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Investor Presentn

  1. 1. ITC Limited
  2. 2. ITC - Financial Snapshot Market capitalisation @ 31/10/2005: Rs. 45200 crs. (US$ 10 bln.)
  3. 3. 2004-05 Financials (Rs. 1 crore = Rs. 10 million)
  4. 4. Segment Revenues 2004/05 (Rs. 1 crore = Rs. 10 million)
  5. 5. Segment Results 2004/05 (Rs. 1 crore = Rs. 10 million)
  6. 6. Segment Capital Employed (Rs. 1 crore = Rs. 10 million) Rs. crores Actuals Actuals 2003-04 2004-05 Goly (%) Capital Employed a) FMCG - Cigarettes 1573 1240 (21.1) - Others 212 262 23.7 Total FMCG 1785 1502 (15.8) b) Hotels 978 1401 43.3 c) Agri Business 477 740 55.1 d) Paperboards, Paper & Packaging 1469 1745 18.8 Total Segment Capital Employed 4709 5388 14.4
  7. 7. ITC Q2 05/06 - Key Financials
  8. 8. ITC H1 05/06 - Key Financials
  9. 9. Segment Revenue: Q2/H1 2005/06
  10. 10. Segment Results: Q2/H1 2005/06 Agri Business: H1 degrowth primarily a/c mix in leaf tobacco and strategic initiatives cost & export incentives in LY
  11. 11. Segment Capital Employed:H1 2005/06 * Before considering provision of 383 crs (30.09.04 - Rs. 1572 crs) in respect of disputed State Taxes * LY includes Pre-deposit of Rs. 350 crs. with Excise Authorities in respect of Excise litigation which since stands resolved
  12. 12. <ul><li>One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004 </li></ul><ul><ul><li>Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are rated as the ‘most attractive companies for investors’ </li></ul></ul><ul><li>Only Indian FMCG Company to feature in Forbes 2000 List </li></ul><ul><ul><li>A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value </li></ul></ul><ul><li>Among top in : </li></ul><ul><ul><li>Sustained value creation (BT-Stern Stewart survey) </li></ul></ul><ul><ul><li>Operating profits </li></ul></ul><ul><ul><li>Cash Profits </li></ul></ul><ul><li>Ranks No. 9 among Indian listed Companies by market cap .(@31/10/05) </li></ul><ul><ul><li>No. 1 in FMCG Sector; 6 th amongst Private Sector </li></ul></ul><ul><li>High rating for Corporate Governance </li></ul><ul><ul><li>First company in India to be CG rated </li></ul></ul>ITC One of India’s most valuable corporations
  13. 13. External recognition (1) <ul><li>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 </li></ul><ul><li>e-choupal initiative continues to win global recognition: </li></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>World Business Award : International Chamber of Commerce & the HRH Prince of Wales International Business forum </li></ul></ul><ul><ul><li>Harvard University case study </li></ul></ul><ul><ul><li>Thought leaders in business strategy </li></ul></ul><ul><ul><ul><li>C K Prahalad , University of Michigan Business School, </li></ul></ul></ul><ul><ul><ul><li>Mohanbir Sawhney , Kellog School of Management </li></ul></ul></ul>
  14. 14. External recognition (2) <ul><li>ITC Centre,Gurgaon awarded Platinum Green building rating by US Green Building Council -Leadership in Energy and Environmental Design </li></ul><ul><ul><li>largest Platinum rated building in the world; 7 th such building in the world </li></ul></ul><ul><li>ITC Welcomgroup – ‘Environment champion of the Year’ 2004 (FHRAI) </li></ul><ul><li>Bhadrachalam paperboard unit : </li></ul><ul><ul><li>adjudged ‘Greenest paper mill in India’ by The Centre for Science & Environment; won the Greentech Environment Excellence Gold Award </li></ul></ul><ul><li>John Players won the ‘Rising Star of the year brand’ - Images Fashion Award 2004 </li></ul>
  15. 15. ITC - Business Portfolio ITC FMCG: Cigarettes * Other FMCG Hotels Agri Business Leaf Tobacco Agri Commodities Paperboard Paper & Packaging * Focus area for future growth
