable incomes &
consumer awareness, low levels of penetration of consumer goods, favourable demographics
and increasing urbanisation amongst others, remain firmly in place which augurs well for
the FMCG industry.
‘YiPPee!' noodles and ‘Dark Fantasy Choco Fills' super-premium cream biscuits
were the key drivers of growth in the Branded Packaged Foods Businesses, ‘Engage'
deodorants, ‘Vivel'/‘Fiama' shower gels & bodywash and ‘Savlon'
handwash reported robust growth in the Personal Care Products Business.
The Education and Stationery Products Business posted a strong performance during the
year led by ‘Classmate' notebooks, which consolidated its leadership position in the
industry. As part of the ongoing restructuring of the Lifestyle Retailing Business, your
Company divested the ‘John Players' trademark/copyright and its variants in the
apparel category along with related goodwill.
Segment EBITDA for the year registered a robust growth of 51% to Rs. 688.25 crores from
Rs. 455.58 crores in 2017-18. Segment Results for the year (excl. net gain on
restructuring of Lifestyle Retailing Business) posted significant improvement to Rs.
315.72 crores from Rs. 164.12 crores in 2017-18. This was driven by enhanced scale,
product mix enrichment and strategic cost management initiatives after absorbing the
impact of sustained investment in brand building, gestation costs of new categories and
facilities, and costs associated with the ongoing structural interventions in the
Lifestyle Retailing Business.
Your Company continued to make investments during the year towards enhancing brand
salience and consumer connect while simultaneously implementing strategic cost management
measures across the value chain.
During the year, your Company commissioned a world-class Integrated Consumer Goods
Manufacturing and Logistics facility (ICML) at Pudukkottai (Tamil Nadu) while operations
of ICMLs at Kapurthala (Punjab),
Panchla (West Bengal) and Guwahati (Assam) were further ramped up. Significant progress
was also made in constructing several other state-of-the-art owned ICMLs across regions
towards supporting the scale up plans in the FMCG Businesses. Currently, several projects
are underway and in various stages of development – from land acquisition/site
development to construction of buildings and other infrastructure. The Businesses deployed
‘Industry 4.0' technologies including advanced analytics, big data and industrial
Internet of Things (IoT) in areas such as overall equipment efficiency, energy management,
quality and traceability. Your Company is leveraging emerging digital technologies such as
mobility solutions, analytics and social media to reduce cycle time and cost of
operations, and engage better with consumers & customers.
The FMCG Businesses comprising Branded Packaged Foods, Personal Care Products,
Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and
Safety Matches have grown at an impressive pace over the past several years.
FMCG - Others Segment EBITDA for the year registered a robust growth of 51% to Rs.
688.25 crores from Rs. 455.58 crores in 2017-18.
Today, your Company's vibrant portfolio of brands represents an annual consumer spend
of over Rs. 18000 crores in aggregate. Over 25 world-class Indian brands, have been built
largely organically by your Company over a relatively short period of time - a feat
unparalleled in the Indian FMCG industry. In terms of annual consumer spend,
‘Aashirvaad' is today over Rs. 4500 crores; ‘Sunfeast' over Rs. 3800 crores;
‘Bingo!' nearly Rs. 2500 crores; ‘Classmate' over Rs. 1400 crores;
‘YiPPee!' over Rs. 1100 crores and ‘Vivel', ‘Mangaldeep' &
‘Candyman' are over Rs. 500 crores each. These world-class Indian brands support the
competitiveness of domestic value chains of which they are a part, ensuring creation and
retention of value within the country.
Your Company's FMCG brands have achieved impressive market standing in a relatively
short span of time. Today, Aashirvaad is No. 1 in Branded Atta, Bingo! is No. 1 in Bridges
segment of Snack Foods (No.2 overall), Sunfeast is No. 1 in the Cream Biscuits segment,
Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in Noodles, Engage is No. 2 in
Deodorants (No. 1 in women's segment) and Mangaldeep is No. 2 in Agarbattis (No. 1 in
Dhoop segment).
‘Many Indias within one India' is both a challenge as well as an opportunity for
consumer goods companies. Your Company remains extremely agile and responsive to the
emerging trends shaping the future of the industry. Some of the noteworthy consumer trends
include the emergence of health and wellness products as a key consumer need; increasing
preference for products rooted to ‘Indianness' and with regional/cultural connects;
increasing need for customised products and experiences; growth in demand for
‘on-the-go' consumption formats in low-unit packs and rising influence of social
media and digitalisation on consumer preferences and shopping behaviour. It has become
imperative for companies to identify micro-segments and address the needs of each
micro-segment in a unique way, tailoring their offerings to meet diverse needs.
The FMCG market construct is likely to undergo rapid change driven by exponential
growth in Tier – II/III towns and rural India and the emergence of relatively new
channels, Modern Trade and e-commerce. These new channels are disrupting the way the
industry operates and provide a platform with touchpoints to showcase and test out a wide
range and portfolio of products. Adaptation, assortment, pricing, shopper experience and
execution have been the key strategic drivers for businesses to gain competitive advantage
in Modern Trade. Several initiatives were implemented during the year towards leveraging
the fast growing e-commerce channel with a view to enhancing the reach of your Company's
products and harnessing digital and social media platforms for deeper consumer engagement.
Your Company continues to leverage its deep rural linkages and its understanding of the
rural economy to devise unique strategies to rapidly grow in these markets. Your Company
continues to invest in cutting-edge digital technologies to tap into unexplored touch
points for brand communication, predictive analytics to enhance informed decision making
and customised mobility solutions for better distribution reach.
The Indian FMCG market is at an inflection point and winning in the market place will
be an outcome of capitalising on the trends as well as building efficiencies in business
operations. Your Company seeks to significantly scale up the FMCG Businesses leveraging
its institutional strengths viz. deep consumer insight, proven brand building capability,
agri-commodity sourcing expertise, cuisine knowledge, strong rural linkages, a deep and
wide channel-tailored distribution network
Your Company's vibrant portfolio of brands in the FMCG - Others Segment, represents an
annual consumer spend of over Rs. 18000 crores in aggregate. and packaging know-how. In
addition, your Company continues to make significant investments in Research &
Development, strengthen supply chain capability, focus on consumer insight discovery and
harness digital technology to develop and launch disruptive and breakthrough products in
the market place. With these interventions, your Company is well poised to strengthen its
market standing and seize growth opportunities in the FMCG industry.
Highlights of progress in each category are set out below.
Branded Packaged Foods
Against the backdrop of a challenging operating environment as aforestated, your
Company sustained its position as one of the fastest growing branded packaged foods
businesses in the country, leveraging a robust portfolio of brands, a slew of
first-to-market offers, a range of distinctive products customised to address regional
tastes and preferences along with an efficient supply chain and distribution network.
The Business implemented several initiatives encompassing cost management, supply chain
optimisation, smart procurement, alternative fuel usage and productivity improvement
through automation which helped in absorbing escalation in input costs, start-up costs of
new facilities and strategic investments in brand building for new categories viz. Dairy,
Juices, Chocolates and Coffee.
Your Company's Branded Packaged Foods Businesses continued to make significant
investments towards brand building and supporting the launch of new variants. Cut-through
advertising and brand engagement platforms touching millions of consumers through market
development efforts strengthened the market standing of its brands across categories. Your
Company's vibrant food brands such as ‘Aashirvaad', ‘Sunfeast', ‘Bingo!',
‘YiPPee!' and ‘B Natural' amongst others, enable strong forward linkages for
domestic agri-value chains, thereby enhancing their competitiveness and making a
meaningful contribution to boost farmer earnings. Encouraged by consumer response, your
Company is scaling up presence in Juices, Chocolates, Coffee and Dairy in a calibrated
fashion.
Relentless focus on delivering superior quality products to consumers remains a key
source of competitive advantage for the Branded Packaged Foods Businesses. The Businesses
continue to leverage your Company's agri-commodity sourcing expertise to procure high
quality raw materials thereby ensuring the highest level of quality and safety of its
products. In addition, each of your Company's branded packaged food products is
manufactured in HACCP/ ISO-certified manufacturing locations ensuring compliance with all
applicable laws and adherence to the highest quality norms.
The Business launched several innovative, distinctive and first-to-market products
during the year leveraging robust product development processes, the capabilities of your
Company's Life Sciences and Technology Centre and the cuisine expertise resident in your
Company's Hotels Business.
Your Company's brands featured prominently amongst India's Most Trusted Brands 2018 in
the Brand Equity survey undertaken by The Economic Times, with Sunfeast at No. 6,
Aashirvaad at No. 8, Sunfeast YiPPee! at No. 12 and Bingo! at No. 20 under the Food
Products Category. Sunfeast and Aashirvaad also featured among Top 100 Most Trusted Brands
across all categories.
Several manufacturing units of your Company's Branded Packaged Foods Businesses,
competing with both the best within and outside the industry, received various awards and
accolades during the year bearing testimony
Your Company sustained its position as one of the fastest growing branded packaged
foods businesses in the country, leveraging a robust portfolio of brands, a slew of
first-to-market offers, a range of distinctive products customised to address regional
tastes and preferences along with an efficient supply chain and distribution network.
to your Company's focus on manufacturing excellence, safety and quality.
Notable awards included ‘Platinum' rating for Haridwar biscuits plant at India
Manufacturing Excellence Awards by Frost & Sullivan and ‘Outstanding Performance
in Food Safety Excellence' Award by CII for biscuits plant in Bengaluru demonstrating your
Company's commitment to excellence in manufacturing processes and food safety.
Your Company was recognised for ‘Overall Procurement Excellence (FMCG)' at the 5th
Inflection Summit and Awards organised by Alden Global in association with NASSCOM along
with Council of Supply Chain Professionals, USA & Singapore Institute of Materials
Management.
Your Company continues to make investments in Integrated Consumer Goods Manufacturing
and Logistics facilities (ICMLs) towards augmenting the manufacturing and sourcing
footprint across categories with a view to improving market responsiveness, leveraging
fiscal incentives and reducing the cost of servicing proximal markets. New manufacturing
lines were commissioned across categories such as Biscuits, Beverages, Noodles, Potato
Chips, Finger Snacks at various locations viz. Kapurthala, Trichy, Panchla and Guwahati.
These ICMLs are expected to set new benchmarks in quality, productivity and cost
efficiency.
Your Company sustained its market standing as the 3rd largest food company in the
country (publicly listed) and its brands have been successful in penetrating into one out
of every two Indian households.
Your Company continues to enter into new categories and industry segments besides
strengthening its existing portfolio of products with new launches. In addition, it
experimented with innovative distribution channels to enhance reach and offer convenience
to consumers in line with emerging consumer trends.
– The Staples Business posted yet another year of robust performance growing well
ahead of the industry. Aashirvaad atta fortified its market standing across geographies
and its leadership position in the industry. Variants in the value-added portfolio such as
Multigrain Atta and Select Atta continued to record robust growth driven by higher
salience in Modern Trade and e-commerce channels.
Your Company had to contend with increased competitive intensity post the
implementation of 5% GST on branded Atta. While it has been the Government's intention to
provide relief of nil rate of GST only to small and local manufacturers thereby benefiting
consumers with lower priced staple products, many manufacturers have used this distinction
in rates as an attractive tax-evasion/ avoidance opportunity by classifying their products
as unbranded or with a declaration that ‘We hereby voluntarily forego all types of
actionable claim or enforceable right in respect of brand name printed on this pack' and
continue to market the product with brand names and distinct trademarks. This inequitable
GST differential between branded and unbranded players has resulted in market distortion,
widening the price gap between national registered brands and local unregistered brands.
It may be recalled that there was a concerted attack on Aashirvaad atta on social media
in late 2017-18. Through 360 degree campaigns reassuring consumers and dispelling the
baseless rumours surrounding Aashirvaad atta, your Company has been successful in
regaining consumer's confidence and reviving growth, especially in the second half of the
year. Focused marketing inputs, consumer activations and region-specific interventions
The Business launched several innovative, distinctive and first-to-market products
during the year leveraging robust product development processes, the capabilities of your
Company's Life Sciences and Technology Centre and the cuisine expertise resident in your
Company's Hotels Business.
supported by media investments have enabled Aashirvaad improve on brand health
parameters.
Your Company takes utmost care in manufacturing its products at HACCP/ISO-certified
manufacturing locations ensuring compliance with all applicable laws and adherence to the
highest quality norms. Powered by the trust reposed by over 2.5 crore households, your
Company is confident of sustaining Aashirvaad's position as India's No. 1 atta brand going
forward.
Supported by its new positioning – sun-dried and made from natural sea salt
crystals – backed up by on-ground activations, visibility and media investments,
Aashirvaad salt gained traction in key geographies and posted strong performance during
the year.
In the branded Spices category, the Aashirvaad range of spices registered robust
revenue growth. New blended spices variants were launched catering to regional tastes and
preferences such as ‘Chicken 65' & ‘Mutton Chukka Masala' in Tamil Nadu and
‘Garam Masala' in Uttar Pradesh. With extension of the portfolio to the new
geographies of North India and Gujarat, Aashirvaad range of spices is now available in
most states of India.
– In the Snacks and Meals Business, the Bingo! range of snacks recorded robust
growth during the year driven by new product launches, portfolio renovation and
extensions, expansion of distribution footprint, tailor-made trade marketing support and
consistent and impactful communication. Bingo! sustained market leadership in the bridges
segment and Tedhe Medhe emerged as India's most distributed brand in the category. The
Business strengthened its product range with the launch of several innovative variants
such as Mad Angles Very Peri Peri,
Mad Angles Fillos & Tedhe Medhe Wakhra Style. These products have garnered
encouraging consumer traction and are being rolled out to other markets. Bingo! potato
chips recorded impressive market share gains and consolidated its leadership position in
the South. Bingo! No Rulz, launched in the previous year, continued to gain consumer
franchise with its unique value proposition of multiple shapes in a single pack.
In the Instant Noodles category, YiPPee! noodles sustained its growth momentum during
the year despite increasing competitive intensity from national and several regional
discount players. The Business continued to focus on premiumising its product portfolio
and enhancing brand affinity. During the year, the Business launched limited edition
variants under the ‘My' range sub-brand. Available in four exciting variants, the
range has been crafted keeping in mind the taste preferences of young adults and has
received good response from consumers.
– The Confections Business continued to premiumise its portfolio and augment its
range with the introduction of low-unit packs and channel-specific SKUs to its assortment.
In the Biscuits category, the Business consolidated its leadership position in the
Super-Premium Creams segment with continued focus on enhancing brand affinity,
strengthening the supply chain and expanding distribution reach. Consistent and impactful
communication, coupled with focused marketing inputs helped improve penetration and brand
health metrics. Dark Fantasy Choco Fills witnessed further acceleration in growth momentum
driven by superior product attributes, focused communication and consumer activation.
During the year, the Business augmented its portfolio in the rapidly growing Cakes segment
through the launch of layered cakes under the Sunfeast Bounce
‘Bingo!' sustained market leadership in the bridges segment and ‘Tedhe Medhe'
emerged as India's most distributed brand in the category.
brand and expanded the offerings in the Marie & Cookies segment with the launch of
Sunfeast Marie Light Vita & Sunfeast Mom's Magic Choco Chip cookies. Various
innovative and first-to-market launches such as Bounce minis and Dark Fantasy Jellifills
also led to premiumising the portfolio. Tailored and contextual content on digital
platforms were deployed to enhance reach and drive brand imagery.
In the Confectionery category, the Business continued to focus on premiumising its
product portfolio with its differentiated and unique offerings at ‘Rupee 1 and above'
price points with greater thrust on Multi-unit pack portfolio. During the year, the
Business augmented its portfolio with the launch of Candyman Tadka Time, a unique
first-to-market format of masala coated jelly beans and forayed into bridged chocolate
segment with the launch of Candyman Fantastik – an innovative offering of wafer
sticks with chocolate crme filling. These products have received encouraging consumer
response.
– In the Dairy & Beverages Business, the ‘B Natural' range of juices
leveraged its ‘Not from Concentrate' platform to deepen consumer connect by providing
a more nutritive and natural tasting experience whilst simultaneously promoting fruit pulp
procured from Indian farmers, thereby supporting the Indian farm and food processing
sector. The entire range of B Natural Beverages is ‘made with 100% Indian Fruit &
0% concentrate'. The Business also launched a premium range of juices comprising Ratnagiri
Alphonso, Himalayan Mixed Fruit and Dakshin Guava in an appealing transparent bottle
format providing an exotic and rich fruit experience which has received an excellent
initial response from the target consumers. In the Dairy segment, Business extended
Aashirvaad pouch milk to Kolkata and Patna, and scaled up presence in existing markets.
The product received excellent response in a relatively short period of time.
‘Aashirvaad Svasti' Ghee continues to gain consumer traction and excellent product
feedback. The Aashirvaad Svasti portfolio was augmented with the introduction of pouch
curd and paneer. The Business also forayed into the Dairy Beverages segment with the
launch of four differentiated variants of milkshakes under the ‘Sunfeast Wonderz'
brand. The product has received encouraging consumer response and is being rolled out to
target markets.
– In the Chocolates category, the Business launched a range of premium chocolate
bars crafted in two unique product formats – ‘Fabelle Soft Centres' (centre
filled chocolate bars) and ‘Fabelle Choco Deck' (layered chocolate bars) in select
markets, which is gaining consumer traction. Presence in the luxury segment portfolio was
strengthened by leveraging the world-class Fabelle boutiques, new launches in the boxed
chocolate segment and continued communication across key digital media. In the boxed
chocolate range, the Business launched India's first Ruby Chocolate, Ruby Gianduja.
‘Sunbean' gourmet coffee, which is available across all ITC Hotels, continues to
receive excellent response from discerning consumers. The Business is also piloting
ready-to-use beaten instant coffee paste in select markets.
A big thrust on India's Food Processing sector can lead to significant job creation,
enhance rural incomes and help manage food inflation. In view of the immense potential of
this industry, your Company is making significant investments in food processing and
remains focused on establishing itself as the ‘most trusted provider of food products
in the Indian market' driven by superior product quality, a differentiated product
portfolio, deep understanding of consumer needs and
Your Company is making significant investments in food processing and remains focused
on establishing itself as the ‘most trusted provider of food products in the Indian
market' driven by superior product quality, a differentiated product portfolio, deep
understanding of consumer needs and preferences, R&D, innovation and operational
excellence across the value chain.
preferences, R&D, innovation and operational excellence across the value chain.
Your Company will continue to make investments towards establishing a distributed
manufacturing footprint, driving cost efficiencies in a structural manner and focus on
supply chain optimisation to support the rapid and profitable growth of the Branded
Packaged Foods Businesses in the years ahead.
Personal Care Products
Your Company's Personal Care Products Business delivered a healthy performance during
the year and continued to enhance its market standing in the Hand Hygiene, Fragrance,
Bodywash and Skin Care categories. This was driven by sustained focus on innovation,
portfolio premiumisation, expansion of distribution reach and proactive cost management.
In the Fragrance category, Engage recorded impressive gains, consolidating its
leadership position in the women's segment and No. 2 position overall.
The Business continues to garner robust consumer traction in the fast-growing small
pack format of pocket perfumes despite intense competition. The Business also launched a
new variant namely Mikkel Verde in the Fine Fragrance space under the Essenza Di Wills
(EDW) brand.
In the Personal Wash category, new bar soap variants such as Vivel Cool received
positive consumer response in the markets of launch. In the bodywash segment, Fiama
continued to garner increasing consumer franchise. During the year, the Business
introduced Vivel Bodywash in select markets at an attractive price point to offer bar soap
users an enhanced bathing experience. Savlon handwash recorded significant gains during
the year across brand health metrics and emerged as one of the fastest growing brands in
the market.
The Business strengthened its presence in the Skincare space with the launch of
‘Dermafique' range of premium skincare products which have been developed at the
Company's state-of-the-art Life Sciences and Technology Centre leveraging the latest
breakthroughs in bioscience, nanotechnology and derma science. Designed and validated for
the Indian consumer, the innovative premium range of products include anti-ageing,
specialised hydrating creams, body serum, cleansing and toning products. In the popular
Skincare space, the Business restaged ‘Charmis' skin cream with a fresh look and
enhanced sensorial experience supported by a focussed marketing campaign. The new product
innovations and launches in the Skincare space have received encouraging response from
target consumers.
Several new and exciting consumer friendly offerings were launched during the year,
which include Savlon Hand Sanitizer in a child-friendly pen format and Savlon Antiseptic
Liquid in a ‘Braille' pack for the visually impaired.
