ITC In Trouble

Presented By
Manoj tarte 1214AMS81 Ravindra Uparkar 1214AMS83 Deepika Vijaykumar 1214AMS85 Bhavya Visharia 1214AMS8 Jimit Vora 1214AMS87 Nilesh Wagh 1214AMS88 Swapnil Wagulde 1214AMS89 Jayesh Ware 1214AMS90

ABOUT ITC

Founded in 1790 by Henry Overton Wills. Started by the UK-based tobacco major BAT. ITC Limited company headquartered in Kolkata. Headed by Yogesh Chander Deveshwar. Revenue is $6 billion and a market capitalization of over $30 Billion. Started as Imperial Tobacco Company. Initially, it was majorly in the business of cigarette manufacturing and tobacco procurement. ITC diversified business to other industries such as hotels, stationery and FMCG products.

1971: Marine product.

1974: Company name change. 1975: First hotel in Chennai. 1977: Textile Industry.

1981: Diversified into cement Business.

1989: Bukhara Restaurant.

ITC DIVERSIFICATION
ITC started UK-based tobacco major BAT called Peninsular. 1910 setup full-fledged sales organization named Imperial Tobacco Company (Imperial). BAT set up another cigarette manufacturing unit in Banglore in 1912 called Indian Leaf Tobacco Company (ILTC). BAT had transferred its holdings in Peninsular and ILTC to imperial. 1975 ITC setup in first hotel in chennai. 1977 company diversified into Textile industry.

1981 company diversified into Cement business.

Crisis Situations
Conduct interrogations FERA violations by ITC arrest were under section 35. ED arrested a few more ITC executives .
Poor corporate governance practices. Excise Duty Violation Charges Against ITC.

ILTC imperial decide to diversify into new business.

Cont.
Share Price Manipulation Charges Against ITC .
ED issued chargesheets to a few top executives in Kolkata, Delhi, Hyderabad, Guntur and Mumbai.

ITC restructured its management and corporate governance practices in early 1997.

ALLEGATIONS
ITCs legal troubles could be traced back to its associations with the US based Suresh Chitalia and Devang Chitalis. 1989 ITC started Bukhara chain of restaurants in the US jointly with its subsidiary ITC International and some Indian (NRI) Doctors. Venture ran into huge losses, ITC decide to make good the losses and honour its commitment of providing 25% return on the investment to NRI Doctors.

FERA SECTIONS VIOLATED BY ITC

Late 1960, Indian govt begun putting pressure on multinational companies to reduce there holding. Documentary evidence of FERA violations by ITC from the raids Oct 30th 1996. The arrest were made under section 35 of FERA to conduct interrogations on FERA violations by ITC in international trading deals during 1991-95.

Cont
ILTD transferred $83 million into India account maintain by chitalia group. Daily instruction to manipulate the invoice related to export $6.5million transferred from ITC global to the chitalias ITC also made payments to non-resident shareholders. ITC transferred funds in an unauthorized manner. Use of funds retained abroad for personal use by ITC executives

Cont
Imperial divested its equity in 1969 through a public offer, which raised the shareholdings of Indian individual and institutional investors from 6.6% to 26%

Regular increases in excise duty on cigarettes started having a negative impact on the companys profitability. Money laundering ITC was regarding the over-invoicing of machinery imported in Italy.

SWOT ANALYSIS
Strength Cigarette market is 22,000 cr and ITC has lions share in it Strong brand recognition and product Distribution network management Weakness Dependence on tobacco revenues Negative Connection of Tobacco

Opportunity Consumption Of personal care products Rural Market Filter cigarette segment of less than 60mm size

Threat Increasing Tax on cigarettes Competition both home & host Regulatory restrictions on cigarettes Ban on smoking

Corporate Governance Structure

Trusteeship

Transparency
Empowerment Ethical Corporate Citizenship

Corporate Governance Structure

MPs accused ITC of poor corporate governance practices and lack of transparency Suspended the committee of Directors and appointed an interim management committee. ITC divided decision making at 3 levels. 1. Board of directors for shareholders. 2. Responsibility of the board on the recomendations of subcomitees.

3. Strategic management by directors for reviewing strategic plans.

Setting Things Right

Criticism of corporate governance practices and the legal problems ITC some drastic step in its board meeting. ITC suspended the powers of the Committee of Directors and appointed an interim management committee. ITC develop new management structure comprised three tiers 1. Board of directors 2. Core management committee 3. Divisional management committee

Conculsion
ITC being a very large company and working across different sectors of business. ITC is a professionally managed organization and the core value underlying corporate philosophy is trusteeship. ITC recognize society as an important stakeholders in this enterprise and therefore it is part of responsibility to practice good corporate citizenship. It clearly delineates the roles responsibilities and authorities of the key entities in the governance structure of the company.