A PROJECT REPORT

On

A Studyof ITC

e-Master of Business Administration

SESSION 2009

Submitted by:
DEVKINANDAN PUROHIT

Under the guidance of:

PROF. Johnson Mascarenhas.
INDEX

Sr.No Topics Page

1. History 2

2. Certifications 3

3. Future Plans 5

4. Working areas 7

5. Market strategies 10

6. Cigarettes Business 13

7. FMCG Business 15

8. Hotel Business 18

9. Agri Business 21

10. Financial over view 26

11. Weblog-Bibliography 27

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History
ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company
of India Limited'. Its beginnings were humble. A leased office on Radha Bazar Lane,
Kolkata, was the centre of the Company's existence. The Company celebrated its 16th
birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee,
(now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the
Company was historic in more ways than one. It was to mark the beginning of a long and
eventful journey into India's future. The Company's headquarter building, 'Virginia House',
which came up on that plot of land two years later, would go on to become one of Kolkata's
most venerated landmarks. The Company's ownership progressively indianised, and the name
of the Company was changed to I.T.C. Limited in 1974. In recognition of the Company's
multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco,
Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports,
Foods, Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the Company's
name were removed effective September 18, 2001. The Company now stands rechristened
„ITC Limited‟.

ITC is one of India's foremost private sector companies with a market capitalization of nearly
19505 cr. and a turnover of over is 12369 cr. ITC also ranks among India's top 10 `Most
Valuable (Company) Brands', in a study conducted by Brand Finance and published by the
Economic Times. ITC was the first company in India to voluntarily seek a corporate
governance rating. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and
the World's Most Reputable Companies by Forbes magazine, among India's Most Respected
Companies by Business World and among India's Most Valuable Companies by Business
Today.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Greeting Cards, Safety Matches and other FMCG products.
While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting
Cards.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is
aggressively pursuing emerging opportunities in providing end-to-end IT solutions, including
e-enabled services and business process outsourcing.

ITC's production facilities and hotels have won numerous national and international awards
for quality, productivity, safety and environment management systems. ITC was the first
company in India to voluntarily seek a corporate governance rating.

ITC employs over 21,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalizing
environment to consistently reward more than 3,97,000 shareholders, fulfill the aspirations of
its stakeholders and meet societal expectations. This over-arching vision of the company is
expressively captured in its corporate positioning statement:

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Certification of ITC

ITC constantly endeavors to benchmark its products, services and processes to global
standards. The Company's pursuit of excellence has earned it national and international
honors. ITC is one of the eight Indian companies to figure in Forbes A-List for 2004,
featuring 400 of "the world's best big companies". Forbes has also named ITC among
Asia's'Fab 50' and the World's Most Reputable Companies

ITC is the first Indian company and the second in the world to win the prestigious
Development Gateway Award. It won the $100,000 Award for the year 2005 for its
trailblazing ITC e-Choupal initiative which has achieved the scale of a movement in rural
India. The Development Gateway Award recognizes ITC's e-Choupal as the most exemplary
contribution in the field of Information and Communication Technologies (ICT) for
development during the last 10 years. ITC e-Choupal won the Award for the importance of its
contribution to development priorities like poverty reduction, its scale and replicability,
sustainability and transparency.

ITC has won the inaugural 'World Business Award', the worldwide business award
recognizing companies who have made significant efforts to create sustainable livelihood
opportunities and enduring wealth in developing countries. The award has been instituted
jointly by the United Nations Development Programme (UNDP), International Chamber
of Commerce (ICC) and the HRH Prince of Wales International Business Leaders
Forum (IBLF).

ITC is the first Corporate to receive the Annual FICCI Outstanding Vision Corporate
Triple Impact Award in 2007 for its invaluable contribution to the triple bottom line
benchmarks of building economic, social and natural capital for the nation.

ITC has won the Golden Peacock Awards for 'Corporate Social Responsibility (Asia)' in
2007, the Award for „CSR in Emerging Economies 2005‟ and „Excellence in Corporate
Governance' in the same year.
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The man behind ITC Success:

YOGESH CHANDER DEWESHWAR

Born: February 4, 1947.

Y C Deveshwar is the Chairman and Chief Executive Officer of ITC Ltd.

He was appointed as a Director on the Board of the Company in 1984 and became the
Chairman on January 1, 1996.

He was recently given a five year extension starting Feb 5th, 2007 as he turns 60 this year.
GREAT JOB Mr.Deveshwar.

Education:
Yogesh Chander Deveshwar was born on 4th February, 1947. He received his Bachelor of
Technology Degree in Mechanical Engineering from the Indian Institute of Technology,
Delhi in 1968. He then obtained an AMP Diploma from Harvard Business School, USA.
And also did a course on Advanced Training in Hoteliering and Services at Cornell
University, USA.He is the person who dreaming to make ITC India's largest FMCG
company.