The Business continued to leverage creative brand campaigns and social media platforms
towards deepening consumer engagement. Savlon Healthy Hands Chalk Sticks won the coveted
‘Creative Effectiveness Grand Prix' at Cannes, a first ever for India. Savlon
‘Healthy Hands' Chalksticks initiatives was ranked amongst the top two most effective
campaigns in the world by World Advertising Research Center, U.K. (WARC) which recognises
excellence in advertising and communication across the world. Savlon won a ‘Gold' at
the Asia Pacific Effie Awards for unique strategy and execution in Handwash category
amongst school children. Winning the prestigious ‘Silver Lion' at the ‘Cannes
Young Lions' competition for marketers, bears testimony to the talent resident amongst our
young employees.
The Personal Care Products Business strengthened its presence in the Skincare space
with the launch of ‘Dermafique' range of premium skincare products which have been
developed at the Company's state-of-the-art Life Sciences and Technology Centre leveraging
the latest breakthroughs in bioscience, nanotechnology and derma science.
During the year, the Business forayed into the Floor Cleaner market with the recently
acquired ‘Nimyle' brand. Leveraging its 100% natural brand positioning, Nimyle has
attained leadership position in West Bengal and is being extended to other parts of India.
Your Company continues to accord the highest priority to manufacturing excellence. The
Guwahati facility became the first in the Personal Care industry in India to receive the
prestigious Five-S certification by JUSE (Union of Japanese Scientists and Engineers)
bearing testimony to your Company's focus on manufacturing excellence, safety and quality.
Your Company continues to strengthen its presence in the Personal Care space in view of
the robust long-term prospects of the industry given the low levels of per capita
consumption currently, rising disposable incomes, increasing urbanisation and growing
consumer preference for enhanced personal grooming. Your Company is well positioned to
seize the emerging opportunities and continues to invest in creation of vibrant brands,
innovative consumer-centric products and a robust supply chain to emerge as a significant
player in this space.
Education and Stationery Products
During the year, the Stationery industry witnessed heightened competitive intensity
along with a sharp escalation in paper prices. Despite these challenging conditions, the
Business posted robust growth in revenue and sustained its leadership position in the
industry anchored on a portfolio of world-class brands and products, and an efficient
distribution network.
The Business continued to leverage its dedicated product development cell and your
Company's Life Sciences and Technology Centre to develop and launch innovative and
superior products in the market. During the year, the product portfolio was augmented with
the launch of several new products including paper and filing solutions, range of vibrant
colour options and gift packs under the ‘Paperkraft' portfolio and several offerings
in the pens category. The Business also scaled up presence in the value segment of the
notebook industry through the ‘Saathi' brand with a view to consolidating its
leadership position.
The Business continued to deepen consumer engagement with the launch of
‘MyClassmate' app – a ‘Perfect Buddy' to the students offering a range of
innovative features and enabling them to traverse their learning journey. The app has
received encouraging response from consumers, garnering close to 1.5 lakh downloads.
‘Classmateshop.com', a first-to-market initiative that offers consumers the option to
personalise the images to be printed on notebook covers, was enhanced through a mobile
optimised version. ‘Be Better Than Yourself' campaign helped Classmate consolidate
its consumer mindshare and preference. The Business continued its association with
‘Classmate Spellbee' and ‘Classmate activation programmes' in key towns. These
engagement programmes collectively reach out to over a million children across 1600
schools.
The concerted efforts of the Business to enhance brand affinity and consumer connect
has enabled Classmate to earn the ‘Superbrand' status in 2018.
In the area of supply chain, initiatives on quality and cost management through network
optimisation yielded superior product quality and enhanced operational efficiency. The
thrust on expanding distribution continued with specific focus on institutional channel
and enhancing market penetration and outlet coverage. Sales and distribution systems were
The Education and Stationery Products Business continued to deepen consumer engagement
with the launch of ‘MyClassmate' app – a ‘Perfect Buddy' to the students
offering a range of innovative features and enabling them to traverse their learning
journey.
strengthened further through innovative processes and superior technology
interventions.
Classmate and Paperkraft notebooks leverage your Company's world-class fibre line at
Bhadrachalam - India's first ozone treated elemental chlorine free facility - and embody
the environmental capital built by your Company in its paper business. During the year,
the Business scaled up the Paperkraft range of notebooks using Forest Stewardship Council
(FSC) certified paper, made at your Company's paper mill, matching the best quality paper
in the world. The project for setting up your Company's dedicated manufacturing facility
for notebooks is nearing completion. Equipped with state-of-the-art machinery, the
facility will enable large-scale automation of processes which is expected to bring in
higher operational efficiencies.
The Indian Education and Stationery Products industry is poised for exponential growth
driven by growing literacy, increasing enrolment ratios, Government's thrust on the
education sector through various policy initiatives like Sarva Shiksha Abhiyan, Right to
Education etc. and a favourable demographic profile of the country's population. Your
Company, with its strong brands and robust product portfolio, and collaborative linkages
with small & medium enterprises is well poised to strengthen its leadership position
in the Indian stationery market.
Incense Sticks (Agarbattis) and Safety Matches
The Agarbatti category witnessed premiumisation with consumers seeking better product
experience and more culturally relevant fragrances. Apart from the introduction of newer
formats and modern fragrances, the industry witnessed heightened media and promotion
spends from many regional and local players. Notwithstanding such competitive intensity,
Mangaldeep's household penetration increased in urban & rural markets during the year
in both the Agarbatti and Dhoop formats. The brand sustained its position as the second
largest brand in the Agarbatti category and a leader in the Dhoop segment.
Mangaldeep enhanced its market standing by focusing on driving brand salience through
sharply targeted media investments, on-ground consumer activations and a differentiated
and superior product experience. Mix enrichment and cost optimisation initiatives
continued to be the other key focus areas for the Business.
The unique and innovative Mangaldeep app, currently available in nine languages on both
the Android & iOS platforms, caters to the everyday devotional needs of consumers. The
content on the app covers information and steps to perform various pujas, popular
devotional songs, panchang (Hindu calendar and almanac), chant counter and temple locator
amongst others. The app has garnered over five lakh downloads and enjoys a healthy rating
of 4.6/5, which is the highest in the devotional space amongst apps of comparable
dimensions. Dwell-time per user has more than doubled over the previous year. The app is
being continually improvised to expand the scope of devotional journey of consumers.
The Agarbatti industry continues to import raw battis and bamboo sticks, although
bamboo and charcoal – the principal raw materials – are available in India in
plenty. This is resulting in loss of livelihood creation opportunities for women and
tribals in rural areas, particularly in the North East. In this regard, the Business is
indigenising raw batti sourcing, by enhancing domestic manufacturing capacity through
technology upgradation and standardisation of processes. Work has also been initiated on
augmenting bamboo plantations in the North East region and indigenisation of bamboo stick
production, which will encourage manufacture of raw battis from domestic bamboo and
facilitate creation of sustainable livelihood opportunities amongst small
‘Mangaldeep' sustained its position as the second largest brand in the Agarbatti
category and a leader in the Dhoop segment.
‘AIM' continues to be the largest selling Safety Matches brand in the industry.
and marginal farmers. The Business has also partnered with various State Government
bodies to manufacture raw battis & branded finished goods in this regard.
In line with your Company's commitment to enhancing the competitiveness of Indian value
chains linked to its operations, the Business has implemented several measures including
facilitating the mechanisation of agarbatti manufacturing and backward integration into
raw batti manufacturing using indigenous inputs at small scale vendor locations.
While demand conditions in the Safety Matches industry remained sluggish, the Business
sustained its market leadership position through portfolio premiumisation and by
leveraging a robust portfolio of offerings across market segments. ‘AIM' continues to
be the largest selling brand in the industry. Inflationary pressures on account of a rise
in cost of input materials were mitigated through value engineering and strategic cost
management initiatives to maintain profitability.
Lifestyle Retailing Business
The Business continued to execute the structural interventions initiated in the
previous year across the value chain including restructuring its retail footprint &
rationalising the store network, modifying the design language of its offerings,
restructuring the terms of trade with business partners and sharpening working capital
management. During the year, your Company divested the ‘John Players'
trademark/copyright and its variants in the apparel category along with related goodwill.
Trade Marketing & Distribution
Your Company's Trade Marketing & Distribution (TM&D) vertical has, over the
years, developed critical insights into customer behaviour and channel-specific trends in
the FMCG industry. Given the diverse needs of your Company's FMCG businesses, the TM&D
vertical has crafted a differentiated and comprehensive market / outlet specific strategy
to address the opportunities in the FMCG industry.
Your Company's formidable distribution network, which facilitates availability of its
products in over six million retail outlets across various trade channels was further
strengthened during the year with the addition of more markets and outlets to its
servicing base. Market standing of your Company's products improved in the urban areas as
your Company continued its customised servicing and engagement programmes for the top
outlets. Given the higher growth rates in rural markets, your Company continues to rollout
business models and market specific interventions to enhance its footprint in these
markets.
During the year, your Company sustained its leadership position in the convenience
channel while consolidating its market standing in premium grocery outlets. Your Company's
trade loyalty programmes in the grocery channel continued to gain traction during the
year.
Your Company's sales continued to grow robustly in the Modern Trade channel driven
through focused joint business planning, increased use of customised packs and assortment,
higher level of category engagement and continued focus on in-store sell-out activities.
The FMCG e-commerce industry is coming into its own through multiple platforms and is
growing at a rapid pace. Your Company continues to strengthen its position in this
emerging space through collaborative planning, constant endeavour to drive customisation
as required by the online shoppers and through higher discoverability of its offers across
various platforms. Your Company will adapt, innovate and collaborate with established and
emerging e-commerce players to stay ahead in further evolution of this channel.
Your Company's formidable distribution network, which facilitates availability of its
products in over six million retail outlets across various trade channels was further
strengthened during the year with the addition of more markets and outlets to its
servicing base.
The scale and diversity of your Company's distribution network continues to be a
critical lever to enhance market presence, gain valuable consumer/ trade insights,
understand the changing trade/consumer behaviour and provide speed and scale of execution
for launches across geographies. During the year, your Company executed more than 50 new
product launches across geographies apart from extending distribution reach of several
existing products in the portfolio.
Your Company's robust supply chain and logistics capabilities continue to play a vital
role in enabling superior market servicing while continuously reducing cost of market
servicing. During the year, several initiatives were undertaken to enhance supply chain
responsiveness and cost competitiveness. These include reducing distance to market,
enhancing flexibility to cater to new launches and contingencies, and reconfiguring market
servicing infrastructure. Robust capability of your Company's supply chain enabled it to
quickly respond to and overcome the disruptions caused by the unprecedented floods in
Kerala during the year. Your Company has also created an end-to-end cold chain catering to
the requirements of new categories such as chocolates and frozen snacks. In addition,
innovative distribution models were implemented to optimise inventory holding and reduce
transit time by increasing direct market servicing. Your Company is also in the process of
setting up several state-of-the-art warehouses co-located with the Integrated Consumer
Goods Manufacturing facilities. Construction of such modern warehouses, which are expected
to provide long-term benefits by improving operating efficiency and enhancing product
freshness in the market, is progressing as per schedule.
Technology enablement in the form of customised mobility solutions, data analytics
comprising insightful visualisation tools and predictive analysis are being leveraged
increasingly to enable quick and accurate data capture, informed decision making in real
time, scientific design of trade inputs and drive sales. With one of the largest
distributed workforce in the FMCG industry, your Company continues its focus on human
resource competency development, productivity enhancement and sustained engagement.
Your Company continues to invest in augmenting the depth and width of its distribution
network while adopting a differentiated approach to address the unique needs of its
diverse FMCG product portfolio, market segments and trade channels. With its robust
systems and processes, an agile and responsive supply chain, synergies arising from
distributing various kinds of products through common channels and relationships built
with its channel partners, the distribution highway is a source of sustainable competitive
advantage for your Company and is well poised to support the rapid scale up of operations
in the ensuing years.
HOTELS
The operating environment in the hospitality sector reflected its growth trajectory
with foreign tourist arrivals growing by over 5% in the year 2018. Healthy growth rate in
demand along with a lower rate of new supply aided in boosting room realisations. Segment
Revenue recorded robust growth driven by increase in average room rates, improvement in
occupancy and higher Food & Beverage revenue from existing hotels and addition of new
properties to the portfolio. Improved operating leverage, notwithstanding gestation costs
of newer hotels in the portfolio boosted profitability.
Your Company's Hotels business remains amongst the fastest growing hospitality chains
in the country with over 105 properties under four distinct brands – ‘ITC
Hotels' in the Luxury segment, ‘Welcomhotels' in the Upper-Upscale segment,
‘Fortune' in the Mid-market to
During the year, your Company executed more than 50 new product launches across
geographies apart from extending distribution reach of several existing products in the
portfolio.
Upscale segment and ‘WelcomHeritage' in the Leisure & Heritage segment. The
Business continues to focus on strengthening the equity of the ITC Hotels brand anchored
on unique and path breaking ‘Responsible Luxury' initiatives, culinary excellence and
personalisation of guest services through hotels that are the truest representation of the
region's culture and ethos.
‘Club ITC', your Company's pan-ITC consumer loyalty programme, continues to gain
franchise amongst the premium clientele of ITC hotels and WLS. The programme continues to
leverage its strategic partnership with Marriott Bonvoy, the combined loyalty programme of
Marriott International. The dining loyalty programme, ‘Club ITC Culinaire',
registered robust growth in membership base.
During the year, the Business continued to strengthen ‘Book Direct' proposition on
digital channels through targeted e-commerce activations for direct conversions, leading
to increased reach and engagement with customers in both domestic and international
markets. The Business leveraged social media communications to garner approximately 75
million impressions & 8 lakh engagements, thereby amplifying brand messaging and
augmenting guest relationships. Key campaigns for the year included those for the launch
of ITC Kohenur and ITC Grand Goa Resort & Spa.
The world-class ambience of your Company's luxury hotels continues to be leveraged for
the gourmet luxury chocolates range under the Fabelle brand with exclusive boutiques
across eight ITC Hotels. In addition to selling Fabelle's packaged luxury chocolates, the
Fabelle chocolate boutiques offer a range of exquisitely crafted desserts and cocoa
beverages, created live by Fabelle Master Chocolatiers enabling experiences across range,
quality and flavours thus establishing the brand position at the luxury end of the market.
The ‘Fabelle Socit de Chocolat', an exclusive chocolate-making programme designed
by the master chocolatiers of Fabelle at ITC luxury hotels for budding chocolatiers and
chocolate lovers was further scaled up in the current year. The programme which enables
appreciation of the nuances of chocolate making is growing in popularity.
Sunbean gourmet coffee has established itself as the beverage of choice in your
Company's luxury hotels. ‘Sunbean Ambassadors' – the specially trained in-house
master baristas continue to bring alive the brand story supported by delightful creations.
Your Company's Hotels Business sustained its pre-eminent position in the hospitality
industry receiving several coveted accolades and recognition during the year. The
Travel+Leisure magazine acknowledged ITC Hotels as the ‘Best Luxury Hotel Chain', ITC
Kohenur as the ‘Best New Luxury Hotel (Editor's Choice Award)' and ITC Grand Bharat
Retreat as the ‘Best Luxury Resort - Domestic' at the ‘India's Best Awards
2018'. ITC Grand Bharat Retreat was ranked amongst the Top 50 resorts in Asia by Conde
Nast Traveller USA.
The Food & Beverage segment continues to be a major strength of your Company's
Hotels Business with some of the most iconic brands in the country. Your Company's
culinary brands continue to retain their leadership position with ‘Bukhara',
‘Dum Pukht', ‘Royal Vega', ‘Dakshin', ‘Avartana', ‘Kebabs &
Kurries', ‘Ottimo', ‘EDO', ‘Pan Asian' and ‘West View' having received
the coveted Times Food Award. ‘Fabelle' received the Times Food Award as the
‘Best Confectionery Destination in the Fine Dining category' in Mumbai, New Delhi,
Bengaluru and Chennai & the ‘Best Chocolatier' in Kolkata and Hyderabad.
Epicurean Guild Awards awarded ‘Bukhara' as an ‘Iconic Restaurant'; Pan Asian,
ITC Maratha –‘Best Multi-Asian restaurant'; and Royal Vega, ITC Grand Chola
– ‘Best New Indian Restaurant'. ‘Avartana', ITC Grand Chola was recognised
as the ‘Best South
Your Company's Hotels business remains amongst the fastest growing hospitality chains
in the country with over 105 properties under four distinct brands – ‘ITC
Hotels' in the Luxury segment, ‘Welcomhotels' in the Upper-Upscale segment,
‘Fortune' in the Mid-market to Upscale segment and ‘WelcomHeritage' in the
Leisure & Heritage segment.
Indian restaurant' at Travel+Leisure Delicious Food Awards besides being included in
the list of Top 50 restaurants of the year 2018 along with ‘Bukhara' and ‘EDO'
by Conde Nast Traveller.
Your Company's Hotels Business continuously strives to reduce water and energy
consumption and enhance the usage of renewable energy to meet its overall energy
requirements. Such commitment to the Triple Bottom Line is manifest in the Business's
‘Responsible Luxury' ethos making it a trailblazer in green hoteliering globally.
Overall energy requirements in several ITC hotels are being fully met by renewable energy
sources.
In view of the long-term potential of the Indian hospitality sector, your Company
remains committed to enhancing the scale of the Business by adopting an ‘asset-right'
strategy that envisages building world-class tourism assets for the nation and growing the
footprint of managed properties by leveraging its hotel management expertise. Managed
properties now account for more than 50% of room inventory of ITC hotels group. During the
year, the Business commissioned ITC Kohenur, Hyderabad. Strategically situated in the
heart of HITEC city, in close proximity to the central business and commercial district,
the hotel offers the finest accommodation and dining experiences. In its first year of
operations, the hotel has been able to establish a pre-eminent position in the luxury
hospitality landscape of Hyderabad.
As reported earlier, on 19th March, 2018, the Honourable Supreme Court upheld the sale
of the 250-room luxury beach resort located in South Goa operating under the name Park
Hyatt Goa Resort & Spa by IFCI Limited to your Company and directed that the hotel
property be handed over within six months. Your Company obtained possession of the hotel
on 19th September, 2018, and successfully commenced operations under the brand name
‘ITC Grand Goa Resort & Spa' from
15th October, 2018. With direct access to the pristine Arossim beach, this beach-side,
village-styled resort's architecture draws inspiration from the Indo-Portuguese vintage
and a distinctive regional allure that is infused in its service, cuisine, rituals and
more - promising a truly immersive experience. Reconfigured with the acknowledged ITC
Hotels personalised service design and infused with an improved food and beverage
portfolio, the hotel has been well accepted by guests – both domestic and
international.
The Business made steady progress during the year in the construction of luxury hotels
at Kolkata and Ahmedabad. Construction of ITC Royal Bengal in Kolkata is nearing
completion and is expected to be commissioned in the first quarter of 2019-20.
ITC Royal Bengal and ITC Sonar together offer one of the largest meetings and
convention space in the East with a total of 693 rooms and suites, and appx. 1,00,000 sq.
ft. of banqueting space and 15 dining destinations.
In the Upper-Upscale segment, the ‘Welcomhotels' brand continues to build on the
‘asset-right' strategy with distinctive brand proposition of addressing traveller
needs beyond traditional service design. The Business seeks to scale up the brand going
forward with the addition of owned hotels under construction at Amritsar, Guntur and
Bhubaneswar along with a robust pipeline of managed properties.
The ‘Fortune' brand sustained its pre-eminent position in the Mid-market to
Upscale segment, with a sharpened brand positioning of ‘First class, full service
hotels - an affordable alternative'. The Fortune brand presently comprises 47 hotels
across 41 cities. The ‘WelcomHeritage' brand remains the country's most successful
and largest chain of heritage hotels with 34 operational hotels.
Your Company, with continued thrust on ‘asset-right' strategy, is well-positioned
to sustain its leadership
Your Company remains committed to enhancing the scale of the Business by adopting an
‘asset-right' strategy that envisages building world-class tourism assets for the
nation and growing the footprint of managed properties by leveraging its hotel management
expertise.
status in the Indian Hospitality industry, given its portfolio of world-class
properties, iconic cuisine brands and best-in-class levels of service excellence.
PAPERBOARDS, PAPER AND PACKAGING
After a sluggish year in 2017-18 when the industry was affected due to GST transition
and ban on sale of liquor in outlets along highways, the Domestic Paperboard, Paper and
Packaging Industry, witnessed demand recovery across end-user segments. The restrictions
imposed by China on import of mixed waste had a major impact on the global fibre trade and
kept international fibre prices at an elevated level, which also reflected in the
relatively higher paper and paperboard realisations during the year under review. This was
further aggravated by pulp supply disruptions in certain origins and rupee depreciation.
