ITC Ltd:Annual Report 2023-24 Analysis

ITC Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Established in 1910 as the Imperial Tobacco Company of India Limited. The company’s name was changed to ITC Limited in 1974.

Headquarters Location and Global Presence #

Headquartered in Kolkata, West Bengal, India. ITC has a significant presence in India and exports its products to over 90 countries.

Company Vision and Mission #

• Vision: To be an exemplar in Sustainability Practices.
• Mission: To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value.

Key Milestones in Their Growth Journey #

• 1910: Established as Imperial Tobacco Company of India Limited.
• 1975: Diversification into the Hotels business with the acquisition of Hotel Chola in Chennai.
• 1984: Entry into the edible oils market.
• 1990: Launch of “Classic” brand cigarettes.
• 2000: Expansion into the packaged foods market.
• 2002: Launch of e-Choupal initiative.
• 2010: Celebrated its centenary.
• Present: Continues to diversify and expand its presence across various sectors, focusing on sustainability and innovation.

Stock Exchange Listing Details and Market Capitalization #

Listed on the Bombay Stock Exchange (BSE: 500875) and the National Stock Exchange of India (NSE: ITC). As of October 26, 2023, market capitalization is around ₹561,061 Crore.

Recent Financial Performance Highlights #

In the fiscal year 2023, ITC reported a robust financial performance, marked by revenue growth and improved profitability across various segments. The company continues to invest in brand building, innovation, and sustainable practices to drive long-term value creation.

Management Team and Leadership Structure #

• Chairman: Sanjiv Puri

Notable Awards or Recognitions #

ITC has received numerous awards for its performance, sustainability efforts, and corporate governance. These include recognition for its sustainability practices, brand value, and employee relations.

Their Products #

Complete Product Portfolio with Categories #

• FMCG:

  • Foods: Aashirvaad, Sunfeast, Bingo!, YiPPee!, Kitchens of India, B Natural, ITC Master Chef, Candyman, Fabelle.
  • Personal Care: Fiama, Vivel, Engage, Savlon, Charmis, Dermafique, Nimyle.
  • Education and Stationery Products: Classmate, Paperkraft.
  • Agarbatti and Safety Matches: Mangaldeep, Aim.

• Cigarettes and Cigars: India Kings, Classic, Gold Flake, Navy Cut, Capstan, Berkeley, Bristol.

• Hotels: ITC Hotels, Welcomhotel, Fortune Hotels, WelcomHeritage.

• Paperboards and Packaging: Printing, Writing, Packaging, Specialty Papers, Graphic Boards.

• Agri-Business: Wheat, Rice, Pulses, Spices, Coffee.

• Information Technology: ITC Infotech.

Flagship or Signature Product Lines #

• Aashirvaad: Atta (wheat flour) and other staples.
• Sunfeast: Biscuits and confectionery.
• Classmate: Stationery products.
• ITC Hotels: Luxury hospitality.
• Gold Flake: Cigarettes.

Key Technological Innovations or Patents #

• e-Choupal: An initiative leveraging technology to connect with farmers.
• Sustainable packaging solutions: Focus on reducing environmental impact.

Manufacturing Facilities and Production Capacity #

ITC has multiple manufacturing facilities across India for its diverse product portfolio. Information on precise production capacities isn’t publicly available.

Quality Certifications and Standards #

ITC follows stringent quality control measures and holds relevant certifications such as ISO 9001, ISO 14001, and HACCP across its various businesses.

Unique Selling Propositions or Technological Advantages #

• Strong Brand Equity
• Extensive Distribution Network
• Sustainability Focus
• Backward Integration in Agri-Business (e-Choupal)

Recent Product Launches or R&D Initiatives #

ITC continuously launches new products and variants across its FMCG portfolio. Recent initiatives include expansion of its healthy foods range, introduction of innovative packaging solutions, and new flavors in its snacks and confectionery categories.

Primary Customers #

Target Industries and Sectors #

• Consumer Goods
• Hospitality
• Agriculture
• Paper and Packaging

Geographic Markets (Domestic vs. International) #

Predominantly focused on the Indian domestic market, with increasing emphasis on exports to international markets.

Major Client Segments (agricultural, industrial, residential, etc.) #

• Residential: FMCG products for households.
• Agricultural: Farmers through e-Choupal and Agri-Business division.
• Industrial: Paperboard and packaging solutions for various industries.
• Hospitality: Business and leisure travelers.

Distribution Network and Sales Channels #

ITC boasts an extensive distribution network spanning urban and rural India. Sales channels include:

• Retail outlets (general stores, supermarkets, etc.)
• Wholesale distributors
• Online channels
• Direct sales (e.g., for paperboard and packaging)
• Institutional sales (hotels, restaurants, etc.)

Major Competitors #

Direct Competitors in India and Globally #

• FMCG: Hindustan Unilever Limited (HUL), Nestle India, Britannia Industries, Godrej Consumer Products.
• Hotels: Taj Hotels, Oberoi Hotels & Resorts, Marriott International.
• Paperboards & Packaging: JK Paper, West Coast Paper Mills.
• Cigarettes: Godfrey Phillips India.

Comparative Market Share Analysis #

ITC holds a significant market share in the cigarettes segment and is gaining ground in various FMCG categories. Market share data varies across product categories and is subject to change.

Competitive Advantages and Disadvantages #

• Advantages: Strong brand reputation, extensive distribution network, diversified portfolio, backward integration in agri-business, focus on sustainability.
• Disadvantages: Dependence on the cigarettes business, competition from established players in various FMCG categories.

How They Differentiate from Competitors #

• Emphasis on quality and innovation.
• Strong rural reach through e-Choupal.
• Focus on sustainability and responsible business practices.
• Diversified product portfolio catering to various consumer needs.

Industry Challenges and Opportunities #

• Challenges: Increasing competition in the FMCG sector, regulatory hurdles for the cigarettes business, fluctuating raw material prices, evolving consumer preferences.
• Opportunities: Growing demand for packaged foods and personal care products in India, increasing disposable incomes, rising awareness about health and hygiene, expanding e-commerce sector.

Future Outlook #

Expansion Plans or Growth Strategy #

ITC is focusing on expanding its FMCG business, strengthening its presence in high-growth categories, and leveraging its distribution network to reach new markets. They aim to expand its FMCG business through organic growth, strategic acquisitions, and partnerships.

Upcoming Products or Innovations #

ITC continues to invest in R&D and is expected to launch new products in the foods, personal care, and other FMCG categories. Emphasis is on developing innovative and sustainable products that cater to evolving consumer needs.

Sustainability Initiatives or ESG Commitments #

ITC has a strong commitment to sustainability and has implemented various initiatives to reduce its environmental footprint, conserve resources, and promote social development. The company aims to be carbon positive, water positive, and waste positive.