  16. 16. Strategy of Organisation to manage diversity of Portfolio Formal 3-tiered governance structure: <ul><li>Board of Directors : </li></ul><ul><ul><li>Comprising executive (4) and non-executive directors (8) </li></ul></ul><ul><ul><li>Strategic supervision </li></ul></ul><ul><li>Corporate Management Committee : </li></ul><ul><ul><li>Comprising executive directors and senior managers </li></ul></ul><ul><ul><li>Strategic management </li></ul></ul><ul><li>CEO & Divisional Management Committee : </li></ul><ul><ul><li>Executive management </li></ul></ul>
  17. 17. <ul><li>Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities </li></ul><ul><li>Pursue World class competitiveness in all businesses and across the entire value chain </li></ul><ul><li>Best-in-class in terms of: </li></ul><ul><ul><li>Internal Vitality </li></ul></ul><ul><ul><li>Market Standing </li></ul></ul><ul><ul><li>Profitability </li></ul></ul><ul><li>Strategy of Organisation and Governance processes geared to manage multiple businesses </li></ul><ul><li>Blend core competencies and leverage ITC umbrella strengths to create new avenues of growth </li></ul>Corporate Strategies
  18. 18. FMCG - Cigarettes
  19. 19. ITC’s Cigarettes Business <ul><li>Market leadership </li></ul><ul><li>Powerful brands across segments </li></ul><ul><li>Leadership in all segments - geographic & price </li></ul><ul><li>Extensive distribution network </li></ul><ul><ul><li>Over 900 wholesale dealers serving more than 1 million retail outlets </li></ul></ul><ul><li>World-class state-of-the-art technology and products </li></ul><ul><ul><li>Investment - Rs.11 billion in six years </li></ul></ul><ul><li>Exciting long term growth potential </li></ul>
  20. 20. Cigarettes: Growth potential <ul><li>Cigarettes account for only 14% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation </li></ul><ul><ul><li>Cigarettes (14% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector </li></ul></ul><ul><li>Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes </li></ul><ul><li>Biri : Cigarettes ratio = 10 : 1 </li></ul><ul><li>Annual per capita adult cigarette consumption in India is appx. one tenth world average : 141 </li></ul><ul><li>Future growth depends on relative rates of growth of per capita income and moderation in taxes </li></ul>
  21. 21. Source : Based on Cigarette consumption data(2003) from “ World Cigarettes”,ERC Group plc.
  22. 22. Hotels & Tourism
  23. 23. Hotels & Tourism industry <ul><li>Foreign arrivals into India - 3.4 million appx. vs 31 million in China </li></ul><ul><ul><li>The two nations were on par 2 decades ago at 750,000 arrivals </li></ul></ul><ul><li>Today, Beijing alone has as many hotel rooms as the whole of India </li></ul><ul><li>India’s luxury rooms availability lower than even smaller East Asian countries </li></ul>
  24. 24. Luxury hotel rooms - East Asia Source: Compendium of Tourism statistics, WTO
  25. 25. Indian hotel industry <ul><li>Current supply - 80,000 rooms of which 5 Star category accounts for less than 30% </li></ul><ul><li>To support GDP growth of 6% p.a., Indian room capacity needs to double in five years </li></ul><ul><li>Present mismatch between supply and demand expected to persist over the short term </li></ul><ul><li>As infrastructure for trade & commerce improves - growing potential for leisure tourism </li></ul>
  26. 26. ITC’s hotel business <ul><li>One of three chains in India </li></ul><ul><ul><li>Strategy to establish presence in key business locations to complete the chain achieved in end 2004 </li></ul></ul><ul><ul><li>Over 5200 rooms under 4 distinct brands </li></ul></ul><ul><li>Revenue leadership in most locations </li></ul><ul><li>Leverage unique service proposition and international alliance with Sheraton </li></ul><ul><li>Large tax advantages on investments on ITC Balance Sheet </li></ul><ul><li>Attractive medium / long term prospects </li></ul>