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ITC’s Future Plans:
A few weeks from now, ITC will unleash a new ad campaign focusing on how it's saving the
environment - it is carbon and water positive and will have zero solid waste in two years. ITC
Chairman YC Deveshwar thinks it will revolutionise the way corporates treat the
environment since his products deliver better value for money anyway. He spoke to Sunil
Jain about this, the company's new growth drivers, including urban retail, and their
increasing share in the company's top and bottomlines. Excerpts:

Tobacco's still 70 per cent of your topline, and 83 per cent of bottomline. Most of your
new initiatives, the choupal and FMCG are still loss makers, and their expansion is
funded through tobacco. So when you talk of Corporate Social Responsibility - carbon
and water positive, and so on - it sounds a bit hollow.

It is not my remit to shut down the tobacco business as long as the law allows it - but our
presence here also means tobacco is in responsible hands, it would have been smuggled in if
we were not in the business! What's important are the new drivers of ITC's sales and profits.

Our CSR effort is unrelated to tobacco, it is about creating value through business models
that are sustainable, in paper, in our agri business through choupals, in other areas.

Today, except for getting solid waste contribution to zero (where we're 90 per cent there
already), we're not a drag on the environment - we replenish more water and reduce more
carbon emissions than we create.

We are the only Indian company to produce chlorine free paper - our water discharge is so
safe, it is being used for irrigating crops. We did this in 2002 even though the tough emission
norms come into effect only in December 2008.

Our non-tobacco business comprised 38 per cent of net turnover in 2003-04, and this was up
to over 51 per cent in the second quarter of this year. While our tobacco business grew 13 per
cent last year, non-tobacco grew 53 per cent.

We can be cash positive in no time, the day we decide to slow down investments. No one in
the world has created 20 new brands, 13 of them big ones such as Aashirwad wheat flour
where we're the number one after just three years with a 52 per cent market share.

Our market share in biscuits is today around 10 per cent. To create new brands, you have to
spend like the existing number one, but without the revenue base - we've done precisely that,
hence the losses. Our aim is to be the number one player in each segment.

In Q2 this year, our hotel net revenues were Rs 185 crore (Rs 1.85 billion) versus Rs 267
crore (Rs 2.67 billion) for the top competitor, but our PBDIT was Rs 73 crore (Rs 730
million) versus their Rs 84 crore (Rs 840 million) - so we're getting there (our PBDIT to sales
is already higher).

For paperboards, paper and packaging, we were below the market leader in the September
quarter (Rs 522 crore versus Rs 577 crore) but our PBDIT was higher (Rs 142 crore versus
134 crore).

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It does, but you have to look at the balance and at the value created. On an annualised basis,
my FMCG business will be worth around Rs 2,000 crore (Rs 20 billion) by the end of the
year.

If you go to buy this business, you'll spend at least Rs 2,000 crore to do this. So, I've created
value of Rs 2,000 crore by spending a few hundred crore rupees.

Five years from now, the turnover will be Rs 5,000 crore (Rs 50 billion). I'm happy to spend
up to 10 per cent of my PBDIT on creating new businesses at any point in time, today this is
around 5 per cent.

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 Working Area of ITC Ltd
ITC is now a day‟s doing eight (8) major area of production, distribution and servicing. these
are as follows-
A. Cigarettes and Tobacco.
B. Hotels.
C. Packaging
D. Paper board & Specialty paper
E. Information Technology (IT)
F. Life style retailing
G. Agro-Exports
H. Group Companies etc
A. Cigarettes and Tobacco: - ITC buys nearly 50% of all cigarettes types tobacco grown in
India. It has been India “single largest integrated sources of quality tobacco for customer”
in 37 countries over the last 6 decades. ITC‟s Comprehensive and sophist6icated R&D
facilities cover all aspects of cultivation. Processing and packaging. ITC to process and
deliver 100 million Kgs of high quality tobacco par Annam. ITC also co-operates with
government agencies to develop new varieties of tobacco and to develop new areas for
tobacco cultivation.

B. Hotels: - ITC entered into hotels field in 1975. He is giving best hospitality services in
some field. ITC have 46 hotels across 42 destination all over India.

C. Packaging: - ITC also producing packaging items like-

I. Flip top boxes.
II. Car board outers.
III. Shells and slides.
IV. Soft cup and strap labels
V. Bundle wraps
VI. Flap boxes
VII. Inner frames
VIII. Coupon inserts & Variety
IX. Folding crotons

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The major unit (factory) which is producing packaging items- one is munger (Bihar) and
other is Tiruvottiyar hear chennai.

D. Paper Board & Specialty paper: - ITC has now integrates sits paperboard & specialty
paper business into its newly created (PSPD), to how new strategic & operational
synergies. ITC is one of the world” most modern and contemn porary manufactures of
packaging (paper board) boards, with a manufacturing capacity of over 2,00,000 tones par
year (1) packaging board coasted folding box boards, solid bleached sulphates board,
white unit chipboard, liquid packaging board (2) cast coated papers and boards. The
division also produced quality-
(a). Printing & Writing papers
(b). Eco- friendly papers
(c). Photo copier papers.

