itc limited - aceanalyser meet/100875_20140523.pdf(griha) rated luxury hotel by the ministry of new...
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ITC LimitedOne of India’s Most Admired and Valuable Companies
2
ITC Performance Track Record
Sensex (CAGR 95-96 to 13-14) : 11.1%
Rs. cr.
1995-96 2013-1418-yr Cagr
95-96 to 13-14
Net Revenue 2,536 32,883 15.3%
PBDIT 584 13,562 19.1%
PBIT 536 12,662 19.2%
PBT 452 12,659 20.3%
PAT 261 8,785 21.6%
Capital Employed 1,886 27,626 16.1%
ROCE % 28.4 45.8
Market Capitalisation 5,571 280708 24.3%
Total Shareholder Returns % 25.9
Market Cap and TSR based on FY-end prices
3
95-96 to
13-14
03-04 to
13-14
08-09 to
13-14
10-11 to
13-14
18 years 10 years 5 years 3 years
GTO 13.1% 14.7% 15.2% 15.2%
PAT 21.6% 18.6% 21.9% 20.8%
TSR 25.9% 28.7% 33.7% 26.4%
Sensex 11.1% 14.9% 18.2% 4.8%
CAGR
TSR and Sensex returns based on Mar-end of each FY
Consistent performance over 18 year, 10 year, 5 year and 3 year horizons
In terms of Revenue, Profits, TSR Vs. Sensex
Consistency of Performance
4
ITC’s rankingAmongst all listed private sector cos.
PBT: No. 5
PAT: No. 5
Market Capitalisation: No. 3
Note: Based on Published Results for YTD Dec-13, Market Capitalisation based on 31st Mar 2014
5
ITC is the only Indian Company to be ranked
amongst the Top 10 global FMCG companies in
value creation during the period 2008-12
(Boston Consulting)
6
One of the foremost in the private sector in terms of :
– Sustained value creation (BT-Stern Stewart survey)
– Operating profits
– Cash Profits
Only Indian FMCG Company to feature in Forbes 2000 List
– A comprehensive ranking of world’s biggest companies measured by acomposite of sales, profits, assets & market value
Also ranked amongst the Top 10 global FMCG companies in terms of value
creation during the period 2005-2009 by Boston Consulting Group. Is the only
Indian company to feature consistently amongst the Top 10 global FMCG
companies.
One of India’s most valuable and admired companies
7
Awards & Accolades (1)
Harvard Business Review rankedITC Chairman Y C Deveshwar asthe 7th Best Performing CEO inthe World
ITC conferredthe prestigious‘WorldBusiness andDevelopmentAward 2012’at the Rio+20UN Summit forits Social andFarm ForestryInitiatives
Chairman Y CDeveshwar wasconferred thePadma Bhushan bythe Government ofIndia (2011)
ITC Grand Chola,the world’s largestLEED Platinumrated hotel in theNew Constructioncategory, launchedin September 2012
8
Awards & Accolades (2)
Businessworld FICCI CSR award in Large Enterprise category
Best Overall CorporateSocial ResponsibilityPerformance : Instituteof Public Enterprise
AIM Asian CSR Award by the Asian Forum on Corporate Social Responsibility
Rainforest Allianceawarded ITC'sBhadrachalam Unit,the ForestStewardshipCouncil ForestManagementcertification
ITC Hotelsawarded the‘Most TrustedHotel brand’ inthe PublicChoice Honourscategory at theTimes TravelHonours
9
Accolades & Awards (3)
• e-Choupal initiative wins global recognition:– World Development Report 2008 published by World Bank
– Stockholm Challenge Award 2006 in the EconomicDevelopment category which recognises initiatives thatleverage Information Technology to improve living conditionsand foster economic growth in all parts of the world.
