ITC Limited

One of India’s Most Valuable

Corporations
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 Performance Track Record- Snapshot

Total Shareholder Returns: 25%

Rs. 1 crore= Rs. 10 million

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Key Financials:2006/07

GTO
NTO
PBT
PAT 3
 Segment Revenues: FY 06/07
Rs. Crores

FY FY
Goly (%)
2006-07 2005-06

1. Segment Revenue
a) FMCG - Cigarettes 12834 11330 13.3
- Others 1704 1013 68.2
Total FMCG 14538 12343 17.8
b) Hotels 986 784 25.7
c) Agri Business 3691 2678 37.8
d) Paperboards, Paper & Packaging 2100 1896 10.8

Total 21315 17701 20.4

Less : Inter-segment revenue 1810 1476 22.6

Gross sales / Income from operations 19505 16224 20.2

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 Segment Results: FY 06/07

2. Segment Results

a) FMCG - Cigarettes
- Others
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 Segment Capital Employed: FY 06/07

Rs. Crores

FY FY
Goly (%)
2006-07 2005-06

3. Capital Employed

a) FMCG - Cigarettes* 2019 1464 37.9

- Others 940 489 92.2
Total FMCG 2959 1953 51.5

b) Hotels 1467 1374 6.8

c) Agri Business 1480 1060 39.7
d) Paperboards, Paper & Packaging 2559 1908 34.1

Total Segment Capital Employed 8465 6295 34.5

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 ITC - Key Financials – Q1 07/08

Gross Turnover External

Net Turnover External
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Segment Revenues: Q1 07/08

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Segment Results: Q1 07/08

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Segment Capital Employed: Q1 07/08

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 ITC
One of India’s most valuable corporations
 One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004

Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are
rated as the ‘most attractive companies for investors’
 Only Indian FMCG Company to feature in Forbes 2000 List

A comprehensive ranking of world’s biggest companies measured by a composite of
sales, profits, assets & market value
 Among top in :

Sustained value creation (BT-Stern Stewart survey)

Operating profits

Cash Profits
 Ranks No. 10 among Indian listed Private Sector Companies by market cap. (@27/07/07)

No. 1 in FMCG Sector
 Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey
2006)
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 Accolades & Awards (1)
• Golden Peacock Global Award for Corporate Social Responsibility in Emerging
economies for 2005 by World Council for Corporate Governance for the e-choupal and
social & farm forestry initiatives
• 2005 Golden Peacock Award for Excellence in Corporate Governance
• ITC Centre,Gurgaon awarded Platinum Green building rating by US Green
Building Council -Leadership in Energy and Environmental Design
– largest Platinum rated building in the world; 7th such building in the world
• Bhadrachalam paperboard unit :
– adjudged ‘Greenest paper mill in India’ by The Centre for Science &
Environment; won the Greentech Environment Excellence Gold Award
• ‘John Players’ adjudged the ‘Most Admired Shirt Brand of the Year’ at the Lycra®
Images Fashion Awards (LIFA) awards in Jan’06

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 Accolades & Awards (2)
• e-Choupal initiative continues to win global recognition:
– Stockholm Challenge Award 2006 in the Economic Development category
which recognises initiatives that leverage Information Technology to improve
living conditions and foster economic growth in all parts of the world.
– First Indian Company to win the Development Gateway Award 2005 for the
most exemplary contribution in the field of Information & Communication
Technologies (ICT) for development during the last 10 years
– World Business Award 2004: International Chamber of Commerce & the
HRH Prince of Wales & International Business forum
– Harvard University case study

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 ITC - Business Portfolio

ITC

FMCG: Agri Business Paperboar

Cigarettes Hotel Leaf Tobacco d
Other FMCG s Agri Paper &
Commodities Packaging

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 Strategy of Organisation to manage diversity of
Portfolio

Formal 3-tiered governance structure:

 Board of Directors :
 Comprising executive (4) and non-executive directors (8)
 Strategic supervision

 Corporate Management Committee :

 Comprising executive directors and senior managers
 Strategic management

 Divisional Chief Executive & Divisional Management Committee :

 Executive management

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 Corporate Strategies
 Sustain multiple drivers of growth, matching internal capabilities
with emerging market opportunities
 Pursue World class competitiveness in all businesses and across
the entire value chain
 Best-in-class in terms of:
 Internal Vitality
 Market Standing
 Profitability
 Strategy of Organisation and Governance processes geared to
manage multiple businesses
 Blend core competencies and leverage ITC umbrella strengths to
create new avenues of growth
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FMCG - Cigarettes

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

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 Cigarettes: Growth potential
 Cigarettes account for only 15% of tobacco consumed in India unlike
world pattern of 85% due to prolonged punitive taxation
 Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the Exchequer from tobacco sector
 Of the 58% of adult Indian males who consume tobacco, barely 15%
can afford cigarettes
 Biri : Cigarettes ratio = 10 : 1
 Annual per capita adult cigarette consumption in India is appx. one
tenth world average : 141
 Future growth depends on relative rates of growth of per capita
income and moderation in taxes
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 Per Capita Adult Cigarette Consumption
(Sticks)

1753
1662

1190

561
488

141

USA China Pakistan Nepal India World Avg.