Your Company's strategic investments in pulp import substitution, proactive capacity
addition in value-added paperboard, process innovations and a cost-competitive fibre chain
supported by effective go-to-market strategies helped deliver robust growth in revenue and
substantial improvement in profitability.
Paperboards & Specialty Papers
Global demand for Paper & Paperboard in 2018 grew by 1% appx. to 417 million
tonnes, with the paperboard segment registering a growth of 2.4% during the same period.
Going forward, global demand for Paper & Paperboard is projected to grow at a subdued
pace of 1% to 1.5% CAGR driven mainly by Paperboard segment. The growth in the Paperboard
segment is expected to be driven by consumer goods, pharmaceuticals and e-commerce. The
Writing & Printing and Newsprint segments, on the other hand, are expected to remain
under pressure largely due to increasing adoption of digital media and proliferation of
smartphone usage.
Domestic demand for Paper & Paperboard was firm during the year, across end-use
segments. Over the next five years, domestic industry is projected to grow at 5.5% to 6.5%
CAGR to reach 24 million tonnes by 2024 with Paperboard (54% of the market) and Writing
& Printing paper (28% of the market) segments estimated to grow at around 7% CAGR and
5% CAGR respectively. Within Paperboards, demand for Value-Added Paperboards (VAP) in
India is projected to grow at a healthy rate of around 10.5% CAGR driven by growth in the
FMCG, Pharma, Publishing and Food & Beverages industries. In the Writing &
Printing paper segment, cut-size paper is projected to register the fastest growth at 9%
CAGR, driven by the education and office stationery segments.
During the year, import of paper and paperboard from China, ASEAN and South Korea
dropped by 39% while overall imports dropped by 25%. This decline in imports is primarily
attributable to higher international fibre prices and imposition of anti-dumping duty on
cut-size copier. Given the cyclical nature of the Industry, imports are bound to increase
when pulp and product prices soften. In fact, correction in global fibre prices was
witnessed in the second half of the year.
The current import policy and extant regulations governing commercial and social
forestry in the country have put the Indian Paper and Paperboard industry at a
disadvantage vis--vis imports. There is clearly a need to review the current import duty
structure and re-examine the existing Free Trade Agreements (FTAs) and the new ones under
formulation towards providing a level playing field to the domestic industry and
encouraging commercial farming of wood in India. Legislative changes along with
appropriate environmental safeguards need to be implemented to enable private sector
participation in commercial forestry on drylands and wastelands.
Your Company's strategic investments in pulp import substitution, proactive capacity
addition in value-added paperboard, process innovations and a cost-competitive fibre chain
supported by effective go-to-market strategies helped deliver robust growth in revenue and
substantial improvement in profitability.
Your Company remains a clear leader in the VAP segment and continues to consolidate its
preferred supplier position amongst leading end-use customers and brands. Your Company's
capacity augmentation in VAP segment at Bhadrachalam mill was commissioned during the
year. The machine, equipped with latest technology, is operating at near-full capacity,
delivering superior quality board which has been well accepted in the market. During the
year, your Company entered the art board market with the launch of ‘Safire Graphik
Duo' which has received positive response. Furthermore, traction was gained in packaging
boards based on renewable and recyclable material. The Business sustained its leadership
position in the sale of eco-labelled products, volumes of which grew by appx. 33% during
the year.
The Business continues to be a leading quality player in the Writing & Printing
paper segment, leveraging strong forward linkages with your Company's Education and
Stationery Products Business. In the Specialty Papers segment, the new Dcor machine
commissioned last year is operating at optimum capacity and the diverse product range has
been well accepted by discerning customers. The Dcor Papers portfolio was further
enhanced with the launch of new surfacing and print base grades.
Your Company continues to source its wood requirements from sustainable sources.
Research on clonal development has resulted in introduction of high yielding and disease
resistant clones that are adaptable to a wide variety of agro-climatic conditions which
aid in securing greater consistency in farmer earnings. In this context, your Company's
Life Sciences and Technology Centre is engaged in developing a stream of higher yielding
second generation clones with enhanced pest and disease resistance attributes.
Your Company has the distinction of being the first in India to have obtained the
Forest Stewardship Council-Forest Management (FSC-FM) certification, which confirms
compliance with the highest international benchmarks of plantation management across the
dimensions of environmental responsibility, social benefit and economic viability. Till
date, your Company has received FSC-FM certification for over 37,000 hectares of
plantations involving over 32,000 farmers. During the year, over 97,000 tonnes of
FSC-certified wood were procured from these certified plantations. All four manufacturing
units of the Business have obtained the FSC Chain of Custody certification and have
complied with all requirements during the year, thereby sustaining your Company's position
as the leading supplier of FSC-certified paper and paperboard in India.
All manufacturing units of the Business continue to recycle nearly 100% of the solid
waste generated during operations by converting the same into lime, fly ash bricks, grey
boards, egg trays, etc. In addition, the Business procured and recycled 1,17,000 tonnes of
waste paper during the year, thereby sustaining your Company's overall positive solid
waste recycling footprint.
Your Company's manufacturing facilities at
Bhadrachalam, Kovai, Tribeni and Bollaram continue to receive industry recognition for
their green credentials and safety standards in line with your Company's focus on
sustainable business practices. The Bhadrachalam unit won the prestigious ‘National
Energy Leader' award under Pulp & Paper sector from Confederation of Indian Industry
(CII). Kovai unit received the Energy Efficiency award from CII. Kovai unit and Bollaram
unit were awarded with 5-star rating by CII Southern Region for EHS Excellence. Tribeni
unit received the award for Excellence in Water Management 2018 from CII.
In line with the objective of enhancing share of renewable energy in its operations,
the Business has implemented
Your Company remains a clear leader in the Value-Added Paperboards segment and
continues to consolidate its preferred supplier position amongst leading end-use customers
and brands.
several initiatives including investments in a green boiler, soda recovery boilers,
high pressure & efficiency circulating fluidised bed boiler, solar & wind energy
and increased usage of bio-fuel. With these initiatives, renewable sources presently
account for 42% of total energy consumed at the Bhadrachalam, Bollaram, Tribeni and Kovai
units. Your Company has commenced work at Bhadrachalam mill for replacement of
conventional Soda Recovery Boilers with the state-of-the-art High Pressure Recovery
Boiler. This investment is expected to lead to increased in-house pulp production thereby
further reducing our dependence on imported pulp, reduction in carbon footprint through
savings in coal consumption and increase in overall share of renewable energy. The project
is expected to be commissioned by 2022.
The 46 MW windmill in Andhra Pradesh is wheeling power to various Business units of
your Company located in Andhra Pradesh, Telangana, Karnataka, Uttar Pradesh, Uttarakhand
and Bihar. Usage of wind energy has led to a reduction of carbon footprint by lowering
consumption of coal at Bhadrachalam mill by 35000 tonnes during the year. The regulatory
framework for levy of charges and banking of power on inter-state wheeling of renewable
energy is still evolving.
Consequently, your Company continues to bear charges/levies at multiple points which
have adversely impacted the returns on this large investment.
Your Company continues to engage with State and Central regulatory authorities towards
seeking relief from such additional levies/charges.
The Business continues to make structural interventions in the areas of strategic cost
management and import substitution. These include augmentation of in-house pulp
manufacturing capacity, efficiency improvements of existing equipment and developing
alternative sources of supply for key inputs on an ongoing basis. Capacity utilisation of
Bleached Chemical Thermo Mechanical Pulp mill (BCTMP) at Bhadrachalam unit was further
scaled up during the year, leading to reduced dependence on imported pulp and thereby cost
savings. Innovations in the pulp mill have resulted in higher pulp production and
improvement in pulp quality and pulp yield. Initiatives such as bund plantation and
plantation in core catchment area in Odisha (Malkangiri) will help in reducing lead
distance of wood sourcing for Bhadrachalam mill. In order to ensure that farmers get the
right price for their wood produce, Business has introduced system of direct purchases
from farmers and enabled online payment to them. More than one lakh tonnes has been
procured during the year through this new initiative. Further, farmer helpline has been
created to address their concerns, if any.
Your Company has been practising principles of Total Productive Maintenance (TPM), Lean
and Six Sigma for over a decade now and has reaped substantial benefits through its
Business Excellence initiative. The Business embarked on an ‘Industry 4.0' journey
last year at Bhadrachalam mill. The initiative has yielded benefits and shown significant
potential in improving manufacturing and supply chain efficiencies. Your Company has now
initiated large scale implementation of Industry 4.0 focusing on areas such as Internet of
Things (IoT), Artificial Intelligence and Advanced Analytics. These interventions will
further help in sustaining and enhancing your Company's competitive advantage.
The integrated nature of the business model comprising access to high-quality fibre
from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and
state-of-the-art manufacturing facilities along with clear market leadership in
value-added paperboards, world-class product quality and a robust forward linkage with the
Education and Stationery Products Business
The Paperboards & Specialty Papers Business sustained its leadership position in
the sale of eco-labelled products, volumes of which grew by appx. 33% during the year.
strategically positions your Company to further consolidate and enhance its leadership
status in the Indian Paperboard and Paper industry.
Packaging and Printing
Your Company's Packaging and Printing Business is a leading provider of superior
value-added packaging for the consumer packaged goods industry. The Business also provides
strategic support to your Company's FMCG Businesses by facilitating faster turnaround for
new launches, design changes, ensuring security of supplies and delivering benchmarked
international quality at competitive cost.
The Business caters to the packaging requirements of leading players across several
industry segments viz. Food & Beverage, Personal Care, Home care, Footwear, Consumer
Electronics, Pharma, Liquor and Tobacco. With its comprehensive capability-set across
multiple platforms, coupled with in-house cylinder making and blown film manufacturing
lines, the Business continues to provide innovative solutions to several key customers in
India and overseas.
Amidst intense competition in the marketplace, the Business continued to aggressively
pursue new business development across segments and to focus on new product development as
a key driver for growth, some of which include antifungal coated cartons,
micro-perforation for specific laminates, braille feature for labels and cold seal
laminates for chocolates. The Business in close coordination with the Cigarettes Business
ensured smooth transition to the new Graphical Health warnings on cigarette packs.
As in previous years, the Business won several awards for operational excellence and
creative packaging solutions. During the year, the Business has been recognised as the
‘Green Printing Company of the year
2018' and ‘Packaging convertor of the year 2018' by Print Week. The Business
continues to be acknowledged as a key associate by several large FMCG companies in the
country for providing superior packaging solutions. The manufacturing facilities at
Tiruvottiyur, Haridwar and Munger maintained the highest standards in Quality and
Environment, Health & Safety (EHS). All the three units are certified as per the
Integrated Management System, consisting of ISO 9001:2015, ISO 14001:2015, OHSAS
18001:2007 and have also received Social Accountability Certification (SA 8000:2008). Both
the Tiruvottiyur and Haridwar units received the highest ‘Grade A' BRC/IOP
certification (British Retail Consortium/ Institute of Packaging), for global standards in
packaging and packaging materials - a key enabler for supplies to the packaged foods
industry. During the year, Haridwar Unit received ‘Shreshtha Suraksha Puraskar' by
National Safety Council of India and ‘National Safety Award' by Ministry of Labour
and Employment while Tiruvottiyur Unit received ‘CII-SR EHS Excellence Award 2018'.
The Risk Management Framework of the Business was re-certified under ISO 31000:2009 during
the year. The 14 MW wind energy farm in Tamil Nadu, set up in 2008, continues to provide
clean energy to the Tiruvottiyur facility, contributing towards reducing your Company's
carbon footprint.
The Packaging and Printing Business has established itself as a one-stop shop offering
a wide range of superior and innovative packaging solutions. With world-class technology
across a diverse range of packaging platforms, best-in-class quality management systems,
intensive investment in skill development and a distributed manufacturing footprint, the
Business is well positioned to grow its external business while continuing to service the
requirements of your Company's FMCG Businesses.
With world-class technology across a diverse range of packaging platforms,
best-in-class quality management systems, intensive investment in skill development and a
distributed manufacturing footprint, the Packaging and Printing Business is well
positioned to grow its external business while continuing to service the requirements of
ITC's FMCG Businesses.
AGRI BUSINESS
Leaf Tobacco
Global production of Flue Cured Virginia (FCV) tobacco registered a further decline of
5.3% in 2018 over the previous year, primarily impacted by continued calibration in
China's crop output. After three successive years of decline, Indian crop output in 2018
increased by 6 million kgs. to 218 million kgs. However, it still remains far below the
levels of 2014 representing a cumulative drop of over 30%.
Extremely high rates of taxes are levied on Cigarettes in India which apart from
impacting domestic legal Cigarette industry, has also resulted in significant pressure on
leaf tobacco crop. This, together with declining trend of global cigarette demand and
relative strength of the Indian Rupee compared to currencies of competing origins, has
culminated in reduced demand for Indian tobacco with leaf tobacco exports declining to a
decade low of approximately 180 million kgs. The Indian tobacco farmers are thus exposed
to significant demand fluctuations both in Indian and export markets. Stable domestic base
would enable the Indian farmer to weather the volatility associated with international
market.
Despite such challenging market conditions, your Company consolidated its leadership
position as the largest Indian exporter of unmanufactured tobacco with further improvement
in market standing. This was achieved through new business development and enhanced value
delivery to existing customers by leveraging the Business's expertise in crop development,
superior leaf procurement processes and world-class processing facilities. The Business
aggressively pursued and acquired new customers to widen the customer base by leveraging
long-term supply arrangements and collaborative crop development. The Business continued
to provide strategic sourcing support to your Company's Cigarettes Business meeting all
requirements at competitive prices.
Your Company's leadership in sustainability was reinforced with the Business remaining
‘carbon positive' in the tobacco farm value chain as per ISO 14064-1 standard for
‘Green House Gas (GHG) Management'.
Strategic cost management across the value chain continues to be a key focus area for
the Business. The Business implemented several initiatives during the year including
improvement in processing yields and manufacturing efficiencies, reduction in specific
consumption of power and logistics optimisation to drive down costs. Several Lean and Six
Sigma projects covering various facets of business operations - from processing, waste
reduction, manpower rationalisation to data analytics - were successfully concluded
resulting in improved process efficiencies and cost savings.
The Business continues to set benchmarks in leaf threshing operations through focused
initiatives and innovative technological solutions. Investments continue to be made in
your Company's Green Leaf Threshing plants (GLT) at Anaparti, Chirala and Mysuru towards
delivering world-class quality and upgrading processing technology. In line with your
Company's strategy of adopting a growth path with low-carbon footprint, the energy needs
of all three units at Chirala, Anaparti and Mysuru are met from renewable sources.
The Business remains committed to the highest standards of EHS and quality and
continues to win recognition in these areas. During the year, the Chirala and Anaparti
GLTs received the ‘Best Management Award' from Andhra Pradesh Labour Department and
the ‘Systematic actions towards sustainable Energy Performance' award from Society of
Energy Engineers & Managers.
Despite such challenging market conditions, your Company consolidated its leadership
position as the largest Indian exporter of unmanufactured tobacco with further improvement
in market standing.
A secular decline in crop output and exports as aforestated along with sustained
pressure on domestic legal cigarette volumes due to steep escalation in tax incidence and
stringent regulations, have led to severe stress on farmer earnings which have declined by
over Rs. 4000 crores in the four years since 2013-14. In addition, emerging trend of New
Generation Products (NGPs) viz. ENDS, EVDs, etc. could pose a threat to global leaf
tobacco trade. Illicit cigarettes as well as smuggled NGPs in the country are a threat to
the Indian leaf tobacco trade as these products do not use Indian tobacco. Accordingly, a
more balanced regulatory and taxation regime that cognises for the unique tobacco
consumption pattern prevalent in India and the economic realities of the country is the
need of the hour to support the Indian tobacco farmer and the 46 million livelihoods
dependent on tobacco. Restoring export incentives to earlier levels would also go a long
way in enhancing the competitiveness of Indian tobacco exports and contribute to
increasing farmer earnings.
The Business will continue to provide strategic sourcing support to your Company's
Cigarette Business even as it sustains its leadership position as a major exporter of
quality Indian tobacco thereby catalysing the multiplier impact of increased farmer
incomes to benefit the rural economy. With its strong R&D capability, modern
processing facilities, crop development and extension expertise, and deep understanding of
customer and farmer needs, your Company is well poised to sustain its position as a
world-class leaf tobacco organisation.
Other Agri Commodities
Domestic food grain production for 2018 crop year stood at 277 million tonnes,
representing a muted growth over the previous year. Production of wheat declined by 1.4%
to 97.1 million tonnes, rice production increased by 1.2% to 111 million tonnes and coarse
cereals production increased by 3.8% to 45.4 million tonnes. Oilseed production increased
by 5.3% to 31.5 million tonnes mainly due to higher soybean output, which increased by 20%
to 13.7 million tonnes. Based on current expectations of a normal monsoon in 2019 crop
year, food grain production is estimated at around 281 million tonnes.
During 2018-19, world wheat output decreased by 30 million tonnes to about 733 million
tonnes mainly due to lower production in European Union, Russia and Australia. Exports
from India were negligible due to uncompetitive prices compared to competing origins such
as Russia and Ukraine. India witnessed a lower production by 1.4 million tonnes which
coupled with increase in government procurement by five million tonnes resulted in a lower
surplus available for domestic trade. Further, increased import duty at 30% coupled with
marked rupee depreciation made imports unviable. However, release of about eight million
tonnes of Wheat under Open Market Sales Scheme (OMSS) presented opportunities for the
Business to trade in such Wheat auctioned by the Government.
Soymeal exports from India remained low as Indian meal continued to be uncompetitive
due to cheaper supplies from South America and USA. The Business leveraged its
geographical presence and risk management capabilities to capture opportunities during the
season in domestic trade of Soya bean. The Business also continued to service orders from
customers in both domestic and export trade in selected varieties of Rice. The Coffee
business continued to export to select markets.
Your Company's deep rural linkages and expertise in agri-commodity sourcing, coupled
with differentiation through value-added services of identity preservation, traceability
and certification is a critical source of competitive advantage for the Branded Packaged
Foods
Your Company's deep rural linkages and expertise in agri-commodity sourcing, coupled
with differentiation through value-added services of identity preservation, traceability
and certification is a critical source of competitive advantage for the Branded Packaged
Foods Businesses.
Businesses. Given the volatile market conditions caused by climatic variations, changes
in Government policies and global demand-supply dynamics, your Company has invested
significantly in building competitively superior agri-commodity sourcing expertise
comprising multiple business models, wide geographical spread and customised
infrastructure. These capabilities and infrastructure have created structural advantages
that facilitate competitive sourcing of agri raw materials for your Company's Branded
Packaged Foods Businesses. The Business continues to focus on developing capabilities and
vectors of differentiation for potential foray into branded consumer and institutional
segments while increasing the overall efficiency of procurement and logistics operations
by consistently pursuing cost optimisation initiatives and eliminating non value-adding
activities.
With regard to Aashirvaad atta, the Business leveraged its wide geographical sourcing
network and multiple sourcing models to secure supplies of critical grades with benchmark
quality towards meeting the growing requirements of the brand. The Business delivered
substantial savings to your Company through efficient logistics management and other cost
optimisation initiatives. In recognition of the various supply chain initiatives
undertaken by the Business, your Company has been awarded by the Confederation of Indian
Industry (CII) with the ‘Supply Chain and Logistics Excellence (SCALE)' Award for
excellence in supply chain transformation. The Institute for Supply Management (ISM-India)
also conferred awards in the areas of Overall Excellence in Procurement, Excellence in use
of Technology and Excellence in Risk Mitigation.
The Business continues to collaborate with reputed research organisations such as
Indian Agricultural Research Institute, Indian Institute of Wheat & Barley Research,
Punjab Agricultural University and Agharkar
Research Institute towards building an efficient and cost competitive agri-value chain.
As part of its wheat crop development programme, the Business has facilitated the
introduction of location-specific new and improved seed varieties along with appropriate
package of practices in nearly 1,50,000 acres across Rajasthan, Uttar Pradesh, Bihar, West
Bengal, Punjab, Jharkhand, Madhya Pradesh and Maharashtra. With a view to supporting the
future requirements of your Company, the Business continues to focus on deepening
capabilities in proprietary crop intelligence, scaling up the sourcing and delivery
network, and developing blends based on customer requirements.
The Business leveraged its extensive sourcing network and associated infrastructure in
key growing areas coupled with deep-rooted farmer linkages to source high quality fruit
pulp for your Company's ‘B Natural' juices brand. The Business tailored its sourcing
and supply chain network to enable migration of the entire B Natural juices portfolio to
‘made with 100% Indian Fruit & 0% Concentrate' proposition – a first in the
industry, benefitting both consumers through higher retention of natural nutrients as well
as the Indian farmers. The Business is working closely with small and marginal farmers
across several states in building scale and sourcing options.
