The document provides an analysis of the tobacco sector in India. It includes industry statistics, market share of major players like ITC Ltd, Godfrey Phillips India and VST Industries, government initiatives to regulate tobacco, and ratio analyses of the key companies. SWOT, Porter's Five Forces, and BCG matrix analyses are also presented to evaluate the industry.

1. Industry Analysis
Tobacco Sector
Abha Mahapatra
BFIA (75003)
SSCBS

2. Contents
• Sector Analysis
I. Surveys and Statistics
II. Government Initiatives
III. Market Share
IV. SWOT Analysis
V. Porter’s Five Forces Model
VI. BCG Matrix
VII.Lifecycle Analysis
VIII.Ratio Analysis

3. Companies studied
• ITC Limited
• Godfrey Phillips India
• VST Industries Limited

4. Tobacco Sector Analysis

5. Sector at a Glance
• One of the most profitable industries in the
world.
• Industry worth INR 58730 crores in 2009.
• CAGR-8.5%
• By 2014 CAGR will be 6.9% and the forecasted
worth is INR 81790 crores.

6. Global Adult Tobacco Survey – India’
In 2009 ‘Global Adult Tobacco Survey – India’, was conducted
across urban and rural regions of 29 states in India to
understand the tobacco consumption trends in the country. The
following were the results observed in the Indian scenario:
Education Proportion of Tobacco users (%)
Secondary Education and higher 21%
Primary Education 33%
Less than Primary Education 45%
No formal schooling 44%

7. Tobacco use among males by age
category
12-18 19-30 31-40 41-50 51-60
Years Years Years Years Years
Sample 8587 13216 7805 5920 5168
Tobacco 1860 7026 5186 4193 3638
users
Prevalence 22 54.9 67.6 72.0 71.5

8. Indian Tobacco Market: Share of top five players vs other players,
by category, 2009
120
Market
100 share in
Percentage
80
Others
60
Market Share of Top 5
Companies
40
20
0
Chewing Tobacco Cigarrettes Cigars

9. Smokeless Tobacco
• Leading Companies and Popular Brands (Smokeless Tobacco Company
Shares ‐ Retail Volume (%) )
Company 2001 2002 2003 2004 2005 2006 2007 2008 2009
Dhariwal 11.5 11.8 11.8 12 12 12.3 12.3 12.5 12.5
Industrie
s Ltd
Dharamp 7.8 8.2 8.8 9.3 9.5 8.8 7.8 7 7.2
al
Satyapal
Ltd
Som 3.7 3.8 4.3 4.2 4 4.7 5 5.5 6
Sugandh
Industrie
s Ltd
Shree 2.3 2.5 2.5 2.8 2.8 3 3 3.2 3.5
Meenaks
hi Food
Products
Pvt Ltd
Kothari 4.5 4.5 4.2 4.3 4.3 4 3.5 2.8 2
Products
Ltd
Others 70.2 69.2 68.4 67.4 67.4 67.2 68.4 69 68.8

10. The Cigarette Industry
• India’s total cigarette production is valued at
'22,000 crore, of which 12 per cent is exported.
• The cigarette market is dominated four key players
— ITC, Godfrey Phillips, VST and GTC.
• Cigarette sales in the country saw a drop in 2009
over 2008 due to high excise duties and other taxes.
• The government has banned foreign direct
investment in cigarette manufacturing for domestic
consumption or exports, closing the doors for
companies like Japan Tobacco, BAT and so on.

11. Historic India Cigarette Market Size
Retail 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Volume
(billion
sticks)
1999
99.6 98.7 89.3 91.9 94.5 96.5 100 101.1 99.8 91.2 90.3

12. Leading Cigarette Brands Promoted
in India
Brand Company name 2009
Gold Flake ITC Group 31.2
Wills ITC Group 18.2
Scissors ITC Group 8.4
Four Square Godfrey Phillips India Ltd 7.9
Capstan ITC Group 7.4
Bristol ITC Group 6.9
Charminar VST Industries Ltd 4
Red & White Godfrey Phillips India Ltd 3
Charms VST Industries Ltd 3
Cavenders Godfrey Phillips India Ltd 2.5

13. Government Initatives
• 1975: The Cigarettes Act 1975 made a statutory
health warning mandatory on all cigarette packets.
• 1980: The central and several state governments
imposed restrictions on tobacco trade and initiated
efforts for comprehensive legislation for tobacco
control.
• 1990: The Central government issued a directive for
prohibiting smoking in public places, banned
tobacco advertising on national radio and TV and
made display of statutory health warnings on
chewing tobacco products mandatory.

14. • 1991: The Central government directed the
Central Board of Film Certificate to comply with
the Cinematography Act 1952.
• 1995: The Parliamentary Committee on
Subordinate Legislation examined the existing
Cigarette Act and made specific suggestions for
stronger provisions..
• 1999: Ministry of Railways banned sale of
cigarettes and bidis on railway platforms and
inside trains.
• 2000: Central Government banned tobacco
advertisements on cable TV.