Industry Trends Affecting Their Business #

• Growing demand for healthy and natural products.
• Increasing adoption of e-commerce and digital channels.
• Rising awareness about sustainability and ethical sourcing.
• Evolving regulatory landscape.

Long-Term Vision and Strategic Goals #

ITC’s long-term vision is to be a leading Indian conglomerate with a strong presence in multiple sectors, driven by innovation, sustainability, and value creation for stakeholders. Their strategic goals include expanding its FMCG business, strengthening its leadership position in cigarettes, enhancing its presence in the hospitality sector, and driving sustainable growth across all its businesses.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics (Standalone) #

• Gross Revenue: FY22: ₹59,101 Cr, FY23: ₹69,481 Cr, FY24: ₹69,446 Cr. Showed robust growth initially but saw a slight decline Year on Year in FY24.
• EBITDA: FY22: ₹18,934 Cr, FY23: ₹23,944 Cr, FY24: ₹24,479 Cr. Consistent growth throughout the period.
• Profit Before Tax (PBT): FY22: ₹19,830 Cr, FY23: ₹24,677 Cr, FY24: ₹26,323 Cr. Demonstrated steady growth.
• Profit After Tax (PAT): FY22: ₹15,058 Cr, FY23: ₹18,753 Cr, FY24: ₹20,422 Cr. Consistent increase, indicating improved profitability.
• Earnings Per Share (EPS) - Basic: Increased, FY22: 12.22, FY23: 15.15, FY24: 16.39.
• Dividends: Showed a consistent dividend payout with an increase. Total dividend (including interim) was ₹11.50 per share in FY22, rising to ₹15.50 in FY23, and to a proposed ₹13.75 in FY24.

Business Segment Performance #

• FMCG - Cigarettes: FY24 saw volume consolidation on a high base. Differentiated variants and the premium segment performed well. Revenue for FY24 was not provided.
• FMCG - Others: Segment Revenue: FY22, not disclosed, FY23: ₹19,122.50 Cr, FY24: ₹20,966.83 Cr. Strong growth on high base, ahead of industry. Segment EBITDA: Growth of 19.7% to ₹2,338.50 crores with margins improving by 94 bps to 11.2%.
• Hotels: Record high Revenue and profits. Segment Revenue: FY23: 2,585.03 Cr, FY24: ₹2,989.50 Cr, (15.6% growth). Segment EBITDA at ₹1,049.88 Cr, 26.2% growth. EBITDA margin expansion of 295 bps to 35.1%.
• Agri Business: Limited business opportunities in bulk commodities due to Government restrictions. Value-added agri products showed strong growth, and the leaf tobacco business performed well. Financial figures for revenue not provided.
• Paperboards, Paper & Packaging: Faced headwinds with soft demand, lower net realisations, high wood costs, and high base effect impacting margins. Structural cost savings and Industry 4.0 helped mitigate the pressure partially. Financial figures for revenue are not provided.

Major Strategic Initiatives and their Progress #

• ‘ITC Next’ Strategy: Ongoing, focusing on multiple growth drivers, digital adoption, sustainability, cost optimisation, and disruptive business models.
• ITCMAARS (Metamarket for Advanced Agriculture and Rural Services): Rapidly scaled up, covering over 1.5 million farmers and over 1,650 FPOs.
• ‘Mission DigiArc’: Next-generation digital architecture, implemented across the value chain.
• Sustainability 2.0 Agenda: Setting higher sustainability targets, focusing on net-zero, water security, circular economy, and biodiversity.
• Asset-right Strategy (Hotels) : Focus on existing asset, increase footprint of management and sweat assets.
• Food Tech: Launched food tech services with cloud kitchens in Bengaluru and Chennai.

Risk Landscape Changes #

• Climate Change: Increased focus on climate risk assessment across 140 sites and agri value chains, developing adaptation plans.
• Cyber Security: Implementation of a multi-tier cyber defence architecture and a Cyber Security Committee. Transitioning to cloud-based systems is increasing cyber threat exposure.
• Agri-Commodity Price Volatility: Managed through policy advocacy, strategic sourcing, and multi-modal logistics. Government restrictions on agri-commodity exports impacted the Agri Business.
• Illicit Trade (Cigarettes): Continues to be a significant challenge, with revenue loss to the exchequer estimated at around ₹21,000 crores annually. Tax stability is seen as critical to address this.

ESG Initiatives and Metrics #

• Sustainability 2.0 Goals: Set ambitious targets for 2030, including 50% renewable energy, 100% grid electricity from renewables, reduction in specific energy and GHG emissions, water stewardship, plastic waste management, sustainable agriculture, and biodiversity conservation.
• Renewable Energy: 50% of total energy from renewable sources, ahead of 2030 target.
• Water Positive: Achieved water positive status for 22 years. Rainwater harvesting potential created: 54 million kl (FY 2023-24).
• Carbon Positive: Achieved carbon positive status for 19 years. Forestry initiatives sequester nearly 60 lakh tonnes of CO2e annually.
• Solid Waste Recycling Positive: Achieved status for 17 years. Plastic Neutral since FY22.
• Green Buildings: 40 platinum-rated green buildings. 12 LEED Zero Carbon certified hotels. 4 LEED Zero Water certified hotels.
• Social Investment: Programs Support Sustainable Livelihood: Horizon I (climate-smart agriculture, water stewardship, afforestation, livestock) and Horizon II (women empowerment, education, public health, skilling, sanitation).

Management Outlook #

• Positive: The management outlook is generally positive, expecting continued growth and scaling up of FMCG businesses, leveraging synergies and a future-ready portfolio.
• Focus: Continued investment in strategic initiatives, digital transformation, and sustainability.
• Agri Business: Building NextGen agriculture value chains, leveraging ITCMAARS, and scaling up the Value-Added Agri Products portfolio.
• Paperboards, Paper and Packaging: Focus on value-added paperboard, plastic substitution, and operational efficiency.
• Hotels: Expects to continue “asset right” strategy, with new revenue streams, to provide best-in-class consumer experience.
• Challenges Management are conscious about impact of ongoing Climate Change , Geo-Political Tensions and Supply Chain Disruptions.

Detailed Analysis #

ITC Limited Financial Position Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(INR Crores)

Significant Changes in Major Line Items (>10% YoY) #

FY24 vs FY23

• FMCG - Cigarettes Assets: Increased by 25.67%, primarily due to Capital expenditure in Cigarettes Business .
• Agri Business Assets: Increased by 22.12% , primarily due to increase in inventory .
• Unallocated Assets: Increased by 3.17% , primarily due to increase in investments.
• FMCG-Cigarettes Liabilities:Increased by 3.8%
• Agri Business Liabilities: Decreased by 16.35% , primarily due to decrease in trade payables.
• Unallocated Liabilities: Increased by 5.83%

FY23 vs FY22

• FMCG - Cigarettes Assets: Increased by 5.19%.
• Agri Business Assets: Increased by 8.35%
• Unallocated Assets: Increased by 5.99%.
• FMCG-Cigarettes Liabilities:Increased by 6.25%.
• Agri Business Liabilities: Increased by 45.01%.
• Unallocated Liabilities: Increased by 5.99%.