  27. 27. Amalgamation <ul><li>Merger of ITC Hotels Ltd. and Ansal Hotels Ltd. effective from 1st April 2004 </li></ul><ul><ul><li>Merger ratios: </li></ul></ul><ul><ul><ul><li>3 shares of ITC for 25 shares of ITC Hotels </li></ul></ul></ul><ul><ul><ul><li>1 share of ITC for every 150 shares of Ansal Hotels </li></ul></ul></ul><ul><li>Post-Merger, ITC’s hotel business : </li></ul><ul><ul><li>Leading hotel chain in terms of pre-tax profits </li></ul></ul><ul><ul><li>Highest EBITDA margin </li></ul></ul>
  28. 28. ITC’s Hotel Properties & Projects <ul><li>ITC Ltd </li></ul><ul><li>ITC Hotels Ltd </li></ul><ul><li>(merged w.e.f 1/4/04) </li></ul><ul><li>Maurya Sheraton, New Delhi </li></ul><ul><li>ITC One, New Delhi </li></ul><ul><li>Grand Maratha, Mumbai </li></ul><ul><li>Sonar Bangla, Kolkata </li></ul><ul><li>Grand Central, Mumbai (Commissioned in Jan ‘05) </li></ul><ul><li>Ansal Hotels Ltd (merged w.e.f. 1/4/04) </li></ul><ul><li>Windsor Manor, Bangalore </li></ul><ul><li>Rajputana Palace, Jaipur </li></ul><ul><li>Mughal, Agra </li></ul><ul><li>Chola, Chennai </li></ul><ul><li>Park, Chennai (Managed) </li></ul><ul><li>Vadodara </li></ul>
  29. 29. Other Hotel Properties <ul><li>Srinivasa Resorts </li></ul><ul><ul><li>(68% shareholding) </li></ul></ul><ul><li>Bay Island Hotels </li></ul><ul><ul><li>(100% shareholding) </li></ul></ul><ul><li>Fortune Park Hotels </li></ul><ul><ul><li>(99.99% shareholding) </li></ul></ul><ul><li>Marudhar Hotels </li></ul><ul><ul><li>(50% shareholding) </li></ul></ul><ul><li>Kakatiya, Hyderabad </li></ul><ul><li>Bay Island, Port Blair </li></ul><ul><li>Manages mid-segment hotels </li></ul><ul><li>Manages Heritage hotels </li></ul>
  30. 30. Paperboards, Paper & Packaging
  31. 31. Indian paperboard market <ul><li>Annual paperboard demand - 0.90 million tonnes </li></ul><ul><li>Fragmented capacity & obsolete technology </li></ul><ul><li>Low per capita usage at 0.75 kg - 1/7th global average </li></ul><ul><li>Indian paperboard market growing at 6 -7% p.a. </li></ul><ul><li>Value Added Coated board - the fastest growing segment (20% p.a.) in India driven by the growing sophistication of the consumer </li></ul>
  32. 32. Paperboard Demand Projections - Asia <ul><li>Asian region demand (excluding Japan) growing by 0.5 million tonnes per annum </li></ul><ul><li>This region expected to be a net importer by 2005 </li></ul><ul><li>Significant export opportunities for high quality Indian manufacturers </li></ul><ul><ul><li>ITC paperboards exports - Rs. 1.6 billion </li></ul></ul>
  33. 33. ITC’s Paperboards Business <ul><li>Market leader in growth segment - value added coated boards </li></ul><ul><li>World-class contemporary technology </li></ul><ul><ul><li>Elemental Chlorine Free (ECF) Pulp Mill fully operational – only one of its kind in India meeting world-class environmental standards </li></ul></ul><ul><li>Internationally competitive quality and cost </li></ul><ul><li>Social farm forestry in mill command area to improve access to cost effective fibre & to attain self-sufficiency </li></ul><ul><ul><li>Biotech research based high yielding Clones – effectiveness tested in about 30,000 hectares </li></ul></ul><ul><li>Pulping capacity enhanced by 100,000 MT to strengthen competitiveness </li></ul>
  34. 34. ITC’s Paperboards & Packaging businesses <ul><li>Capacity expansion in recycled segment </li></ul><ul><ul><li>Acquisition of Kovai Unit in March 2004: +65000 TPA </li></ul></ul><ul><ul><li>Another 75000 TPA commissioned in Jan. ‘05 </li></ul></ul><ul><li>ITC’s packaging SBU -India’s largest converter of paperboard into high quality printed packaging </li></ul><ul><ul><li>Leading supplier to Indian FMCG segment </li></ul></ul>
  35. 35. Agri Businesses - Leaf Tobacco - Agri Commodities
  36. 36. Indian Leaf Tobacco industry <ul><li>India - the second largest producer of tobacco </li></ul><ul><li>But, Indian exports constitutes mere 0.7% of the value of world trade in tobacco </li></ul><ul><li>Upgradation of tobacco consumption from other formats to cigarettes will enable: </li></ul><ul><ul><li>growing domestic base </li></ul></ul><ul><ul><li>larger opportunities for value added exports </li></ul></ul><ul><li>ITC - India’s largest buyer, processor, consumer & exporter of cigarette tobaccos </li></ul>