During the year, the Business also strengthened its milk procurement network for
‘Aashirvaad Svasti' Dairy Products with significant increase in daily milk
collection. During the year, the Business expanded its milk sourcing network to Kolkata
for Fresh Dairy Products and to Punjab for meeting the requirement of Dairy Beverages
under the Brand ‘Sunfeast Wonderz'. In this regard, the Business provided farmers
with the required infrastructure (such as milking machines, automatic milk testing
equipment and chilling units) and package of practices to improve operational
The year also marked your Company's foray into branded packaged frozen snacks under the
‘ITC Master Chef' brand in select cities for the retail segment, leveraging the
culinary expertise of ITC Hotels.
efficiency and to maintain quality with identity preservation and traceability.
Your Company's Spices Business continued to expand in Food Safe Markets viz. US, EU and
Japan, leveraging its strong backward integration and customer focused strategies. Exports
of spices grew at a healthy pace driven by the addition of new customers and foray into
new markets. During the year, the Business scaled up its Integrated Crop Management (ICM)
programme, thereby enhancing its ability to produce food safe spices in a sustainable
manner. The Business continues to partner with the various state governments for
production of food safe spices. Your Company's Spices Business has maintained an
unblemished track record on food safety parameters leveraging its superior processes and
custody of supply chain, thereby consolidating its position as a preferred supplier for
food safe customers.
The Spices business was awarded ‘CII Food Safety Award 2018' for ‘Significant
Achievement on Food Safety' for its Integrated Sterilisation and Grinding plant in Guntur.
As a recognition for the adherence to sustainable farm management practices, the Business
also received Rainforest Alliance certification during the year. The Business was awarded
a ‘Certificate of Merit' by Spices Board India, Ministry of Commerce & Industry,
Government of India recognising meritorious performance in the export of Spices &
Spice products.
In the Agri Business, your Company remains focused on enhancing its presence in the
high value-added segment. Branded frozen prawns and packaged frozen snacks are some of the
recent additions in these high value-added segments. The branded prawns under the
‘ITC Master Chef' range are ‘Super Safe' frozen prawns which adhere to the same
stringent standards prevalent in USA, Europe, and Japan. These products go through
rigorous testing (240+ tests) and are ‘individually quick frozen' to ensure
freshness. Launched in six cities, leveraging ITC's experience of catering to customers in
international markets, the range has been well appreciated for its taste and quality.
The year also marked your Company's foray into branded packaged frozen snacks under the
‘ITC Master Chef' brand in select cities for the retail segment, leveraging the
culinary expertise of ITC Hotels. The Business continues to expand its footprint in
branded apples and potatoes by offering differentiated varieties of low Sugar,
antioxidant, baby potatoes and french fry potatoes.
Nearly two decades ago, your Company conceptualised and rolled out the e-Choupal
network as a unique delivery mechanism towards enhancing agricultural growth and
productivity, and fostering sustainable rural development. Your Company continues to focus
on providing a range of value-added services in rural areas towards enhancing the
competitiveness of Indian agriculture and playing a critical enabling role in integrating
farmers, input vendors and government agencies besides facilitating the necessary market
linkages.
The unique ‘Choupal Haat' platform seeks to create awareness and improve access of
the rural community to a wide range of areas - ranging from financial services and
pharmaceuticals to commercial vehicles and white goods. Along with Choupal Saagars
(integrated rural services hubs), this platform fosters round-the-year and large scale
engagement with the rural community thereby enhancing the vitality of your Company's
e-Choupal network.
Your Company believes that it is imperative to take an integrated and holistic view of
the agricultural value chain. This requires a joint participatory approach from all the
stakeholders such as farmers, input vendors, traders, processors and government agencies.
In this regard, the Government's initiative to develop a uniform
Your Company continues to focus on providing a range of value-added services in rural
areas towards enhancing the competitiveness of Indian agriculture and playing a critical
enabling role in integrating farmers, input vendors and government agencies besides
facilitating the necessary market linkages.
and suitable legal framework to undertake reforms in marketing of agricultural produce
through a Central Agricultural Produce Market Committee (APMC) Act as well as introduction
of e-auctions to facilitate transparency of transactions and superior price discovery at
the Mandis are welcome steps towards stimulating agricultural growth in the country.
Your Company will continue to leverage the unique e-Choupal platform to serve as a
unique delivery mechanism towards enhancing agricultural growth and productivity, and
fostering sustainable rural development. The Agri Business, with its deep rural linkages
and agri-commodity sourcing expertise, is well positioned to scale up in identified areas
that lend to higher value addition while meeting the increasing requirements for high
quality agricultural produce thereby creating a unique source of sustainable competitive
advantage for your Company's Branded Packaged Foods Businesses.
NOTES ON SUBSIDIARIES
The following may be read in conjunction with the Consolidated Financial Statements
prepared in accordance with Indian Accounting Standard 110. Shareholders desirous of
obtaining the report and accounts of your Company's subsidiaries may obtain the same upon
request. Further, the report and accounts of the subsidiary companies is also available
under the ‘Shareholder Value' section of your Company's website, www.itcportal.com,
in a downloadable format. During the year, no new subsidiary has been
incorporated/acquired. On 10th July, 2018, ITC Global Holdings Pte. Limited, Singapore
(‘Global'), a subsidiary of your Company which had been under winding up, was
dissolved vide the Order of the High Court of the Republic of Singapore. Consequently,
Global ceased to be a subsidiary of your Company. The Policy for determining Material
Subsidiaries, adopted by your Board, in conformity with Regulation 16 of the Securities
and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations
2015, can be accessed on your Company's corporate website at https://www.itcportal.com/about-itc/policies/policy-on-material-subsidiaries.aspx.
Presently, your Company does not have any material subsidiary.
Surya Nepal Private Limited
The economy of Nepal grew by 5.9% during the year ended July 2018 as against 7.4%
during previous year, which had a low base due to lingering effects of the devastating
earthquake in 2015 and severe trade disruptions in 2016. Pick-up in economic activity
following a decade of tepid growth is being supported by ongoing reconstruction,
successive favourable monsoons, improved power supply and, expansionary fiscal and
monetary policies. As per a recent IMF report, the near term outlook of the economy is
favourable and growth is expected to reach 6.5% in the fiscal year ending July 2019.
However, the widening current account deficit resulting from exponential increase in trade
deficit and a drop in foreign exchange reserves continue to build up external sector
vulnerabilities in the economy.
The Government of Nepal continued to focus on policies and reforms towards promoting
the country as an attractive investment location by enacting the Foreign Investment and
Technology Transfer Act, Public Private Partnership and Investment Act, Consumer
Protection Act, etc. While these reforms have the potential to boost investor confidence,
it is essential that these policy measures are supported by regulations which enhance the
ease of doing business and encourage investment in the country.
During the year, the company's Revenue from Operations at Nepalese Rupees (NRs.) 3576
crores (previous year NRs. 3181 crores) and Profit After Tax at NRs. 945 crores (previous
year NRs. 857 crores) recorded a growth of 12% and 10% respectively. The company continues
to be one of the largest contributors to the exchequer, accounting for about 3% of the
total revenues of the Government of Nepal.
In spite of significant pressures due to the substantial increase in taxation, the
company reinforced its market standing by leveraging its strong portfolio of brands,
superior product quality and a robust distribution network. During the year, the company's
differentiated and innovative offerings such as Surya 24 Carat Arctic Burst received
positive consumer response. The relentless focus on developing world-class products
anchored on innovation and benchmarked international quality standards is a key source of
sustainable competitive advantage for the company.
The persistent pursuit of operational excellence by the company resulted in the
manufacturing systems setting benchmarks in sustainability, responsiveness, quality and
productivity. The company also continued to strengthen its quality processes and hygiene
standards. During the year, long-term agreements were concluded with the employees of
Simara and Seratar factory, anchored on the company's philosophy of maintaining harmonious
employee relations.
During the year, the company sustained the growth momentum in the Agarbatti business
and continued to strengthen its market standing driven by a robust portfolio of offerings
catering to all consumer segments. In the Safety Matches business, the company enhanced
its market standing and leadership position in both wax and wooden matches segments.
With the objective of creating new drivers of growth, the company completed the launch
of confectionery products comprising Hard Boiled Candy, clairs, Jelly and Toffee across
major geographies of the country during the year. The company's manufacturing facility is
at an advanced stage of completion at Biratnagar in eastern Nepal, which would enable
scaling up the business through indigenous production of various confectionery products.
The company continues to support and invest in initiatives aimed at enhancing the
social and economic capital of the nation including in areas relating to environmental
preservation, social empowerment and promoting and improving education in public schools.
As part of the ongoing interventions in this area, the company continues to:
provide assistance to farmers in agro-forestry, agri-infrastructure and
vermi-composting in villages situated in the economic vicinity of its operating locations;
impart training and development to farmers for improvements in productivity and other
income generating activities;
support the animal husbandry sector by facilitating extension services covering animal
breeding, health and nutrition in order to drive yield improvement and generate higher
returns for farmers;
promote improvement in quality of education in public schools in the economic vicinity
of its operating locations.
The company declared a dividend of NRs. 453/- per equity share of NRs. 100/- each for
the year ended 16th July, 2018 (32nd Ashadh, 2075) amounting to NRs. 913.25 crores.
With structural reforms being initiated by the Nepalese Government, the company is well
positioned to leverage the investments made over the years to pursue sustainable growth
opportunities over the long-term.
ITC Infotech India Limited and its subsidiaries
The IT services industry continues to witness rapid transformation driven by increasing
adoption of digital technologies, emergence of new models of customer value delivery,
enhanced focus on experience journeys and client demands for efficiency, especially in
traditional service lines through automation. The industry is also focusing on creating
Centres of Excellence (CoEs), experience and design centers to collaborate with customers
and develop proofs of concept and solutions in emerging digital technologies.
The Indian IT- BPM industry witnessed an improvement in performance with an estimated
growth of ~8.4% in constant currency dollar terms on the back of strong growth in digital
technologies.
Technology spending is witnessing a clear shift in favour of digital technologies,
which are estimated to account for 80% of incremental IT spends. With traditional lines of
businesses and business models coming under increasing pressure, the fragmented IT
Services market is gearing up to meet these challenges by strengthening alternative
delivery models and accelerating investments in digital capabilities.
In this context, the company remains focused on providing domain-led digital services
and solutions to customers in its targeted industry verticals. The company's revenue
growth was fuelled by strong growth in its digital lines of businesses.
During the year, the company's consolidated Total Income was Rs. 2019.91 crores
(previous year Rs. 1652.10 crores), with Profit Before Tax of Rs. 155.40 crores (previous
year Rs. 81.69 crores). Net Profit stood at Rs. 103.90 crores (previous year Rs. 40.42
crores). Revenue growth was driven by increasing traction with existing customers as well
as new client additions, especially in digital technologies across the company's focus
geographic markets. For the year under review:
a. ITC Infotech India Limited recorded Revenue from Operations of Rs. 1212.68 crores
(previous year Rs. 1002.93 crores) and Net Profit of Rs. 76.46 crores (previous year Rs.
27.68 crores).
For the year under review, the company paid a dividend of Rs. 8.25 per Equity Share of
Rs. 10/- each aggregating Rs. 70.29 crores (previous year: Rs. 6/- per Equity Share of Rs.
10/- each aggregating Rs. 51.12 crores).
b. ITC Infotech Limited, UK, (ITC Infotech UK), a wholly-owned subsidiary of the
company, recorded Revenue of GBP 49.11 million (previous year GBP
42.44 million) and Net Profit of GBP 1.57 million (previous year GBP 1.27 million).
c. ITC Infotech (USA), Inc., (ITC Infotech USA), a wholly-owned subsidiary of the
company, together with its wholly-owned subsidiary Indivate Inc., recorded Revenue of US$
96.98 million (previous year US$ 88.11 million) and Net Profit of US$ 3.68 million
(previous year US$ 1.97 million).
For the year under review, the company paid a dividend of US$ 10 per share on 1,82,000
Common Shares (without par value) aggregating US$1.82 million (previous year: US$ 8 per
share aggregating US$ 1.46 million).
The company's superior service delivery capability continues to earn global
recognition. During the year, the company successfully qualified for CMMI level 5
certification which will further augment the company's processes towards delivering high
quality services with predictability. The company was also recognised in the
‘Leadership Zone' for Enterprise Software in Zinnov Zones ER&D 2018 report and
was recognised amongst ‘High Performers' in the HfS Blueprint report on Software
Product Engineering Services. During the year, the company's automation capabilities were
also acknowledged in the Gartner report on Consulting and
System Integration Service Providers for Robotic Process Automation and in Avasant's
report on Intelligent Automation RadarView 2018.
The outlook for the Indian IT Industry in the near term continues to remain uncertain
with NASSCOM not providing a forecast growth rate for 2019-2020. The company remains
committed to its transformation journey with a sharper focus on providing differentiated,
business-friendly offerings to select industry verticals and technology areas. The company
will continue to focus on building domain-specific digital solutions across identified
areas and driving efficiencies through automation in delivery, investments in developing
employees in emergent technologies and other internal processes.
Technico Pty Limited and its subsidiaries
The company continues to focus on upgradation and commercialisation of its
TECHNITUBER Seed technology and customising its application across various geographies.
Besides, the company is engaged in the marketing of TECHNITUBER seed to global customers
produced at the facilities of its subsidiaries in China and Canada and Technico Agri
Sciences Limited, India, a wholly-owned subsidiary of your Company.
For the year under review:
a. Technico Pty Limited, Australia registered a turnover of Australian Dollar (A$) 2.41
million (previous year A$ 2.52 million) and a Net Profit of A$ 1.25 million (previous year
A$ 1.45 million).
b. Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada
and Technico Horticultural (Kunming) Co. Limited, China – There were no significant
events to report with respect to the above companies.
Technico Agri Sciences Limited
The company's leadership in production of early generation seed potatoes and strength
in agronomy continues to support the Bingo! range of potato chips of your Company and in
servicing the seed potato requirements of the farmer base of your Company's Agri Business.
The year under review continued to remain an extremely challenging one for the seed
potato industry.
Potato prices that had remained firm till November 2018 dropped sharply due to excess
left over stocks in cold stores as well as the upcoming fresh potato crop. This adversely
impacted the seed markets across the country, especially in West Bengal and Gujarat. In
spite of such adverse conditions, the company leveraged the strength of its brand,
superior product quality, better on-field performance and strong trade and customer
relationships to increase its Revenue from Operations to Rs. 160.26 crores (previous year
Rs. 76.89 crores) with a Net Profit of Rs. 8.20 crores (previous year (-) Rs. 14.07
crores). Total Comprehensive Income for the year stood at Rs. 8.23 crores (previous year
(-) Rs. 14.02 crores).
WelcomHotels Lanka (Private) Limited
WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company
was incorporated in Sri Lanka with the objective of developing and operating a mixed-use
development project (‘Project') comprising a luxury hotel and a super-premium
residential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.
The Project has been accorded ‘Strategic
Development Project' status entitling the company to various fiscal benefits in Sri
Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.
During the year, the company made steady progress on construction of the project. Both
the hotel and residential towers are progressing as per scheduled timelines. The
Experience Centre, showcasing the features of the super-premium residential apartments,
was commissioned during the year. The company also launched the sale of its luxury
apartments ‘Sapphire Residences' – positioned as the best residential address in
Colombo, with launch events at Colombo and London. The recent socio-economic stress in Sri
Lanka has adversely affected the economic and business environment of the country. The
company has put in place appropriate measures to ensure adequate safeguard of its assets
and people in Sri Lanka.
Your Company's investment in WLPL stood at US$ 208 million as at 31st March, 2019.
Landbase India Limited
The company owns ‘ITC Grand Bharat' – a 104-key all-suite luxury retreat at
Gurugram, which has been licensed to your Company. The Retreat, an oasis of unhurried
luxury, is co-located with the company's prestigious Classic Golf & Country Club, a
27-hole Jack Nicklaus Signature Golf Course.
ITC Grand Bharat has received several accolades, establishing itself amongst the top
luxury resort destination hotels in the world. During the year, the property was listed
amongst the ‘Top 50 Resorts in Asia' by Conde Nast Traveller, USA and was accorded
the Editor's Choice Award by Travel+Leisure magazine for the ‘Best Luxury Resort
– Domestic'.
The Classic Golf & Country Club continued to host various prestigious tournaments
and sustained its leadership position in the corporate tournament segment. The Club enjoys
strong brand equity with its members, guests and the golfing fraternity and continues to
receive the patronage of professional and amateur golfers in the country. During the year
ended 31st March, 2019, the company recorded Total Income of Rs. 26.57 crores (previous
year Rs. 30.54 crores) and Net Profit of Rs. 3.11 crores (previous year Rs. 9.84 crores).
Total Comprehensive Income for the year stood at Rs. 3.13 crores (previous year Rs.
9.89 crores, including a once-off net gain of Rs. 6.88 crores on account of Award for
compulsory acquisition of land under the Land Acquisition Act).
Srinivasa Resorts Limited
The company's hotel ‘ITC Kakatiya' in Hyderabad continued to face sluggish demand
conditions during the year. While room occupancy rates and average room rates remained
under pressure, Food and Beverages recorded robust growth.
The company recorded Total Income of Rs. 60.49 crores (previous year Rs. 58.37 crores)
for the year ended 31st March, 2019 with Net Loss of Rs. 2.12 crores (previous year Net
Profit of Rs. 0.48 crore).
Total Comprehensive Income for the year stood at (-) Rs. 2.13 crores (previous year Rs.
0.40 crore).
‘Dakshin', the South Indian fine dining restaurant at the hotel, was adjudged the
‘Best South Indian Fine Dining Restaurant' at the Times Food Guide Nightlife Award
2019 for the 9th consecutive year. ‘Dakshin' was also among the Top 3 in the list
of Top 10 Restaurants in India and amongst the Top 10 in the list of top 25 restaurants in
Asia at TripAdvisor's Travellers' Choice Awards 2018.
During the year, the company's 101-key full service hotel under development on leased
land in Amritsar was sold to your Company along with assignment of the leased land on an
arm's length basis.
Fortune Park Hotels Limited
The company, which caters to the ‘Mid-market to Upscale' segment through a chain
of Fortune hotels, continues to forge new alliances and expand its footprint. Currently,
the company has an aggregate inventory of nearly 4,000 rooms spread over 53 properties of
which 47 are operating hotels. Of the balance six properties, one is slated to be
commissioned in the ensuing year while five are in various stages of development.
The company has established ‘Fortune' as the premier ‘value' brand in the
Indian hospitality sector. The brand remains a frontrunner in its operating segment and is
well positioned to sustain its leadership position in the industry.
During the year, the company bagged the ‘Today's Traveller Award 2018' as well as
the ‘Hospitality India Travel Award 2018' in the ‘Best Premier Class Business
Hotel Chain' category. It was also awarded the ‘Versatile Excellence Travel Award
(VETA) 2018' in the ‘Best Business Hotel Chain' category by Travelscapes.
During the year ended 31st March, 2019, the company recorded Total Income of Rs. 29.98
crores (previous year Rs. 27.59 crores) and Net Profit of Rs. 6.61 crores (previous year
Rs. 1.93 crores). Total Comprehensive Income for the year stood at Rs. 6.63 crores
(previous year Rs. 2.05 crores). The Board of Directors of the company has recommended a
dividend of Rs. 12.50 per Equity Share of Rs. 10/- each for the year ended 31st March,
2019 (previous year Rs. 12.50 per Equity Share).
Bay Islands Hotels Limited
Fortune Resort Bay Island, the company's hotel in Port Blair, with its strategic
location, excellent architectural design and superior service quality, continues to offer
a unique gateway to the Andamans. A comprehensive renovation and expansion programme
towards enhancing the market standing of the hotel is currently underway with the first
phase (24 rooms) being commissioned during the year. The second phase of renovation (24
rooms) is expected to be completed over the next year.
During the year ended 31st March, 2019, the company recorded Total Income of Rs. 1.61
crores (previous year Rs. 1.33 crores) and Net Profit of Rs. 1.10 crores (previous year
Rs. 0.97 crore).
Total Comprehensive Income for the year stood at Rs. 1.10 crores (previous year Rs.
0.97 crore).
The Board of Directors of the company has recommended a dividend of Rs. 70.00 per
Equity Share of Rs. 100/- each for the year ended 31st March, 2019 (previous year Rs.
70.00 per Equity Share).
Wimco Limited
The company's business activities comprise fabrication and assembly of machinery for
tube filling, cartoning, wrapping, material handling including conveyor solutions and
engineering services for the FMCG and Pharmaceutical industries.
