ITC Limited v0.pptx

Table of Content
• About ITC Limited
• Cigarettes Business
• FMCG(Others) Business
• Paperboards, Paper & Packaging
Business
• Hotels Business
• Agri-Business
• ITC Infotech
• Financial Analysis
• Management Analysis
• ESG Analysis
• Valuation
• Share Performance Analysis
• Information about Shareholders
• Conclusion

About ITC Limited
• Established in 1910, ITC Limited is a diversified
conglomerate with businesses spanning Fast Moving
Consumer Goods
• The Company was incorporated initially under the
name Imperial Tobacco Company of India Limited
as a subsidiary of British American Tobacco
• As the Company's ownership progressively
Indianized, the name of the Company was changed
to India Tobacco Company Limited in 1970 and then
to I.T.C. Limited in 1974
• In recognition of the ITC's multi-business portfolio
encompassing a wide range of businesses, the full
stops in the Company's name were removed effective
September 18, 2001
FMCG -
Cigarettes
46%
FMCG - Others
25%
Hotels
4%
Agri Business
12%
Paperboards,
Paper &
Packaging
9%
IT & Others
4%
Breakup of Revenue in FY 2020 (50,969 Rs cr.)

Cigarettes Business
The Cash Cow fuelling growth of the FMCG Businesses

About Tobacco
• The world tobacco production of tobacco is around 7,000 mil kg where China occupies the 1st place with 2,350
mil kg & India occupies the 3rd place with 750 mil kg production
• In India, tobacco is grown on 0.45 mil ha of area accounting for only 0.31% of net cultivated area
• India has ~5% share of the 12 billion $ global tobacco leaf export trade & earns annually around Rs 6,000
crores as foreign exchange
• In India, the tobacco crop directly or indirectly supports ~457 million people for whom it serves like a lifeline
for sizeable chunk of population, particularly rural women, tribals and other weaker sections of the society
• This is the main reason why government may impose unjust amount of taxes but will never ban it completely
• Flue-Cured Virginia Tobacco, grown in Andhra Pradesh and Karnataka, accounts for around 30% of the
total tobacco production and is the only tobacco type suitable for cigarettes
Source: Statistica, Vikaspedia

Unjust Taxation weighing down the sector
• Legal cigarettes have been punitively taxed as compared to bidis and other tobacco forms because of which tobacco production
has been restricted to only 0.3% of the net cultivated area despite good value
• The discriminatory taxes on the legal cigarette industry have resulted in an alarming rate of growth in the illicit/ illegal cigarette
trade in the country - Currently, 68% of the tobacco produced in India continues to remain out of the tax net
• While the share of legal cigarettes in the total tobacco consumption in the country has declined considerably from 21% in
1981-82 to a mere 9% (against global average of 90%), aggregate tobacco consumption in the country has increased over the
same period
Source: ITC Annual Reports, USDA; Tobacco Board; Food and Agriculture Organization (FAO)

Change in Excise Duty directly affects production
Source: ITC Annual Reports
Steep rise in excise duties
in Union Budget 2014-15
Small rise in excise duties
in Union Budget 2010-11
(mainly in filtered)

Production has remained rangebound in last 10 years
Source: Statistica

Tax Revenues & Affordability
• The tax revenue to the Indian government from
tobacco stands around 3,480 crore Rs out of the
approx. 10,43,000 crore indirect tax collected (~0.33%)
• Out of this, more than 80% taxes are collected
from the legal cigarettes business despite being a
smaller portion of the aggregate cigarettes market.
• After GST Implementation, the total effective tax
burden currently for tobacco products in India is only
about 49% for cigarettes, 22% for bidis and 60% for
smokeless tobacco
• The recent increase in Union Budget of 2020 increased
the taxes on cigarettes by around 10% thereby
increasing it to around 55%
Source: Statistica

Other Issues faced by the Cigarettes Sector
• Unfairly Large Statutorily Mandated Warning
• The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production,
Supply and Distribution) Act, 2003 (COTPA) requires cigarette packages to bear the statutorily mandated pictorial and textual
warnings covering 85% of the surface area of the packet (one of the largest in the world)
• Illegal cigarettes and imported cigarettes don’t carry similar warnings which makes consumers perceive that they are relatively safe
• Cigarettes in India cost more than most countries
due to unfair taxation on legal cigarettes
• Government stance hasn’t been favourable in the
past with the tax gap between legal cigarettes and
bidis & other products
Source: Statistica, Student Research

ITC’s Cigarettes Business
• ITC’s core business of cigarettes has been around for >100 years where it dominates the market with
around 75.5% market share in 2019
• Manufacturing locations covering all geographies: Bengaluru (Karnataka), Munger (Bihar), Saharanpur
(UP), Kolkata (West Bengal) and Pune (Maharashtra)
• ITC’s vast and efficient supply chain & distribution network covers the length & breadth of the country – 6
million retail outlets covered by ITC (includes all businesses)
• Exports constitute 14% of net revenue – West Asia and Nepal are key export regions
• ITC has cemented its international standing being the 3rd largest player in the countries of Bahrain & Qatar
• ITC was also the first company to introduce a flavor on demand (capsule) cigarettes in the economy industry segment in
West Asia region
• In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market. Armenteros cigars are
available exclusively at tobacco selling outlets in select hotels, fine dining restaurants and exclusive clubs

Why its hard to replicate the overseas model in India?
• The worldwide average is 1,083 cigarettes per year per person above age 14 whereas in India, it is 89.3 cigarettes per day
• India ranks 176th in the world in terms of per capita consumption, which shows significant room for growth but due to several
factors, it has not fulfilled its potential
• Some major reasons for the low penetration of cigarettes in India are:
• Rolled cigarettes or Bidis: As per WHO, Bidis consumption is 7-8 times larger than conventional cigarettes in India
• High Sin Good Taxes: Around 55% tax is levied on cigarettes vs 22% on bidis makes bidis more affordable despite poor quality
• Other cheaper alternatives of tobacco intake like chewing tobacco, pan masalas etc. are available in India
• Consumer perception that imported, illegal cigarettes are safer due to absence of warning labels
• Cigarettes are much cheaper globally due to lower taxes: Cost of Marlboro cigarettes was around 2.3 $/pack (160 Rs/pack) in Brazil
vs 260 Rs/pack in India. Even though existing customers are relatively price insensitive, attracting new customer would be challenging
• Illegal cigarettes & bidis market size is much larger and is continuously increasing, posing a threat to the legal cigarettes business –
Government stance hasn’t been also much in favour to the legal cigarette players
Source: Tobacco Atlas, WHO

ITC’s Cigarettes has shown resilient performance
20,721
23,232
27,136
30,418
31,856
34,063
35,878
24,848
22,913
23,679
6,001
7,191
8,694
10,419
17,766
18,686
13,204
14,128
15,412 15,838
29%
31% 32%
34%
56% 55%
37%
57%
67% 67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ITC's Cigarette Business Performance over the past 10 years
Revenue EBIT EBIT Margin%
Impact due to GST
Implementation

ITC’s Cigarettes business vs. Competitors
* - Adjusted for excise duty changes
Revenue from Operations* Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
ITC Ltd 11,897 13,838 15,799 17,581 17,766 18,686 21,543 24,848 22,913 23,679 7.1%
VST Industries 578 684 669 789 836 883 922 948 1,099 1,239 7.9%
Godfrey Phillips 1,627 1,909 2,096 2,477 2,586 2,331 2,403 2,326 2,497 2,877 5.9%
EBIT Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
ITC Ltd 6,001 7,191 8,694 10,419 11,637 12,348 13,204 14,128 15,412 15,838 10.2%
VST Industries 139 210 180 218 243 237 248 294 353 415 11.5%
Godfrey Phillips 276 326 327 367 367 324 254 258 403 592 7.9%
EBIT Margins Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
ITC Ltd 50.4% 52.0% 55.0% 59.3% 65.5% 66.1% 61.3% 56.9% 67.3% 66.9%
VST Industries 24.1% 30.6% 27.0% 27.6% 29.0% 26.9% 26.9% 31.0% 32.1% 33.5%
Godfrey Phillips 16.9% 17.1% 15.6% 14.8% 14.2% 13.9% 10.6% 11.1% 16.1% 20.6%
ITC has been able to maintain leadership position and has expanded its already superior margins to a great extent
Source: ITC, VST & Godfrey Phillips Annual Reports

Why COVID-19 disruption wouldn’t harm cigarettes?
• Tax collection in Q1 FY21 stood at Rs. 185,240 Cr, 41% lower than last
year (Rs. 314,093 Cr)
• The Goods and Services Tax (GST) revenue shortfall to states is estimated at more
than Rs 3 lakh crore in 2020-21, but only 22% of this can be compensated
through cess collections as per government estimates
• According to government estimates, compensation cess collections in the current
fiscal will be around Rs 65,000 crore, leaving a gap of Rs 2.35 lakh crore
• Of the Rs 3 lakh crore, Rs 1.5 lakh crore is the shortfall in the first four months of
this fiscal itself, showcasing the massive impact of the Covid-19 pandemic
• In order to overcome the shortfall, the government will have to look for
avenues beyond legal cigarettes which contributes only around 34,800 crore
tax revenue
• On the other hand, the revenues of cigarettes segment dipped 30% in Q1 due to
lock-down but the demand has returned to pre-COVID levels now
Source: Livemint, GST Council Collection Data

Future Outlook - Weak
 Faint Prospects of volume growth in legal cigarettes
 Due to the unfair taxation policy on cigarettes, the legal cigarettes market is expected to stay weak in the near future amongst the
pressure of illegal cigarettes
 The 13% rise in taxes on cigarettes w.e.f 1st Feb 2020 (Union Budget 2020) is expected to further weaken prospects for cigarette
companies.
 Ban on Vaping Products
 In September, 2019, a ban on the production, import and sale of vaping products (Like e-cigarettes) in India was announced
 Expected to increase the consumption of tobacco products like cigarettes
 However, the market size for e-cigarettes was estimated at around 55 crore which is negligible as compared to the overall industry
 Dim hopes of reducing the tax differential between taxes on cigarettes and other items like bidis
 There have been discussions in the past for increasing the taxes on other tobacco items and reduce the differential between taxes levied
on cigarettes and other items like bidi due to the loss of tax revenue.
 In case the government works on reducing this differential in the future, it would positively impact ITC’s performance to a huge extent
but probability is very low looking at the government’s discriminatory stance in the past.
Source: Press Releases

FMCG (Others) Business
Growth Driver which might lead to re-rating of the stock

ITC’s FMCG Business
• In 2001, ITC decided to look beyond Tobacco in a big way and
forayed into the Fast-Moving Consumer Goods (FMCG) sector
• By 2020, the annual consumer spends on the 25 mother brands are
over Rs 19,700 crore
• In 2017, ITC made an ambitious internal target of achieving Rs
65,000 cr revenue from packaged food by 2030 in order to reach
the goal of Rs 100,000 cr. revenue from non-cigarette businesses
• In the FMCG (Others) segment, ITC has the following categories:
1. Branded Packaged Foods
2. Personal Care products
3. Education and Stationary Products
4. Agarbatti & Safety Matches
6000
4000
2700
1400
1300
800
500
3100
Consumer Spends
2020 (Rs. Crore)