– First Indian Company and second in the world to win theDevelopment Gateway Award 2005 for its trail-blazing e-Choupal initiative
– Corporate Social Responsibility Award from The Energy andResources Institute (TERI)
– World Business Award 2004: International Chamber ofCommerce & the HRH Prince of Wales & InternationalBusiness forum
– Harvard University case study
– Applauded by the then President of India Dr APJ Kalam inhis “special address during the national symposium tocommemorate 60th year of Independence”
11
ITC’s Vision
Make a significant and growing contribution towards :
• mitigating societal challenges
• enhancing shareholder rewards
By
• creating multiple drivers of growth while sustaining leadership in
tobacco, and
• focusing on Triple Bottom Line Performance
Enlarge contribution to the Nation’s
- Financial capital
- Environmental capital
- Social capital
12
Key Corporate Strategies
Focus on the chosen business portfolio
– FMCG; Hotels; Paperboards, Paper & Packaging; Agri Business, Information
Technology
Blend diverse core competencies residing in various businesses to enhance
the competitive power of the portfolio
Position each business to attain leadership on the strength of world class
standards in quality and costs
Craft appropriate strategy of organisation and governance process to :
– Enable focus on each business and
– Harness diversity of portfolio to create unique sources of competitive advantage
13
ITC Business Portfolio
FMCG
,
Paperboards, Paper & Packaging
Hotels Agri BusinessInformation Technology
Cigarettes Personal CareFoods Lifestyle Retailing
Education & Stationery Matches Incense Sticks
14
Strategy of Organisation to manage diversity of Portfolio
Formal 3-tiered governance structure:• Board of Directors :
Comprising executive (4) and non-executive directors (11)
Strategic supervision
• Corporate Management Committee :
Comprising executive directors and senior managers
Strategic management
• Divisional Chief Executive & Divisional Management Committee :
Executive management
16
ITC’s Cigarettes Business
Market leadership
Leadership across all segments - geographic & price
Extensive FMCG distribution network
– Direct servicing of 1,00,000 markets & 2 million retail
outlets
State-of-the-art technology and world class products
17
Cigarette Industry in India
Cigarettes account for less than 12% of tobacco consumed in India unlike
world pattern of 85% due to prolonged punitive taxation
– Cigarettes (<12% of tobacco consumption in India) contribute the bulk of
Revenue to the Exchequer from tobacco sector
48% of adult Indian males consume tobacco. Only 10% of adult Indian males
smoke cigarettes as compared to 16% who smoke biris and 33% who use
smokeless tobacco (Source: Global Adult Tobacco Survey India 2010)
Annual per capita adult cigarette consumption in India is appx. one
ninth of world average
18
Per Capita Consumption of Tobacco in India (gms per year)
Source:World Cigarettes – ERC Statistics, Tob Board & Industry Estimates – gms/Yr
Per Capita consumption is ~60% of World Average
China USA Pakistan Nepal India World
11451256
438 461 468
743
Per Capita Cigarette Consumption – per annum
Source: The Tobacco Atlas - 4th Edition (American Cancer Society), 2012
Russian Federation Japan China USA Pakistan Nepal Bangladesh India
2786
18411711
1028
468 420
154 96
No. of cigarettes per capita per annum
• Although India accounts for 17% of world population, it’s share of world cigarette consumption is just 1.8%
• Per Capita consumption in India ~11% of World average
20
Drivers of Growth & Value Capture - New FMCG Initiatives
FMCG - Others
21
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
5631013
1704
25113014
3642
4482
5545
7012
8122
Rs. crs
Rapid scale up of FMCG businesses…
23
Branded Packaged Foods
Biscuits, Staples, Snacks, Confectionery, Ready to Eat & Noodles
24
Branded Packaged Foods
Amongst one of the fastest growing Foods business in the country– Bakery and Confectionery Foods - Biscuits, Confectionery
– Snack Foods - Savoury Snacks, Noodles and Pasta
– Staples, Spices and Ready to Eat Foods - Atta, Salt, Spices, Ready to Eat (RTE)
– Aashirvaad – Staples (Wheat flour, Salt,Spices), Ready to Eat – Ready Meals, InstantMixes
– Sunfeast – Biscuits, Noodles and Pasta
– Bingo! – Potato Chips – Yumitos, FingerSnacks – Mad Angles, Tedhe Medhe, Tangles,Galata Masti
– mint-o & Candyman – Confectionery
– Kitchens of India – Ready Meals, Premiumconserves, chutneys & Cooking sauces
Atta (wheat flour) - #1 in Brandedpackaged Atta among national players
Biscuits - #3 All India
Noodles - #2 All India
Savoury Snacks - #2 All India
Confectionery - #3 in Sugar Confectionery
Ready-to-Eat - Leveraging expertise ofHotels business. PremiumConserves/Chutneys– first in India
Driven by strong brands-
25
Products
– Notebooks
– Writing Instruments (Pen, Pencils etc)
– Scholastic products
Education & Stationery
Brands
– Classmate
– Paperkraft
26
Education & Stationery Products Business
Leverages print and paper know-how to address suitable opportunities in
the stationery market.