The company's Revenue from Operations for the year stood at Rs. 9.68 crores (previous
year Rs. 8.77 crores) with a Net Profit of Rs. 0.04 crore (previous year (-) Rs. 3.03
crores). Total Comprehensive Income for the year stood at Rs. 0.06 crore (previous year
(-) Rs. 3.01 crores).
The company continues to focus on developing superior solutions towards addressing
customer requirements.
North East Nutrients Private Limited
Your Company holds 76% equity stake in North East Nutrients Private Limited (NENPL), a
company formed with the objective of setting up a food processing facility in Mangaldoi,
Assam to cater to the fast-growing biscuits market in Assam and other north-eastern
States. In August 2015, the company commissioned a state-of-the-art facility comprising
three biscuit manufacturing lines in Mangaldoi, Assam.
During the year, the company implemented several initiatives which resulted in
improvement in operational efficiency and productivity. Such initiatives, coupled with
improvement in sales mix and implementation of various cost management initiatives, led to
the delivery of strong financial performance during the year. During the year, the company
also received a Capital Subsidy under the North East Industrial & Investment Promotion
Policy, 2007 for setting up its unit in Assam, apart from actualising fiscal incentives
under the schemes of Central and the State government.
Revenue from Operations for the year stood at Rs. 161.69 crores (previous year Rs.
150.30 crores). The company recorded a Net Profit of Rs. 9.05 crores (previous year Rs.
3.15 crores) while Total Comprehensive Income for the year stood at Rs. 9.12 crores
(previous year Rs. 3.30 crores).
Russell Credit Limited
During the year, the company registered Total Income of Rs. 61.35 crores (previous year
Rs. 82.88 crores) and Net Profit of Rs. 37.84 crores (previous year Rs. 64.03 crores).
Total Comprehensive Income for the year stood at Rs. 65.42 crores (previous year Rs. 89.82
crores). Total Income and Net Profit/Total Comprehensive Income for the previous year
included Rs. 33.78 crores and Rs. 18.48 crores respectively attributable to one-off sale
of Non-Convertible Preference Shares of ICICI Bank Limited. Temporary surplus liquidity of
the company is mainly deployed in bonds, debt mutual funds, bank certificate of deposits
and bank fixed deposits. The company continues to explore opportunities to make strategic
investments for the ITC Group.
Gold Flake Corporation Limited
During the year, the company registered Total Income of Rs. 4.01 crores (previous year
Rs. 3.44 crores) and Net Profit of Rs. 2.86 crores (previous year Rs. 2.37 crores). The
company holds 50% equity stake in ITC Essentra Limited – a joint venture with
Essentra Group, UK.
Greenacre Holdings Limited
During the year, the company recorded Total Income of Rs. 5.33 crores (previous year
Rs. 5.45 crores) and Net Profit of Rs. 1.78 crores (previous year Rs. 1.87 crores). The
company continues to provide maintenance services for commercial office buildings.
ITC Investments & Holdings Limited
The company, a Core Investment Company within the meaning of the Core Investment
Companies
(Reserve Bank) Directions, 2016, recorded Total Revenue of Rs. 0.06 crore during the
year (previous year Rs. 0.06 crore) and Net Profit of Rs. 0.02 crore (previous year Rs.
0.03 crore).
MRR Trading & Investment Company Limited
The company, a wholly-owned subsidiary of ITC Investments & Holdings Limited, holds
tenancy rights in a commercial building located in Mumbai and also provides estate
maintenance services. During the year, the company recorded Total Income of Rs. 0.07 crore
(previous year Rs. 0.07 crore).
Pavan Poplar Limited
The operations of the company continue to be adversely impacted pursuant to the Order
of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the
writ petition filed by the company against the Order of the District Magistrate
authorising the State authorities to take possession of the land leased to the company.
The appeal filed by the company against the aforestated Order was admitted in April 2014
and the matter is pending before the Honourable High Court.
Since the operations of the company continue to be adversely impacted pursuant to the
said order, the Management has completed separation of the non-managerial staff under the
Industrial Disputes Act, 1947.
During the year, the company recorded Total Revenue of Rs. 0.10 crore (previous year
Rs. 0.16 crore) and Net Loss of Rs. 0.55 crore (previous year (-) Rs. 0.29 crore).
Prag Agro Farm Limited
The operations of the company continue to be adversely impacted pursuant to the Order
of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the
writ petition filed by the company against the Order of the District Magistrate
authorising the State authorities to take possession of the land leased to the company.
The appeal filed by the company against the aforestated Order was admitted in April 2014
and the matter is pending before the Honourable High Court.
During the year, the company recorded Total
Revenue of Rs. 0.05 crore (previous year Rs. 0.07 crore) and Net Loss of Rs. 0.007
crore (previous year (-) Rs. 0.004 crore).
NOTES ON JOINT VENTURES
ITC Essentra Limited
The relentless pressure on volumes of the legal cigarette industry on account of steep
taxation regime coupled with intense regulatory burden continues to exert pressure on the
demand for cigarette filters.
Despite such challenging business conditions, the company was able to increase its
revenue and profits on the back of improved sales mix and various cost management
initiatives. The company retained its leadership position of being the preferred supply
chain partner for several well-known national and international brands leveraging its core
strengths – strong customer relationships, access to world-class innovation, superior
execution, consistent delivery and best-in-class quality.
During the year ended 31st March, 2019, on a comparable basis, the company's revenue
from sale of products (net of all taxes) stood at Rs. 356.05 crores (previous year Rs.
245.05 crores). Net Profit during the year stood at Rs. 32.79 crores (previous year Rs.
16.45 crores).
During the year, the company scaled up its capability for manufacturing capsule filters
to cater to the growth in this segment. Investments continue to be made in technology
induction and capability building towards sustaining the company's position as the
innovation and quality benchmark in the Indian cigarette filter industry.
In celebration of the company completing 25 years, the Board of Directors has
recommended a Special Dividend of Rs. 15 per Ordinary Share in addition to a dividend of
Rs. 15 per Ordinary Share of Rs. 10/- each (previous year Rs. 12 per share) for the year
ended 31st March, 2019.
Maharaja Heritage Resorts Limited
Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana
Heritage Resorts Private Limited, currently operates 34 heritage properties across 13
States in India. The company, with its WelcomHeritage brand portfolio comprising
‘Legend Hotels', ‘Heritage Hotels' and ‘Nature Resorts' provides uniquely
differentiated offerings to guests in the cultural, heritage and adventure tourism
segments respectively.
During the year ended 31st March 2019, the company recorded Total Income of Rs. 3.82
crores (previous year Rs. 4.06 crores) and Net Loss of Rs. 0.14 crore (previous year (-)
Rs. 0.33 crore). Total Comprehensive Income for the year stood at (-) Rs. 0.15 crore
(previous year (-) Rs. 0.33 crore).
During the year, the WelcomHeritage hotels brand was awarded ‘The Best Heritage
Hotel Chain' by Golden Star Awards, ‘The Best Heritage Hotel Chain' by Today's
Traveller and ‘Most Preferred Heritage Hotel Chain' by ET Now.
Espirit Hotels Private Limited
Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and the
Ambience Group, Hyderabad, for developing a luxury hotel complex at Begumpet, Hyderabad.
Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in
EHPL and will, inter alia, provide hotel operating services upon commissioning of the
hotel.
As reported in the previous year, the Ambience Group has expressed its desire to review
the timing of further investments in EHPL, citing concerns about the viability of the
project in view of the challenging economic environment and the sluggish demand conditions
currently prevailing in the relevant market.
Your Company continues to explore its options in this regard.
Your Company's investment in EHPL stood at Rs. 46.51 crores as at 31st March, 2019.
Logix Developers Private Limited
Logix Developers Private Limited (LDPL) is a joint venture between your Company and
Logix Estates Private Limited for developing a luxury hotel-cum-service apartment complex
at the company's site located at Sector 105 in NOIDA. Under the terms of the Joint Venture
Agreement, your Company holds 27.9% equity stake in LDPL and will, inter alia, provide
hotel operating services, upon commissioning of the hotel by LDPL.
As reported in the previous year, your Company reiterated its position with the JV
partner that it was committed to developing a luxury hotel-cum-service apartment complex
as envisaged under the JV
Agreement and that it was not interested in progressing with any alternative project
plans proposed by the JV partner. However, the JV partner refused to progress the project
and instead expressed its intent to exit from the JV by selling its stake to your Company.
Subsequently, the JV partner proposed that both parties should find a third party to
sell the entire shareholding in LDPL. In view of these developments, your Company had
filed a petition before the erstwhile Company Law Board submitting that the affairs of the
JV entity were being conducted in a manner that was prejudicial to the interest of your
Company and the JV entity. The matter is currently before the National Company Law
Tribunal (NCLT). The JV partner had also filed a petition before the Honourable Delhi High
Court for winding up the JV company, which was transferred to the NCLT by the Honourable
Delhi High Court. The matter was heard before the NCLT on several occasions during the
year and hearing for final arguments of the Company has concluded and the matter is
scheduled for 27th May, 2019 for the JV partner to conclude its submissions.
During the year ended 31st March, 2019, the company recorded a Net Loss of Rs. 30.09
crores (previous year Rs. 24.87 crores). The Net Worth of the company stood at (-) Rs.
31.98 crores as at 31st March, 2019 (previous year (-) Rs. 1.89 crores). Your Company's
total investment in LDPL was Rs. 41.95 crores. In view of the aforestated developments,
your Company had made a provision of Rs. 23.45 crores towards diminution in the carrying
value of investment in LDPL in the previous year.
The financial statements of LDPL for the year ended 31st March, 2019 are yet to be
approved by its Board of Directors. In the absence of audited financial statements of
LDPL, the Consolidated Financial Statements of your Company for the year ended 31st March,
2019 have been prepared based on the financial statements prepared by the management of
LDPL.
NOTES ON ASSOCIATES
International Travel House Limited
The company offers a full range of travel services including air ticketing, car
rentals, inbound and outbound tourism, domestic holidays, conferences, events and
exhibition management and foreign exchange services to travellers.
During the year ended 31st March, 2019, the company recorded a Total Income of Rs.
210.64 crores (previous year Rs. 207.69 crores) and Net Profit for the year of Rs. 2.68
crores (previous year Rs. 6.95 crores). Total Comprehensive Income for the year stood at
Rs. 1.98 crores (previous year Rs. 6.02 crores).
The Board of Directors of the company has recommended a dividend of Rs. 2.50 per Equity
Share of Rs. 10/- each for the year ended 31st March, 2019 (previous year Rs. 4.25 per
Equity Share).
Gujarat Hotels Limited
The company's hotel, ‘Welcomhotel Vadodara', at Vadodara is operated by your
Company under an Operating License Agreement.
During the year ended 31st March, 2019, the company recorded Total Income of Rs. 5.66
crores (previous year Rs. 5.02 crores), Net Profit and Total Comprehensive Income of Rs.
4.08 crores (previous year Rs. 3.37 crores).
The Board of Directors of the company has recommended a dividend of Rs. 3.50 per Equity
Share of Rs. 10/- each for the year ended 31st March, 2019 (previous year Rs. 3.50 per
Equity Share).
ATC Limited (an associate of Gold Flake Corporation Limited)
The company is a contract manufacturer of cigarettes. During the year, the company
recorded Total Revenue of Rs. 23.67 crores (previous year Rs. 23.13 crores) and Net Profit
of Rs. 0.31 crore (previous year Rs. 0.66 crore).
The company continued to maintain high levels of operational responsiveness and
benchmark quality in its manufacturing operations. During the year, the company was
conferred the ‘Suraksha Puraskar' by the National Safety Council of India, Platinum
Award for Safety Systems Excellence by the Federation of Indian Chambers of Commerce &
Industry and ‘4 Star Rating' for commitment to Environment, Health & Safety
practices by the Confederation of Indian Industry (Southern Region).
Associates of Russell Credit Limited
Russell Investments Limited
During the year, the company recorded Total Income of Rs. 6.01 crores (previous year
Rs. 4.47 crores) and
Net Profit of Rs. 4.80 crores (previous year Rs. 3.60 crores). The company continues to
explore opportunities to make investments.
Divya Management Limited
During the year, the company recorded Total Income of Rs. 0.57 crore (previous year Rs.
0.49 crore) and Net Profit of Rs. 0.24 crore (previous year Rs. 0.21 crore). The company
continues to explore opportunities to make investments.
Antrang Finance Limited
During the year, the company recorded Total Income of Rs. 0.28 crore (previous year Rs.
0.28 crore) and Net Profit of Rs. 0.05 crore (previous year Rs. 0.10 crore). The company
continues to explore opportunities to make investments.
INTERNAL FINANCIAL CONTROLS
The Corporate Governance Policy guides the conduct of affairs of your Company and
clearly delineates the roles, responsibilities and authorities at each level of its
three-tiered governance structure and key functionaries involved in governance. The ITC
Code of Conduct commits management to financial and accounting policies, systems and
processes. The Corporate Governance Policy and the ITC Code of Conduct stand widely
communicated across the enterprise at all times and together with the ‘Strategy of
Organisation', Planning & Review Processes and the Risk Management Framework provide
the foundation for Internal Financial Controls with reference to your Company's Financial
Statements.
Such Financial Statements are prepared on the basis of the Significant Accounting
Policies that are carefully selected by management and approved by the Audit Committee and
the Board. These Policies are supported by the Corporate Accounting and Systems Policies
that apply to the entity as a whole to implement the tenets of Corporate Governance and
the Significant Accounting Policies uniformly across the Company. The Accounting Policies
are reviewed and updated from time to time. These, in turn, are supported by a set of
divisional policies and Standard Operating Procedures (SOPs) that have been established
for individual businesses.
Your Company uses ERP Systems as a business enabler and also to maintain its Books of
Account. The SOPs in tandem with transactional controls built into the ERP Systems ensure
appropriate segregation of duties, tiered approval mechanisms and maintenance of
supporting records. The Information Management Policy reinforces the control environment.
The systems, SOPs and controls are reviewed by divisional management and audited by
Internal Audit whose findings and recommendations are reviewed by the Audit Committee and
tracked through to implementation.
Your Company has in place adequate internal financial controls with reference to the
Financial Statements. Such controls have been assessed during the year taking into
consideration the essential components of internal controls stated in the Guidance Note on
Audit of Internal Financial Controls over Financial Reporting issued by The Institute of
Chartered Accountants of India. Based on the results of such assessment carried out by
management, no reportable material weakness or significant deficiencies in the design or
operation of internal financial controls was observed. Nonetheless, your Company
recognises that any internal control framework, no matter how well designed, has inherent
limitations and accordingly, regular audit and review processes ensure that such systems
are reinforced on an ongoing basis.
RISK MANAGEMENT
As a diversified enterprise, your Company continues to focus on a system-based approach
to business risk management. The management of risk is embedded in the corporate
strategies of developing a portfolio of world-class businesses that best match
organisational capability with market opportunities, focusing on building distributed
leadership and succession planning processes, nurturing specialism and enhancing
organisational capabilities through timely developmental inputs. Accordingly, management
of risk has always been an integral part of your Company's ‘Strategy of Organisation'
and straddles its planning, execution and reporting processes and systems. Backed by
strong internal control systems, the current Risk Management Framework consists of the
following key elements:
– The Corporate Governance Policy approved by the Board, clearly lays down the
roles and responsibilities of the various entities in relation to risk management covering
a range of responsibilities, from the strategic to the operational. These role
definitions, inter alia, provide the foundation for appropriate risk management
procedures, their effective implementation across your Company and independent monitoring
and reporting by Internal Audit.
– The Risk Management Committee, constituted by the Board, monitors and reviews
the strategic risk management plans of your Company as a whole and provides necessary
directions on the same.
– The Corporate Risk Management Cell, through focused interactions with
businesses, facilitates the identification and prioritisation of strategic and operational
risks, development of appropriate mitigation strategies and conducts periodic reviews of
the progress on the management of identified risks.
– A combination of centrally issued policies and divisionally-evolved procedures
brings robustness to the process of ensuring that business risks are effectively
addressed.
– Appropriate structures are in place to proactively monitor and manage the
inherent risks in businesses with unique / relatively high risk profiles.
– A strong and independent Internal Audit function at the Corporate level carries
out risk focused audits across all businesses, enabling identification of areas where risk
management processes may need to be strengthened. The Audit Committee of the Board reviews
Internal Audit findings and provides strategic guidance on internal controls. The Audit
Compliance Review Committee closely monitors the internal control environment within your
Company including implementation of the action plans emerging out of internal audit
findings.
– At the Business level, Divisional Auditors continuously verify compliance with
laid down policies and procedures and help plug control gaps by assisting operating
management in the formulation of control procedures.
– A robust and comprehensive framework of strategic planning and performance
management ensures realisation of business objectives based on effective strategy
implementation. The annual planning exercise requires all businesses to clearly identify
their top risks and set out a mitigation plan with agreed timelines and accountabilities.
Businesses are required to confirm periodically that all relevant risks have been
identified, assessed, evaluated and that appropriate mitigation systems have been
implemented.
Your Company endeavours to continually sharpen its Risk Management systems and
processes in line with a rapidly changing business environment. In this regard, it is
pertinent to note that some of the key businesses of your Company have adopted the ISO
31000 Standard and the Risk Management systems and processes prevalent in these businesses
have been independently assessed to be compliant with the said global Standard on Risk
Management. This year two more businesses were assessed for compliance to ISO 31000
Standard. This intervention provides further assurance on the robust nature of risk
management practices prevalent in your Company.
The centrally anchored initiative of conducting external independent reviews of key
business processes with high ‘value at risk' continued during the year. The Risk
Management Committee met thrice during the year and was updated on the status and
effectiveness of the risk management plans. The Audit Committee was also updated on the
effectiveness of your Company's risk management systems and policies.
A Cyber Security Committee was set up to provide specific focus on cyber security
related risks, primary responsibility being to track emerging practices, vendors and
technologies and provide suitable recommendations for enhancing security of the IT systems
and infrastructure.
Your Company sources several commodities for use as inputs in its businesses and also
engages in agri-commodity trading as part of its Agri Business.
In respect of commodities sourced for use as inputs in its businesses, your Company has
well laid out policies to manage the risks arising out of the inherent price volatility
associated with such commodities. This includes robust mechanisms for monitoring market
dynamics towards making informed sourcing decisions; well defined inventory holding norms
based on considerations such as seasonality and the strategic nature of the commodity
concerned; entering into long-term contracts with suppliers to secure supply of critical
items at competitive cost and continuous diversification of supplier base. Multiple
sourcing models, wide geographical spread, extensive supply chain network and associated
infrastructure in key growing areas coupled with deep-rooted farmer linkages ensures
sourcing high quality agri-commodities at competitive cost.
Your Company's strategy of backward integration in sourcing of agri-commodities such as
wheat, potato, fruit pulp, spices and leaf tobacco; in-house manufacturing of paperboards,
paper and packaging (including pulp production and print cylinder making facilities); wood
procurement from the economic vicinity of the Bhadrachalam unit, facilitates access to
critical inputs at benchmark quality and competitive cost besides ensuring security of
supplies. Further, each of your Company's businesses continuously focuses on product mix
enrichment towards protecting margins and insulating operations from spikes in input
price.
In respect of Agri-commodity trading, your Company has a well laid out policy to manage
the risks associated with sourcing of such commodities. This includes:
– segregation of duties and robust internal controls through a system of checks
and balances embedded in the organisation and governance structure;
– clearly defined limits for trading position (long and short) and net cash loss
for specific commodities/commodity groups;
– mitigation of price, liquidity and counter party risks in respect of commodities
such as soya, mustard and chana through hedging on commodity exchanges (mainly NCDEX).
Correlation between prices prevailing in the physical market and those on the commodity
exchange is analysed regularly to ensure effectiveness of hedging;
– robust monitoring and review mechanisms of net open positions and ‘value at
risk'.
The combination of policies and processes as outlined above adequately addresses the
various risks associated with sourcing of commodities for your Company's businesses.
AUDIT AND SYSTEMS
Your Company believes that internal control is a necessary concomitant of the principle
of governance that freedom of management should be exercised within a framework of
appropriate checks and balances.
Your Company remains committed to ensuring an effective internal control environment
that inter alia provides assurance on orderly and efficient conduct of operations,
security of assets, prevention and detection of frauds/errors, accuracy and completeness
of accounting records, timely preparation of reliable financial information and compliance
with the requirements with respect to related party transactions.
Your Company's independent and robust Internal Audit processes, both at the Business
and Corporate levels, provide assurance on the adequacy and effectiveness of internal
controls, compliance with operating systems, internal policies and regulatory
requirements.