Asset Quality Metrics #

(INR Crores)

Debt Structure and Maturity Profile #

(INR Crores)

Most of the borrowings are classified as current liabilities. The sales tax deferment loans are interest-free, reducing the immediate financial burden.

Off-Balance Sheet Items #

(INR Crores)

Financial Analysis of ITC Limited #

Profitability Ratios (3-Year Trends) #

Consolidated Data #

• Return on Equity (ROE):

  • FY24: 29.22%
  • FY23: 28.99%
  • FY22: Data not available

• Operating Profit Margin:

  • FY24: 38%
  • FY23: 35.6%
  • FY22: Data not available

• Net Profit Margin:

  • FY24: 29.4%
  • FY23: 26.9%
  • FY22: Data not available

Segment-wise PBIT Margins (FY24 Only) #

• Hotels: 25.22%
• Agri Business: 7.94%
• Paperboards, Paper and Packaging: 16.51%

Liquidity Metrics (Consolidated Data) #

• Current Ratio:

  • FY24: 2.91
  • FY23: 2.84

• Cash Ratio:

  • FY24: 0.53
  • FY23: 0.33

Efficiency Ratios (Consolidated Data) #

• Inventory Turnover:

  • FY24: 5.98
  • FY23: 6.75

• Receivables Turnover:

  • FY24: 24.66
  • FY23: 32.51

Leverage Metrics (Consolidated Data) #

• Debt/Equity Ratio: Negligible, as the company has very low debt.

Working Capital Ratios (Consolidated Data) #

• Net Capital Turnover Ratio:
  • FY24: 2.94
  • FY23: 3.05

Business Segments #

Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• FMCG - Cigarettes: Segment Revenue consolidated on a high base amidst subdued demand. The financial year 2023-24 showed an appx. volume growth of 3% vs. 7% p.a. average in the pre-pandemic period.
• FMCG - Others: Segment Revenue grew by 9.6% to ’ 20,966.83 crores. Segment EBITDA grew by 19.7% to ’ 2,338.50 crores. Segment EBITDA margin expanded by 94 bps to 11.2%.
• Hotels: Segment Revenue grew by 15.6% to ’ 2,989.50 crores. Segment EBITDA grew by 26.2% to ’ 1,049.88 crores. Segment EBITDA margin expanded by 295 bps to 35.1%.
• Agri Business: Strategic portfolio of value-added agri products recorded strong growth. Overall, limited business opportunities in bulk commodities due to government restrictions.
• Paperboards, Paper & Packaging: Segment faced headwinds with soft demand and high wood costs impacting margins. Integrated business model and Industry 4.0 initiatives partly mitigated margin pressure.

Market Share and Competitive Position #

• FMCG - Cigarettes: Reinforced market standing through focused interventions; illicit trade remains a challenge. Differentiated variants and premium segment performed well.
• FMCG - Others: Grew ahead of the industry in both urban and rural markets. ‘Aashirvaad’ is No.1 in Branded Atta, ‘Sunfeast’ is No.1 in Cream Biscuits, ‘Bingo!’ is No.1 in Bridges segment of Snack Foods, ‘Classmate’ is No.1 in Notebooks, ‘YiPPee!’ is No.2 in Noodles, and ‘Mangaldeep’ is No.2 in Agarbattis (No.1 in Dhoop segment).
• Hotels: The Group operates over 130 properties across more than 80 destinations. Footprint of management contracts increased.
• Paperboards, Paper & Packaging: Clear market leader in scale and profitability. Over 50% of the energy consumption is from renewable sources.

Key Products/Services Performance #

• FMCG - Others:
  • Staples (Aashirvaad): Robust growth on a high base; value-added atta portfolio saw strong growth.
  • Spices (Sunrise & Aashirvaad): Strong growth due to distribution expansion and region-specific products.
  • Biscuits (Sunfeast): Resilient performance; ‘Dark Fantasy’ maintained leadership in the premium segment.
  • Snacks (Bingo!): Launched millet-based offerings; maintained leadership in Bridges segment and potato chips in South India.
  • Noodles (YiPPee!): Strengthened market standing; launched millet-based noodles.
  • Frozen Foods: Strong growth with innovative offerings.
  • Dairy (Aashirvaad Svasti): Strong growth led by the premium milk variant.
  • Personal Wash: ‘Fiama’ recorded strong growth; ‘Vivel’ saw healthy growth.
  • Fragrances (Engage): Resilient performance, premium perfume segment witnessed strong growth.
  • Education and Stationery Products: Strengthened its market leadership position in the industry.
  • Agarbatti: Mangaldeep continued to enhance its standing in the category.
  • Safety Matches: The Business strengthened its market leadership position.
• Hotels: RevPAR growth was driven by retail, MICE, and marquee events.
• Paperboards & Specialty Papers: Specialty Papers Segment delivered robust performance.

Geographic Distribution and Market Penetration #

• FMCG - Others: Expanded export footprint to over 70 countries. Exploring strategic opportunities in proximal markets. Distribution reach expanded to over 25 crore households in India.
• Agri Business: Operations span 22 states and over 20 agri-value chains. ITCMAARS covers 1650 FPOs in 10 states, with over 15 lakh farmer registrations.
• Hotels: First international hotel, ITC Ratnadipa, launched in Colombo, Sri Lanka.
• Paper & Paperboard Mill: Located in Telangana.

Operational Efficiency Metrics #

• FMCG - Others: Investments in Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) are enhancing product freshness, supply chain agility, and reducing costs. Delayering of supply chain operations through direct-to-market shipments.
• Agri Business: Multi-modal logistics capability and agile supply chain operations leveraged.
• Paperboards, Paper & Packaging: Integrated business model, Industry 4.0 initiatives, and capacity augmentation in Value-Added Paperboards aided margin protection. Over 50% of total energy consumed at manufacturing units is from renewable sources.
• TM&D: Deployed innovative delivery models, strategic partnerships. Enhanced distribution to reach approximately 7 million retail outlets, with increased market coverage.

Growth Initiatives and Challenges #

• FMCG - Others: Focus on a 4P strategy (Portfolio, Premiumisation, Penetration, Personalisation), leveraging power brands, and building categories of the future.
• Agri Business: Focus on NextGen Agri by fostering market-responsive value-chains, promoting climate-smart agriculture, and digitally empowering farmers through ITCMAARS.
• Hotels: “Asset-right” strategy focusing on sweating existing assets and increasing management contracts.
• Paperboards, Paper & Packaging: Focus on sustainable packaging solutions, including recyclable paperboards and moulded fibre products.
• General Challenges:
  • Global economic slowdown and uncertainty.
  • Subdued consumption demand, especially in rural markets, impacting FMCG.
  • Illicit trade impacting the Cigarettes business.
  • Agri-commodity export restrictions impacting Agri Business.
  • Input cost volatility and competition from cheaper imports impacting Paperboards & Packaging.
  • Climate change and extreme weather events.