15. • 2001:Ministry of Railways imposed ban on sale of gutka
at railway stations, concourses, reservation centres and
inside trains. The National Commission on Human
Rights at the S.E. Asia regional consultation meeting,
advocated for tobacco control as an essential measure to
protect human rights
• 2001-03: The states of Tamil Nadu, Kerala, Andhra
Pradesh, Maharashtra, Bihar, Goa and Madhya Pradesh
banned the production and sale of gutka and pan masala
under the Prevention of Food Adulteration Act.
• 2008:A nationwide ban on smoking at the workplace
and in restaurants, hotels, pubs, public transport (buses,
trains and metros), airports and railway stations,
educational institutions, cafes, theatres and other public
places came into effect from 2 October 2008.
• 2o11:Govt bans FDI in cigarette manufacturing

16. Growth Potential
Market Share
Chewing Tobacco 21%
Bidis 43%
Mfg Exports 2%
Un-mfg exports 19%
Cigarettes 15%

17. Market Share
• Indian Cigarette pie
Market share
ITC 72%
GTC 8%
VST 8%
GPI 22%

18. SWOT Analysis
Strengths
• India one of the largest manufacturer of
Tobacco.
• Export Potential.
• Amounts for 5.8% of the international trade and
ranks 5thafter Brazil, U.S.A. Turkey and
Zimbabwe.

19. SWOT contd.
Weaknesses
• Increased taxation
• Badly developed relations between producer and
buyer.

20. SWOT contd.
Opportunity
• Research for development of alternative uses of
Tobacco in view of anti-smoking campaign.
• Significant opportunity for exports.

21. SWOT contd.
Threats
• Total ban on direct and indirect advertisements
of all tobacco products.
• Prohibition on sponsorship of sports and
cultural events which encourage tobacco use;
ban on smoking in public places.
Ban on smoking in public place.
• Eroding social acceptability of smoking

22. PEST Analysis
Political Factors
• Challenging environment with respect to
government regulation.
• Taxation.

23. PEST contd.
Economic Factors
• India among top three producers in the world.
• Among top 10 exporter.
• 2.3 million persons depended on this sector for
livelihood.
• Total net value added by all enterprises averaged
Rs 15000 million.

24. PEST contd.
• Social Analysis
• Growing public concern against increasing
consumption of tobacco.
• Restrictions by government has made the
promotion of tobacco brands almost impossible.

25. PEST contd.
• Technological analysis
• Great inventory control.
• Logistic Support.
I. Hardware investment(high shelves, large
storehouses etc.)
II. Software investment(GPS monitoring
circuits, long-distance clients landing
enquiries, GIS circuit optimization, and online
method of electronic clearing, etc.)

26. BCG Matrix
ITC - CIGARETTES GTCI
VST
?
GPI
Market attractiveness & Competitive
strength is also important.

27. porter’s Five Forces analysis
New Entries:
Buyers bargaining powers:
Oligopoly market situation.
➢ Suppliers bargaining power:
Fragmentation, consolidation
& integration.
Low switching costs
➢ Threat of substitutes:
Depends on buyer to buyer.
Some are Brand Loyalists.
➢ Competitive rivalry:
New innovative products by
rivals.

28. Lifecycle Analysis
Godfrey Philips
India and VST ITC Ltd
Industries

29. Ratio Analysis
• Liquidity Ratio
• Profitability Ratio
• Efficiency Ratio
• Solvency Ratio

30. Liquidity Ratios
Current Ratio
2.5
2
1.5
ITC
1 GPI
VST
0.5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 1.189 1.009 1.73 1.58 1.63 1.44 1.167
GPI 1.63 1.97 1.66 1.52 1.75 1.66 1.27
VST 0.78 0.69 0.64 0.45 0.55 0.54 0.78

31. • Acid Test Ratio
1.4
1.2
1
0.8 ITC
0.6 GPI
VST
0.4
0.2
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 1.1 1.022 1.201 1.065 1.231 1.15 0.79
GPI 0.615 0.67 0.46 0.5 0.71 1.26 0.494
VST 0.15 0.11 0.12 0.11 0.1 0.2 0.4

32. Solvency Ratios
Debt Equity Ratio
0.3
0.25
0.2
ITC
0.15
GPI
0.1 VST
0.05
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 0.01 0.01 0.01 0.02 0.02 0.01 0.03
GPI 0.29 0.17 0.17 0.21 0.15 0.21 0.19
VST 0.06 0.02 0.01 0.04 0.05 0.02 0.24

33. Profitability Ratios
Operating Profit Margin
40
35
30
25
ITC
20
GPI
15
VST
10
5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 34.33 33.13 31.36 32.77 31.7 33.39 34.99
GPI 12.59 12.09 14.65 18.6 17.5 13.3 14.6
VST 23.38 20.74 19.34 25.31 25.21 35.8 30.09

34. • Return on Capital Employed
45
40
35
30
25 ITC
20 GPI
15 VST
10
5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 44.94 42.64 34.6 36.60 37.24 27.41 18.74
GPI 24.74 19.31 21.99 23.58 24.19 36.26 33.09
VST 47.47 30.50 32.87 34.87 36.37 20.95 23.28