Independent consultants have confirmed compliance of Internal Audit systems and
processes with the Standards on Internal Audit (SIA) issued by the Institute of Chartered
Accountants of India (ICAI). Although the Standards continue to be recommendatory in
nature, such validation evidences the contemporariness of the Internal Audit function.
The Internal Audit function consisting of professionally qualified accountants,
engineers and Information Technology (IT) Specialists is adequately skilled and resourced
to deliver audit assurances at highest levels.
In the context of the IT environment of your Company, systems and policies relating to
Information Management are periodically reviewed and benchmarked for contemporariness.
Compliance with the Information Management policies receive focused attention of the
Internal Audit team. Information Technology systems undergo pre-implementation audit
before being deployed for usage in businesses, thereby delivering an independent assurance
with respect to the rigour of implementation. The usage of data analytics in audits was
augmented across the organisation.
Qualified engineers in the Internal Audit function review the quality of design,
planning and execution of all ongoing projects involving significant expenditure to ensure
that project management controls are adequate and yield ‘value for money'. Internal
Audit continues to use state-of-the-art tools and software for conducting project audits.
Processes in the Internal Audit function have been continuously strengthened for
enhanced effectiveness and productivity including the deployment of best-in-class tools
for analytics in the Audit domain, certification as complying with ISO 9001:2015 Quality
Standards in its processes, ongoing knowledge improvement programmes for staff, etc. The
Audit methodology is also designed to validate effectiveness of critical IT controls that
are embedded in the business systems, leading to greater alignment with the business
process environment.
The Audit Committee of your Board met eight times during the year. The Terms of
Reference of the Audit Committee inter alia included reviewing the effectiveness of the
internal control environment, evaluation of the Company's internal financial control and
risk management systems, monitoring implementation of the action plans emerging out of
Internal Audit findings including those relating to strengthening of your Company's risk
management systems and discharging of statutory mandates.
HUMAN RESOURCE DEVELOPMENT
The talent management strategy of your Company focuses on sustaining ITC's position as
one of India's most valuable corporations, remaining customer-focused,
competitively-superior, performance-driven and future-ready. The initiatives and processes
strive to deliver the unique talent promise of Building Winning Businesses, Developing
Business Leaders and Creating Value for India. The talent development practices help
create, foster and strengthen the capability of human capital to deliver critical outcomes
on the vectors of strategic effectiveness, operational efficiency and capital
productivity.
Your Company's ‘Strategy of Organisation' is based on the approach of distributed
leadership enabled through a three-tier governance structure. Such an approach allows
businesses, through their management committees, to focus, develop and execute business
plans relevant to their product-market spaces while leveraging the institutional strengths
of your Company and the opportunities for synergy between businesses.
Your Company's strong employer equity has enabled the attraction and retention of high
quality talent. The management trainee programme augmented with recruitment of high
quality talent when required, is an integral part of our leadership pipeline development
process. We continue to draw the finest technical, managerial and financial talent from
premier institutions in the country and are ranked amongst the leading companies in these
institutions. A recent survey conducted by Nielsen amongst MBA students featured ITC
amongst the Top 8 most preferred employers. Your Company's intensive engagement with
campuses over decades to communicate ITC's talent proposition through case study
competitions, knowledge sharing programmes by senior managers and the annual internship
programmes have all contributed to create a compelling reason for the best candidates to
aspire for a career with ITC.
Your Company's approach to talent development is founded on the belief that learning
initiatives must remain synergistic and aligned to business outcomes, emphasise
experiential learning, provide an enabling and supportive environment and promote learning
agility. Deep functional expertise is fostered through immersion in solving complex
customer problems by the application of domain expertise early in managerial careers. Key
talent is provided critical experiences in high impact roles and mentored by senior
managers. Managers are assessed on your Company's behavioral competency framework and
provided with learning and development support to address any areas identified for
improvement. As part of your Company's managerial development and capability building
strategy, five platform areas have been identified - Strategic, Value Chain, Leadership,
Innovation and Human Resources Development. Various programmes have been designed and
customised to your Company's requirements under these platforms, delivered by leading
international faculty. Learning is further supplemented with on demand, online programmes
made accessible to employees through globally recognised content platforms. Your Company's
investments in creating an internal technical training infrastructure and academy was
recently acknowledged by Frost & Sullivan when the institute, ITC Gurukul, won the
‘Project Evaluation and Recognition Program 2018' for ‘Enhancing Learning
Effectiveness by Leveraging Technology'.
Your Company has further strengthened its performance management system and its culture
of accountability through renewed emphasis on Management by
Objectives which includes clearly defined goals, outcomes based assessment and even
sharper alignment of performance and rewards.
Your Company continued with the practice of periodically assessing employee engagement
through a Company-wide survey in 2018. During the year, comprehensive action plans were
formulated and implemented which included the launch and strengthening of various
recognition initiatives, systems for career dialoguing, employee wellbeing programmes,
periodic communication by the leadership teams in each business as well as through the
novel digital platform ‘Studio One'.
Driven by an ambitious growth agenda, your Company has already commissioned several
world-class Integrated Consumer Goods Manufacturing and Logistics facilities across the
country and the footprint is in the process of being expanded further. Your Company
believes that alignment of all employees to a shared vision and purpose is vital for
winning in the marketplace. It also recognises the mutuality of interests with key
stakeholders and is committed to building harmonious employee relations. Your Company
remains dedicated to an Employee Relations climate of partnership and mutuality while
ensuring operations are cost competitive, flexible and responsive. The Employee Relations
philosophy of your Company, anchored in the tenets of Scientific Management, Industrial
Democracy, Human Relations and Employee Well-being, has contributed to building a robust
platform which has aided the conclusion of long-term agreements at several of its
manufacturing units and hotel properties, ensured smooth commencement of operations at
greenfield locations and the execution of productivity improvement practices. Several
initiatives have been taken to foster a culture of commitment amongst the demographically
diverse workforce in these new facilities.
Your Company believes that the drive for progress is in never being satisfied with the
status quo. We are confident that every one of your Company's 27,000 plus employees will
relentlessly strive to meet the bold growth agenda, deliver world-class performance,
innovate newer and better ways of doing things, uphold human dignity, foster team spirit
and discharge their role as ‘trustees' of all stakeholders with true faith and
allegiance.
Your Company is committed to perpetuate this vitality of ITC – its growth in
dimensions and also as a great institution – so that it continues to succeed in its
relentless pursuit of creating enduring value.
Details of constitution of Internal Complaints Committee under the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are provided in the
‘Business Responsibility Report', forming part of Report and Accounts.
WHISTLEBLOWER POLICY
Your Company's Whistleblower Policy encourages Directors and employees to bring to the
Company's attention, instances of unethical behaviour, actual or suspected incidents of
fraud or leak of unpublished price sensitive information, or any violation of the ITC Code
of Conduct, that could adversely impact your Company's operations, business performance
and / or reputation. The Policy provides that your Company investigates such incidents,
when reported, in an impartial manner and takes appropriate action to ensure that
requisite standards of professional and ethical conduct are always upheld. It is your
Company's Policy to ensure that no employee is victimised or harassed for bringing such
incidents to the attention of the Company. The practice of the Whistleblower Policy is
overseen by the Audit Committee and no employee has been denied access to the Committee.
The Whistleblower Policy is available on your Company's corporate website ‘www.itcportal.com'.
SUSTAINABILITY – CONTRIBUTION TO THE ‘TRIPLE BOTTOM LINE'
Inspired by the opportunity to sub-serve larger national priorities, your Company
redefined its Vision to not only reposition the organisation for extreme competitiveness
but also make societal value creation and environmental replenishment the bedrock of its
corporate strategy. This super-ordinate vision spurred innovative strategies to address
some of the most challenging societal issues including widespread poverty, unemployment
and environmental degradation. Your Company's sustainability strategy aims at creating
significant value for the nation through superior ‘Triple Bottom Line' performance
that builds and enriches the country's economic, social and environmental capital. The
sustainability strategy is premised on the belief that the transformational capacity of
business can be very effectively leveraged to create significant societal value through a
spirit of innovation and enterprise.
Your Company is today a global exemplar in sustainability. It is a matter of immense
satisfaction that your Company's models of sustainable development have led to the
creation of sustainable livelihoods for around six million people, many of whom belong to
the marginalised sections of society. Your Company has also sustained its position of
being the only Company in the world of comparable dimensions to have achieved the global
environmental distinction of being carbon positive (for 14 consecutive years), water
positive (for 17 years in a row) and solid waste recycling positive (for 12 years in
succession).
To contribute to the nation's efforts in combating climate change, your Company's
strategy of adopting a low-carbon growth path is manifest in its growing renewable energy
portfolio, establishment of green buildings, large-scale afforestation programme,
achievement of international benchmarks in energy and water consumption. During the year,
about 41% of your Company's total energy requirements were met from renewable energy
sources - a creditable performance given its expanding manufacturing base.
Your Company has adopted a comprehensive set of sustainability policies that are being
implemented across the organisation in pursuit of its ‘Triple Bottom Line' agenda.
These policies are aimed at strengthening the mechanisms of engagement with key
stakeholders, identification of material sustainability issues and progressively
monitoring and mitigating the impacts along the value chain of each business.
Your Company's 15th Sustainability Report, published during the year details the
progress made across all dimensions of the ‘Triple Bottom Line' for the year 2017-18.
This report is in conformance with the Global Reporting Initiative (GRI) standards under
‘In Accordance – Comprehensive' category and is third-party assured at the
highest criteria of ‘reasonable assurance' as per International Standard on Assurance
Engagements (ISAE) 3000. The 16th Sustainability Report, covering the sustainability
performance of your Company for the year 2018-19, is being prepared in accordance with the
GRI Standards and will be made available shortly.
In addition, the Business Responsibility Report (BRR), as mandated by the Securities
and Exchange Board of India (SEBI), for the year under review is annexed to this Report
and Accounts. The BRR maps the sustainability performance of your Company against the
reporting framework suggested by SEBI.
Corporate Social Responsibility (CSR)
Your Company's overarching commitment to create significant and sustainable societal
value is manifest in its CSR initiatives that embrace the most disadvantaged sections of
society, especially in rural India, through economic empowerment based on grassroots
capacity building. Towards this end, your Company adopted a comprehensive CSR Policy in
2014-15 outlining programmes, projects and activities that your Company plans to undertake
to create a significant positive impact on identified stakeholders. All these programmes
fall within the purview of Schedule VII read with Section 135 of the Companies Act, 2013
and the Companies (Corporate Social Responsibility Policy) Rules, 2014.
The key elements of your Company's CSR interventions are to:
– Deepen engagement in identified core operational geographies to promote holistic
development and design interventions in order to respond to the most significant
development challenges of your Company's stakeholder groups.
– Strengthen capabilities of Non-Government Organisations (NGOs) / Community Based
Organisations (CBOs) in all the project catchments for participatory planning, ownership
and sustainability of interventions.
– Drive the development agenda in a manner that benefits the poor and marginalised
communities in your Company's factory and agri-catchments, thereby significantly improving
Human Development Indices (HDI).
– Ensure behavioural change through focus on demand generation for all
interventions, thereby enabling participation, contribution and asset creation for the
community.
– Continue to strive for scale by leveraging government partnerships and accessing
the most contemporary knowledge / technical know-how.
Your Company's stakeholders are confronted with multi-dimensional and inter-related
concerns, at the core of which is the challenge of securing sustainable livelihoods.
Accordingly, interventions under your Company's Social Investments Programme (SIP) are
appropriately designed to build their capacities and promote sustainable livelihoods.
The footprint of your Company's projects is spread over 27 States/Union Territories
covering 235 districts.
Social Forestry
Your Company's pioneering afforestation initiative through the Social Forestry
programme greened 33,982 acres during the year. It is currently spread across 16 districts
in six States covering 3.29 lakh acres in 5,087 villages, impacting over 1,21,557 poor
households. Together with your Company's Farm Forestry programme, this initiative has
greened nearly 7.33 lakh acres till date, and generated about 135 million person days of
employment for rural households, including poor tribal and marginal farmers. Integral to
the Social Forestry programme is the Agro-Forestry initiative, which cumulatively extends
to over 1.12 lakh acres and ensures food, fodder and wood security.
Besides enhancing farm level employment, generating incomes and increasing green cover,
this large-scale initiative also contributes meaningfully to the nation's endeavour to
create additional carbon sinks for tackling climate change.
In addition to the above, the Social and Farm Forestry initiative of your Company,
through a multiplier effect, has led to improvement in pulpwood and fuelwood availability
in Andhra Pradesh, Telangana, Karnataka, Chhattisgarh and Odisha. In the state of Tripura,
this initiative is also creating bamboo wood source that is suitable for agarbatti
manufacturing.
Soil and Moisture Conservation
The Soil and Moisture Conservation programme aims to ensure water security for all
stakeholders in the factory catchments and to drought-proof the agri-catchments to
minimise risks to agricultural livelihoods arising from drought and moisture stress. The
programme promotes the development and management of local water resources in
moisture-stressed areas by facilitating community participation in planning and
implementing measures such as building, reviving and maintaining water-harvesting
structures. The coverage of this programme currently extends to 43 districts of 15 States.
During the year, the area under watershed increased by 1,37,105 acres, taking the
cumulative coverage area till 2018-19 to over 10.12 lakh acres. 2,646 water-harvesting
structures were built during the year, creating 3.39 million kilolitres of rainwater
harvesting potential, taking the total number of water harvesting structures to 15,086 and
total net rainwater harvesting potential to 34.64 million kilolitres.
Biodiversity
The focus of the programme is on reviving ecosystem services provided to agriculture by
nature such as natural regulation of pests, pollination, nutrient cycling, soil health
retention and genetic diversity, which have witnessed considerable erosion over the past
few decades. During the year, your Company's biodiversity conservation initiative covered
5,937 acres in seven states and 18 districts, taking the cumulative area under
biodiversity conservation to 22,031 acres. While the conservation work is being carried
out in select plots of village commons, this intervention significantly benefits
agricultural activity in the vicinity of these plots through soil moisture retention,
carbon sequestration and by acting as hosts to insects and birds.
Sustainable Agriculture
The Sustainable Agriculture programme attempts to de-risk farmers from erratic weather
events through the promotion of climate-smart agriculture premised on dissemination of
relevant package of practices, adoption of appropriate mechanisation and provision of
institutional services. Currently, 3.95 lakh acres are covered under the programme, which
has a significant multiplier effect in terms of adoption by the farming community. During
the year, knowledge was disseminated through 4,747 Farmer Field Schools and Choupal
Pradarshan Khets benefiting around 1.34 lakh farmers. 351 Agri Business Centres delivered
extension services, arranged agri-credit linkages and established collective input
procurement and agricultural equipment on hire. In pursuit of your Company's long-term
sustainability objective of increasing soil organic carbon, a total of 3,169 compost units
were constructed during the year taking the total number till date to over 40,699 units.
The ‘Village Adoption Programme' pioneered by your Company's Agri Business
presently covers 250 model villages in the states of Andhra Pradesh, Karnataka, Telangana
and Rajasthan. This initiative is aligned to the Prime Minister's Sansad Adarsh Gram
Yojana (SAGY), an initiative to promote holistic rural development. Your Company had
entered into a partnership with NITI Aayog in April, 2018 to improve agriculture and other
allied services in 27 aspirational districts of eight states (Assam, Bihar, Jharkhand,
Rajasthan, Madhya Pradesh, Maharashtra, Odisha and Uttar Pradesh). The plan was to train
government officers who, in turn, would cascade the methodology to farmers. During the
year, your Company succeeded in creating 402 block level agri-officers as Master Trainers
(MT), who in turn trained 2,259 village level personnel as Village Resource Persons (VRPs)
to train farmers directly. These VRPs have so far covered 2.05 lakh farmers in package of
practices appropriate for the dominant crop of the region.
Livestock Development
The programme provides an opportunity for farmers to improve their livestock based
livelihoods by improving productivity of the progeny through breed improvement and
dissemination of improved animal husbandry practices. The programme provided extension
services, including breeding, fodder propagation and training of farmers in six States and
21 districts. During the year, 1.46 lakh artificial inseminations (AIs) were carried out
which led to the birth of 0.62 lakh high yielding progeny. Cumulatively, the figures for
AIs and calving stand at 23.67 lakh and 8.13 lakh respectively.
Your Company is also working with dairy farmers in Bihar and Punjab to improve farm
productivity through several extension services and to facilitate higher milk production.
Qualified teams comprising veterinarians and para-veterinarians have been deployed to
facilitate animal breeding, animal nutrition and animal health services towards improving
farm productivity and promoting commercial dairy farming among farmers. During the year,
1.29 lakh cattle of 55,074 dairy farmers across 426 villages in six districts of Bihar
were supported through training programmes on clean milk production, mastitis control and
animal husbandry services like deworming, ectoparasite control, etc.
Women Empowerment
This initiative provided a range of gainful employment opportunities to over 64,000
poor women cumulatively, supported with capacity building and financial assistance by way
of loans and grants. Included in the total are 22,700 ultra-poor women in your Company's
core catchments, who have access to sustainable sources of income through non-farm
livelihood opportunities. The financial literacy and inclusion project, in partnership
with Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation, was
rolled out in 765 villages across 11 districts during the year.
Education
The Primary Education Programme aims to provide children from weaker sections of
society in your Company's factory catchments access to education with focus on learning
outcomes and retention. Operational in 24 districts of 14 states, the programme covered
1.15 lakh children during the year, thus taking the total coverage to around 6.91 lakh
children. In addition, nearly 27,000 children were covered through support in teaching and
learning material. 199 government primary schools were provided infrastructure support
comprising boundary walls, additional classrooms, sanitation units, and furniture, taking
the total number of government primary schools covered till date to 1,802. To ensure
sustainable operations and maintenance of infrastructure provided, 682 School Management
Committees were strengthened and 566 Child Cabinets and Water and Sanitation (WATSAN)
Committees cumulatively were formed in various schools with the active involvement of
students and teachers.
Skilling & Vocational Training
The Skilling & Vocational Training programme provides training in market linked
skills to youth to enable them to compete in the job market. 12,172 youth were enrolled
under different courses during the year of which 44% were female and 36% belonged to the
SC/ST communities. The programme is operational in 32 districts of 17 States. In addition,
785 youth were trained with requisite skills and provided increased opportunities for
entrepreneurial development.
The Company continues to work with the Welcomgroup Graduate School of Hotel
Administration (WGSHA) together with Dr TMA Pai Foundation to cater to the ever-growing
need for professionally trained human resources in the hospitality industry. In addition,
since the inception of ITC Culinary Skills Training Centre, Chhindwara in 2014, 103
trainee chefs have successfully completed the six-month programme wherein cooking skills
are imparted to youth from economically marginalised communities.
Health & Sanitation
Your Company continues to adopt a multi-pronged approach towards improving public
health and hygiene. To promote a hygienic environment through prevention of open
defecation and to reduce incidence of water-borne diseases, 4,443 Individual Household
Toilets (IHHT) were constructed in 26 districts of 15 States in collaboration with the
respective State Governments/District sanitation departments. With this, a total of 35,916
IHHTs have been constructed so far in your Company's catchment areas. In addition, 32
community toilets were constructed/renovated in Bihar, West Bengal and New Delhi during
the year, taking the cumulative to 62. Along with sanitation infrastructure development,
special focus was given to awareness campaigns to create demand and drive behavioural
change.
To make potable water available to local communities in three districts of Andhra
Pradesh, Reverse Osmosis (RO) water purification plants were set up in villages with poor
quality water. 26 new RO plants were established in 2018-19 taking the total to 127, which
provide safe drinking water to over 150,000 rural people.
The Company continued to enhance awareness on various health related issues through a
network of 415 women Village Health Champions (VHCs) who covered nearly 3.22 lakh women,
adolescent girls and school children during the year. The programme is operational in
seven districts of Uttar Pradesh and four districts of Madhya Pradesh. The VHCs conducted
over 7,000 village meetings and participated in over 4,000 group events, apart from making
door-to-door visits focusing on aspects like sanitation, menstrual and personal hygiene,
family planning, diarrhoea prevention and nutrition.
Through your Company's ‘Swasth India Mission', a combination of audio-visual aids,
games and practical training was leveraged to encourage healthy hygiene habits. Nearly
19.2 lakh children from around 5,247 schools in 60 cities in 12 states were covered during
the year. Additionally, access to handwashing was enabled through the unique ‘ID
Guard' initiative to all the students covered in these 5,247 schools.
Over 77,000 beneficiaries were covered under Mother and Child Health initiative aimed
at improving the health-nutrition status of women, adolescents and children in the
catchments of a few of your Company's factories with high maternal and infant mortality
indices. This was achieved by strengthening institutional capacity, promoting greater
convergence with existing government schemes and increasing access to basic services on
maternal, child, and adolescent health, nutrition and child protection.