Risk Assessment Framework #

FMCG - Cigarettes #

1. Strategic Risks #

• Severity: High.
• Likelihood: High.
• Trend: Stable/Increasing.
• Analysis: Continued market share leadership is challenged by the growth of illicit cigarettes, representing about 1/3rd of the legal industry volume. Sustained growth momentum with consolidation.
• Mitigation Strategies: Portfolio fortification, innovation, premiumisation, enhanced product availability. Focused portfolio interventions and agile execution. Differentiated varients introduced.
• Control Effectiveness: Partially Effective. Market standing reinforced, but illicit trade remains elevated.
• Potential Financial Impact: Significant revenue loss due to illicit trade (estimated at ’ 21,000 crores annually for the exchequer).

2. Operational Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Decreasing.
• Analysis: Supply chain disruptions and input cost volatility are key operational risks.
• Mitigation Strategies: Leverage of integrated seed-to-smoke value chain, Industry 4.0, and smart manufacturing initiatives. Investments in ICMLs for improved supply chain agility.
• Control Effectiveness: Effective. Structural advantages aid in mitigating pressure on margins.
• Potential Financial Impact: Cost increases and operational inefficiencies, partially mitigated.

3. Financial Risks #

• Severity: High.
• Likelihood: High.
• Trend: Increasing.
• Analysis: Punitive and discriminatory taxation leads to consumption migration to illicit and tax-evaded tobacco products. Taxes are multiple times higher than those in developed countries.
• Mitigation Strategies: Engagement with policymakers for pragmatic, equitable, and non-discriminatory regulations.
• Control Effectiveness: Limited. Stable tax regimes show buoyancy in tax collections, but steep increases adversely affect tax collections and volumes.
• Potential Financial Impact: Substantial revenue loss due to tax arbitrage.

4. Compliance/Regulatory Risks #

• Severity: High.
• Likelihood: High.
• Trend: Stable.
• Analysis: Stringent tobacco control measures and large pictorial warnings (85% of the packet surface) are regulatory requirements.
• Mitigation Strategies: Compliance with the Cigarettes and Other Tobacco Products Act (COTPA) and other applicable laws. Ongoing litigation challenging the 85% pictorial warnings.
• Control Effectiveness: High for current regulations; outcome of ongoing legal challenges is uncertain.
• Potential Financial Impact: Legal and compliance costs, potential changes in packaging and marketing regulations.

5. Emerging Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Analysis: Growth of smuggled international brands without required pictorial warnings, creating a misleading perception of safety, and increasing market share due to lower pricing because of tax avoidance.
• Mitigation Strategies: Counter illicit trade by focusing on market interventions and promoting “Make in India”.
• Potential Financial impact: Reduced demand for the company’s products.

FMCG - Others #

1. Strategic Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Stable.
• Analysis: Intense competition from regional/local players and changing consumer preferences.
• Mitigation Strategies: Focus on a consumer-centric 4P strategy, premiumisation, market penetration, and omni-channel strategy. Value accretive acquisitions and collaborations.
• Control Effectiveness: Good. Segment Revenue grew by 9.6% and EBITDA by 19.7%.
• Potential Financial Impact: Market share volatility, potential for margin pressure.

2. Operational Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Decreasing.
• Analysis: Supply chain efficiency, input cost volatility, and gestation costs of new initiatives.
• Mitigation Strategies: Leveraging distributed manufacturing and logistics infrastructure (ICMLs), smart buying and manufacturing, and Industry 4.0 technologies.
• Control Effectiveness: Effective. Margin expansion due to premiumisation, supply chain efficiency, and cost management.
• Potential Financial Impact: Cost fluctuations, operational inefficiencies.

3. Financial Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Stable.
• Analysis: Weak demand conditions and significant increase in competitive intensity. High base effect.
• Mitigation Strategies: Agile cost management and judicious pricing actions. Rapid scaling up.
• Control Effectiveness: Positive. Segment EBITDA margins expanded by 94 bps to 11.2%.
• Potential Financial Impact: Pressure on margins, potential revenue growth limitations.

4. Compliance/Regulatory Risks #

• Severity: Moderate.
• Likelihood: Low.
• Trend: Stable.
• Analysis: Compliance with food safety and personal care product standards.
• Mitigation Strategies: Adherence to HACCP/ISO-certified manufacturing, compliance with all applicable laws.
• Control Effectiveness: High. All branded packaged food products manufactured in certified locations.
• Potential Financial Impact: Regulatory penalties, reputational damage.

5. Emerging Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Analysis: Rapid adoption of millets, new consumer trends (health, nutrition, etc.).
• Mitigation Strategies: “Help India Eat Better” strategy, introduction of millet-based products, focus on “good-for-you” products.
• Potential Financial Impact: Potential shift in consumer demand.

Hotels #

1. Strategic Risks #

• Severity: Moderate.
• Likelihood: Low.
• Trend: Decreasing.
• Analysis: Competitive positioning in the luxury and upscale hotel segments.
• Mitigation Strategies: “Asset-right” approach, focus on management contracts, and sweating existing assets. Creation of new revenue streams.
• Control Effectiveness: High. Segment Revenue and EBITDA growth.
• Potential Financial Impact: Revenue and profit fluctuations based on market conditions.

2. Operational Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Stable.
• Analysis: Fluctuating occupancy rates, dependence on tourism trends, and managing diverse properties. High competition from other operators.
• Mitigation Strategies: Multi-dimensional strategy, dynamic pricing, focus on customer segments (retail, MICE), and leveraging marquee events.
• Control Effectiveness: Positive. Strong growth in RevPAR.
• Potential Financial Impact: Revenue volatility, cost management challenges.

3. Financial Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Decreasing
• Analysis: Record high revenue and profit.
• Mitigation Strategies: Cost optimisation, efficient operations.
• Control Effectiveness: Very Effective. Segment Revenue grew by 15.6% and Segment EBITDA by 26.2%.
• Potential Financial Impact: Limited financial risk due to strong performance.

4. Compliance/Regulatory Risks #

• Severity: Low.
• Likelihood: Low.
• Trend: Stable.
• Analysis: Compliance with hospitality industry regulations.
• Mitigation Strategies: Robust governance and internal control systems.
• Control Effectiveness: High. No significant issues reported.
• Potential Financial Impact: Regulatory penalties, reputational damage.