Branded Packaged Foods Division
• ITC's foray into the Foods business an outstanding example of successfully blending multiple internal
competencies of the agribusiness to create a new growth driver for the future
• Within 19 years, the Foods business has grown to a significant size under numerous distinctive brands, with
an enviable distribution reach, a rapidly growing market share and a solid market standing.
• Only Nestle (Rs 12,369 crore) and Britannia (Rs 10,987 crore) have revenues than ITC’s Packaged
Foods division (Rs 10,378 crore) - Both these companies have been in existence for more than 100 years
• The most notable thing is that ITC’s branded packaged foods division has been mostly organic except the B
Natural Brand acquired in 2015
• In May 2020, ITC took the first major step towards inorganic growth through acquisition of Sunrise Foods
Pvt. Ltd., a Kolkata-based spice maker for Rs 2,150 crore (FY 20 Revenue for Sunrise was 592 cr)
Source: Statistica

Branded Packaged Foods – Flagship Brands (1/2)
Source: ITC Annual Reports, Press Releases, Interviews with Management
• ITC’s mother brand of Branded Snacks
introduced in 2007
• Includes varieties of wafers and finger
snacks
• Bridges segment of snack foods was
3,400 crore market in 2018
• Market Leader in Finger Snacks
• Bingo! Tedhe Medhe has gained over
33% share in this market in a short time
beating Kurkure (Pepsico)
• ITC’s mother brand of Biscuits
introduced in 2003
• Biscuits – India's largest consumer
product segment, worth Rs 35,000 crore
• 3rd largest biscuits brand in terms of
sales after Britannia (~10,000 cr sales) &
Parle (~9,000 cr sales)
• No. 1 in cream biscuit segment
• Brand extended to Milkshakes (Sunfeast
Wonderz) in 2018 - 1000 crore market
growing at ~20% CAGR
• Marks ITC’s foray into staples (2002)
• No. 1 in Branded Atta (Wheat flour) with
~75% market share
• Brand extended to Ghee & Milk Segments
introduced in 2015 & 2018
• In 2020, Ragi and Jowar flours introduced
– more in pipeline
• Growth drivers: More working-class
women, Consumer preference shifting
towards convenience of ready-made atta,
market shifting towards organized sector

Branded Packaged Foods – Flagship Brands (2/2)
• Acquired from Balan Natural Foods for
~100 cr in 2015
• B Natural had 9-10% market share in
2000 crore fruit beverages market
• Overall packaged juices & fruit
beverages market growing at 25%
CAGR
• Sales of B Natural estimated at around
180 cr in 2019
• Entry into Instant Noodles market in
2010
• 2nd largest player with 22% market
share
• Nestle (Maggi) is the market leader with
over 60% share
• The FSSAI ban on Maggi in 2015
helped ITC as their market share dipped
from over 90% to below 50%
Other Promising Brands
Market leader in 1 Re cough lozenges
(17% market share in 2007)
3rd player in frozen foods market after
McCain & Venkys (7,400 crore market)

Factors Contributing to Rapid Growth
• Backward Integration for Raw Materials
• ITC’s Branded Packaged foods business is backward integrated which is something none of the other FMCG companies have
• This would help ITC maintain low sourcing costs making it easier for them to do aggressive pricing to gain market share & over
time, the company can work towards margins improvement
• The fact that from 2005, ITC’s internal consumption of Agri Business has grown at a higher pace
• Same distribution network being leveraged for all products
• As of 2020, ITC’s distribution network has over 6 million retail outlets making it one of the largest distribution networks in the
country (Peers: Hindustan Unilever’s 8 million, Dabur’s 6.7 million & Godrej Consumer Product’s 5.8 million)
• By increasing cross-selling using the same network, ITC has been consistently registering higher volume growth than its peers
• Substantial resources at disposal from Agri Business to help create new profit centres
• ITC’s E-choupal touches over 4 million farmers, a network which is unmatched by any other company
• With this substantial network, it becomes easy for ITC to tap into this network for procuring new products which are limited to a
season or region or both

Personal Care Products
• ITC entered the Personal Care Business in 2005 with the launch of Essenza Di Wills, the premium fragrance brand
• Over the years, the company has been slowly but steadily expanding the product portfolio and increasing market share
across the segments
• Unlike the Branded Packaged Foods business, ITC’s growth in Personal Care Products business has been mostly
through acquisitions
• Most of the major brands have been added in the last 5 years because of which revenues from this business are
much lower as compared to the branded packaged foods business
• Over the years, ITC’s personal care division has been credited with several innovations like pocket perfumes,
sanitizer sachets etc. offered at good value (which is key for Indian customers)
• ITC has plans to re-position its personal-care products every 6-12 months and explore unconventional outlets for selling
soaps, shampoos, or shower gels

Personal Care Products – Flagship Brands (1/2)
• Introduced in 2008 with soaps,
Vivel is the largest brand in ITC’s
personal care category
• Vivel has around 3% market share
in the market which is dominated
by Lifebuoy and Lux
• Lifebuoy and Lux have around 15%
& 13% market shares respectively
• Introduced in 2007 with gel bars
• Current Offerings: Shower Gels,
Hand, Washes, Gel Bars, Bath
Essentials
• 2nd largest brand in Shower Gels
with 17% market share in 2017 -
Leader was Nivea with 20% market
share
• Shower Gel penetration in low
single digits
• Premium fragrances under Essenza
Di Wills was introduced in 2005
• Portfolio now incorporates Fine
Fragrances, Deodorants, Hair &
Body Shampoos & Bathing Bars
Source: ITC Annual Reports, Press Releases, Interviews with Management, HUL Category Presentation

Personal Care Products – Flagship Brands (2/2)
• Acquired from Johnson & Johnson in
2015
• Estimated to clock around 250-300 cr.
revenue in 2015 (during acquisition)
• Upto 2015, Savlon was niche product
and much smaller in scale than Dettol
• Savlon has ~6% market share in
handwash segment vs ~50% of Dettol
and ~25% of Lifebuoy (2017)
• Savlon is expected to become a 1000
crore brand in FY2021
• Introduced in 2013, Engage was pioneer
of pocket deos in India
• Has nearly 11% of India’s deodorant
market which is pegged at Rs 3,047
crore
• Engage is growing at 17-18% YOY and
the pocket perfume segment is
approximately 4% of the total deo
market
• Acquired in Arpita Agro Pvt Ltd. in 2018
• Nimyle has 60 – 65% market share in floor,
bathroom & kitchen cleaning space in East
India & plans to establish national presence
• Already 3rd largest brand in the floor cleaner
category (Market size: 40,000 cr.)
Other Promising Brands

Personal Care Products – Key Trends after COVID-19
 Significant demand boost from the COVID-19 pandemic
• Health and hygiene brands like Savlon, Vivel, Fiama, Nimyle have received a surge in demand due to the pandemic with increased
penetration and consciousness towards hygiene
• Even though the pandemic would get subsided in a few months, the increased demand wouldn’t go away totally
• ITC introduced a new product category, Nimwash and marked its entry in the fruit and vegetable wash segment which was very
small in scale before the pandemic
• However, the health and hygiene market has also seen several other players, both small and large enter the market in a big way
• Market had very low penetration of personal care products before the crisis
• Penetration of toilet soaps in India is close to 100%, which is the highest in the personal care products category
• For several products like handwash, sanitizers etc, penetration was even less - The penetration of handwash stood at 20%
whereas penetration of sanitizers was a merely 1.5% before the COVID-19 crisis
• The pandemic is expected to help increase per capita consumption in these under-penetrated categories.

Education and Stationary Products
• ITC launched a diverse portfolio in the premium executive stationery and office consumables segment under
brand Paperkraft in 2002
• To augment its offering and to reach a wider student population, the Classmate range of notebooks was launched in 2003 to
address the 5000 cr. market, which is about 20% of the country’s stationary business
• Classmate over the years has grown to become India's largest notebook brand with nearly 1400 crores in annual consumer
spends – ~25% market share
• Over the years, ITC has introduced several products like Practical Books, Drawing Books, Geometry Boxes, Pens and Pencils
under the 'Classmate' brand
• Deepening consumer engagement through Classmateshop.com & MyClassmate app to deliver customized notebooks
• ITC has a dedicated notebooks manufacturing facility equipped with state of the art machinery at Gollapudi, Andhra Pradesh
• Industry growth driven by increasing literacy and enhanced scale of government and public private education initiatives

Agarbattis & Safety Matches
• In 2003, ITC commenced marketing Agarbattis (Incense Sticks) which is sourced from small-scale and cottage units
• Mangaldeep is a highly established national brand (~12% share) in a 7000 cr. agarbatti market which is growing at ~6% and is highly
fragmented (Market Leader: Cycle Brand with around 15% share)
• Mangaldeep is now No. 2 in Agarbattis and No. 1 in Dhoop segment whereas ‘AIM’ (Homelites) continues to be the largest selling
safety matches brand in India
• Differentiating itself by launching an app to cater to the everyday devotional needs of consumers and innovative offerings incl. ‘Lo
Smoke Agarbattis’ (80% lesser smoke) & Temple range of dual fragranced Agarbatti
• Core Strengths of ITC: Nation-wide marketing & distribution, Innovative solutions & inhouse sourcing of packaging solutions
• With effect from 1st April, 2020, GST rates for all safety matches irrespective of process of manufacture (mechanised/semi-
mechanised units and ‘handmade’ safety matches) have been harmonized at 12% compared to 18% for mechanised/semi-mechanised
and 5% for handmade matches earlier, offering a level playing field for all players
• Agarbatti and Safety Matches businesses not very high on priority as compared to other FMCG segments – Safety Matches demand
falling with adoption of gas over kerosene stoves

ITC’s FMCG Growth over the years
4,504
5,564
7,038
8,141
9,054
9,751
10,537
11,357
12,535 12,875
-7.4%
-3.9%
-1.3%
0.1% 0.3%
0.9%
0.2%
1.5%
3.2% 3.3%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ITC's FMCG (Other) Revenue (in Rs cr.) & EBIT Margins
Revenue EBIT Margin
Most segments of ITC are in high growth phase with constant capacity
additions, new product launches etc., its margins have remained under
stress despite posting healthy revenue growths

Growth of consumer spends over the years
3,500
4,000
4,500
6,000
3,000
3,500
3,800
4,000
1,000 1,000 1,000
1,400
1,000
2,000
2,500
2,700
1,000 1,000 1,000
1,300
500 500 500 500
500 500 500 500
500 500 500
800
-
1,000
2,000
3,000
4,000
5,000
6,000
2017 2018 2019 2020
Annual Consumer Spends over the years (in Rs. Crore)
Aashirvaad Sunfeast Classmate Bingo! Yippee Candyman Vivel Mangaldeep

Capital Expenditure vs. Revenue Growth
4,504
5,564
7,038
8,141
9,054
9,751
10,537
11,357
12,535
12,875
1,134
2,765
3,664
4,657
7,187
8,147
11,574
8,359
13,249
8,599
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FMCG Business Revenue vs Capex Trend
Revenue (Rs Cr) Capital Expenditure (Rs Mn)
ITC has added new capacities and products at a much
faster rate in the last 5 years mainly in the personal care
business (4000 cr in FY 19) as compared to the past which
will benefit the company in the near future