Solid Waste Management
Your Company's waste recycling programme, ‘WOW – Well-Being Out of Waste',
enables the creation of a clean and green environment and promotes sustainable livelihoods
for waste collectors. The programme continued to be executed in Coimbatore, Chennai,
Bengaluru, Delhi, Muzaffarpur (Bihar), several districts of Telangana and Andhra Pradesh
and now expanded to Mysuru and Chikmagalur districts during the year. The quantum of dry
waste collected during the year was 51,696 tonnes from 651 wards. The programme has
covered 89 lakh citizens, 48 lakh school children and 2,000 corporates since its
inception. It creates sustainable livelihoods for 14,745 waste collectors by facilitating
an effective collection system in collaboration with municipal corporations.
The intervention has also created over 178 social entrepreneurs who are involved in
maximising value capture from dry waste collected.
In addition to WOW Programme, another programme on solid waste management which deals
with both dry and wet waste has spread to 15 districts of 10 States covering 2.12 lakh
households and collected 12,608 tonnes of waste during the year. This programme focuses on
minimising waste to landfill by managing waste at source. Home composting was practiced by
10,892 households. Under this programme, in 2018-19, 8,462 tonnes of wet waste was
composted,
2,383 tonnes of dry waste recycled and only 14% of the total waste was sent to
landfills.
ITC Sangeet Research Academy
The ITC Sangeet Research Academy (ITC SRA), which was established in 1977, is an
embodiment of your Company's sustained commitment to a priceless national heritage. The
Company's pledge towards ensuring enduring excellence in Classical Music education
continues to drive ITC SRA in furthering its objective of preserving and propagating
Hindustani classical music in the age-old principle of the ‘Guru-Shishya Parampara'.
The eminent Gurus of the Academy, most of whom reside in the Academy's campus, impart
intensive training and quality education in Hindustani Classical Music to the Scholars.
The present Gurus of the Academy are Padma Shri Pt. Ajoy Chakrabarty, Padma Shri Pt. Ulhas
Kashalkar, Pt. Partha Chatterjee, Pt. Uday Bhawalkar, Vidushi Subhra Guha and Shri Omkar
Dadarkar. The Academy's focus continues to be on nurturing exceptionally gifted students
selected from across India through a system of multi-level audition. Full scholarship is
provided to them to reside and pursue music education in the Academy's campus and in other
designated locations under the tutelage of the country's most distinguished musicians. The
creation of the next generation of masters of Hindustani classical music for the
propagation of a precious legacy continues to be the Academy's objective.
Forging Partnerships with NGOs
The meaningful contribution made by your Company's Social Investments Programme to
address some of the country's key development challenges, has been possible in significant
measure, due to your Company's partnerships with globally renowned NGOs such as BAIF, DSC,
FES, DHAN Foundation, MYRADA, Pratham, SEWA Bharat, Outreach, WASH Institute and Water for
People, amongst others. These partnerships, which bring together the best-in-class
management practices of your Company and the development experience and mobilisation
skills of NGOs, will continue to provide innovative grassroots solutions to some of
India's most challenging problems of development in the years to come.
CSR Expenditure
The annual report on Corporate Social Responsibility activities as required under
Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies
(Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies
(Accounts) Rules, 2014 is provided in the Annexure forming part of this Report.
Environment, Health & Safety
Your Company's Environment, Health & Safety (EHS) strategies are directed towards
achieving the greenest and safest operations across all your Company's units by optimising
natural resource usage and providing a safe and healthy workplace. Systemic efforts
continue to be made towards natural resource conservation by continuously improving
resource-use efficiencies and enhancing the positive environmental footprint following a
life-cycle based approach.
Your Company's focus on inculcating a green and safe culture is supported through the
adoption of EHS standards that incorporate best international standards, codes &
practices and verified through regular audits.
Your Company is addressing the critical area of climate change mitigation through
several innovative and pioneering initiatives. These include continuous improvement in
energy efficiency, enhancing the renewable energy portfolio, integrating green attributes
into the built environment, better efficiency in material utilisation, maximising water
use efficiencies and rain water harvesting, maximising reuse and recycling of waste and
utilising post-consumer waste as raw material.
Energy Conservation and Renewable Energy
Your Company is well positioned to benefit from energy conservation and renewable
energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy
Certificates (RECs) promoted by the Government of India. As a responsible corporate
citizen, your Company has made a commitment to reduce dependence on energy from fossil
fuels. Accordingly, all factories incorporate appropriate green features and premium
luxury hotels and office complexes continue to be certified at the highest level by either
the US Green Building Council, Indian Green Building Council or the Bureau of Energy
Efficiency (BEE).
Despite capacity augmentation during the year in FMCG, Hotels and Paperboards
Businesses, about 41% of your Company's total energy requirements were met from renewable
sources such as biomass, wind and solar.
Your Company continues its efforts to achieve a 50% renewable energy share in its total
energy consumption based on a mix of energy conservation and renewable energy investments,
despite significant enhancement in its scale of operations going forward.
Water Security
With water scarcity increasingly becoming an area of serious concern, your Company
continues to focus on an integrated water management approach that includes water
conservation and harvesting initiatives at its units – while at the same time working
towards meeting the water security needs of all stakeholders at the local watershed level.
Interventions have been rolled out to improve water-use efficiencies by adopting latest
technologies and increasing reuse and recycling practices within the fence while also
working with farmers and other community members towards improving their water-use
efficiencies. The supply side interventions include enhancing capture and storage of
rainwater (in soil and storage ponds) and recharging aquifers. These initiatives have
resulted in the creation of rainwater harvesting potential that is over three times the
net water consumption of your Company's operations.
Greenhouse Gases and Carbon Sequestration
The greenhouse gas (GHG) inventory of your Company for the year 2018-19 compiled as per
the ISO 14064 Standard has been assured, as in the earlier years, at the highest
‘Reasonable Level' by an independent third party.
Reaffirming your Company's commitment to the ethos of ‘Responsible Luxury',
premium luxury hotels of your Company are Leadership in Energy & Environmental Design
(LEED) Platinum certified, making it a trailblazer in green hoteliering globally. Your
Company is a pioneer in the green buildings movement. In 2004, the ITC Green Centre at
Gurugram was certified as the largest platinum rated building in the world by the US Green
Building Council (USGBC-LEED).
ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst
the world's largest
LEED Platinum certified green hotels, besides holding a 5-Star rating from the Green
Rating for Integrated Habitat Assessment (GRIHA) Council. The data centre at Bengaluru,
ITC Sankhya, is the first data centre in the world to receive the LEED Platinum
certification by USGBC.
Several of your Company's factories and office complexes have also received the Green
Building certification from Indian Green Building Council (IGBC), the LEED certification
from USGBC and star ratings from the Bureau of Energy Efficiency (BEE). Large
infrastructure investments, such as the ITC Green Centre at Manesar (LEED Platinum
certified) and the ITC Green Centre at Bengaluru (pre-certified for LEED Platinum)
continue to demonstrate your Company's commitment to green buildings. To date, 24
buildings of your Company have achieved Platinum certification by USGBC/IGBC. In order to
continually reduce your Company's energy footprint, green features are integrated in all
new constructions and also incorporated in existing hotels, manufacturing units,
warehouses and office complexes.
Over twice the amount of Carbon Dioxide emissions from your Company's operations, are
being sequestered through its Social and Farm Forestry initiatives. Besides mitigating the
impact of increasing levels of GHG emissions in the atmosphere, these initiatives help
greening of degraded wasteland, prevent soil erosion, enhance organic matter content in
soil and enhance ground water recharge.
Waste Recycling
Your Company continues to make significant progress in reducing specific waste
generation through constant monitoring and improvement of efficiencies in material
utilisation and also in achieving almost total recycling of waste generated in operations.
In this way, your Company has prevented waste reaching landfills and the associated
problems of soil and groundwater contamination and GHG emissions, all of which can
adversely impact public health. In the current year, your Company has achieved over 99%
waste recycling, with the Paperboards and Specialty Papers Business, which accounts for
89% of the total waste generated in your Company, recycling 99.9% of the total waste
generated by its operations. During the year, this
Business also recycled around 89,000 tonnes of externally sourced post-consumer waste
paper, thereby creating yet another positive environmental footprint.
Circular Economy Approach to Plastic Packaging
ITC aims to go beyond the requirements of Plastic Waste Management Rules, 2016 to
ensure that, over the next decade, 100% of packaging is reusable, recyclable or
compostable. Your Company is working towards optimising packaging in a way that it reduces
the environmental impact arising out of post-consumer packaging waste without affecting
integrity of the product. This is being done in a structured manner by optimising design,
identifying alternative packaging material with lower environmental impact and suitable
end-of-life solutions for packaging waste. ITC is also working towards establishing
scalable, replicable and sustainable models of municipal solid waste management based on
circular economy principles. ITC's approach is centred around treating waste as a resource
and ensuring that zero waste goes to landfill, which can be achieved only when waste is
segregated at source. These initiatives focus on educating citizens on segregating waste
at source into dry and wet waste streams and ensuring that value is derived from these
resources and in the process create sustainable livelihood for waste collectors and
rag-pickers. These models operate on a public-private partnership basis with active
involvement of Urban Local Bodies, Civil Society and the informal sector of waste
collectors.
Under its flagship ‘Well-Being Out of Waste' (WOW) programme running across
various cities in Karnataka, Bihar, Delhi, Tamil Nadu, Andhra Pradesh and Telangana,
around 16,000 tonnes of post-consumer plastic waste including around 7400 tonnes of Low
Value Plastics (LVP), comprising of multi-layered plastic and thin films, is being
collected annually. In 2018-19, your Company also launched an LVP waste collection
programme in Pune in collaboration with SWaCH, a cooperative of waste pickers with decade
long experience in implementing source segregation and door-to-door collection in Pune.
The collection programme was operationalised in January 2019 and has successfully started
channelising post-consumer LVP waste to an authorised recycler and is targeting a
collection of around 200 tonnes of LVP waste per month.
Safety
Your Company's commitment to provide a safe and healthy workplace to all has been
reaffirmed by several national and international awards and certifications received by
various units. Your Company's approach has been to institutionalise safety as a value-led
concept with focus on inculcating a sense of ownership at all levels in order to drive
behavioural change. In line with this approach, several of your Company's operating units
are progressively implementing behaviour-based safety initiatives and customised risk
assessment supported by planned job observation programmes to strengthen their safety
culture.
Your Company continuously strives to improve on safety performance by incorporating
best-in-class engineering standards in the design and project execution phase itself for
all investments in the built environment, besides optimising costs. Environment, Health
& Safety audits before commissioning and during the operation of units continue to be
carried out to verify compliance with standards.
Promoting Thought Leadership in Sustainability
The ‘CII–ITC Centre of Excellence for Sustainable Development', established
by your Company in 2006 in collaboration with the Confederation of Indian Industry (CII),
continues to focus on its endeavour to promote sustainable business practices amongst
Indian enterprises. The major highlights during the year include the following:
The 13th edition of the Centre's flagship event, the ‘Sustainability Summit:
Everyone's Future', was held on 6th & 7th September, 2018 in New Delhi with focus on
the ‘Circular Economy Mission' (CEM) under the European Union Resource Efficiency
Initiative. Key dignitaries included Dr Harsh Vardhan, Minister for Environment, Forest
& Climate Change, Science & Technology, and Earth Sciences, Mr Suresh Prabhu,
Minister of Commerce & Industry and Civil Aviation, Mr Hardeep Singh Puri, Minister
for State (I/C) Housing and Urban Affairs, Mr Karmenu Vella, Commissioner for Environment,
Maritime Affairs and Fisheries, European Commission and Mr Sanjiv Puri, ITC Limited. 80
delegates from 16 different countries with their representatives from industry, business
associations and academia as well as research institutions were present at the EU-CEM.
The circular economy guidebook for CEOs, titled ‘Circular Economy: A New Source of
Competitiveness', which discusses alternatives to current business models by adopting the
concept of circular economy, was launched at the Sustainability Summit.
A high-level B2G Partnership Conclave on
Sustainable Development Goals (SDGs) was jointly organised by the Centre, NITI Aayog
and the UNDP. The conclave focused on three core areas— water, energy and green
industry—which have been identified as fast tracks for the 2030 Agenda. Key
dignitaries included Mr. Raj Kumar Singh, Hon'ble Minister of State (I/C), Power and New
& Renewable Energy and Mr. Amitabh Kant, CEO, NITI Aayog. A three-year partnership MoU
was signed between CII and NITI Aayog at the Conclave. This partnership aims to showcase
the efforts of Indian businesses to the Government and the UNDP, increase awareness
amongst businesses, share best practices and build a tracking mechanism for further
improving industry engagement to achieve SDGs by 2030. The Centre also launched a report
during the event titled ‘Indian Solutions for the World to Achieve SDGs'.
The Centre's India Business & Biodiversity Initiative (IBBI) participated in the
Business & Biodiversity Forum of the 14th Meeting of the Conference of the Parties
(COP 14) to the UN Convention on Biological Diversity (CBD) held in Sharm El Sheikh, Egypt
from 17th to 29th November 2018 with the theme of ‘Investing in biodiversity for
people and planet'. The Centre took an Indian industry delegation to participate in the
forum to present Indian companies' initiatives and best-practice case studies on
mainstreaming biodiversity into the sectors of energy, mining, infrastructure,
manufacturing and processing and health.
The Centre organised a session on voluntary climate adaptation framework for industry
at the 24th Conference of Parties under United Nations Framework Convention on Climate
Change (COP24) held at Katowice, Poland in December 2018.
The 13th CII-ITC Sustainability Awards 2018 took place in December 2018. Since 2006,
878 businesses have applied for the Awards, of which 275 have been recognised so far. In
2018, out of 77 applicants, 39 companies were declared winners in various categories.
The Centre promoted capacity building in sustainability through a range of training and
consulting assignments. In 2018, almost 2,000 participants were covered through 75
programmes, conducted both in India and abroad. Topics included Value Innovation, CSR
Rules and Impact Measurement, Sustainability Reporting, Integrated Reporting, Cluster
Platform for Transformative Solutions, Human Rights and Biodiversity.
R&D, QUALITY AND PRODUCT DEVELOPMENT
Your Company continues to invest in a comprehensive Research & Development
programme leveraging its world-class infrastructure, benchmarked processes,
state-of-the-art technology and a business-focused R&D strategy.
ITC's Life Sciences & Technology Centre (LSTC), Bengaluru, continues to focus on
its mandate to develop unique sources of competitive advantage and build future readiness.
LSTC seeks to achieve this by harnessing contemporary advances in several relevant areas
of science and technology and blending the same with classical concepts of product
development often leveraging cross-business synergies. Competencies are constantly
evolving at LSTC as it strives for scientific rigour at par with the best our global
competitors have to offer. LSTC is resourced with 350 highly qualified scientists,
world-class measurement systems and state-of-the-art facilities to conduct experimental
research, rapid prototyping and process development. Several Centres of Excellence have
been established over the past few years in these areas in LSTC. In addition, a number of
areas centred around these capabilities have secured global quality certifications.
The Agrisciences R&D team continues to engage in evaluating and introducing several
germplasm lines of identified crops including Casuarina and Eucalyptus to increase the
genetic and trait diversities in these species. This intervention would facilitate the
development of new varieties with higher yields, better quality and other traits relevant
for your Company's businesses. These new lines are being introduced commercially and will
enable farmers increase their revenues and earnings significantly on account of
productivity gains and improved disease resistance. Besides pulpwood species, the
Agrisciences team continues to focus on delivering world-class solutions using
contemporary technologies in crops such as wheat, soya, potato and rice. This includes
evaluating and building research collaborations with globally recognised centres of
excellence with a view to accelerating the journey towards demonstrating multiple
‘proofs of concept'. These collaborations, covering identified crops and species, are
designed in a manner that enables your Company in gaining fundamental insights into
several technical aspects of plant breeding and genetics and the influence of
agro-climatic conditions on the growth of these species. Such interventions will
accelerate LSTC's efforts in creating future generations of crops that are more adaptable
to varied agro-climatic conditions thereby providing farmers relatively safer and more
profitable alternatives, whilst helping secure your Company's supply chain and
contributing to the vitality and competitiveness of your Company's Branded Packaged Foods
Businesses. Further, these outcomes have a strong potential to contribute towards
augmenting the nation's ecological capital and biodiversity as well.
Recognising the unique construct of your Company in terms of its strong presence in
Agri, Branded Packaged Foods and Personal Care Products Businesses, a convergence of
R&D capabilities is being leveraged to deliver future products aimed at nutrition,
health and well-being. In keeping with the above, during the year, your Company launched a
variety of potatoes which are low in sugar content and rich in antioxidants. LSTC's
Biosciences team has designed and developed several long-term research platforms for
evolving multi-generation product concepts and associated claims that are fully backed by
scientific evidence for the Branded Packaged Foods and Personal Care Products Businesses.
Consumer insight driven propositions have been identified in the area of functional foods
which are being progressed to products of the future with strong scientifically validated
claims via clinical trials. Several of these initiatives have completed clinical
assessment of safety and efficacy of products in line with global standards and
specifically for the Indian population. These interventions will go a long way in enabling
your Company to become a world-class producer of nutritionally superior food products in
the near-term. Similar advances have been made in the skin care, hair care and
health/hygiene arena. New best-in-class initiatives, such as data analytics, consumer
experience labs and Industry 4.0 are being seeded across LSTC with a view to further
strengthen your Company's long-term competitiveness. Intellectual properties arising from
these efforts have also been secured as appropriate and as of 31st March, 2019, your
Company has filed 836 patents. The product development teams at LSTC were instrumental in
developing over 50 unique products that were launched during the year by our FMCG
Businesses.
LSTC has a clear vision and road map for long-term R&D, backed by a well-crafted
Intellectual Property strategy. With scale, speed, science and sustainability
considerations, LSTC is poised to deliver long-term competitive advantage for your
Company.
In line with your Company's relentless focus on operational excellence and quality,
each Business is mandated to continuously innovate on processes and systems to enhance
their competitive position. During the year, your Company's Hotels Business leveraged its
‘Lean' and ‘Six Sigma' programmes to improve business process efficiencies. This
will further enhance capability to create superior customer value through a service
excellence framework. The Paperboards, Paper & Packaging Businesses continued to
pursue ‘Total Productive Maintenance' (TPM) programmes in all units, resulting in
substantial cost savings and productivity improvements.
All manufacturing units of your Company have ISO quality certification. All
manufacturing units of the Branded Packaged Foods Businesses (including contract
manufacturing units) and hotels operate in compliance with stringent food safety and
quality standards. Almost all Company owned units/hotels and contract manufacturing units
of the Branded Packaged Foods Businesses are certified by an accredited third party in
accordance with ‘Hazard Analysis Critical Control Points' (HACCP)/ISO 22000
standards. Additionally, the quality of all FMCG products of your Company is regularly
monitored through ‘Product Quality Rating System' (PQRS) which measures competitive
superiority of your Company's product offerings.
PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE
In the proceedings initiated by the Enforcement Directorate in 1997, in respect of some
of the show cause memoranda issued by the Directorate, after hearing arguments on behalf
of your Company, the appropriate authority has passed orders in favour of your Company,
and dropped those memoranda.
In respect of some of the remaining memoranda, your Company filed writ petitions,
challenging their validity before the Honourable Calcutta High Court, which have been
allowed, and the proceedings in respect of these memoranda have been quashed. Meanwhile,
some of the prosecutions launched by the Enforcement Directorate have been quashed by the
Honourable Calcutta High Court while others are pending.
TREASURY OPERATIONS
During the year, your Company's treasury operations continued to focus on deployment of
surplus liquidity and management of foreign exchange exposures within a well-defined risk
management framework.
The first half of the financial year witnessed a sharp spike in global price of crude
oil leading to concerns on retail inflation and the Government's ability to adhere to the
fiscal deficit target. Further, exit by Foreign Institutional Investors from the capital
markets led to currency depreciation, which accentuated the negative sentiment. In
response, RBI increased policy interest rates. In addition, credit growth outpacing
deposit growth, increase in currency holding by the public and default in debt repayment
by a large non-banking finance company contributed to volatility and increase in market
interest rates. In the second half of the financial year, market concerns started to abate
as price of crude oil corrected significantly and domestic retail inflation remained
anchored within the targeted range.
Consequently, market interest rates normalised, supported by RBI reducing policy
interest rates and infusing unprecedented amount of liquidity into the Banking system
through open-market purchase of Government Securities.
All investment decisions relating to deployment of surplus liquidity continued to be
guided by the tenets of Safety, Liquidity and Return. Treasury operations focused on
proactive rebalancing of portfolio duration and mix in line with the evolving interest
rate environment.