An emerging (currently `12000 cr. Stationery) market in India - growth
driven by increasing cross-cultural exposure, government spending on
education
Classmate and Paperkraft continue to gain consumer franchise
– Classmate : Market leader in Notebooks segment
27
Personal Care
Brands:
• Essenza Di Wills
• Fiama Di Wills
• Vivel
• Superia
• Engage
Product portfolio:• Personal Wash
(Soaps, Shower Gel)
• Deodorants
• Skin Care(Skin Cream, Face Wash etc.)
• Hair Care(Shampoo, Conditioner)
• Talc
28
Personal Care Products
Current market size estimated at over ` 57000 crores (growing at 14% p.a.)
Portfolio approach straddling all consumer segments with 4 umbrella brands
– Essenza Di Wills
– Fiama Di Wills
– Vivel
– Superia
Recently launched ‘Engage’ brand in the fast
growing deodorants segment well received
Laboratoire Naturel – A state-of-the-art consumer and product interaction
centre – leveraged to launch unique and differentiated products
Products continue to receive encouraging consumer response
29
Lifestyle Retailing
• Enhanced lustre & premiumness to brand ‘Wills’ to a position of eminence
• Offering a Lifestyle proposition with portfolio straddling multiple genres
- Wills Lifestyle - a fashion destination, offers a choice of super-premium formals for men,designer, work, relaxed & evening wear and fashion accessories
- John Players embodies the spirit of the modern youth that is playful, fashionable and cool
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Lifestyle Retailing
Upmarket product range available in exclusive Wills Lifestyle stores (91) across 40
cities and more than 700 ‘shop-in-shops’ in leading departmental stores and multi-
brand outlets.
Strong distribution network in place for the mid-market brand ‘John Players’
– availability in more than 400 Exclusive Branded outlets, 1600 multi branded
outlets and departmental stores
‘Club ITC’ – a ‘pan-ITC’ consumer loyalty programme – with over 1.8 Lakh
members, serves as a platform for creating superior bonding with premium
consumers and leverages synergies between Wills Lifestyle and ITC Hotels
31
Safety Matches & Incense sticks (Agarbattis)
Current Safety Matches & Incense sticks industry consumer spend
estimated at ~ ` 6,700 crores
‘AIM’ – India’s largest selling Safety Matches brand
‘Mangaldeep’ : India’s second largest selling Incense sticks brand
ITC markets its brands with value-added products across price points
ITC’s ‘Matches & Incense sticks businesses provide livelihood opportunities
to more than 18000 people
34
Hotels & Tourism industry
Source: Compendium of Tourism statistics, WTO
Foreign arrivals into India: ~6.6 million Vs. ~57.7 million in China
– The two nations were on par 2 decades ago
Today, Beijing alone has as many hotel rooms as the whole of India
India’s luxury rooms availability lower than even smaller East Asian countries
Huge potential driven by India’s diversity and economic growth
0
10000
20000
30000
40000
50000
60000
70000
80000
Hong Kong Bangkok Singapore Malaysia India
35
Indian Hotel Industry
Current supply – ~183,000 rooms of which 5 Star category represents
nearly 50,000 of total inventory
India needs an additional 50,000 rooms in the next 3/5 years to
service projected tourist arrivals
Present high levels of room inventory in key Indian cities leading to a
relatively weak pricing scenario to persist over the short term
As infrastructure for trade & commerce improves - potential for
leisure tourism to grow
36
100 properties across 70 locations
– 4 Brands – ITC Hotels, WelcomHotel, Fortune & WelcomHeritage
20 Five-Star Deluxe/ Five-Star Properties with over 4500 rooms
42 Fortune Hotels with over 3300 rooms
38 WelcomHeritage Properties with nearly 1000 rooms
During the year, added four new hotels under Management Contract atNew Delhi, Chandigarh, Kollam and Kozhikode
‘ITC Hotels’ rated as greenest luxury hotel chain in the world
– ITC Grand Chola - First 5 Star 'Green Rating for Integrated Habitat Assessment'
(GRIHA) rated luxury hotel by the Ministry of New and Renewable Energy
Projects underway at Kolkata, Classic Golf Resort (near Gurgaon) andHyderabad
ITC Hotels
“Responsible Luxury” ethos weaved into the Brand Identity
ITC Hotels: World’s Greenest Luxury Hotel Chain
All ITC Luxury Hotels LEED Platinum certified
39
Paperboards & Packaging Business
• No. 1 in Size
• No. 1 in Profitability
• No. 1 in Environmental Performance
40
Indian Paperboard market
Annual paperboard demand over 2 million tonnes
Low per capita usage of paper at around 9 kgs p.a. (world average –over 55 kgs p.a.)