Summary: 10 Year Financials
FMCG - Others Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
Revenue from Operations 4,495 5,556 7,028 8,129 9,017 9,712 10,524 11,339 12,517 12,844 13.1%
Add : Inter Segment Revenues 9 8 10 12 10 12 14 18 18 31 16.5%
Total Segment Revenue 4,504 5,564 7,038 8,141 9,027 9,724 10,537 11,357 12,535 12,875 13.1%
Earnings Before Interest & Tax -332 -215 -89 12 31 57 26 170 396 425 -
Segment Assets 2,518 2,654 3,278 4,259 4,922 6,179 7,258 7,760 8,225 8,810 13.8%
Segment Liabilities 538 635 728 840 871 1,187 1,412 1,909 2,021 2,123 16.0%
Capital Expenditure 113 277 366 466 719 838 1,157 836 1,325 860 22.8%
Depreciation/Amortisation 97 107 129 146 178 240 246 302 384 498 16.0%
FCFF (excl. WC Changes) -249 -320 -300 -312 -519 -557 -893 -415 -664 48 6.7%
• The recent years have seen capital expenditure far outgrowing the revenues in order to establish the necessary
manufacturing capabilities, scale and expanding the product portfolio
• The business is still in a high growth phase with more volume growth than value
• So, it has been FCF-negative business for the company but the margins have steadily improved

Paperboards, Paper &
Packaging Business
First step of Downward Integration

Introduction
• The first six decades of ITC's existence were primarily devoted to the growth and consolidation of the Cigarettes and
Leaf Tobacco businesses
• ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business
• Today, ITC's Paperboards and Specialty Papers Business is the leader in volume, product range, market reach and
environmental performance, and is the clear market leader in the value-added paperboards segment
Source: CRISIL, Investec Paper Industry Report
Sr. Product ITC Installed Capacity (MTPA) Overall India Demand (MTPA)
1 Paperboard (Virgin) 493,000 800,000
2 Writing Paper 124,700 5,100,000
3 Industrial & Fine Paper 50,000 500,000 for Fine & 5,300,000 for Industrial
4 Recycled boards 103,000 3,200,000
5 Poly Extrusion Coated Boards 40,000 -

History
 1979: ITC entered the Paperboards business by promoting ITC
Bhadrachalam Paperboards Limited and was amalgamated with
ITC in 2002
 1990: ITC acquired Tribeni Tissues Limited, a Specialty paper
manufacturing company and a major supplier of tissue paper to
the cigarette industry
 2002: Tribeni tissues was merged with Bhadrachalam Paperboards
his division merged with the Company's Tribeni Tissues Division
to form ITC Paperboards & Specialty Papers Division
 2004: ITC acquired the paperboard manufacturing facility of BILT
Industrial Packaging Co. Ltd (BIPCO), Kovai to improve customer
service with reduced lead time and a wider product range in the
specialty segment
Source: ITC Website, Press Releases, Interviews with Management
• 650,000 TPA of Paperboard and 124,700 TPA of
Paper
Bhadrachalam
• 60,000 TPA of Fine & Industrial Paper
Tribeni
• 103,000 TPA of Recycled boards.
Kovai
• 65,000 TPA of Poly Extrusion Coated Boards
• 5,000 TPA of Cast Coated Boards
Bollaram

About Paperboards & Specialty Paper Segment
 Packaging paper & board demand growth is driven by base demand
growth in FMCG, Consumer durables and Pharma [5 year CAGR 2011-
2016 of 9.2%, 11.4% and 5.6% respectively].
 In addition, higher value coated paper demand is growing at a faster
pace with premiumization.
 High growth rates in e-Commerce (Amazon/Flipkart) should be
another strong driver for sustained packaging paper demand.
Source: CRISIL

Impact of Anti-Dumping & Anti-Subsidy Duties
• Imports from China, ASEAN and South Korea rose sharply by 27% during FY 2020
• The current import policy and extant regulations governing commercial and social forestry in the country have put the
Indian Paper and Paperboard industry at a significant disadvantage vis-à-vis imports.
• Ever since ASEAN-India FTA came into force on January 1, 2010 and basic customs duties were progressively reduced
to nil in India on almost all grades, imports of paper & paperboard from ASEAN, especially writing and printing paper,
have increased at a frantic pace
• As per Indian Paper Manufacturers Association (IPMA), imports from ASEAN countries have jumped from 29,000 MT
in FY 2011 to nearly 343,000 MT in FY 20. ASEAN’s share in paper imports has increased from 5.4% in FY 2011 to
21% in FY 2020, representing a 1100% growth
• Under the Asia Pacific Trade Agreement, India has extended import tariff concessions to China (and other countries)
and reduced basic customs duty from 10 per cent to 7 per cent on most grades of paper

• Despite increased pressure of imports, they achieved the highest ever volume of production and sales, crossing 8 lakh
tonnes and maintained decent margins & free cash flows
• This was driven by strategic investments in augmenting VAP manufacturing capacity, continuous focus on enhancing
operational efficiency and innovations across the value chain
Paperboards Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
Add : Inter Segment Revenues 1,403 1,604 1,838 1,972 1,623 1,482 1,630 1,554 1,630 1,608 2.8%
Earnings Before Interest & Tax 819 937 964 892 921 908 966 1,042 1,239 1,305 6.1%
Segment Assets 4,246 4,830 5,462 5,857 5,919 6,020 6,314 6,731 6,961 6,817 5.6%
Segment Liabilities 485 478 509 544 496 510 624 787 755 764 8.2%
Capital Expenditure 250 594 690 663 154 350 561 910 259 248 2.2%
EBIT Margins 22% 22% 21% 17% 19% 18% 18% 20% 21% 21% -
FCFF (excl. WC Changes) 555 299 245 257 723 528 370 94 935 1,023 6.7%

Future Outlook & Triggers
• Key Innovations - Product-related
• ITC entered the art board market with the launch of ‘Safire Graphik Duo’ in 2018
• In 2019, ITC introduced recyclable barrier board ‘Filo’ series – a substitute for single-use plastics in the food service segment and the
biodegradable ‘Omega Series’ – an alternative to plastic coated containers and cups is gaining significant customer franchise
• Key Innovations - Process related
• Last year, a pioneering initiative was taken to introduce a system of direct wood purchases from farmers with online payment enablement
• Renewable sources presently account for 43% of total energy consumed – reiterates ITC’s focus towards ESG
• Trigger: Discussions on reviewing in the FTA Agreement
• In September 2020, upon the request of IPMA, the Union Ministry of Commerce & Industry will be reviewing the FTA agreement with
ASEAN countries to determine if they need to put paper & paperboard in the negative list
• The main motive is to provide a level-playing field for Indian paper manufacturers who have been bearing the brunt of indiscriminate
import of cheap paper, especially writing, printing paper, from ASEAN countries
• ‘Atmanirbhar Bharat’ initiative taken up by the government in the light of COVID-19 is expected to boost the industry
Source: ITC Annual Reports, Press Releases

Hotels Business
Potential Spin-Off Candidate

Introduction
• In 1975, the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-
Welcomgroup Hotel Chola' (now renamed My Fortune, Chennai)
• The objective of ITC's entry into the hotels business was rooted in the concept of creating value by its potential to earn high
levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment
• Since then ITC's Hotels business has grown to occupy a position of leadership, with 109 owned and managed properties spread
over 70 locations across India
• ITC Hotels recently took its first step toward international expansion with an upcoming super premium luxury hotel
in Colombo, Sri Lanka
• In addition, ITC Hotels also recently tied up with RP Group Hotels & Resorts to manage 5 hotels in Dubai and India under
ITC Hotels' 5-star 'WelcomHotel' brand and the mid-market to upscale 'Fortune' brand.
• OYO rooms is the leader over 23,000 hotels whereas IHCL Hotels of the Tata Group is the second largest with 157 Hotels in
India at over 80 locations (OYO isn’t operating in the premium category like the others)

Branding & Positioning
• ITC has 4 brands:
1. ‘ITC Hotels’ in the Luxury segment
2. ‘Welcomhotels’ in the Upper-Upscale segment
3. ‘Fortune’ in the Mid-market to Upscale segment
4. ‘WelcomHeritage’ in the Leisure
• Positioning
• Anchored on unique and path breaking ‘Responsible
Luxury’ initiatives, culinary excellence and
personalisation of guest services through hotels that
are the truest representation of the region’s culture
and ethos.
Source: ITC Annual Reports, CRISIL

Synergy from the Hotels Business & Growth Strategy
 Synergy by providing a platform for Marketing
o ITC uses the hotels network for making consumers aware about the gourmet luxury chocolates range, Fabelle with
exclusive boutiques across 8 ITC Hotels and kiosks at 3 Welcomhotels.
o Marketing of Sunbean gourmet coffee is done by specially trained in-house master baristas who continue to bring alive
the brand story with customized creations
 Growth Strategy
1. Drive profitable growth by leveraging world-class infrastructure & capability
o Iconic properties
o Iconic cuisine brands
o Loyalty programmes
o Cutting-edge digital infrastructure / distribution
2. Leveraging assets and growing through management contracts
o Asset-right approach - WelcomHotel brand proposition sharpened for management contracts in 5-Star segment

Exploring Adjacencies
1. Flavours & Gourmet Couch: Takeaways/Deliveries
 ITC Hotels has introduced 2 unique gourmet experiences - ''Gourmet Couch'' and ''Flavours‘’
 While Flavours celebrates seasonal produce across ITC hotels and WelcomeHotels with their mindfully curated
menus, Gourmet Couch presents a distinctive menu collection showcasing their culinary legacy from their globally-acclaimed
restaurants
 Both services are now available on Swiggy & Zomato
2. Lavadeneria: Laundry Service
 ITC Hotels has launched ‘LAVANDERIA’, an initiative that offers impeccable contact light laundry services with strict
monitoring of safety and hygiene norms at each step
 ‘LAVANDERIA’ allows customers to hand over the items at a designated point at the hotel where the laundry would be ready
for pick up by the customer within 24 hours, where the customer would be intimated via a message which would include a
payment link to enable contactless payment, the entire process remains contact-light with safe distancing at every point
 ‘LAVANDERIA’ services are available pan India at ITC Hotels in Delhi, Kolkata, Bengaluru, Hyderabad, Vishakhapatnam and
Chennai with more locations in pipeline

COVID Impact on Hotel’s Business
• The coronavirus pandemic has brought one of the longest downcycles in the hotels business
• There is a high demand-supply gap across destinations in FY 21, low demand aggravated by supply additions across
select destinations
• Premium hotel supply expected to grow at 2-4% in FY 21, Openings are expected to get deferred and hoteliers will put
expansion plans on hold
• Domestic hotel chains are speeding up to make their asset light strategy and look for alternate revenue streams
• Even in the base case scenario taken in June 2020, CRISIL had projected around 50% dip in revenues of premium hotel
chains and recovery is unlikely in the short term (1-2 years)
• With the pandemic still prevalent in India in September, the scenario seems to be quite bleak
• ITC’s plan to spin off hotels into a separate business seems at an opportune time for creating value for shareholders
Source: ITC Annual Reports, CRISIL