35. • Return on Equity
2.5
2
1.5
ITC
GPI
1
VST
0.5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 1.37 1.33 1.16 1.2 1.21 1.11 0.99
GPI 2.05 2.17 2.05 1.909 1.9 0.23 2.179
VST 2.27 2.04 1.6 1.5 1.67 1.73 1.88

36. • Earning per share
120
100
80
ITC
60
GPI
40 VST
20
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 6.49 5.34 8.66 8.29 7.19 6.08 4.91
GPI 159.67 113.84 104.73 107.73 84.73 57.82 61.16
VST 61.53 40.18 40.04 37.79 35.68 46.76 34.98

37. • Dividend per share
35
30
25
20 ITC
15 GPI
VST
10
5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 4.45 10 3.7 3.5 3.1 2.65 31
GPI 35 25 25 25 25 22.5 22
VST 45 30 30 20 20 3 2.5

38. • P/E Ratio
45
40
35
30
25 ITC
20 GPI
15 VST
10
5
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 28.2 24.7 24.9 20.9 32.1 18.2 18.2
GPI 12.5 17.8 7.2 12.5 14.2
VST 61.53 40.18 40.04 37.79 35.68 27.91 34.98

39. Turnover Ratios
• Fixed Asset Turnover Ratio
7
6
5
4 ITC
3 GPI
VST
2
1
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 1.69 1.58 1.44 1.59 2.42 2.31 2.01
GPI 3.18 3.31 3.18 3.41 6.15 4.82 4.38
VST 1.85 1.73 1.49 1.47 1.72 3.01 6.49

40. • Inventory Turnover Ratio
14
12
10
8 ITC
6 GPI
VST
4
2
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 6.05 6.04 5.26 5.51 3.76 3.82 3.91
GPI 8.76 7.52 6.43 7.96 5.18 10.15 5.47
VST 5.94 6.31 7.52 10.24 12.62 6.05 5.56

41. • Accounts Receivables Turnover Ratio
120
100
80
ITC
60
GPI
40 VST
20
0
2005 2006 2007 2008 2009 2010
2011 2010 2009 2008 2007 2006 2005
ITC 23.91 24.31 21.32 20.43 20.79 18.22 20.07
GPI 33.58 35.24 41.93 45.82 56.81 95.67 90.96
VST 40.96 48.52 80.64 67.63 69.55 6.42 5.77

43. ITC
one oF inDia’s Most valuaBle corporations
One of India’s premier private limited groups
completing 100 years.
Large & established Distribution Networks.
Annually turnover of the co. is RS 2888 Crore
It is one of the eight Indian companies to feature in
Forbes A-list in 2004.
It has more then 21,000 employees at more then 60
location across India with 4,86,000 shareholders.
Ranks No. 4 among Indian listed Private Sector
Companies by market cap. (@ April 09)
Rated as- one of India’s Most Respected Companies
(IMRB-Business world Survey 2006)

44. SWOT Analysis
 Strength  Weakness
• Biggest and the largest player • It still has to consolidate its
in the Indian tobacco market foot in the cigar market largely
with a market share of 80%. dominated by Godfrey Philips.
• Its Gold Flake tobacco brand is
the largest FMCG brand in
India - and this single brand
alone holds 70% of the tobacco
market.

45. SWOT Analysis
 Opportunities  Threats
• ITC is moving into new • The obvious threat is
and emerging markets from competition, both
like developing countries domestic and
of Eastern Europe, Africa international.
etc. • Health hazard
• Increasing tax in
Cigarettes

47. Godfrey Phillips India ltd.
The second largest player in the Indian cigarette
industry.
Annual turnover exceeds INR 1800 crore
(approx. US $369.6 million)
Has two major stakeholders, one of India's
leading industrial houses - the K. K. Modi Group
and one of the world's largest tobacco
companies, Philip Morris.

48. SWOT Analysis
 Strength  Weakness
• The second biggest tobacco • low popularity of most of its
company in India products
• The first and only tobacco • No sole authority
company to organize the
fragmented cigar market in
India and secure its position as
the market leader in the cigar
distribution.
• Partnering with some of the
top most players in the
international tobacco industry.

49. SWOT Analysis
 Opportunities Threats
• Already present in the Middle • ITC getting into the cigar
East, West Africa, South East market
Africa and South East • It has a mere 12% in market
Asia, GPI can strengthen its share
position as an international
player by entering new
markets.
• Even expanding market share
in the Indian tobacco market
is an opportunity

51. About VST Industries
• VST Industries Ltd. is
a public conglomerate company headquartered
in Hyderabad, India. The company manufactures
and distributes cigarettes. Its Market Capitalization
is 844.49, PE Value: 15.70 and Dividend: 5.49.The
company has its registered office in Hyderabad. It
started off as the formerly Vazir Sultan Tobacco
Company, commonly known as VST and shares
collobration with British American Tobacco group of
the United Kingdom. It is fully independent and
registered as VST Industries Ltd in the year 1983.