5. Emerging Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Analysis: Transition to sustainable practices, growing consumer demand for responsible luxury.
• Mitigation Strategies: “Responsible Luxury” ethos, LEED certifications, focus on water and carbon neutrality.
• Potential Financial impact: Reputational gains in the medium term

Paperboards, Paper & Packaging #

1. Strategic Risks #

• Severity: High.
• Likelihood: High.
• Trend: Increasing.
• Analysis: Competition from cheap Chinese supplies in international markets, soft demand conditions.
• Mitigation Strategies: Focus on value-added paperboard (VAP) segment, customised solutions, and eco-labelled products.
• Control Effectiveness: Moderate. Leadership position maintained in VAP, but external factors impact overall performance.
• Potential Financial Impact: Pressure on margins, potential revenue decline.

2. Operational Risks #

• Severity: High.
• Likelihood: High.
• Trend: Stable.
• Analysis: Unprecedented escalation in domestic wood costs, supply chain efficiencies.
• Mitigation Strategies: Integrated business model, Industry 4.0 initiatives, strategic investments in High Pressure Recovery Boiler, capacity augmentation.
• Control Effectiveness: Partially Effective. Pressure on margins partially mitigated.
• Potential Financial Impact: Cost increases, potential production limitations.

3. Financial Risks #

• Severity: High.
• Likelihood: High.
• Trend: Increasing.
• Analysis: Subdued realisations due to depressed demand, high wood costs, and high base effect.
• Mitigation Strategies: Cost optimisation, operational efficiency improvements.
• Control Effectiveness: Partially Effective. Margins were under pressure during the year.
• Potential Financial Impact: Significant impact on margins and profitability.

4. Compliance/Regulatory Risks #

• Severity: Moderate.
• Likelihood: Low.
• Trend: Stable.
• Analysis: Compliance with environmental regulations and standards.
• Mitigation Strategies: Adherence to ISO standards, waste recycling, renewable energy usage.
• Control Effectiveness: High. All manufacturing units recycle nearly 100% of solid waste.
• Potential Financial Impact: Regulatory penalties, reputational damage.

5. Emerging Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing
• Analysis: Growing need for sustainable packaging solutions.
• Mitigation Strategies: Promoting sustainable packaging solutions that substitute single-use plastics (FiloPack, FiloServe, etc.).
• Potential Financial Impact: Opportunities in the sustainable packaging market.

Agri Business #

1. Strategic Risks #

• Severity: High.
• Likelihood: High.
• Trend: Stable
• Analysis: Government restrictions on agri-commodity exports due to food security and inflation concerns.
• Mitigation Strategies: Focus on scaling up Value-Added Agri Products (VAAP) portfolio.
• Control Effectiveness: Limited. Operations were impacted by government restrictions.
• Potential Financial Impact: Significant limitation on business opportunities in bulk commodities.

2. Operational Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Decreasing
• Analysis: Climate change impact on crop production, farmer incomes.
• Mitigation Strategies: Climate Smart Agriculture interventions, promotion of FPOs, digitalisation through ITCMAARS.
• Control Effectiveness: Progressing. ITCMAARS covers over 1.5 million farmers.
• Potential Financial Impact: Crop yield variability, supply chain disruptions.

3. Financial Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Stable
• Analysis: Volatility in agri-commodity prices, impact of global supply chain disruptions.
• Mitigation Strategies: Sourcing expertise, multi-modal logistics, and customer relationships.
• Control Effectiveness: Moderate. Strategic portfolio of value-added products recorded growth.
• Potential Financial Impact: Fluctuations in revenue and profitability.

4. Compliance/Regulatory Risks #

• Severity: Moderate.
• Likelihood: Low.
• Trend: Stable
• Analysis: Compliance with food safety and export regulations.
• Mitigation Strategies: Adherence to global standards, traceability, and identity-preserved sourcing.
• Control Effectiveness: High. Maintained position as a preferred supplier in ‘food safe’ markets.
• Potential Financial Impact: Regulatory penalties, restrictions on exports.

5. Emerging Risks #

• Severity: Moderate.
• Likelihood: Moderate.
• Trend: Increasing.
• Analysis: Evolving consumer preferences for nutritious and sustainably sourced food products.
• Mitigation Strategies: ITC Mission Millets, focus on sustainable and climate smart agriculture.
• Potential Financial Impact: Market share loss if consumer preferences are not satisfied.

FMCG - Cigarettes #

Long-Term Strategic Goals and Progress #

Consolidation of volumes on a high base was achieved, although challenged by subdued demand and elevated illicit trade. Focus remains on reinforcing market standing through portfolio and market interventions.

Competitive Advantages and Market Positioning #

Leadership position is driven by a seed-to-smoke value chain, consumer insights, innovation, and product development. The segment countered illicit trade and reinforced market standing through portfolio innovation and enhanced product availability. Differentiated variants and premium segment performed well.

Innovation Initiatives and R&D Effectiveness #

Introduction of differentiated variants under ‘Classic’, ‘Gold Flake’, ‘American Club’, and ‘Bristol’ brands. Investments in building a differentiated portfolio coupled with last-mile execution capabilities are in place.

Management’s Track Record in Execution #

Successfully strengthened direct reach in target markets, and augmented stockist network for rural/semi-urban areas.

Capital Allocation Strategy #

Investments focus on building a differentiated portfolio and agile execution.

FMCG - Others #

Long-Term Strategic Goals and Progress #

Focus on rapid scale-up anchored on growth platforms and a future-ready portfolio. Strategic brand extensions into value-added adjacencies and categories of the future. Segment Revenue grew by 9.6% with Segment EBITDA growing at 19.7%. Segment EBITDA margins expanded by 94 bps to 11.2%.

Competitive Advantages and Market Positioning #

Ahead of the industry growth in both urban and rural markets. Strong brand portfolio, with several brands (‘Aashirvaad’, ‘Bingo!’, ‘Sunfeast’, ‘Classmate’, ‘YiPPee!’, and ‘Mangaldeep’) achieving leadership or No. 2 positions in their respective categories. Total addressable market expansion potential amongst the highest in Indian FMCG space.

Innovation Initiatives and R&D Effectiveness #

Launched over 100 new products during the year, anchored on vectors of Health & Nutrition, Hygiene, Protection & Care, Convenience & On-the-Go, and Indulgence. R&D platforms of LSTC are leveraged. ‘Help India Eat Better’ nutrition strategy and significant investment in millet-based products.

M&A Strategy and Execution #

Proactive pursuit of value-accretive acquisitions, joint ventures, and collaborations to accelerate growth. Investments in D2C capabilities and start-ups like Mother Sparsh and Mylo.

Management’s Track Record in Execution #

Successful scaling of business with Segment EBITDA margin expansion. Delivered on premiumisation, supply chain efficiency, cost management, and judicious pricing actions.

Capital Allocation Strategy #

Strategic investments in building future categories and scaling up nascent categories. Investments in state-of-the-art Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs).

Organizational Changes and Their Impact #

Reorganization of Branded Packaged Foods Businesses into product market-centric clusters with integrated and empowered teams.