Source : Based on Cigarette consumption data(2003) from

“World Cigarettes”,ERC Group plc.

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Hotels & Tourism

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 Hotels & Tourism industry
 Foreign arrivals into India: 4.4 million appx. Vs. 35 million in China
• The two nations were on par 2 decades ago at 750,000 arrivals
 Today, Beijing alone has as many hotel rooms as the whole of India
 India’s luxury rooms availability lower than even smaller East Asian
countries
80000
70000
60000
50000
40000
30000
20000
10000
0
HongKong Singapore India

Source: Compendium of Tourism statistics, WTO

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 Indian hotel industry

 Current supply – appx. 110,000 rooms of which 5 Star category

accounts for appx. 30%
 India needs an additional 50,000 rooms in the next 2/3 years to service
projected tourist arrivals
 Present mismatch between supply and demand expected to persist over
the short term
 As infrastructure for trade & commerce improves - growing potential
for leisure tourism

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Economic impact of the Travel & Tourism Sector

% Share of W
Travel &Tour
Demand^

WORLD 100.0
Full potential yet to be harnessed in the Indian context
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 ITC’s Hotel Business
 ITC-Welcomgroup : a leading hotel chain in India
• Strategy to establish presence in key business locations to complete the chain
achieved in end 2004
• Over 5200 rooms under 4 distinct brands
Category Brand Positioning
Luxury ITC Hotel: Luxury Collection "Mansions of Luxury"
Upper upscale WelcomHotel: Sheraton "Passion for Quality"
Upscale - mid-scale Fortune Hotels "Promise of True Value"
Heritage WelcomHeritage "Unique Experiences"

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

• Manages 18 full service mid-market properties (2650 rooms)

under the Fortune Hotels brand
– 100% subsidiary company : Fortune Park Hotels Ltd.
• Also operates 51 properties under the ‘WelcomHeritage’
brand
– Maharaja Heritage Resorts Ltd. 50% JV with Marudhar Hotels
(P) Ltd.

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Paperboards, Paper
&
Packaging

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 Indian paperboard market

 Annual paperboard demand – appx. 1.1 million tonnes

 Fragmented capacity & obsolete technology

 Low per capita usage at around 6 kgs p.a. (world average – over 50 kgs
p.a.)
 Indian paperboard market growing at 7% p.a.

 Value Added Coated board - the fastest growing segment (20% p.a.) in
India driven by the growing sophistication of the consumer

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 Paperboard Demand Projections - Asia

 Asian region demand (excluding Japan) growing by 0.5

million tonnes per annum
 Significant export opportunities for high quality Indian
manufacturers
• ITC paperboards exports - Rs. 2 billion appx.

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 ITC’s Paperboards Business
 Market leader in growth segment - value added coated boards
 World-class contemporary technology
• Elemental Chlorine Free (ECF) Pulp Mill fully operational – only one of
its kind in India meeting world-class environmental standards
 Internationally competitive quality and cost
 Social farm forestry in mill command area to improve access to cost
effective fibre & to attain self-sufficiency
• Biotech research based high yielding Clones – effectiveness tested in
nearly 68,000 hectares
 Fully integrated operations with in-house pulping capacity at appx. 1.10
lac MT
• Expansion programme underway; source of sustainable competitive
advantage
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 ITC’s Paperboards & Packaging businesses

 Capacity expansion projects underway

• 100000 TPA paper machine (to support Stationery business growth plans)

• 90000 TPA paperboards machine

 ITC’s packaging SBU -India’s largest converter of paperboard into high

quality printed packaging
• Leading supplier to Indian FMCG segment

• Provides superior packaging solutions to the cigarettes and new FMCG

businesses

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Agri Businesses
- Leaf Tobacco
- Agri Commodities

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 Indian Leaf Tobacco industry
 India – the third largest producer of tobacco
 However, India’s share is only 7% in world tobacco trade
 Upgradation of tobacco consumption from other formats to cigarettes
will enable:
• growing domestic base
• larger opportunities for value added exports
 ITC – India’s largest buyer, processor, consumer & exporter of
cigarette tobaccos
 Pioneering cultivation of flavourful Flue-cured, superior Burley and
Oriental tobaccos in India