Distress in Hotel Industry
• Continued liquidity pressure & absence of support for hoteliers from government may lead to closure of some
properties, especially single owned properties
Source: Quantix (CRISIL)

Distress with Key Players – Opportunity for ITC?
Source: Quantix (CRISIL)

• The hotels business has been a financial drain on ITC as the rate of revenue growth has been quite low despite high
capital expenditures
• Over the last 10 years, the business has been FCF-negative which has been weighing down the stock price
Hotels Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
Add : Inter Segment Revenues 10 12 13 12 15 14 14 15 19 15 3.9%
Earnings Before Interest & Tax 283 294 149 146 52 61 117 145 186 154 -5.9%
Segment Assets 3,070 3,634 4,310 4,531 5,314 5,558 5,850 6,565 7,302 7,563 9.4%
FCFF (excl. WC Changes) -82 -473 -609 -67 -752 -150 -218 -642 -607 -482 -

325
81
173
322
374
421
369
765
819
298
985
383
472
919 936
857
0
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Capital Expenditure trend since 2005
Has ITC’s Historical Performance always been bad?
628
850
1,061
1,174 1,093
978
1,066 1,075 1,139 1,198 1,256
1,359 1,414 1,495
1,747
1,926
0
500
1,000
1,500
2,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue trend since 2005
160
287
386
436
335
231
283 294
149 146
52 61
117
145
186
154
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EBIT trend since 2005
8.6%
15.6%
20.3%
18.7%
12.3%
6.2% 6.3% 5.6%
2.3% 2.2%
0.6% 0.7% 1.2% 1.2% 1.4% 1.0%
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE trend since 2005
Low ROCE can be attributed to lower utilization as significant capex ramp up since 2012 hasn’t been reflected in Revenues

How is ITC Hotels’ Performance vs Peers?
With aggressive rise in Capex, ITC’s operating profits have been under pressure which may be attributed to lower occupancy
1,066 1,075 1,139 1,198 1,256 1,359 1,414 1,495
1,747 1,926
2,862
3,444
3,743
4,066 4,189 4,023 4,021 4,104
4,512 4,463
1,252 1,407 1,469 1,547 1,669 1,661 1,529 1,599 1,811 1,596
0
1,000
2,000
3,000
4,000
5,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year Revenue Trend
ITC Hotels Indian Hotel Co. Ltd. (Tata Group) EIH Ltd. (Oberoi Group)
ITC Hotels 6.1%
IHCL 4.5%
EIH Ltd. 2.5%
283 294
149 146
52 61
117 145 186 154
446
550 527 562
427
612
512
667
788
946
237
316 284 327 331 322
263 300
394
295
0
200
400
600
800
1,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year Operating Profit Trend
ITC Hotels -5.9%
IHCL 7.8%
EIH Ltd. 2.2%
6.3%
5.6%
2.3% 2.2%
0.6% 0.7%
1.2% 1.2% 1.4%
1.0%
-1.5%
0.0%
-5.4%
-7.6%
-4.5%
-3.1%
-0.9%
1.3%
7.8%
7.2%
-0.2%
3.8%
1.3%
3.4%
2.0%
4.2%
3.2%
8.2%
9.5%
5.8%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year ROCE Trend
Note: IHCL = Indian Hotel Company (Taj – Tata Group), EIH Ltd. (Oberoi Group)

How is ITC Hotels’ Performance vs Peers?
With aggressive rise in Capex, ITC’s operating profits have been under pressure with lower asset turnover ratio vs peers
Source: ITC Annual Reports Note: IHCL = Indian Hotel Company (Taj – Tata Group), EIH Ltd. (Oberoi Group)
3,070
3,634
4,310 4,531
5,314 5,558 5,850
6,565
7,302 7,563
8,877 9,230 9,291 9,514 9,884 9,797
8,599
9,314 9,514
11,442
4,170 3,707 3,927 3,704 3,719 3,604 3,680 4,064 4,242 4,442
0
2,000
4,000
6,000
8,000
10,000
12,000
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
10 Year Total Assets Trend
ITC Hotels 9.4%
IHCL 2.6%
EIH Ltd. 0.6%
0.35
0.30
0.26 0.26
0.24 0.24 0.24 0.23 0.24 0.25
0.32
0.37
0.40 0.43 0.42 0.41
0.47
0.44
0.47
0.39
0.30
0.38 0.37
0.42
0.45 0.46
0.42 0.39
0.43
0.36
-
0.1
0.2
0.3
0.4
0.5
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10 Year Asset Turnover Ratio

Steps taken by ITC to Improve Returns
1. Pursue asset-light strategy
• The next milestone for hotel business is to reach of 30:70 ratio between owned and managed hotel properties from the present 40:60 mix, as it
seeks to scale up the room capacity faster
2. Focus towards improving ROI to historical levels eventually with slowdown in expansion
• There have been years when return on investment for the hotels division was north of 20% (post 2000)
• Unlike competitors, ITC chose to expand its footprint with the conviction that tourism in India will pick up and that the market price of hotels
will appreciate with time
• Now with decrease in capex due to coronavirus, they will realign focus on improving operational aspects to return to 20% ROI
3. Develop Alternative Sources of Revenue
• ITC has started 2 services during the pandemic : Flavours & Gourmet Couch for Takeaways/Deliveries and Lavadeneria: Laundry Service
• Takeaway & Delivery service have received good customer feedbacks as the company has taken several initiatives to ensure that the customers
get the similar luxurious experience in the safe space of their homes

Agribusiness
Integral Part for Sourcing of Raw Materials for the FMCG Business

Introduction
• ITC is one of India's largest integrated agri business enterprises with significant presence across every node of the agri value chain
• It is one of the leading domestic players and country's second largest exporter of agri-products, which also works with farmers to
improve the productivity and quality of agri-products
• Backed by decades of expertise, the business deploys customised infrastructure and technology to supply these products to discerning
customers in India and over 60 markets worldwide
• ITC Agri Business' unique strength is the extensive backward linkages it has established with the farmers
• A powerful illustration of this unique business model is the pioneering ITC e-Choupal initiative that delivers largescale societal value by
co-creating markets with rural communities
• ITC e-Choupal is a unique click-and-mortar channel that facilitates the two-way flow of goods and services in and out of villages across
17 states as of FY 2020
• It is the largest Internet-based intervention in rural India by a corporate entity & has won numerous awards, including the United
Nations Development Program World Business Award, the Stockholm Challenge Award, and the Development Gateway Award
Source: ITC Annual Reports, Website

Products traded by the Agri-Business
 Leaf Tobacco (Raw Material for Cigarettes Business)
o Largest exporter of leaf tobacco in India & 5th largest in the world where it pioneers cultivation of Flue-cured & superior Burley tobacco
 Feed Ingredients – Soyameal
 Food Grains - Wheat & Wheat Flour, Rice, Pulses, Barley & Maize
 Marine Products - Shrimps and Prawns
o Since 1971, ITC has been a significant exporter of seafood from India like frozen & cooked shrimps and other seafood products to Europe, Japan,
Middle East, Russia, USA, Vietnam etc.
 Processed Fruits - Frozen foods, IQF (individually quick frozen) fruits, niche products like baby-food quality purees, traceable and
organic purees
o In Processed Fruits category, ITC exports from ISO certified plants to Western Europe, North Africa, West Asia, Japan and North America, a wide
range of Processed Fruit products made from Mango (Alphonso, Kesar & Totapuri), Guava, Papaya and Pomegranate.
o ITC is the leading Indian exporter of Organic and Fairtrade Certified Fruit Products certified to European (EC 2092/91) & US (NOP) Standards

Business Model: Why it isn’t easily replicable?
• Unlike a pure trading model which doesn’t require much capital investment,
the e-Choupal model (till 3.0 version), in contrast, requires significant
investments to create and maintain its own IT network in rural India and to
identify and train a local farmer to manage each e-Choupal which only few
companies can
• e-Choupal system bypasses government-mandated trading mandis
(APMCs)
• The objective is not to be a platform provider for sale of third-party
products and services but rather a network choreographer who orchestrates
bi-directional demand and supply of goods through a collaborative
business model
• ITC intends to differentiate itself by serving only those products and
services to which it can add value & its core asset is its knowledge of the
customer
• By transforming the value chain and setting up a platform for procuring
commodities from them directly, they now have a foundation for forging a
close relationship with the farmers
Source: What works: ITC’s e-Choupal and profitable rural transformation (Authors: Kuttayan Annamalai & Sachin Rao (August 2003))
Farmers (Mainly
Small & Marginal)
• Primary Beneficiaries
• Decision Makers
• Co-creators
Sanchalak Lead
Farmer
• Bridge between ITC
and Farmers
• Beneficiary
Academic/Technical
Institutes
• Partners for content &
services on e-Choupal
ITC Limited
• Facilitator, R&D,
Programme Design,
Funding, Monitoring &
Evaluation Provider
e-Choupal
Ecosystem

Trying to build a network effect ‘moat’ using deep pockets
Farmers’ Network
 As of 2020, over 35,000 villages (India: ~6.38 lakh) across
have been linked through 6,100 ‘e-Choupals’, reaching 4
million farmers (expansion stopped since 2007 due to slow reforms
& other issues)
 Currently, the 'e-Choupal' website provides information to
farmers across the 17 States like Madhya Pradesh, Haryana,
Uttarakhand, Uttar Pradesh, Rajasthan, Karnataka, Kerala,
Maharashtra, Andhra Pradesh and Tamil Nadu.
 Crops and crop development programmes cover over 17,000
hectares across states by engaging 1,30,000 farmers (India: 160
million hectares)
 In terms of potential network, ITC has just scratched the
surface in comparison to the India level numbers
Infrastructure & Logistics Network
 Over the years, ITC has established a customised
infrastructure and logistics for the agri-business based on
the perishable nature of products & other requirements
 India’s first and only privately owned warehouse-cum-
freight terminal
 Over 6.5 million sq ft of warehousing space
 ITC operates the agri-business through 65 hubs and over
300 warehouses spread across more than 20 states and
over 160 districts of India
 Network major Agri-Universities and crop research
institutions in India for crop specific interventions
Source: ITC Annual Reports, Website, Ministry of Home Affairs

How e-Choupal has Evolved over its history?
E-Choupal 1.0 & 2.0: Growth Phase (2000 – 2012)
 Linking small & marginal farmers with buyers to connect
them directly with buyers
 Serves as the back-end source of raw materials that go into
ITC’s cigarettes, personal care products and packaged foods
 At one point, ITC was opening 6 e-Choupals every hour
Source: ITC Annual Reports, Website, Press Releases
E-Choupal 3.0 (2012 – 2020)
 Offer personalized crop management advisory services
to individual farmers
 Can be used as Rural employment exchanges, which
will connect the rural youth with jobs (wasn’t successful)