Hotels #

Long-Term Strategic Goals and Progress #

Focus on ‘asset-right’ strategy, sweating existing assets, increasing management contract footprint, and creating additional revenue streams. Segment Revenue grew by 15.6%, Segment EBITDA at 26.2%

Competitive Advantages and Market Positioning #

One of the largest hotel chains with over 130 properties, operating under six distinct brands. Emphasis on ‘Responsible Luxury’. Holds a high number of LEED Platinum® certified hotels.

Innovation Initiatives and R&D Effectiveness #

Launched new brands - ‘Mementos’ (luxury lifestyle) and ‘Storii’ (boutique premium). Focus on curated propositions across accommodation, dining, and banqueting services.

M&A Strategy and Execution #

Focused on management contracts and strategic alliances

Management’s Track Record in Execution #

Achieved record highs in Revenue and Profits. Strong growth in RevPAR. Successful launch of new hotel brands.

Capital Allocation Strategy #

Asset-right approach, sweating existing assets.

Organizational Changes and Their Impact #

The proposed demerger of the Hotels Business into ITC Hotels Limited, is awaiting approval.

Paperboards, Paper and Packaging #

Long-Term Strategic Goals and Progress #

Focus on maintaining leadership in Value-Added Paperboard (VAP) segment. Development of sustainable packaging solutions to substitute single-use plastics.

Competitive Advantages and Market Positioning #

Market leader in scale and profitability. Strong focus on sustainable packaging solutions and integrated business model (Industry 4.0 initiatives, High Pressure Recovery Boiler, capacity augmentation).

Innovation Initiatives and R&D Effectiveness #

Development of recyclable, compostable, and barrier-coated boards (‘Filo’ series). R&D capabilities of LSTC leveraged, along with external collaborations.

M&A Strategy and Execution #

Wholly-owned subsidiary, ITC Fibre Innovations Limited (IFIL), forayed into Moulded Fibre Products (MFP) with a new facility.

Management’s Track Record in Execution #

Successful completion of capacity augmentation project for Décor paper. Strategic cost management initiatives implemented.

Capital Allocation Strategy #

Strategic investments in High Pressure Recovery Boiler and capacity augmentation in Value-Added Paperboards.

Agri Business #

Long-Term Strategic Goals and Progress #

Focus on scaling up Value-Added Agri Products (VAAP) portfolio, including Spices, Coffee, Frozen Marine Products, and Processed Fruits. Development of NextGen agriculture value chains.

Competitive Advantages and Market Positioning #

Strong farm linkages, extensive sourcing expertise, multi-modal logistics, and customer relationships. Largest Indian exporter of unmanufactured tobacco.

Innovation Initiatives and R&D Effectiveness #

Launch of ITCMAARS, a ‘phygital’ platform empowering farmers with digital technology and services. Development of market-responsive value-chains, promotion of climate-smart agriculture. Collaboration with research organisations.

Management’s Track Record in Execution #

Scaling up of ITCMAARS, partnerships with research institutes, and implementation of climate-smart agriculture programs. Successful expansion in ‘food safe’ export markets for spices.

Capital Allocation Strategy #

Investments in value-added agri-products portfolio and ITCMAARS.

Organizational Changes and Their Impact #

Implementation of ITCMAARS represents a significant organizational shift towards digital empowerment of farmers.

Trade Marketing & Distribution (TM&D) #

Long-Term Strategic Goals and Progress #

Focus on effective market service. Leveraging emerging market trends.

Competitive Advantages and Market Positioning #

Facilitates availability of products in nearly seven million retail outlets, with direct servicing to over one-third. Multi-channel capability of your Company’s strong distribution network was leveraged to enhance availability.

Innovation Initiatives and R&D Effectiveness #

Sharpened channel-specific strategies. Customised services, including use of automation and AI.

Management’s Track Record in Execution #

Stepped up market coverage to nearly 2x. Deployed a hub and spoke distribution model, expanded the rural stockist.

Capital Allocation Strategy #

Investments in technology. Strategic collaboration with banks and Fintech partners. Partnered with Open Network for Digital Commerce (ONDC).

Organizational Changes and Their Impact #

Transformed into a smart omni-channel network.

ESG Framework #

Environmental Metrics and Targets #

• Hotels: 12 LEED Zero Carbon certified hotels and 4 LEED Zero Water certified hotels; all major properties are LEED Platinum certified. COP21 2030 emission targets were achieved ahead of time.
• Paperboards, Paper & Packaging: Over 50% of energy consumption from renewable sources. Bhadrachalam mill’s High Pressure Recovery Boiler is reducing carbon footprint. Progressively enhancing energy efficiency. Kovai unit is the first paper mill in the world to achieve Platinum rating under Alliance for Water Stewardship Standards. Recycled nearly 100% of solid waste. Procured 4.85 lakh tonnes of FSC certified wood.
• Agri Business: Climate Smart Agriculture program covered around 28 lakh acres across 19 states. Promotes FPOs engaged in millets farming with ITCMAARS.

Social Responsibility Programs #

• FMCG - Others: ‘Help India Eat Better’ strategy; ‘ITC Mission Millets’ program supporting farmers and promoting millet-based products. Brands like Vivel and Savlon lead purposeful initiatives. ‘Classmate All Rounder’ supports holistic child development.
• Hotels: Supports livelihood generation. ‘Responsible Luxury’ ethos combines luxury with responsible practices.
• Agri Business: ITCMAARS ‘phygital’ ecosystem supports over 1.5 million farmers and over 1,650 FPOs. Climate Smart Agriculture intervention aims to de-risk farmers. Collaboration with NITI Aayog to boost agricultural activities. Partnership with CGIAR’s ‘Climate Change and Food Security Programme’ covers nearly 19 lakh acres.
• Paperboards, Paper & Packaging: Anchoring inclusive fibre value chain.

Governance Structure and Effectiveness #

• All Segments: Adherence to ITC Code of Conduct, derived from principles of good corporate governance, corporate citizenship, and personal conduct. Three-tier governance structure: strategic supervision by Board, strategic management by Corporate Management Committee, and executive management by Divisional Management Committees. Compliance is confirmed with the requirements prescribed under Regulations 17 to 27 and clauses (b) to (i) of sub-regulation (2) of Regulation 46 of the Listing Regulations.
• Board of Directors: Balanced board comprising Executive and Non-Executive Directors, with Independent Directors representing at least 50% of the total strength. Non-Executive Directors are drawn from eminent professionals.
• Board Committees: Include Audit, Nomination & Compensation, Securityholders Relationship, CSR and Sustainability, and Independent Directors Committees. Risk Management Committee reviews risk mitigation.

Sustainability Investments and ROI #

• FMCG - Others: Investments in state-of-the-art Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) provide structural advantages, driving operational efficiencies.
• Hotels: Investments in renovations and refurbishments. Digital investments to enhance guest experience.
• Paperboards, Paper & Packaging: Investments in High Pressure Recovery Boiler and value-added paperboards capacity augmentation, and in Industry 4.0 technology adoption. A new state-of-the-art manufacturing facility in Madhya Pradesh specializes in molded fibre products.
• Agri Business: Investments in developing value-added agri-products portfolio. State-of-the-art Spices processing facility in Andhra Pradesh.