Indian paperboard market growing at 6% p.a.
Value-added Paperboards- the fastest growing segment (12% p.a.)in India driven by :
Increasing demand for branded packaged products
Rising Income table and growing consumer base
Increasing proliferation of organised retail
41
Market leader in growth segment – Value-Added Paperboards
World-class contemporary technology– Ozone bleached Pulp Mill fully operational – one of its kind in Asia meeting world-class
environmental standards– Fully integrated with in-house pulping capacity at ~3 lakh MT
Internationally competitive quality and cost
Social farm forestry in mill command area to improve access to cost effective fibre &to attain self-sufficiency– Biotech research based high yielding clones – effectiveness tested in approx. 165000
hectares
Newly commissioned 1 lakh MT per annum Paperboard machine running well
ITC’s packaging SBU - India’s largest converter of Paperboard into high quality printedpackaging– Provides superior packaging solutions to the cigarettes and new FMCG businesses– Leading supplier to Indian FMCG industry– Fully integrated packaging unit at Haridwar operationalised and running well
ITC’s Paperboards, Paper & Packaging businesses
43
Agri Business
• No. 1 in Leaf Tobacco
• No. 2 in Agri commodities
• Pioneer in rural transformation
44
Indian Leaf Tobacco industry
India – the second largest producer of tobacco
However, India’s share is only at 8% of world tobacco trade
ITC – India’s largest buyer, processor, consumer & exporter of cigarettetobaccos– 5th largest leaf tobacco exporter in the world
Pioneering cultivation of flavourful Flue-cured, superior Burley andOriental tobaccos in India
Robust growth in exports in recent years with improvement in realizations
45
ITC’s Agri Commodity Business
Distinctive sourcing capability for ITC’s Foods businesses
Farm linkages in 17 States covering Wheat, Soya, Potato, Coffee etc.
Unique Customer Relationship Management programme for commodity customersin both domestic and international markets
Leveraging Information Technology for the transformational ‘e-Choupal’ initiative
– Rural India’s largest Internet-based intervention
– Over 35000 villages linked through around 6100 e-Choupals servicing around 4million farmers
e-choupal: Strategic Thrust Procurement: cost & quality optimisation
– strategic sourcing support to the Foods business (support creation of verticals in wheat,potato etc.)
– cost-effective sourcing for exports/domestic external business
Rural retail
– 24 Choupal Saagars operational
46
ITC: An Exemplar In ‘Triple Bottom Line‘ Performance
– ECONOMIC– SOCIAL– ENVIRONMENT
48
ITC - Key Financials – 2013/14
Rs. Cr.
FY 14
Actuals
FY 13
ActualsGoly %
Gross Turnover 46713 41810 11.7
Net Turnover 32883 29606 11.1
PBDIT 13562 11566 17.3
PBIT 12662 10771 17.6
PBT 12659 10684 18.5
PAT 8785 7418 18.4
49
ITC - Key Financials – Q4 2013/14
Rs. Cr.
Q4 13/14
Actuals
Q4 12/13
ActualsGoly %
Gross Revenue 12554 11305 11.1
Net Revenue 9145 8180 11.8
PBDIT 3470 2960 17.2
PBIT 3232 2754 17.4
PBT 3223 2729 18.1
PAT 2278 1928 18.2
51
2013/14: Segment Revenues
Rs. Cr.
2013-14 2012-13 %
Segment Revenue (Net)
a) FMCG - Cigarettes 15456 13970 10.6
- Others 8099 6983 16.0
Total FMCG 23555 20953 12.4
b) Hotels 1133 1074 5.5
c) Agri Business 7752 7201 7.7
d) Paperboards, Paper & Packaging 4861 4237 14.7
Total 37301 33464 11.5
Less : Inter segment revenue 4418 3859 14.5
Net sales / income from operations 32883 29606 11.1
Full YearGOLY(%)
52
2013/14: Segment Results
Rs. Cr.