What stopped e-Choupal’s network growth from 2007?
Export Bans for Selected Crops
• Sudden Government restrictions in exports of selected crops disrupts the entire supply chain making it harder to consolidate ITC’s export position
• However, easing of these restrictions in the recent years especially in few key foodcrops like wheat have helped India
Source: International Trade Centre calculations based on UN COMTRADE statistics since January, 2019.
Wheat exports were banned from 2007 to 2011.
Predicting exports has been quite erratic due
to continuous change in government stance

• Stock controls
• The absence of a transparent liquidation policy has resulted in India
accumulating foodgrains several times the buffer norm in its official reserves
for majority of the years
• This happens at a time when the farm distress is continuing and there is
mounting pressure on the state governments to buy grains at the minimum
support prices.
• Prohibition of futures
• At the government’s behest, the market regulator summarily banned new
contracts in both commodities on 27 February 2007 to tame retail inflation
• The futures ban destroyed the process of price discovery that is crucial if
farmers are to have some control over their earnings & increase reliance on
Minimum Support Prices (MSP)
• The ban was later reverted in 2009
Source: FCI, Press Releases
Apart from FY2007, Indian buffer stocks have far
exceeded norms leading to wastage and government
liquidating stocks at low prices

Agriculture Produce Marketing Committee (APMC) Act, 2003
• Union Government had prepared a Model APMC Act in 2003 for development of efficient marketing system with the infrastructure of
APMC Mandis & Promotion of agri-processing and agricultural exports
• However, instead of helping the farmers, it has been made quite a dent on their pockets with several problems plaguing the system like
• Monopoly of APMC: APMC Agents deprives farmers from better customers, and consumers from original suppliers
• Cartelization among agents: Several APMCs have seen cartel formation which results in profiteering i.e. buying from farmers at lower prices &
selling to customers at higher prices, defeating the whole purpose of the APMC
• Entry Barriers: At most places only a group of village/urban elite operates in APMC who put in artificial entry barriers to outside farmers
• Conflict of Interest: In this model, APMC plays a dual role of regulator and market. In such a setting, consequently its role as regulator is
undermined by vested interest in lucrative trade (profiteering)
• High Costs: APMCs charge commissions, marketing fees, APMC cess, other taxes etc. to farmers
• Other issues: APMCs have been well-known for notoriously blocking payments & not providing payment slips to farmers due to fictitious reasons

e-Choupal 4.0 – Moat changing from entry barriers to
‘network’ model
• ITC’s e-Choupal had stopped expansion from 2007 due to slow pace of agricultural reforms,
• India’s current internet penetration stood at 50% in January 2020 whereas in 2007, internet penetration was also less
than 4% when mobile internet was at a nascent stage in India
• In 2020, with increasing penetration of internet & mobiles, ITC e-Choupal rolled out its version With the objective to
build an integrated platform for the farmer’s first mile and last mile needs
• 4.0 this year.Key Features of e-Choupal 4.0:
• Real time information on weather and markets (prices)
• On-farm diagnostics: Provide farmers with information they need to make informed management and treatment decisions
• Continuous crop monitoring using geo-spatial information for building weather resilience
• Agronomic advisory for improving productivity & quality and farm inputs to make agriculture a viable enterprise
• Forward linkages to remunerative output markets – connecting farmers with buyers
Source: ITC Annual Reports, Website, Statistica

Synergy with the other businesses & Bingo! Case Study
• ITC's Agri business is progressively aligning its commodity
portfolio with the sourcing needs of the Company's Foods
business to generate higher order value
• It will help in raw material sourcing for products of Farmland
brand
Bingo!
• The business has commenced procurement of chipstock potatoes,
one of the critical raw materials in the manufacture of the
Company's 'Bingo!' brand of potato chips
• The acquisition of Technico, an Australian company with
technology leadership in the production of early generation seed
potatoes, helped the business access a ready pipeline of new high-
yielding varieties of chipstock potato seeds
• Through innovation, ITC has helped farmers an additional
income of Rs 30,000/acre
Sr. Brand Raw Material
1 Aashirvaad Atta Wheat
2 B Natural & Farmland Fruits & Vegetables
3 Sunfeast Wonderz & Aashirvaad Svasti Milk
4 ITC Master Chef Spices, Sea food, Processed
Fruits & Vegetables

Agri-Business SBU: Strategic Direction
Source: ITC Investor Presentation
Deliver sustainable competitive edge to ITC’s FMCG Businesses through agri-sourcing
Enhance scale & scope of external business leveraging deep and wide sourcing network
Build a robust portfolio of value-added products to expand margin and establish B2B & B2C brands
Develop a Future Ready portfolio - Organic/Food safe/attribute based products and Medicinal & Aromatic
Plants

ITC’s Pilot Project in UP – Stronger Rural Connects
Source: ITC Investor Presentation

• ITC’s Agri-business has been growing at a decent pace considering that the e-choupal network has stopped growing since 2007 due to Export
bans, subsidies, stock controls, prohibition of futures and slow amendment to the Agriculture Produce Marketing Committee (APMC) Act
• Over the past 10 years, it has seen major inflows due to increased costs of expanding the network and technological improvements
• Despite this, it has been FCF positive for the last 10 years and has been highly value accretive
FMCG - Agribusiness Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 CAGR
Add : Inter Segment Revenues 1,933 2,283 2,278 2,739 2,814 3,200 3,071 3,681 3,490 4,541 8.4%
Earnings Before Interest & Tax 566 643 731 835 904 934 926 841 793 830 -
Segment Assets 2,150 2,212 1,906 2,909 2,651 2,970 3,256 3,693 4,191 4,334 8.2%
FCFF (excl. WC Changes) 328 313 455 538 467 576 538 564 574 597 5.5%
Margins 11.9% 11.3% 10.2% 10.8% 10.8% 12.5% 11.0% 10.3% 8.3% 7.9%

Possible Triggers for the Agri-Business
• Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 – APMC Act Reform
• This bill allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets and other markets
notified under the state APMC Acts
• The Centre has said that this bill will also permit the “electronic trading of scheduled farmers’ produce (agricultural produce regulated
under any state APMC Act) in the specified trade area”
• This bill is targeted to break the monopolistic nature of APMCs
• Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
• The bill talks about creating a framework for contract farming through an agreement between a farmer and a buyer before the production
or rearing of any farm produce
• This could boost e-Choupal, the largest online marketplace for connecting farmers with buyers
• Successful implementation of e-Choupal 4.0 – Expansion to new geographies
• In form of a mobile digital platform, e-Choupal’s reach can be amplified as a number of value added services can be offered at minimal
costs to India’s remotest parts

Information Technology
Business
Targeting niches & evolving into a full-fledged Technology Company

Introduction
• In 2000, ITC ventured into the lucrative information technology business
through its wholly owned subsidiary, ITC Infotech India Limited, at the
peak of the dotcom bubble
• Today, ITC Infotech is one of India's fastest growing global IT and IT-
enabled services companies and has established itself as a key player in
offshore outsourcing, providing outsourced IT solutions and services to
leading global customers
• It deals with customers across these key focus verticals:
• Banking Financial Services & Insurance (BFSI)
• Consumer Packaged Goods (CPG) & Retail
• Manufacturing Engineering Services
• Media & Entertainment
• Others (Travel, Hospitality, Life Sciences and Transportation & Logistics)
India, 31.6%
North
America,
19.2%
Europe,
30.7%
Middle East
& America,
15.5%
Rest of
World, 3.0%
Geographical Breakup of Revenue
(FY 20)

Journey & Major Accolades
• Qualified for CMMI level 5 certification in 2018-19.which validates the process maturity of the Company in delivering high
quality services with predictability
• Recognised in the ‘Disruptors’ category in Avasant’s Intelligent Automation RadarView 2019 report amongst the Top 24
service providers globally
• Recognised in the ‘Leadership Zone’ for Enterprise Software in Zinnov Zones ER&D 2018 report
• Featured as a ‘Leader’ in the archetype ‘Enabling Digital’ in ISG Insights Index (i3) in 2017 for ADM

Four Strategic Pillars for Growth
 Achieving meaningful scale:
o Testing as a Service (TaaS) and Supply Chain Management (SCM) were seeded as new LoBs. Industry veterans were hired to lead these
newly formed LoBs
o Industry leaders were hired in the predominant markets of USA and Europe to lead new business development efforts
 Becoming future ready:
o Developed a clear definition and framework for Digital offerings which currently contribute more than 20% of the Company’s revenues
o Instituted a new “Innoruption” Lab to focus on R&D and innovation in areas like Digital Supply Chain solutions, Mobility Solutions,
Internet of Things, Cognitive Automation and to build an ecosystem of startups
 Enhancing Profitability
o Established a central resource management organization, Operational excellence and resource allocation (OPERA), to drive utilisation and
operational efficiency which has already started showing encouraging results
 Building institutional capabilities:
o Launched Achievers’ club for sales and other functions to motivate and push sales productivity, innovation and efficiency
o Dedicated a Thought Partner to ITC businesses to increase co–creation opportunities; a program called Anubhav has been socialised to
bring in high performers from ITC businesses to ITC Infotech thereby further strengthening domain knowledge in GTM verticals

Financial Summary since Inception
0 14 21 49 79 130 162 205 264
566 568
636
830
1,018
1,279
1,476
1,555 1,554
1,652
2,020
2,269
-2 0
-16
-8 -3 2
10
21
7
20
43
18
50
67
86
106
77
38 40
104
209
-50
-
50
100
150
200
250
-
500
1,000
1,500
2,000
2,500
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
Revenue (Rs. Cr.) & Profit After Tax (Rs. Cr.) Trend since Inception
Revenue from Operations Profit After Tax
Sudip Singh
Ex Infy
Sushma Rajagopalan
Ex LTI, Zensar
Sumant Bhargavan
Internal
Sanjiv Puri
Internal
• After Ms. Sushma Rajagopalan took reins of ITC Infotech, it
commenced on a transformational journey to become a Specialized,
Global–scale Full-service provider led by Business and
Technology consulting
• Prior to that, CEO succession was done through internal hiring e.g.
Sanjiv Puri, Sumant Bhargavan both of whom now serve on ITC’s
board
• She also realigned focus towards Digital

Financial Analysis
Understanding How ITC is earning & spending its money

Steady Sales Growth over the years
Source: Analysis based on ITC Annual Reports
59% 58% 57% 56% 56%
41% 42%
57%
47%
42% 41%
12% 13% 14% 15% 15%
21% 22%
17%
22%
23% 22%
3% 3% 3% 2% 2%
3%
3%
2%
3%
3% 3%
13% 13% 14% 15% 14%
19% 17%
13%
15%
18% 18%
11% 10% 10% 9% 10% 12% 11%
9% 10% 11% 11%
2% 2% 3% 3% 3% 4% 4% 2% 3% 4% 4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Revenue Mix Trend over the last 10 years
FMCG - Cigarettes FMCG - Others
Hotels Agri Business
Paperboards, Paper and Packaging Others
19,766
23,050
27,310
32,505
36,288
40,091 40,723
44,565 45,281
50,526
52,002
630
777
784
878
971
1,257 1,531
1,762 1,832
2,174
2,598
-
10,000
20,000
30,000
40,000
50,000
60,000
Revenue Growth over the Years
Excise Adjusted Operating Revenue Other Income
ITC’s sales have grown at 8.5% CAGR over the past 10 years with revenue mix shifting towards the FMCG & Agribusiness
8.5%