Your Company's risk management processes ensured that investment of surplus liquidity
was made after proper evaluation of underlying risk while remaining focused on capturing
market opportunities.
US$ strength was a dominant theme in global currency markets during the year,
attributed to a strong US economy (pick-up in economic growth, decline in unemployment
rate) and monetary policy normalisation by the US Federal Reserve through interest rate
hikes. By mid-October, the Indian Rupee (INR) depreciated by over 14% against the US$
(from 65 to 74.48). Other factors, which contributed to Rupee weakness include widening
Current Account Deficit and global risk aversion due to economic/political crisis in some
of the Emerging Markets. Thereafter, as global risk sentiment towards Emerging Markets
improved, Rupee regained some of the losses to close the year at Rs. 69.16. In this
scenario, your Company adopted a proactive forex exposure management strategy, which
included the use of foreign exchange forward contracts and plain vanilla options to
protect business margins and reduce risks/costs.
As in earlier years, commensurate with the size of the temporary surplus liquidity
under management, treasury operations continue to be supported by appropriate control
mechanisms, including independent check of 100% of transactions by your Company's Internal
Audit department.
DEPOSITS
Your Company's erstwhile Public Deposit Scheme closed in the year 2000. As at 31st
March, 2019, there were no deposits due for repayment except in respect of two deposit
holders totalling to Rs. 20,000/- which have been withheld on the directives received from
the government agencies.
There was no failure to make repayments of Fixed Deposits on maturity and the interest
due thereon in terms of the conditions of your Company's erstwhile Schemes.
Your Company has not accepted any deposit from the public / members under Section 73 of
the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014
during the year.
DIRECTORS
Changes in Directors
Mr. Yogesh Chander Deveshwar, Chairman of the Company since 1st January, 1996, passed
away on 11th May, 2019. Your Directors express their sincere condolences on the demise of
Mr. Deveshwar and place on record their deep appreciation for his legendary stewardship of
the Company for more than two decades.
Spearheading a journey of stellar growth,
Mr. Deveshwar's leadership transformed ITC into a valuable and admired multi-business
conglomerate with a robust portfolio of front-ranking businesses in FMCG, Hotels,
Paperboards, Paper & Packaging and Agri Business. His vision to make societal value
creation a bedrock of corporate strategy also led ITC to become a global exemplar in
sustainability and the only company in the world of comparable dimensions to be carbon
positive, water positive and solid waste recycling positive for over a decade, creating
over six million livelihoods, many of whom represent the most disadvantaged in society.
Mr. Deveshwar's outstanding contribution and foresight helped in creation of
world-class Indian brands which capture and retain larger value in the country and
national assets in the form of intellectual property, state-of-the-art manufacturing
facilities and iconic hospitality properties. Mr. Deveshwar's inspiring vision will
continue to guide your Company in the journey ahead.
The Board of Directors of your Company (‘the Board'), on the recommendation of the
Nomination & Compensation Committee (‘the Committee'), appointed Mr. Sanjiv Puri,
Managing Director, also as the Chairman of the Company with effect from 13th May, 2019.
Mr. Suryakant Balkrishna Mainak [representing the Life Insurance Corporation of India
(‘LIC')] resigned from the Board with effect from 24th July, 2018. Your Directors
place on record their appreciation for the services rendered by Mr. Mainak.
Mr. John Pulinthanam was appointed, with your approval, as a Non-Executive Director of
the Company with effect from 27th July, 2018, representing the General Insurers' (Public
Sector) Association of India.
On the recommendation of the Committee, the Board at the meeting held on 27th July,
2018, appointed
Mr. Hemant Bhargava as an Additional Non-Executive Director of your Company with effect
from 28th July, 2018, representing LIC.
Mr. Sumant Bhargavan, on the recommendation of the Committee, was appointed by the
Board at the meeting held on 15th November, 2018, as an Additional Director of your
Company and, subject to the approval of the Members, also as a Wholetime Director, with
effect from 16th November, 2018.
By virtue of the provisions of Article 96 of the Articles of Association of your
Company and Section 161 of the Companies Act, 2013 (‘the Act'), Messrs. Bhargava and
Sumant will vacate office at the ensuing Annual General Meeting (‘AGM') of your
Company.
The Board at the meeting held on 13th May, 2019, on the recommendation of the
Committee, recommended for the approval of the Members (a) appointment of Mr. Bhargava as
a Non-Executive Director of your Company, liable to retire by rotation, for a period of
three years from the date of the ensuing AGM, and (b) appointment of Mr. Sumant as a
Director, liable to retire by rotation, and also as a Wholetime Director of your Company,
for a period of three years from the date of the ensuing AGM.
Further, the Board at the meeting held on 13th May, 2019, on the recommendation of the
Committee, recommended for the approval of the Members, the re-appointment of Mr. Arun
Duggal, Mr. Sunil Behari Mathur and Ms. Meera Shankar as Independent Directors of your
Company in terms of Section 149 of the Act and Regulation 17 of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015 (‘Listing Regulations 2015') with effect from 15th September, 2019.
Requisite Notices under Section 160 of the Act have been received in respect of Messrs.
Bhargava, Sumant, Duggal and Mathur and Ms. Shankar, who have filed their consents to act
as Directors of the Company, if appointed.
Appropriate resolutions seeking your approval to the above are appearing in the Notice
convening the 108th AGM of your Company.
Retirement by Rotation
In accordance with the provisions of Section 152 of the Act read with Article 91 of the
Articles of Association of the Company, Messrs. David Robert Simpson and John Pulinthanam
will retire by rotation at the ensuing AGM and being eligible, offer themselves for
re-election. The Board has recommended their re-election.
Number of Board Meetings
Eight meetings of the Board were held during the year ended 31st March, 2019.
Attributes, Qualifications & Independence of Directors and their Appointment
The Nomination & Compensation Committee, as reported in earlier years, adopted the
criteria for determining qualifications, positive attributes and independence of
Directors, including Independent Directors, pursuant to the Act and the Rules thereunder.
The Corporate Governance Policy, inter alia, requires that Non-Executive Directors be
drawn from amongst eminent professionals, with experience in business/finance/law/public
administration and enterprises. The Board Diversity Policy of your Company requires the
Board to have balance of skills, experience and diversity of perspectives appropriate to
the Company. The skills, expertise and competencies of the Directors as identified by the
Board, are provided in the ‘Report on Corporate Governance' forming part of the
Report and Accounts.
The Articles of Association of your Company provide that the strength of the Board
shall not be fewer than five nor more than eighteen. Directors are appointed/ re-appointed
with the approval of the Members for a period of three to five years or a shorter
duration, in accordance with retirement guidelines and as may be determined by the Board
from time to time. All Directors, other than Independent Directors, are liable to retire
by rotation, unless otherwise approved by the Members. One-third of the Directors who are
liable to retire by rotation, retire every year and are eligible for re-election.
The Independent Directors of your Company have confirmed that (a) they meet the
criteria of Independence as prescribed under Section 149 of the Act and Regulation 16 of
the Listing Regulations 2015, and (b) they are not aware of any circumstance or situation,
which could impair or impact their ability to discharge duties with an objective
independent judgement and without any external influence. Further, in the opinion of the
Board, the Independent Directors fulfil the conditions prescribed under the Listing
Regulations 2015 and are independent of the management of the Company.
Details of the Company's Policy on remuneration of Directors, Key Managerial Personnel
and other employees is provided in the ‘Report on Corporate Governance' forming part
of the Report and Accounts.
Board Evaluation
The Nomination & Compensation Committee, as reported in earlier years, formulated
the Policy on Board evaluation, evaluation of Board Committees' functioning and individual
Director evaluation, and also specified that such evaluation will be done by the Board,
pursuant to the Act and the Rules thereunder and the Listing Regulations 2015.
In keeping with ITC's belief that it is the collective effectiveness of the Board that
impacts Company's performance, the primary evaluation platform is that of collective
performance of the Board as a whole. Board performance is assessed against the role and
responsibilities of the Board as provided in the Act and the Listing Regulations 2015 read
with the Company's Governance Policy. The parameters for Board performance evaluation have
been derived from the Board's core role of trusteeship to protect and enhance shareholder
value as well as to fulfil expectations of other stakeholders through strategic
supervision of the Company. Evaluation of functioning of Board Committees is based on
discussions amongst Committee members and shared by the respective Committee Chairman with
the Board. Individual Directors are evaluated in the context of the role played by each
Director as a member of the Board at its meetings, in assisting the Board in realising its
role of strategic supervision of the functioning of the Company in pursuit of its purpose
and goals.
While the Board evaluated its performance against the parameters laid down by the
Nomination & Compensation Committee, the evaluation of individual Directors was
carried out against the laid down parameters, anonymously in order to ensure objectivity.
Reports on functioning of Committees were placed before the Board by the Committee
Chairmen. The Independent Directors Committee of the Board also reviewed the performance
of the non-Independent Directors and the Board, pursuant to Schedule IV to the Act and
Regulation 25 of the Listing Regulations 2015.
KEY MANAGERIAL PERSONNEL
During the year, Mr. Sumant Bhargavan was appointed as an Additional Wholetime Director
of the Company, as stated above. There were no other changes in the Key Managerial
Personnel of your Company.
AUDIT COMMITTEE & AUDITORS
The composition of the Audit Committee is provided under the section ‘Board of
Directors and Committees' in the Report and Accounts.
Statutory Auditors
The Company's Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants,
who were appointed with your approval at the 103rd AGM for a period of five years, will
complete their present term on conclusion of the ensuing 108th AGM of the Company.
The Board, on the recommendation of the Audit Committee, recommended for the approval
of the Members, the appointment of Messrs. S R B C & CO LLP, Chartered Accountants
(‘SRBC'), as the Auditors of the Company for a period of five years from the
conclusion of the ensuing 108th AGM till the conclusion of the 113th AGM. On the
recommendation of the Audit Committee, the Board also recommended for the approval of the
Members, the remuneration of SRBC for the financial year 2019-20. Appropriate resolution
seeking your approval to the appointment and remuneration of SRBC as the Statutory
Auditors is appearing in the Notice convening the 108th AGM of the Company.
Cost Auditors
Your Board, as recommended by the Audit Committee, appointed for the financial year
2019-20:
(i) Mr. P. Raju Iyer, Cost Accountant, for audit of Cost Records maintained by the
Company in respect of ‘Wood Pulp', ‘Paper and Paperboard' and ‘Nicotine
Gum' products.
(ii) Messrs. S. Mahadevan & Co., Cost Accountants, for audit of Cost Records
maintained in respect of all applicable products of the Company, other than ‘Wood
Pulp', ‘Paper and Paperboard' and ‘Nicotine Gum' products.
Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules,
2014, appropriate resolutions seeking your ratification to the remuneration of the
aforesaid Cost Auditors are appearing in the Notice convening the 108th AGM of the
Company.
The Company maintains necessary cost records as specified by Central Government under
sub-section 1 of Section 148 of the Act read with the Companies (Cost Records and Audit)
Rules, 2014.
Secretarial Auditors
Your Board appointed Messrs. Vinod Kothari & Company, Practising Company
Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st
March, 2019. The Report of Messrs. Vinod Kothari & Company is provided in the Annexure
forming part of this Report, pursuant to Section 204 of the Act.
CHANGES IN SHARE CAPITAL
During the year, 5,43,36,690 Ordinary Shares of Rs. 1/- each, fully paid-up, were
issued and allotted upon exercise of 54,33,669 Options under the Company's Employee Stock
Option Schemes.
Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st
March, 2019, stands increased to Rs. 1225,86,31,601/- divided into 1225,86,31,601 Ordinary
Shares of Rs. 1/- each.
The Ordinary Shares issued during the year rank pari passu with the existing Ordinary
Shares of your Company.
EMPLOYEE STOCK OPTION SCHEMES
Disclosures with respect to Stock Options, as required under Regulation 14 of the
Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014
(‘the Regulations'), are available in the Notes to the Financial Statements and can
also be accessed on the Company's corporate website ‘www.itcportal.com' under
the section ‘Shareholder Value'. During the year, there has not been any material
change in the Company's Employee Stock Option Schemes.
Your Company's Auditors, Messrs. Deloitte Haskins & Sells, have certified that the
Employee Stock Option Schemes of the Company have been implemented in accordance with the
Regulations and the resolutions passed by the Members in this regard.
INVESTOR SERVICE CENTRE
The Investor Service Centre of your Company (‘ISC'), accredited with ISO 9001:2015
certification, is registered with the Securities and Exchange Board of India as Category
II Share Transfer Agent for providing in-house share registration and related services.
ISC continues to focus on upgrading its infrastructure, systems and processes for
providing contemporary and efficient services to the shareholders and investors of your
Company, in compliance with the applicable statutory requirements.
During the year, Messrs. Det Norske Veritas, accredited agency for ISO certification,
accorded the highest possible ‘Level 5' rating to ISC's systems and processes for the
tenth consecutive year, exemplifying the excellence achieved by ISC in providing quality
investor services.
RELATED PARTY TRANSACTIONS
All contracts or arrangements entered into by the Company with its related parties
during the financial year were in accordance with the provisions of the Companies Act,
2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015. All such contracts or arrangements have been approved by
the Audit Committee, as applicable. No material contracts or arrangements with related
parties were entered into during the year under review. Further, the prescribed details of
related party transaction in Form No. AOC-2, in terms of Section 134 of the Act read with
Rule 8 of the Companies (Accounts) Rules, 2014 is given in the Annexure to this Report.
Your Company's Policy on Related Party Transactions, as adopted by your Board, can be
accessed on the corporate website at https://www.itcportal.com/about-itc/policies/policy-on-rpt.aspx.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134 of the Companies Act, 2013, your Directors confirm
having:
a) followed in the preparation of the Annual Accounts, the applicable accounting
standards with proper explanation relating to material departures if any;
b) selected such accounting policies and applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair view of the
state of affairs of your Company at the end of the financial year and of the profit of
your Company for that period;
c) taken proper and sufficient care for the maintenance of adequate accounting records
in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets
of your Company and for preventing and detecting fraud and other irregularities;
d) prepared the Annual Accounts on a going concern basis;
e) laid down internal financial controls to be followed by your Company and that such
internal financial controls are adequate and were operating effectively; and
f) devised proper systems to ensure compliance with the provisions of all applicable
laws and that such systems were adequate and operating effectively.
CONSOLIDATED FINANCIAL STATEMENTS
Your Company's Board of Directors is responsible for the preparation of the
consolidated financial statements of your Company & its Subsidiaries (‘the
Group'), Associates and Joint Venture entities, in terms of the requirements of the
Companies Act, 2013 and in accordance with the accounting principles generally accepted in
India, including the Indian Accounting Standards specified under Section 133 of the Act.
The respective Board of Directors of the companies included in the Group and of its
associates and joint venture entities are responsible for maintenance of adequate
accounting records in accordance with the provisions of the Act for safeguarding the
assets and for preventing and detecting frauds and other irregularities; the selection and
application of appropriate accounting policies; making judgements and estimates that are
reasonable and prudent; and the design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and presentation of
the financial statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error, which have been used for the purpose of
preparation of the consolidated financial statements by the Directors of your Company, as
aforestated.
OTHER INFORMATION
Compliance with conditions of Corporate Governance Report
The certificate from your Company's Auditors,
Messrs. Deloitte Haskins & Sells, confirming compliance with the conditions of
Corporate Governance as stipulated under the Listing Regulations 2015, is annexed.
Integrated Report
The Company has voluntarily prepared its Integrated Report for the financial year
2018-19. As a green initiative, the Report has been hosted on the Company's corporate
website at https://www.itcportal.com/about-itc/shareholder-value/index.aspx#sectionb2
.
Going Concern status
There is no significant or material order passed during the year by any regulator,
court or tribunal impacting the going concern status of the Company or its future
operations.
Extract of Annual Return
The information required under Section 134 of the Act read with Rule 12 of the
Companies (Management and Administration) Rules, 2014, is provided in the Annexure forming
part of this Report.
Particulars of loans, guarantees or investments
Details of Loans, Guarantees and Investments covered under the provisions of Section
186 of the Companies Act, 2013 are provided in Notes 4, 5, 6, 9 and 27 (v) (a) (ii) to the
Financial Statements.
Particulars relating to Conservation of Energy and Technology Absorption
Particulars as required under Section 134 of the Companies Act, 2013 relating to
Conservation of Energy and Technology Absorption are also provided in the Annexure to this
Report.
Compliance with Secretarial Standards
The Company is in compliance with the applicable Secretarial Standards issued by the
Institute of Company
Secretaries of India and approved by the Central Government under Section 118(10) of
the Act.
Employees
The total number of employees as on 31st March, 2019 stood at 27,279.
There were 91 employees, who were employed throughout the year and were in receipt of
remuneration aggregating Rs. 102 lakhs or more or were employed for part of the year and
were in receipt of remuneration aggregating Rs. 8.5 lakhs per month or more during the
financial year ended 31st March, 2019. The information required under Section 197(12) of
the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.
Dividend Distribution Policy
The Company's Dividend Distribution Policy is provided in the Annexure forming part of
this Report and is also available on the Company's corporate website ‘www.itcportal.com'.
There has been no change in the Policy during the year.
Key Financial Ratios
Key Financial Ratios for the financial year ended 31st March, 2019, are provided in the
Annexure forming part of this report.
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements that involve risks and uncertainties.
When used in this Report, the words ‘anticipate', ‘believe', ‘estimate',
‘expect', ‘intend', ‘will' and other similar expressions as they relate to
the Company and/or its Businesses are intended to identify such forward-looking
statements.
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. Actual
results, performances or achievements could differ materially from those expressed or
implied in such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of their dates. This
Report should be read in conjunction with the financial statements included herein and the
notes thereto.
CONCLUSION
Inspired by the opportunity to serve a larger national purpose, your Company redefined
its Vision about two decades ago to transform itself into a vibrant engine of growth that
would make a substantial contribution to the Indian economy, whilst rewarding shareholders
by creating growing value for the Indian society.
Over the last 23 years, your Company has created multiple drivers of growth by
developing a portfolio of world-class businesses across all sectors of the national
economy spanning agriculture, manufacturing and services. Your Company ranks amongst the
Top 3 in the private sector in terms of Contribution to the Exchequer. Over the last 23
years, your Company's Value Addition aggregated Rs. 4.6 lakh crores of which nearly 75%
accrued to the Exchequer at the Central and State levels. During this period, your
Company's net revenue and post-tax profit have recorded an impressive compound annual
growth of 13.3% and 18.3% respectively. Total Shareholder Returns, measured in terms of
increase in market capitalisation and dividends, have grown at a compound rate of 22.3%
per annum during this period, placing your Company amongst the foremost in the country in
terms of efficiency of servicing financial capital.
Your Company's non-cigarette businesses have grown over 21-fold since 1996 and
presently constitute appx. 60% of net segment revenue. In aggregate, the non-cigarette
businesses account for over 80% of your Company's operating capital employed, about 90% of
the employee base and over 80% of annual investments.
Your Company today is the leading FMCG marketer in India, a pre-eminent hotel chain and
a globally acclaimed icon in green hoteliering, the clear market leader in the Indian
Paperboard and Packaging industry, a pioneering trailblazer in farmer and rural
empowerment through its Agri Business and a global exemplar in sustainable business
practices.
Aligned with the Government's Make in India Vision, your Company is building national
assets in the manufacturing and tourism sector. As stated earlier in this Report, several
world-class Integrated Consumer Manufacturing & Logistics facilities are being built
to deliver sustainable competitive advantage to your Company's FMCG businesses. Several
projects with an aggregate outlay of Rs. 25000 crores are in various stages of
implementation / planning across the length and breadth of the country facilitating
regional and national economic development. Recognising that tomorrow's world will belong
to those who create, own and nurture intellectual capital, your Company continues to
invest in augmenting the capability of its globally benchmarked Life Sciences and
Technology Centre to ensure that its Businesses are future-ready and contribute to
building intellectual property assets for the nation.
Your Company's Board and employees are inspired by the Vision of sustaining ITC's
position as one of India's most admired and valuable companies, creating enduring value
for all stakeholders, including the shareholders and the Indian society. The vision of
enlarging your Company's contribution to the Indian economy is driven by its ‘Let's
Put India First' credo anchored on the core values of Trusteeship, Transparency,
Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of ITC's
Corporate Governance philosophy.
Inspired by this Vision, driven by Values and powered by internal Vitality, your
Directors and employees look forward to the future with confidence and stand committed to
creating an even brighter future for all stakeholders.
|
|
On behalf of the Board |
| 13th May, 2019 |
|
|
| Gurugram |
S. PURI |
Chairman & Managing Director |
| India |
R. TANDON |
Director & Chief Financial Officer |