ESG Ratings and Peer Comparison #

• Overall: Sustained ‘AA’ rating by MSCI-ESG for the sixth consecutive year (highest amongst global tobacco companies). Included in Dow Jones Sustainability Emerging Markets Index for the fourth year in a row. ‘A List’ for Water by CDP and ‘A-’ for CDP Climate.

Regulatory Compliance and Future Preparations #

• All Segments: Compliance with relevant statutes reported. Statutory compliance reports from business units / corporate functions are tabled for the Board’s review.
• Paperboards, Paper & Packaging: Adopting sustainable packaging solutions to substitute single-use plastics and meet emerging regulations. Focus on recyclable paperboards like ‘FiloPack’, ‘FiloServe’, ‘FiloTub’, ‘FiloBev’.
• FMCG-Cigarettes: Engages with policymakers for pragmatic, equitable, non-discriminatory regulations and taxation policies that balance economic and tobacco control objectives, advocating for a stable taxation regime.
• Agri Business: PLI Scheme for the food processing sector is expected to play a critical role in future growth.

FMCG - Cigarettes #

Management Guidance and Assumptions: #

• Management expects consolidation on a high base after a period of sustained growth.
• Illicit trade remains a key challenge, assumed to remain at elevated levels.
• Focus is on fortifying market standing through innovation, premiumisation, and enhanced availability.
• The Tax incidence increase impacts the revenue collection.

Market Growth Forecasts: #

• Overall tobacco consumption in India is growing, but legal cigarettes’ share has declined to 9% (vs. a global average of 90%).
• Illicit cigarette volumes are growing, now accounting for about 1/3rd of the legal industry.

Planned Strategic Initiatives: #

• Fortify product portfolio with new, differentiated variants (‘Classic’, ‘Gold Flake’, ‘American Club’, ‘Bristol’).
• Strengthen presence in focus markets with targeted offerings.
• Enhance direct reach and stockist network, especially in rural/semi-urban markets.
• Leverage digital technologies (Industry 4.0, Data Sciences) for smart manufacturing and supply chain efficiency.

Capital Expenditure Plans: #

• Continued investments in manufacturing modernization and technology upgrades.

Efficiency Improvement Targets: #

• Set new benchmarks in quality, sustainability, supply chain responsiveness, and productivity.
• Leverage Industry 4.0 and Data Sciences for a smart manufacturing environment.
• Nearly 55% of total energy used by the Business is generated from renewable sources.

Potential Challenges and Opportunities: #

• Challenges: Punitive taxation leading to growth in illicit trade, impacting legal cigarette volumes and farmer livelihoods. Regulatory challenges related to pictorial warnings.
• Opportunities: Clawing back volume from illicit trade during periods of tax stability and with enforcement agency actions. Growing domestic and export demand for Indian tobaccos.

Scenario Analysis/Sensitivity: #

• Stable taxation and regulatory regimes are critical for the legal cigarette industry to regain market share from illicit trade.

FMCG - Others #

Management Guidance and Assumptions: #

• Expect continued growth ahead of the industry, driven by consumer insights, innovation, and channel strategies.
• Margin expansion is a priority, leveraging premiumisation, supply chain efficiency, and cost management.
• Focus on scaling up newer categories and entering value-added adjacencies.

Market Growth Forecasts: #

• Low household penetration and per capita consumption in chosen categories offer significant headroom for long-term growth.
• Addressable market expansion potential is among the highest in the Indian FMCG space.
• Export footprint is expanding, now reaching over 70 countries.

Planned Strategic Initiatives: #

• 4P strategy: Fortify & scale mega brands, leverage power brands for adjacencies, craft categories of the future, and build purpose-led brands.
• Launch of over 100 new products, focusing on health, nutrition, hygiene, convenience, and indulgence.
• Scale up presence in value-added adjacencies and invest in future categories.
• Proactive pursuit of value-accretive acquisitions, joint ventures, and collaborations.
• Leverage digital platforms for consumer insights, engagement, and brand loyalty.
• Expand export footprint, leveraging the PLI scheme for several categories.

Capital Expenditure Plans: #

• Continued investments in Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) to enhance freshness, agility, and reduce costs.
• Ramp-up of capacity utilization at 11 operational ICMLs.

Efficiency Improvement Targets: #

• Supply chain delayering and optimization, smart buying, and smart manufacturing using automation and Industry 4.0.
• Strategic cost management initiatives to counter input cost volatility.

Potential Challenges and Opportunities: #

• Challenges: Subdued demand conditions and heightened competition, especially from regional/local players. Input cost volatility.
• Opportunities: Rapid scale-up potential due to low penetration categories, brand extensions, and FoodTech services. Leveraging enterprise strengths (agri-business linkages, distribution network, R&D).

Scenario Analysis/Sensitivity: #

• Success depends on the effective execution of the 4P strategy and the ability to adapt to evolving consumer preferences.

Hotels #

Management Guidance and Assumptions: #

• Continue “asset-right” strategy, focusing on sweating existing assets, management contracts, and additional revenue streams.
• Maintain best-in-class consumer experience.

Market Growth Forecasts: #

• Indian Travel & Tourism sector experiencing robust growth; domestic air travel exceeding pre-pandemic levels.
• Significant headroom for growth in foreign tourist arrivals.
• Government’s thrust on infrastructure and tourism development to support growth.

Planned Strategic Initiatives: #

• Increase footprint of management contracts.
• Create additional revenue streams.
• Leverage marquee events hosted in the country.
• Promote new brands: ‘Mementos’ and ‘Storii’.
• Scale up operations of ‘Sleeep’ Boutiques.

Capital Expenditure Plans: #

• Timely renovations and refurbishments to leverage high season opportunities.

Efficiency Improvement Targets: #

• Increase the number of LEED® Zero Carbon Certifications.
• Reduce carbon emission levels.
• Leverage digital investments for guest experience, revenue generation, and operational efficiency.

Potential Challenges and Opportunities: #

• Opportunities: Growing interest from property owners in partnering with ITC’s brands. Strong pipeline of management contracts.
• Launch of first international property, ITC Ratnadipa, in Colombo, Sri Lanka.

Paperboards, Paper & Packaging #

Management Guidance and Assumptions: #

• Focus on structural interventions for sustainable competitive advantage.
• Expects paperboard demand to remain firm in the medium term.

Market Growth Forecasts: #

• End-user segments like Pharmaceuticals, Apparels, QSR, FMCG, and e-Commerce are projected to register strong growth.
• Writing & Printing paper demand expected to be firm.
• Growing need for sustainable packaging solutions.