  37. 37. ITC’s Agri Commodity Exports <ul><li>Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Edible nuts, Coffee </li></ul><ul><li>Unique CRM programme in commodity exports </li></ul><ul><li>Leveraging IT for the transformational ‘e-Choupal’ initiative </li></ul><ul><ul><li>Rural India’s largest Internet-based intervention </li></ul></ul><ul><ul><li>Over 30000 villages linked through 5200 e-Choupals servicing over 3 million farmers </li></ul></ul><ul><ul><li>2 rural malls (‘Choupal Sagar’) operational at Sehore & MHOW, M.P; construction of 10 more underway </li></ul></ul><ul><li>Distinctive sourcing capability for ITC’s Foods business </li></ul>
  38. 38. e-Choupal - Recognition <ul><li>World Business Award – ICC-UNDP </li></ul><ul><li>Enterprise Business Transformation Award -Wharton Infosys </li></ul><ul><li>Harvard Business School – case study </li></ul><ul><li>Showcased at ICT4D, Geneva – UN </li></ul>
  39. 39. ITC’s strategic thrust <ul><li>Cost-effective extension services to enhance farm productivity and quality, and better align farm produce with requirements of the market, both domestic and international </li></ul><ul><ul><li>Enhances competitiveness of ITC agri-sourcing </li></ul></ul><ul><li>Create e-infrastructure to serve as transaction backbone </li></ul><ul><ul><li>Provides ITC two-way fulfilment capability in and out of rural markets for a range of goods and services </li></ul></ul><ul><ul><li>Rural marketing initiatives being scaled up progressively </li></ul></ul>
  40. 40. Future Growth & Value Capture New FMCG Initiatives
  41. 41. Strategic Rationale <ul><li>Blend multiple competencies residing within the ITC Group to create new avenues of growth </li></ul><ul><li>Best fit between internal capabilities and emerging market opportunities </li></ul><ul><li>Each segment enhances the depth and width of ITC’s FMCG distribution capability </li></ul><ul><li>Business model retains critical elements of value chains within ITC with other elements outsourced </li></ul><ul><ul><li>Contributing to the competitiveness of SMEs </li></ul></ul>
  42. 42. FMCG Business Initiatives Branded Packaged Foods <ul><li>Leverages: </li></ul><ul><ul><li>Unique Agri sourcing skills </li></ul></ul><ul><ul><li>ITC Welcomgroup’s specialist cuisine & bakery knowledge </li></ul></ul><ul><ul><li>FMCG distribution synergies </li></ul></ul><ul><ul><li>ITC Group R&D Centre,Bangalore </li></ul></ul><ul><li>4 chosen categories: </li></ul><ul><ul><li>Staples </li></ul></ul><ul><ul><ul><li>Aashirvaad Atta, Salt, Spices </li></ul></ul></ul><ul><ul><li>Snack Foods </li></ul></ul><ul><ul><ul><li>Sunfeast Biscuits </li></ul></ul></ul><ul><ul><li>Confectionery </li></ul></ul><ul><ul><ul><li>Candyman, mint-o </li></ul></ul></ul><ul><ul><li>Ready to Eat </li></ul></ul><ul><ul><ul><li>Kitchens of India, Aashirvaad ReadyMeals, Sunfeast Pasta </li></ul></ul></ul>
  43. 43. FMCG Business Initiatives Branded Packaged Foods <ul><li>Aashirvaad Atta: </li></ul><ul><ul><li>current market leader amongst national branded players; leverages the e-choupal network for cost-quality optimisation and region specific offerings </li></ul></ul><ul><li>Sunfeast Biscuits: </li></ul><ul><ul><li>Differentiated & innovative products; very encouraging response in launch markets; distributed & outsourced supply chain being ramped up </li></ul></ul><ul><li>Number of innovative products in the pipeline leveraging the capabilities of the ITC Group R&D centre </li></ul>