With Even Better Profit Growth
ITC’s EBITDA, EBIT and PAT have grown at 10.0%, 10.2% and 11.8% CAGR annually outpacing the revenue growth (8.5%)
7,357
9,210
11,174
13,052
14,202 14,451
15,436
16,483
18,406
19,260
6,658
8,464
10,315
12,087
13,174 13,373
14,283
15,247
17,010
17,615
5,079
6,322
7,694
8,991
9,766 9,501
10,477
11,493
12,836
15,593
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Profit Trend over the Years
EBITDA EBIT PAT

Supported by Margin Expansion & WC Management
ITC’s profits have been steadily growing with margin expansion and better work capital management which could mainly be related to the
change in the revenue mix (increase share of FMCG and other adjacencies)
28.9%
31.0%
31.7%
33.3%
32.9% 32.8%
32.0%
33.7% 33.7% 33.9%
22.0%
23.2%
23.7%
24.8%
24.4%
23.3% 23.5%
25.4% 25.4%
30.0%
22.0%
24.0%
26.0%
28.0%
30.0%
32.0%
34.0%
22%
24%
26%
28%
30%
32%
34%
Operating Profit & PAT Margin Trend
EBIT Margin PAT Margin
247
241
222 226
207
240
205
184
163
180
17 16 16
25
18 17 20 22
29
18
65
58
52
58
48
62 63
86
73 73
200 199
185
193
177
195
162
120 119
124
-
20
40
60
80
100
120
140
160
180
200
-
50
100
150
200
250
Working Capital - Key Metrics Trend
Inventory Days Receivable Days
Payable Days Cash Conversion Cycle

Where has ITC spent the profit generated over the years?
Operating Profit 1,42,601.2 Rs. Cr
Depreciation and
amortization expense
10,804.5 -
Interest Income -7,283.6 -
Fair Value change
(Profit) or loss
-3,735.0 -
Trade Receivables -3,406.7 -2.4%
Inventories and
biological assets
-3,660.0 -2.6%
Trade payables, other
liabilities and provisions
4,897.9 3.4%
Income tax paid -43,537.6-30.5%
Other Operating
Expenses
-28.1 0.0%
Net Cash from
Operating Activities
96,866.7 67.9%
Purchase of PPE &
Intangibles
-26,686.6 -18.7%
Purchase of current
investments
-4,276.0 -3.0%
Purchase of non-current
investments
-13,553.3 -9.5%
Interest received 6,549.0 4.6%
Investment in bank
deposits (> 3 month)
-4,245.7 -3.0%
Investment in deposit with
HFCs
-1,460.5 -1.0%
Others 1,746.9 1.2%
Net Cash used in Investing
Activities
-41,926.2 -29.4%
Profits mainly distributed amongst Taxes (37%), PPE (19%) & Dividends (36%)
Proceeds from issue of
share capital
8,366.9 5.9%
Dividend paid -51,973.8 -36.4%
Income tax on dividend
paid
-9,355.5 -6.6%
Net Cash used in
Financing Activities
-53,161.8 -37.3%
If we consider D&A amount to be an
approximation of Maintenance capex,
then around 40% of the total purchase of
PP&E and Intangibles goes into
maintenance capex

How has been the company’s capital allocation?
ITC has spent majority of its capex on diversification opportunities with FMCG & Hotels topping the list
FMCG -
Cigarettes
17%
FMCG -
Others
29%
Hotels
28%
Agri
Business
5%
Paperboards, Paper
and Packaging
19%
Others
2%
Breakup of Capex done over 10 years
58.9
13.1
2.0
68.6
10.7
26.5
3.8
0.1 0.0
0.7
0.3
0.5
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
FMCG -
Cigarettes
FMCG - Others Hotels Agri Business Paperboards,
Paper and
Packaging
Others
Incremental Sales or Profit Generated over the last 10 years
Sales/Capex Profit/Capex
Hotels business has been the only
business which has been a major
cash drain with very low return in
terms of revenue as well as profits
despite decent capital expenditure
17%
77%
37%
21% 19% 19% 24%
11% 13%
43%
20%
50%
36%
19% 21%
31%
0%
20%
40%
60%
80%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Depreciation / Capital Expenditure
As ITC is stopping addition of new hotels, incremental sales & profit generated
by hotels business is expected to rise which was the case in early 2000s

Business Wise ROCE over the years
Disregarding FMCG Segment which is still in nascent stage, all business have performed satisfactorily except Hotels Biz (ROCE would be
greater or equal to Cost of Capital)
100% 100%
103%
93%
97% 98%
105% 106%
126%
123%
136%
80%
90%
100%
110%
120%
130%
140%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in Cigarettes over the Years
-13.6%
-9.9%
-6.3%
-2.0%
0.2% 0.4% 0.6% 0.2%
1.3%
2.8% 2.6%
-16.0%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in FMCG - Others over the Years
6.2% 6.3%
5.6%
2.3% 2.2%
0.6% 0.7%
1.2% 1.2% 1.4%
1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in Hotels over the Years
18.0%
20.4%21.6%
29.7%
22.3%
23.9%
20.3%
18.7%
13.7%
10.6% 10.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in Agribusiness over the Years
18.0%
20.4% 21.6%
29.7%
22.3%
23.9%
20.3%
18.7%
13.7%
10.6% 10.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in Paperboards, Paper &
Packaging over the Years
7.5%
10.8%
9.8%
13.1%
15.5%
17.3%
12.2%
9.0% 8.7%
11.7%
9.7%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROCE in Others over the Years
Avg. ROCE: 107.9%
Avg. ROCE: -2.2%
Avg. ROCE: 2.6%
Avg. ROCE: 19.0%
Avg. ROCE: 10.8%
Avg. ROCE: 11.4%

Management Analysis
Who helped Imperial Tobacco Company become ITC Ltd?

CEO History - How they changed ITC for good/bad
Ajit Narayan Haskar : 1966 – 1983
• Ajit Narayan Haskar was the first Indian chairman of ITC Limited
• He led the charge in Indianizing the company as well as the management
• Haksar also took ITC out of purely the tobacco industry and into hotels and paperboards
• During his tenure, the company was first renamed as India Tobacco Company Limited in 1970 and
later I.T.C. Limited in 1974
• He was succeeded by his brother-in-law, Jagdish Narain Sapru
JN Sapru: 1983 – 1991
• While Mr Haskar unleashed the company’s intellectual freedom, Mr Sapru developed and honed
its emotional intelligence – Employees started feeling connected to its new diversification ventures
• In his tenure as chairman, Sapru was responsible for ITC diversifying into the agribusiness

KL Chugh: 1991 – 1996
• His entire tenure has been controversial with the emergence of several disputes which ITC had to endure for many years
• “ITC does not need BAT” – Chugh was quoted then when he reiterated his stand that BAT was trying to increase its stake and added
that BAT only wanted to use ITC's funds for its own benefits & to stop diversification efforts
• It was a one of a kind corporate war where the company revolted against its majority shareholder
• Eventually, BAT backtracked and ITC won the battle, thanks to the support of the government via holdings of LIC & SUUTI and
other legal restrictions which prevents further FDI in tobacco
• Just after the BAT tussle, in 1995, there were several allegations and counter allegations between K. L. Chugh, the then chairman of
ITC and BAT
• This public drama on ownership issue followed a spate of raids by officials of the Enforcement Directorate (ED) on grounds of ITC
violating the Foreign Exchange Regulation Act, 1973
• The enquiries by the ED led to the arrest of several top executives of ITC, including Chugh

Yogesh Chander Deveshwar: 1st January 1996 to 04th February 2017 – The Game Changer
 He joined in 1968 after graduating from IIT-Delhi and stayed till his demise, except a 4-year stint at Air India
 When Deveshwar took over in 1996 from KL Chugh, ITC was experiencing an unenviable mix of challenges:
 The cigarette business had been slapped with a retrospective excise duty demand of Rs 803 crore
 Its diversification into hotels and paperboards had not reached fruition for want of adequate investments
 The recent forays into financial services, edible oils and international trading were still incurring losses
 Weak diversification performance was facing severe criticism from shareholders
 A battle for control of the company arose again with BAT
 Deveshwar, however, wanted what he called responsible diversification and managed to convince the government as well as financial
institutions to keep BAT at bay and let ITC remain an independent, board-managed organisation
 By June 1997, BAT and ITC resolved their differences as BAT licensed ITC to manufacture and sell some of its prestigious global brands
 The rationalisation of ITC’s business portfolio began with the exit from financial services (which was sold to ICICI in 1998); edible oils,
overseas restaurants, real estate followed after which he renamed the company from I.T.C Limited to ‘ITC’
 Deveshwar also played a key role in grooming the next leadership team which includes executive director Sanjiv Puri, president (consumer
goods) B. Sumant, head of agri and IT businesses S. Sivakumar, head of trade-marketing Hemant Malik, chief executive of foods division V.L.
Rajesh and chief executive of tobacco division and Sandeep Kaul, among others
Conferred the Padma Bhushan in 2011 for his exemplary service to the nation through ITC

Board of Directors – Executive Directors
Sanjiv Puri – Chairman & Managing Director (58)
• Sanjiv Puri was appointed as a Wholetime Director on the Board of ITC with effect from December 6,
2015, and was being groomed to replace YC Deveshwar
• He assumed Chief Executive Officer position from February 5, 2017 following YC Deveshwar’s
untimely demise, and was re-designated as the Managing Director of ITC effective May 16, 2018
• He is an alumnus of the Indian Institute of Technology, Kanpur, and Wharton School of Business
after which he joined ITC in January 1986
• Over the years, he has assumed different roles across all businesses of ITC ranging from cigarettes to
consumer goods and IT
• He is Chairman & Non-Executive Director of several ITC subsidiaries like ITC Infotech India
Limited, ITC Infotech Limited (UK), ITC Infotech (USA) Inc., Surya Nepal Private Limited
• Mr. Puri is also a member of the Executive Board of Indian School of Business

Board of Directors – Executive Directors
Nakul Anand (63)
• Appointed as a Wholetime Director on the Board effective January 3, 2011, Nakul Anand continues to oversee ITC’s Hotel Business
• An Economics Honours Graduate from the Delhi University with an AMP Degree from the Bond University, Australia, Nakul Anand
joined ITC Hotels’ Management Training Programme in 1978
• He holds Chairman & Non-Executive Directorship position in the subsidiaries of the hotels business
Sumant Bhargavan (56)
• He is responsible for overseeing the FMCG Businesses of the Company
• He is an alumnus of the NIT, Durgapur, joined ITC in January 1986, and has handled a wide range of roles across several businesses
Rajiv Tandon (66)
• He is responsible for Finance, Accounting, Internal Audit & IT Functions and also for the Investment Subsidiaries of the Company
along with his responsibilities as the Chief Financial Officer
• He is a Fellow Member of the Institute of Chartered Accountants of India with over four decades of experience, majority of which has
been with ITC across different businesses (1987 onwards)