Planned Strategic Initiatives: #

• Fortify market leadership in Value-Added Paperboard (VAP) segment.
• Scale-up sustainable packaging solutions, including ‘Filo’ series and Moulded Fibre Products (MFP).
• Expand customer base in food-safe export markets.
• Continue wood procurement from sustainable sources.

Capital Expenditure Plans: #

• Setting up a state-of-the-art coater for sustainable packaging.
• ITC Fibre Innovations Limited (IFIL) commissioned a state-of-the-art MFP manufacturing facility.
• Recently commissioned High Pressure Recovery Boiler at Bhadrachalam mill to enhance efficiency.

Efficiency Improvement Targets: #

• Increase in-house chemical & mechanical pulp manufacturing.
• Enhance energy efficiency.
• Improve product & process innovation, digital interventions, including Industry 4.0.
• Reduce coal consumption at the Bhadrachalam mill by approximately 25%.

Potential Challenges and Opportunities: #

• Challenges: Soft domestic and export demand, cheap Chinese supplies, and high domestic wood costs.
• Opportunities: Growing demand for sustainable packaging solutions.
• Potential for import substitution with supportive policies for wood-based industry.

Agri Business #

Management Guidance and Assumptions: #

• Strategic focus on scaling up Value-Added Agri Products (VAAP).

Market Growth Forecasts: #

• India’s share of global agri-trade remains low, indicating growth potential.

Planned Strategic Initiatives: #

• Scale up ITCMAARS (Metamarket for Advanced Agriculture and Rural Services).
• Promote climate-smart agriculture and digitally empower farmers.
• Fortify Value-Added Agri Products portfolio.
• Develop product-specific climate-controlled infrastructure.
• Expand into fresh and processed fruits & vegetables, and medicinal and aromatic plant extracts.

Capital Expenditure Plans: #

• Investment in state-of-the-art Spices processing facility in Guntur, Andhra Pradesh.
• Continued investment in farm linkages, sourcing expertise, and multi-modal logistics.

Efficiency Improvement Targets: #

• Enhance productivity and quality in agri-value chains.
• Reduce cultivation costs.
• Strengthen climate resilience.

Potential Challenges and Opportunities: #

• Challenges: Restrictions on agri-commodity exports due to food security concerns, global supply chain disruptions.
• Opportunities: Growing global demand for sustainable, traceable, and high-quality agri-products.
• Potential for increasing farmers’ income and employment generation through value addition.

Scenario Analysis/Sensitivity: #

• Policy interventions supporting sustainable livelihoods and agri-exports are critical.
• Development of robust domestic agri and wood-based value chains are of national importance.
• The PLI Scheme for the Food Processing sector is expected to provide a boost.
• Success of NextGen Agri depends on scaling up ITCMAARS and adoption by farmers.
• Global FCV Tobacco demand and pricing.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Auditors, S R B C & CO LLP, have issued an unmodified audit opinion on the standalone and consolidated financial statements, indicating a true and fair view in conformity with generally accepted accounting principles in India.
• No qualifications were mentioned in the Auditor’s Report concerning the financial statements, or record keeping.

Key Accounting Policies and Changes #

• The Company uses the historical cost convention, except for certain items measured at amortized cost or fair value.
• The Company adopted Ind AS from 1st April 2016.
• There was a change in accounting policies related to Ind AS 12 “Income Taxes, during the year. The amendement has narrowed the scope of the intitial recognition exemption and this will impact transations such as leases.
• There was a change in accounting policies relted to Ind AS 1, “Presentation of Finacial Statements”. The change requires the company to disclose it’s material accounting policies rather than it’s significant accounting policies.
• The Company adopted revenue recognition policies in line with IND AS 115
• Accounting policies are reviewed and updated from time to time.
• Subsidiaries, associates, and joint ventures prepare their financial statements in conformity with the relevant Ind AS.

Internal Control Effectiveness #

• The company maintains internal financial controls over financial reporting. The auditor’s report provides an unqualified opinion that the company in all material respects, has maintained adequate internal financial control and that such controls were operating effectively.
• The Company has an internal audit system commensurate with its size and nature of business.
• The Company’s internal audit processes are certified as complying with ISO 9001:2015 Quality Standards.
• The Audit Committee reviews the effectiveness of internal controls.

Regulatory Compliance Status #

• The Company confirmed compliance with applicable laws and the existence of adequate systems for monitoring such compliance.
• The Company confirmed payment of undisputed statutory dues.
• The Company confirmed no instances of non-compliance were imposed by Stock Exchanges, SEBI, or Statutory Authorities on capital market matters in the last three years.
• The Company asserts compliance with Secretarial Standards.

Legal Proceedings and Their Potential Impact #

• There are ongoing litigations with revenue authorities regarding claims not acknowledged as debts.
• There is disclosure of contingent liabilities including claims related to excise duty, VAT/sales taxes, GST, and other indirect tax claims totaling INR 645.81 Crores.
• Proceedings have been initiated by the Enforcement Directorate in 1997; some notices have been dropped or quashed, while others are pending.
• Cancellation of a sub-lease for land for failure to fulfil the conditions of the sub lease.
• There were no materially significant related party transactions during the year which may have a potential conflict with the interest of the company at large.

Related Party Transactions #

• All related party transactions were in the ordinary course of business and on an arm’s length basis.
• The Audit Committee approved all related party transactions.
• There is detailed disclosure provided in the “Notes to the Standalone Financial Statements” (Note 30), including a list of related parties, the nature of relationships, and the types and amounts of transactions.
• There are no outstanding loans or guarantees to directors.
• The company purchased shares of International Travel House Limited, and Maharaja Heritage Resorts Limited from a wholly owned subsidiary, making them associates.

Subsequent Events #

• A definitive agreement was signed to acquire 100% shareholding of Blazeclan Technologies Private Limited.
• The National Company Law Tribunal, Kolkata Bench, convened a Meeting of the Ordinary Shareholders for the purpose of seeking your approval to the Scheme of Arrangement (Hotels Demerger).
• ITC Ratnadipa in Colombo, Sri Lanka, was inaugurated on 25th April, 2024.

Analysis of Accounting Quality #

• The selection of accounting policies and standards is appropriate.
• The disclosure is made in the correct format and with a sufficient level of detail.
• Disclosure of policies and standards related to employee stock options is made
• Detailed disclosure of revenue recognition, including adjustments for discounts and returns.
• Reconciliation of effective tax rate is provided.

Regulatory Risk Assessment #

• High: Ongoing legal proceedings with revenue authorities (Excise, VAT, GST, etc.) pose a significant risk. The outcomes of these disputes could have a material impact on the financial statements.
• Moderate: Compliance with regulations related to CSR, dividend distribution, and employee benefits is generally strong, but there may be areas where scrutiny could arise.
• Low: The Company appears to have robust systems for compliance with applicable laws and regulations.
• The Company is facing cancellation of a sub-lease. The Group is evaluating its options to pursue its rights. This constitutes significant risk.