2013-14 2012-13
Segment Results
a) FMCG - Cigarettes 9858 8326 18.4
- Liab. no longer reqd. written 158 0
a) FMCG - Cigarettes 10016 8326 20.3
- Others 22 (81)
Total FMCG 10038 8245 21.7
b) Hotels 140 138 1.5
c) Agri Business 835 731 14.2
d) Paperboards, Paper & Packaging 892 964 (7.4)
Total 11905 10078 18.1
Less: i) Finance Costs 38 86 (56.4)
Liab. no longer reqd. written back (35) 0
Less: i) Finance Costs 3 86 (96.6)
ii) Other Unallocable Exp/(Inc.) - Net (757) (693) 9.3
Profit Before Tax 12659 10684 18.5
Full YearGOLY(%)
53
Q4 2013/14: Segment Revenues
Rs. Cr.
Q32013-14 2013-14 2012-13 %
Segment Revenue (Net)
4116 a) FMCG - Cigarettes 4079 3623 12.6
2078 - Others 2315 2036 13.7
6194 Total FMCG 6393 5659 13.0
315 b) Hotels 321 315 1.6
1786 c) Agri Business 2004 1854 8.1
1257 d) Paperboards, Paper & Packaging 1261 1058 19.3
9553 Total 9979 8887 12.3
930 Less : Inter segment revenue 834 707 18.1
8623 Net sales / income from operations 9145 8180 11.8
Q4GOLY(%)
54
Q4 2013/14: Segment Results
Rs. Cr.
Q3
2013-14 2013-14 2012-13
Segment Results
2653 a) FMCG - Cigarettes 2552 2112 20.8
10 - Others 43 12 263.0
2663 Total FMCG 2595 2124 22.2
62 b) Hotels 60 41 47.3
205 c) Agri Business 145 128 14.1
232 d) Paperboards, Paper & Packaging 188 188 0.1
3162 Total 2989 2481 20.5
9 Less: i) Finance Costs 10 24 (60.7)
(287) ii) Other Unallocable Exp/(Inc.) - Net (244) (273) (10.8)
3440 Profit Before Tax 3223 2729 18.1
Q4GOLY(%)
55
2013/14: Segment Capital Employed
2013-14 2012-13
Capital Employed
a) FMCG - Cigarettes 5705 4953
- Others 3384 2532
Total FMCG 9089 7485
b) Hotels 3625 3460
c) Agri Business 2052 1257
d) Paperboards, Paper & Packaging 5319 4958
Total Segment Capital Employed 20086 17160
FY14Rs. Cr.
56
ITC’s Economic Contribution to the Nation
10 year Value addition ~ Rs. 1.9 lakh crore (US$ 39 billion)
– ~75% of value addition accrued to the Exchequer
• Among the top tax payers in the nation (Private sector)
• Excise payments represent ~ 7% of India’s total Excise collection
Foreign exchange earnings in the last 10 years: USD 6 bln
– Of which agri exports constituted ~60%
57
Social Performance
Direct employment ITC Group : 30,000
Supported creation of 6 million sustainable livelihoods
e-choupal: world’s largest rural digital infrastructure serving around 4million farmers
Social and Farm forestry initiative has greened nearly 163,000hectares & provided over 73 million person-days of employmentamong tribals & marginal farmers
Significant thrust on social sector investments– Natural resource management– Sustainable livelihoods– Community development programmes in the economic vicinity of
operating locations
58
Environmental Performance
Carbon positive enterprise – 9th year in a row– Sequestering/storing more than the amount of CO2
that the company emits
Water positive - 12th year in a row– Creating over twice rainwater harvesting potential
than ITC’s net consumption
Solid waste recycling positive – 7th year in a row
Over 38% of total energy consumed is fromrenewable sources
Only Company in the world of comparable dimensions to have achieved the global environmental distinction of being Carbon positive, Water positive and Solid
waste recycling positive
59
Forward-looking Statements
Statements in this presentation describing the Company’s objectives, future prospects, estimates, expectations etc. may be “forward looking statements” within the meaning
of applicable securities laws and regulations. Investors are cautioned that “forward looking statements” are based on certain assumptions of future events over which the
Company exercises no control. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. Therefore there can be no guarantee as to their accuracy. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be
projected or implied by these forward looking statements. Such risks and uncertainties include, but are not limited to: growth, competition, acquisitions, domestic and
international economic conditions affecting demand, supply and price conditions in the various businesses in the Company’s portfolio, changes in Government
regulations, tax regimes and other statutes, and the ability to attract and retain high quality human resource.