Board of Directors – Non-executive Directors
Shilabhadra Banerjee (71)
• He joined the ITC Board as a Non-Executive Director effective July 24, 2014 and was appointed as an Independent Director effective
July 30, 2014
• He is a Masters in History from St. Stephen’s College, Delhi, Post Graduate Diploma holder in Public Administration from the Indian
Institute of Public Administration, New Delhi, and an M. Phil in Social Sciences from the University of Panjab
• He began his career in the Indian Administrative Service in 1971 and in a career spanning over 37 years, he has held several eminent
positions like the Joint Secretary in the Ministry of Petroleum & Natural Gas and the then Ministry of Urban Development
Hemant Bhargava (60)
• He joined the ITC Board as a Non-Executive Director effective July 28, 2018, representing the Life Insurance Corporation of India
• He is a Masters in Economics and has studied Masters in Financial Management from Jamnalal Bajaj Institute of Management Studies
• During his long tenure of 38 years at LIC, he worked across diverse set of roles both in India and abroad, building multi-dimensional
experience in different capacities, especially in Marketing, International Operations and new ventures

Arun Duggal (73)
• He joined the ITC Board as a Non-Executive Independent Director effective September 15, 2014
• A Mechanical Engineer from IIT Delhi and MBA from IIM Ahmedabad, he is an international banker with global experience in
financial strategy, M&A and capital raising
• He is currently serving on boards of several large companies of the country in non-executive roles
Atul Jerath (59)
• He joined the ITC Board as an Additional Non-Executive Director effective January 31, 2020, representing the General Insurers’
(Public Sector) Association of India
• A Commerce Graduate from the Delhi University and a Fellow of the Insurance Institute of India with specialised Diploma in Marine
and Health Insurance, he also has a Diploma in Business Administration
• He is the Chief Underwriting Officer of The Oriental Insurance Company Limited (‘Oriental Insurance’), overseeing a wide portfolio
including Property, Health and Aviation insurance

Anand Nayak (69)
• He joined the ITC Board as a Non-Executive Independent Director effective July 13, 2019
• Nayak is a Post Graduate in Personnel Management and Industrial Relations from XLRI, Jamshedpur, from where he graduated in 1973
• He joined ITC the same year and served for more than 42 years until his retirement in December 2015
Sunil Behari Mathur (75)
• Sunil Mathur has been on the ITC Board since July 29, 2005, first as a representative of LIC and then in his individual capacity as a
Non-Executive Independent Director
• A qualified Chartered Accountant, Mathur retired from LIC in October 2004 as its Chairman
• Mathur took over as Chairman of LIC at a time when the insurance sector had just opened up and under his leadership, LIC
successfully rose to the challenges of a competitive environment by enhancing product offerings
• He is currently serving on boards of several large companies of the country in non-executive roles

Nirupama Rao (69)
• She was appointed as a Non-Executive Independent Director on the Board of ITC effective April 8, 2016
• A career diplomat from the Indian Foreign Service from 1973 to 2011, she served the Government in several important positions
including that of the Foreign Secretary of India
• She was also the first woman spokesperson of the Ministry of External Affairs
• After her retirement, she was appointed Ambassador of India to the United States for a period of two years from 2011 to 2013
• Other Independent Directorships: KEC International, JSW Steel, Adani Ports & Special Economic Zone (APSEZ)
Ajit Kumar Seth (68)
• Seth is a retired IAS officer with administrative experience of more than 41 years and joined the ITC Board as a Non-Executive
Independent Director effective July 13, 2019
• He retired in June 2015 as the Cabinet Secretary of the Government of India, the highest position in civil services

Meera Shankar (69)
• She was appointed as a Non-Executive Independent Director on the Board of ITC effective September 6, 2012
• A Post Graduate in English Literature, she joined the Indian Foreign Service in 1973 and had an illustrious career spanning 38 years
serving in the Prime Minister’s Office for six years from 1985 to 1991 working on foreign policy and security matter after which she led
the Commercial Wing in the Indian Embassy in Washington as Minister (Commerce) till 1995
• She served as Ambassador of India to Germany from 2005 to 2009 and then to the United States from 2009 to 2011
• Other Independent Directorships: Pidilite Industries Limited, Adani Transmission Limited, JK Tyre & Industries Limited
David Robert Simpson (63)
• He was appointed as a Non-Executive Director on the Board of ITC effective January 27, 2017, as a representative of Tobacco
Manufacturers (India) Limited, a subsidiary of British American Tobacco
• David Simpson started his career in 1979 and has held various leadership positions with major corporates including Barclays, de Zoete
Wedd Limited and KPMG LLP

Altman Z-score
Source: Student Research
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Share Price on Last Day of FY* 122 151 194 239 212 224 280 256 297 169
Working Capital ₹ -1,337 ₹ -1,079 ₹ -456 ₹ 870 ₹ 5,600 ₹ 5,572 ₹ 5,941 ₹ 3,665 ₹ 4,570 ₹ 4,942
Total Assets ₹ 26,405 ₹ 30,102 ₹ 35,353 ₹ 40,884 ₹ 46,547 ₹ 51,692 ₹ 55,943 ₹ 64,289 ₹ 71,798 ₹ 77,367
Retained Earnings ₹ 5,079 ₹ 6,322 ₹ 7,694 ₹ 8,991 ₹ 9,766 ₹ 9,501 ₹ 10,477 ₹ 11,493 ₹ 12,836 ₹ 15,593
Market Value of Equity ₹ 1,49,560 ₹ 1,85,945 ₹ 2,38,715 ₹ 2,93,784 ₹ 2,60,190 ₹ 2,75,383 ₹ 3,44,551 ₹ 3,14,067 ₹ 3,65,387 ₹ 2,07,493
Earnings Before Interest & Taxes ₹ 6,658 ₹ 8,464 ₹ 10,315 ₹ 12,087 ₹ 13,174 ₹ 13,373 ₹ 14,283 ₹ 15,247 ₹ 17,010 ₹ 17,615
Operating Revenue ₹ 32,078 ₹ 36,617 ₹ 43,921 ₹ 49,247 ₹ 52,759 ₹ 55,061 ₹ 58,732 ₹ 47,689 ₹ 49,862 ₹ 51,393
Altman Z-Score 5.65 6.10 6.54 6.82 5.86 5.50 5.98 4.77 4.86 3.38
* - Share Price has been adjusted for bonuses & splits
• An Altman Z-score close to 1.8 suggests a company might be headed for bankruptcy, while a score closer to 3 suggests a
company is in a solid financial position
• Altman Z-score of ITC has been consistently above 3 which shows that ITC’s financial position is quite strong

Beneish M-score
• Beneish M-score has been calculated to identify whether a company has manipulated its earnings
• ITC’s Beneish M-score has stayed less than -2.22 threshold which depicts that the company is not a manipulator
Parameter 2012 2013 2014 2015 2016 2017 2018 2019 2020
Days Sales in Receivables Index (DSRI) 0.97 0.97 1.56 0.76 0.93 1.21 1.34 1.44 0.62
Gross Margin Index (GMI) 1.16 1.21 1.12 1.07 1.05 1.07 0.76 1.02 1.03
Asset Quality Index (AQI) 1.12 1.21 1.16 1.09 1.02 1.13 1.02 1.21 1.21
Sales Growth Index (SGI) 1.18 1.20 1.12 1.10 1.02 1.09 1.02 1.11 1.02
Depreciation Index (DEPI) 1.02 1.06 0.96 1.07 0.96 0.99 0.97 1.04 0.90
Sales General & Administrative Expenses Index (SGAI) 0.96 0.90 0.94 0.99 1.07 0.91 0.94 1.02 1.00
Leverage Index (LVGI) 0.94 0.96 0.97 0.45 0.98 0.99 1.13 0.97 0.89
Total Accruals to Total Assets (TATA) -0.03 -0.04 -0.06 -0.12 -0.02 -0.03 0.02 -0.03 -0.03
M-Score -2.35 -2.30 -1.99 -2.93 -2.60 -2.23 -2.23 -2.02 -2.81

Piotroski F-score
• ITC’s Piotroski F-score was 6 which is quite reasonable and it depicts that its financial position is quite strong
• With increase in size of diversified businesses, asset turnover of ITC & CFO has reduced but is expected to improve in the future
Sr. Categories Criteria Points
1 Profitability
• Positive Net Income
• Positive Return on Assets in the current year
• Positive Operating Cash Flow in the current year
• Cash Flow from Operations being greater than Net Income
1
1
1
0
2
Leverage, Liquidity & Source of
Funds
• Lower ratio of long term debt in the current period vs. last year
• Higher current ratio in the current year vs. last year
• No new shares were issued in the last year
1
1
0
3 Operating Efficiency
• Higher Gross Margin as compared to the previous year
• Higher Asset Turnover as compared to the previous year
1
0
Total 6

ESG Analysis
A Real Concern or A Recent Fad weighing down Price?

ESG at a Glance
• ITC adopted the philosophy of the 'triple bottom line' in early
2000s and has been one of the few companies that “walks the talk”
• It has been ranked #1 globally amongst peers (companies with
Market Cap between USD 38 Bn. and USD 51 Bn.) and overall #3
globally in the Food Products industry by Sustainalytics – a
renowned global ESG ratings company
• It has also been rated ‘AA’ by MSCI-ESG - the highest among
global tobacco companies
• Within years of adopting this philosophy, ITC was ranked 2nd
among top Indian companies in 2008 on S&P’s ESG Index
o This feat is remarkable considering that ITC gets beaten down in
social ratings due to its cigarettes business
• The initiative which was pioneered by Y.C. Deveshwar has
continued to stay as the top priority in the pursuit of enhancing
stakeholder value
Source: ITC Sustainability Reports

Environmental Aspects
• ITC boasts of being the only company in the world which is carbon, water and solid waste recycling positive
• 41.2% of ITC’s energy is derived from renewable sources
• 7 ITC units met more than 90% of their electrical energy requirements from renewable sources in 2019-20
• Across all businesses, ITC continues to work to find aspects for improving this further and regularly communicates its goals to all
stakeholders via its annually published sustainability report
• With FMCG Business growing at an exponential rate, ITC has been working constantly to ensure 100% of packaging is reusable,
recyclable or compostable as FMCG companies like Unilever, P&G, Coca Cola continue to be the largest plastic waste generators
• The company is also working on finding better ways to communicate the efforts being taken for sustainable sourcing of raw materials,
packaging and manufacturing practices
• ITC also tries to source maximum amount of resources from local based suppliers who also ensure sustainability at their ends through
compliance with international standards like ISO 9001, ISO 14001, OHSAS 18001 and ITC’s Corporate Environment, Health and
Safety (EHS) Guidelines

Social Aspects
• ITC’s e-Choupal initiative has already impacted lives of over 4 million farmers by helping them increase their incomes
• Apart from this, the company also works with them closely to build rural infrastructure and develop sustainable agricultural practices
• The e-Choupal 4.0 platform aims to demonstrate the development of a globally competitive crop production system which
addresses the key elements of farmer profitability - i) farm productivity (lower costs, increased yield, and minimized wastage), ii)
product quality and integrity (which determines the realizable price and marketability), in an environmentally sustainable manner
• ITC targets is cover over 1,00,000 acres by the 2023-24 season from the current 50,000 acres – Higher number of data points
ITC takes extra efforts to analyze whether
the beneficiaries of the funds are the
disadvantaged sections of soceity