  44. 44. FMCG Business Initiatives Lifestyle Retailing <ul><li>Leverages trade mark and services expertise of hotels </li></ul><ul><li>Relaxed wear market growth > 25% p.a </li></ul><ul><li>Upmarket p r oduct range available in exclusive Wills Lifestyle stores and multi-branded outlets/ large format retail stores across the country </li></ul><ul><li>State-of-the-art Master Facility aids speed of execution </li></ul><ul><li>Outsourced JIT plant for ‘quick response’ manufacturing </li></ul><ul><li>Product and brand range being expanded </li></ul><ul><ul><li>‘ Wills’ range expanded to Formals and Social evening wear segments </li></ul></ul><ul><ul><li>Strong distribution network in place for the mid-market brand ‘John Players’ </li></ul></ul>
  45. 45. FMCG Business Initiatives Greetings, Gifting & Stationery <ul><li>Leverages p rint and paper know-how </li></ul><ul><li>An emerging market in India - growth driven by increasing cross-cultural exposure </li></ul><ul><li>ITC’s ‘Expressions’ range commenced with greeting cards; now widened to include stationery & gift wraps </li></ul><ul><li>Distribution network being strengthened to scale up the Stationery business significantly </li></ul><ul><li>Serves to expand the width of ITC’s FMCG distribution capability with negligible incremental investment </li></ul>
  46. 46. FMCG Business Initiatives Safety Matches <ul><li>Current industry consumer spend estimated at Rs.1250 crores p.a. for 24 billion match boxes </li></ul><ul><li>Fragmented supply base arising from policy of reservation for small scale industry </li></ul><ul><li>ITC markets its brands with value added products across each price point </li></ul><ul><ul><li>Support SMEs with complementary marketing strengths </li></ul></ul><ul><li>‘ AIM’ – India’s largest selling Safety Matches brand </li></ul><ul><li>74% shareholding acquired in WIMCO Ltd. through Russell Credit </li></ul><ul><ul><li>Key brands: Homelites, Ship, Cheetah Fight etc. </li></ul></ul>
  47. 47. FMCG Business Initiatives Incense sticks (Agarbattis) <ul><li>Current industry consumer spend estimated at over Rs. 900 crores p.a. </li></ul><ul><li>Fragmented supply base arising from policy of reservation for small scale industry </li></ul><ul><li>ITC markets its brands with value added products across each price point </li></ul><ul><ul><li>Support cottage sector with complementary marketing strengths </li></ul></ul><ul><ul><li>‘ Mangaldeep’ : the only National brand in the country </li></ul></ul>
  48. 48. FMCG business initiatives……. <ul><li>Concurrently, ITC’s IT subsidiary assists in web-enabling business processes </li></ul><ul><ul><li>CRM initiatives </li></ul></ul><ul><ul><li>ERP transaction processing systems </li></ul></ul><ul><ul><li>SCM including the e-choupal capability </li></ul></ul><ul><li>… hosted on ITC’s Virtual Private Network </li></ul><ul><li>ITC awarded the best IT user in FMCG category by Nasscom </li></ul>
  49. 49. Future Positioning of ITC A leading FMCG player in India F A R M E R S M A R K E T S Cigarette Trade Marketing capability Branded Foods Expanded FMCG distribution capability e-choupal rural two-way fulfillment capability A basis for strategic partnerships with other FMCG brand owners VPN providing SCM, ERP & CRM capability Lifestyle retailing Greeting cards/stationery Matches & Agarbattis
  50. 50. Forward-looking Statements Statements in this presentation describing the Company’s objectives, future prospects, estimates, expectations etc. may be “forward looking statements” within the meaning of applicable securities laws and regulations. Investors are cautioned that “forward looking statements” are based on certain assumptions of future events over which the Company exercises no control. Therefore there can be no guarantee as to their accuracy. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be projected or implied by these forward looking statements. Such risks and uncertainties include, but are not limited to: growth, competition, acquisitions, domestic and international economic conditions affecting demand, supply and price conditions in the various businesses in the Company’s portfolio, changes in Government regulations, tax regimes and other statutes, and the ability to attract and retain high quality human resource.