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 ITC’s Agri Commodity Business

 Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products,

Coffee etc.
 Unique CRM programme in commodity exports
 Leveraging IT for the transformational ‘e-Choupal’ initiative
 Rural India’s largest Internet-based intervention
 Over 38000 villages linked through around 6400 e-Choupals servicing
over 3.5 million farmers
 Distinctive sourcing capability for ITC’s Foods business

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

* Information and Communication Technologies for Development

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

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Future Growth & Value Capture

New FMCG Initiatives

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 Strategic Rationale
 Blend multiple competencies residing within the ITC Group to create
new avenues of growth
 Best fit between internal capabilities and emerging market opportunities

 Each segment enhances the depth and width of ITC’s FMCG

distribution capability
 Business model retains critical elements of value chains within ITC with
other elements outsourced
• Contributing to the competitiveness of SMEs

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

• Aashirvaad Atta:
– Current market leader amongst national branded players; leverages the e-
choupal network for cost-quality optimisation and region specific
offerings
• Sunfeast Biscuits:
– Differentiated & innovative products; continues to build consumer
franchise; distributed & outsourced supply chain being ramped up
• Number of innovative products in the pipeline leveraging the capabilities
of the ITC R&D Centre

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 FMCG Business Initiatives
Lifestyle Retailing
 Leverages trade mark and services expertise of hotels
 Relaxed wear market growth > 25% p.a
 Upmarket product range available in exclusive Wills Lifestyle stores and
multi-branded outlets/ large format retail stores across the country
 State-of-the-art Master Facility aids speed of execution
 Outsourced JIT plant for ‘quick response’ manufacturing
 Product and brand range being expanded
• Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills
Sport’ relaxed wear and ‘Wills Clublife’ evening wear
• Strong distribution network in place for the mid-market brand ‘John
Players’

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 FMCG Business Initiatives
Greetings, Gifting & Stationery

 Leverages print and paper know-how

 An emerging market in India - growth driven by increasing cross-
cultural exposure
 ITC’s ‘Expressions’ range commenced with greeting cards; now
widened to include stationery & gifting
 Robust distribution network in place to scale up the Stationery business
significantly
• ‘Classmate’ brand already the most widely distributed brand in India
 Serves to expand the width of ITC’s FMCG distribution capability with
negligible incremental investment

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 FMCG Business Initiatives
Safety Matches
 Current industry consumer spend estimated at Rs. 1250 crores p.a. for 24
billion match boxes
 Fragmented supply base arising from policy of reservation for small scale
industry
 ITC markets its brands with value added products across each price point
• Support SMEs with complementary marketing strengths
 ‘AIM’ – India’s largest selling Safety Matches brand
 Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as
at 31/03/07: 94.25%)
• Key brands: Homelites, Ship, Cheetah Fight etc.

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 FMCG Business Initiatives
Incense sticks (Agarbattis)

 Current industry consumer spend estimated at over Rs. 900 crores p.a.
 Fragmented supply base arising from policy of reservation for small
scale industry
 ITC markets its brands with value added products across each price
point
 Support cottage sector with complementary marketing strengths
 ‘Mangaldeep’ : the only National brand in the country

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 FMCG business initiatives…….

 Concurrently, ITC’s IT subsidiary assists in web-enabling business

processes
 CRM initiatives
 ERP transaction processing systems
 SCM including the e-choupal capability
 … hosted on ITC’s Virtual Private Network
 ITC awarded the best IT user in FMCG category by Nasscom

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 Future Positioning of ITC
A leading FMCG player in India

VPN providing SCM, ERP & CRM

F capability M
A e-choupal rural two-way A
R fulfillment capability R
M K
Cigarette Trade Marketing capability E
E
R
Expanded FMCG distribution capability T
S S
Greetin
Brande Lifestyl Matches
g
d e &
cards/s
Foods retailin Agarbat
tatione
g tis
ry
basis for strategic partnerships with other FMCG brand owne
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 Forward-looking Statements
Statements in this presentation describing the Company’s
objectives, future prospects, estimates, expectations etc. may
be “forward looking statements” within the meaning of
applicable securities laws and regulations. Investors are
cautioned that “forward looking statements” are based on
certain assumptions of future events over which the Company
exercises no control. Therefore there can be no guarantee as
to their accuracy. These statements involve a number of
risks, uncertainties and other factors that could cause actual
results to differ materially from those that may be projected
or implied by these forward looking statements. Such risks
and uncertainties include, but are not limited to: growth,
competition, acquisitions, domestic and international
economic conditions affecting demand, supply and price
conditions in the various businesses in the Company’s
portfolio, changes in Government regulations, tax regimes
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and other statutes, and the ability to attract and retain high