ITC’s 2030 Goals

Contribution to UN SDGs

Governance Checklist – Executive Committee
Sr. Criteria Description Company Policies Check
1 Independence
Reasonable number of Independent Directors: 2 independent
directors or 33% independent members on the board
ITC has 4 executive directors & 10 independent directors i.e. 71.4% of
the board ✓
2 Accountability
Governance practices should reflect a board that is
answerable to its owners
Roles, responsibilities, and accountabilities of the board of directors
have been clearly outlined ✓
3 Responsiveness
Directors should be responsive to the wishes of its
shareholders (minority or otherwise)
Independent directors include representatives of LIC & Consortium
which represent the majority owners along with 1 rep of BAT ✓
4 Competency
Directors should add value through skills or expertise in a
particular field
Majority directors have diverse backgrounds spanning almost every
sector from finance to law ✓
5 Elections
Directors selected through an election process for a stipulated
time period
Directors are appointed with the approval of the Members for a
period of 3-5 years as may be determined by the Board ✓
6 Board Attendance
Adequate attendance of directors at board & committee
meetings
More than 80% attendance of all members with key executive
members present in all of them ✓
7
Related Party
Transactions
Absence of material related party transactions
Most related party transactions are done with subsidiaries which are
done at arms-length and are negligible in amount ✓
8
Number of Board
Members
Board of at least 5 but no more than 15 members Board currently has 14 members ✓
9 Role Delegation Role of CEO and chair should be separate
The CEO position has been designated as Managing Director (MD).
MD & Chairman are the same at ITC – Sanjiv Puri ×
10 Committees
Different committees should be in place to take care of the
interests of stakeholders
There are several committees in place for functions like Audit, CSR,
Sustainability, Nomination, Compensation etc. ✓

Governance Checklist – Audit & Shareholder Rights
1 Independent Audit Auditor should provide an impartial and professional opinion
S.R.Batliboi & CO LLP, a part of the big four
accounting firms is ITC’s auditor ✓
2 Independent Audit
Board's Audit Committee should be Independent & its
chairperson’s compensation should be in line with other directors
Compensation of chairperson of audit committee is
comparable with other independent directors ✓
3 Integrity of Financials Company’s financials should have integrity
M-score has been consistently high depicting no
malpractice & is one of the largest tax payers in India ✓
4
Familiarization with company
for directors
Company should allow directors to get familiarized with the
company’s operations
Familiarization programme in place to help directors get
insights into operations ✓
Audit Committee
Protection of Shareholder Rights
1 Election One share, One vote ITC only has common shares which carry one vote each ✓
2 Shareholder Rights Right to Dividend
All shareholders of the company are entitled to dividends declared at the discretion
of the board ✓
3 Shareholder Rights
Adequate participation of investors in
passing key resolutions
More than 95-99% shareholders by number of votes participate in passing
resolutions like declaring dividends, appointment on directors etc. ✓
4 Shareholder Rights Information
Shareholders are entitled to access company’s financial reports without restrictions.
All such reports are also uploaded on the exchange’s website ✓

1 Performance metrics
Performance metrics should encourage executives to make
decisions that benefit shareholders
Current board compensation structure mainly consists sitting fees &
commissions ✓
Performance Metrics should be communicated to
shareholders
Compensation details of the board & key managerial personnel is
available in the annual reports ✓
A portion of executive compensations should be in the
form of equity
• Certain eligible key managerial personnel have stock options as a
part of the compensation structure which doesn’t include members
of the board i.e. CEO and other executive directors
• Number of stock options provided by the company is very low as
% of total outstanding shares
✓
Shareholders should be notified about executive
compensation & details about options
Key managerial personnel have both fixed & variable compensation
components, all of which is duly disclosed ✓
Governance Checklist – Compensation Committee & Summary
• ITC has overcome the corporate governance shortcomings of the past related to the excise duty case, dispute with BAT etc. and come a
long way to successfully function as an independent board-managed company
• The company checks out all boxes except one where the CEO/MD position and Chairman need to be separated but it’s not a major red
flag as this problem arose due to YC Deveshwar’s untimely death*
*YC Deveshwar appointed as Chairman from 2017 for a period of 5 years i.e. till February 2022

13.9
17.2 16.4 16.6
23.4
25.7
22.4
11.4
34.4 36.0
22.7
0.33% 0.34%
0.26%
0.22%
0.26% 0.26%
0.24%
0.11%
0.30%
0.28%
0.15%
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Key Managerial Compensation Trend over the years
Management Compensation % of PAT
Management Compensation Trend
• ITC’s management compensation has stayed steady at around 0.2 – 0.3% of PAT over the years and is well within the ceiling set by the Section
198 of the Companies Act, 2013
• It’s growth has been similar to Topline trend and hasn’t grown abnormally in the trend observed over the last 11 years
Sanjiv Puri
appointed as CEO
YC Deveshwar’s
demise

ESG Performance vs. Last Year
Management & Shareholder Scores
are the least in Governance
Source: Refinitiv ESG Report on ITC

ESG Performance – Material Factors
• Material factors include factors where directional change in scores is greater than 8 points
• Changes in company’s year-over-year ESG scores are driven by two factors: Company’s relative ranking against its peers, and changes in
underlying data as reported by company

ESG Performance – Last 5 Year Trend
• Over the last 5 reporting periods, ITC has an average ESG score of 70.47, ranging from 72.27 (FY 20) to 69.29 (FY 16)
• Of the three pillars that make up the overall ESG score, Environmental pillar performed the best, with an 5-year average score of
88.00, followed by Social pillar (Average score: 76.79) and then Governance pillar (Average score: 40.18)

Refinitiv ESG Score for ITC vs. Food & Tobacco Peers
Company’s Governance score has been weighing down ESG score

Refinitiv ESG Score for ITC vs. FMCG Peers
ITC
Score: 72.27
Britannia
Industries
Score: 38.07
Hindustan
Unilever
Score: 70.84
Nestle India
Score: 71.4
Despite such low scores in
governance pillar, ITC outperforms
all major players in the FMCG Space

Valuation
Is there a Gap between ITC’s Intrinsic Value & Price?

DCF Valuation – Methodology
• For calculating the intrinsic value of ITC, Free Cash Flow generated by each business has been projected individually in
order to arrive at the consolidated number
• As ITC doesn’t provide projections or hold concalls, projections for the base case have been taken based on historical
numbers from which they eventually converge towards the terminal growth rate
• Same principle has been followed to estimate the other profit & loss and balance sheet line items which would be critical
for projections
• Trivial parameters which don’t play a role in the DCF calculations have been avoided for ease of estimation
• All estimations have been done on the conservative end in order to avoid overvaluation e.g. Cash conversion cycle of
ITC has reduced steadily over the last 10 years but in the projections, it has been kept constant in order to keep it simple
• At the end, 15% conglomerate discount has been taken in account the multiple factors like the hotels business which
have been weighed down the stock price

DCF Valuation – Assumptions
Based on historical performance of the 6 major businesses,
major line items were projected to arrive at FCFE for the base
case scenario
P&L Related
• Employee Benefit Expenses: 8.3% of Net Revenue from Operations
• Finance Costs: 0.12% of Net Revenue from Operations
• Other Expenses: 17.1% of Net Revenue from Operations
Capex Related
• Capex to Sales ratio starting from historical numbers with capex
eventually tapering down to become equal to D&A
• Sale of Fixed Assets: 1.11% of Capex
Revenue from
Operations
Target
EBIT
Margin
Est. Assets
Growth
D&A as %
of Segment
Assets
Yr 1-5 Yr 6-10
FMCG – Cigarettes 2.0% 2.0% 67.0% 4.2% 3.5%
FMCG – Others 13.1% 9.0% 15.0% 13.8% 4.1%
Hotels 6.1% 5.0% 13.5% 9.4% 3.7%
Agri Business 10.0% 7.5% 10.5% 10.5% 2.1%
Paperboards, Paper &
Packaging
7.0% 5.5% 22.0% 22.0% 5.1%
IT & Others 13.5% 9.5% 18.0% 18.0% 3.6%
Balance Sheet Related:
• Other Assets: 5.50% of Net Revenue from Operations
• Financial Current Liabilities: 5% of COGS
• Short Term Provisions: 0.50% of COGS
• Other Current Liabilities: 25% of COGS

DCF Valuation – Calculations
Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26 Mar-27 Mar-28 Mar-29 Mar-30
EBIT 17,615.3 17,727.6 20,606.2 21,622.8 22,758.6 24,031.9 25,265.1 26,611.7 28,084.0 29,695.5 31,461.2
0.64% 16.24% 4.93% 5.25% 5.59% 5.13% 5.33% 5.53% 5.74% 5.95%
NOPAT 12,066.4 12,143.4 14,115.2 14,811.6 15,589.7 16,461.9 17,306.6 18,229.0 19,237.6 20,341.4 21,550.9
PAT 15,592.8 13,768.9 15,978.1 16,813.9 17,745.8 18,788.2 19,772.4 20,844.8 22,014.6 23,291.9 24,687.9
Capex 2,441.2 3,440.1 2,909.4 3,217.9 3,170.4 3,092.6 2,978.5 2,764.5 2,508.8 2,206.1 1,850.7
D & A 1,644.9 1,479.8 1,566.7 1,627.5 1,698.7 1,765.0 1,825.4 1,878.4 1,920.4 1,949.9 1,965.5
NWC (371.4) (241.9) (180.4) (782.9) (470.6) (519.9) (575.1) (470.8) (506.2) (544.5) (585.9)
FCFE 14,425.1 11,566.7 14,455.0 14,440.5 15,803.6 16,940.7 18,044.2 19,488.0 20,920.0 22,491.2 24,216.8
TV 4,55,108.8
PV FCFE 11,078.5 12,700.9 11,639.7 11,685.8 11,491.6 11,228.8 11,125.1 10,955.8 10,805.3 10,673.0
PV Terminal Value 2,00,579.0

DCF Valuation – Results
WACC Calculation
Real Risk Free Rate Rf 4.10%
Equity Risk Premium ERP 5.23%
Beta Beta 0.65
Cost of Capital Ke 7.5%
ESG Premium -1.5%
Cost of Capital (after ESG Consideration) Ke 9.0%
RBI 10-yr bond yield - 5.79%
Sovereign CDS - 1.69%
4.10%
Beta
Reuters 0.68
Ace Analyzer 0.64
Capital Line 5 year Beta 0.64
Average 0.65
Terminal Growth 3.5%
Cost of Capital 9.0%
PV FCFE ₹ 1,13,385
TV ₹ 4,55,109
PV TV ₹ 2,00,579
EV ₹ 3,13,964
Debt -
Cash ₹ 7,277
Equity Value (in crores) ₹ 3,21,241
Current Market Value of Equity (cr.) ₹ 2,07,493
Shares o/s 1229
Implied Intrinsic Share Price ₹ 261.34
Conglomerate Discount 15%
Implied Share Price ₹ 222.14
Current Share Price ₹ 168.80
Upside Potential 32%

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