Specialty paper:- ITC is the premier manufacturer of specialty paper in India, with a
diversified product. Range ITC‟s specialty paper are used in the manufacturer of cigarettes,
decorative laminates. Electrical equipment, fire works and automotive factory filters. They
are also used for fire printing, packaging and carbonizing.
The division pioneered the manufacturer of specialty paper for Indian cigarette industry in
1949.
It currently offers a comprehensive range of cigarette Tissues; plug Wray, tipping base,
printed tipping papers and metailising base.

E. Information Technology (IT): - ITC has recently spun off its 20 year old information
system division into a wholly owned subsidiary to aggressively pursue growth
opportunities in this sector. ITC Infotech India Ltd offer a powerful customer value
proposition based on its in depth domain‟s know ledge gained from the experience of
servicing a range of internal & external customers across diverse domains. -
1. FMCG
2. Hoteliering
3. Packaging
4. Paper boards
5. Specialty papers
6. International Trading Etc.
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F. Life style retelling: - ITC also manufacturing ready made garments range of
international quality of relaxed wear under the brand name “wills sport”. It have 48 retail
out across 38 cites in the country. Recently he also lunched another brand name “john
players” offers complete range of contemn porary men‟s wear- like shirts, Trousers, t-
shirts & denims. It also lunches in Nov. 2002 under brand name “ the classes collection”.

G. Agro-Exports: - ITC international business division (IBD) is doing Exports activities of

Agriculture products and processed foods Etc. he exports following items to UK, US and
Another European countries-

1. Soya meal.
2. Rice
6. Aqua products.
7. Peanuts.
8. Coffee.
9. Wheat.
10. Sesame Seeds.
11. Black pepper
12. Processed & frozen fruits & vegetables.

H. Group Companies: - Main group companies-

a). ITC Hotels.

b). Surya Nepal private limited.
c). International travel house
d). Land base
Associate companies -ITC filtrona.

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 ITC’s market strategies are:

Create multiple drivers of growth by developing a portfolio of world class businesses that
best matches organizational capability with opportunities in domestic and export markets.

Continue to focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards &
Packaging, Agri Business and Information Technology.

Benchmark the health of each business comprehensively across the criteria of Market
Standing, Profitability and Internal Vitality.

Ensure that each of its businesses is world class and internationally competitive.

Enhance the competitive power of the portfolio through synergies derived by blending the
diverse skills and capabilities residing in ITC‟s various businesses.

Create distributed leadership within the organisation by nurturing talented and focused top
management teams for each of the businesses.

Continuously strengthen and refine Corporate Governance processes and systems to

catalyse the entrepreneurial energies of management by striking the golden balance between
executive freedom and the need for effective control and accountability.

Sustain ITC's position as one of India's most valuable corporations through world class performance,
creating growing value for the Indian economy and the Company‟s stakeholders

To enhance the wealth generating capability of the enterprise in a globalising environment,

delivering superior and sustainable stakeholder value

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Corporate Governance

Preamble

Over the years, ITC has evolved from a single product company to a multi-business corporation. Its
businesses are spread over a wide spectrum, ranging from cigarettes and tobacco to hotels, packaging,
paper and paperboards and international commodities trading. Each of these businesses is vastly different
from the others in its type, the state of its evolution and the basic nature of its activity, all of which
influence the choice of the form of governance. The challenge of governance for ITC therefore lies in
fashioning a model that addresses the uniqueness of each of its businesses and yet strengthens the unity of
purpose of the Company as a whole.

Since the commencement of the liberalisation process, India's economic scenario has begun to alter
radically. Globalisation will not only significantly heighten business risks, but will also compel Indian
companies to adopt international norms of transparency and good governance. Equally, in the resultant
competitive context, freedom of executive management and its ability to respond to the dynamics of a fast
changing business environment will be the new success factors. ITC's governance policy recognises the
challenge of this new business reality in India.

DEFINITION AND PURPOSE

ITC defines Corporate Governance as a systemic process by which companies are directed and controlled
to enhance their wealth generating capacity. Since large corporations employ vast quantum of societal
resources, we believe that the governance process should ensure that these companies are managed in a
manner that meets stakeholders aspirations and societal expectations.

CORE PRINCIPLES

ITC's Corporate Governance initiative is based on two core principles. These are :

i. Management must have the executive freedom to drive the enterprise forward without undue
restraints; and
ii. This freedom of management should be exercised within a framework of effective accountability.

ITC believes that any meaningful policy on Corporate Governance must provide empowerment to the
executive management of the Company, and simultaneously create a mechanism of checks and
balances which ensures that the decision making powers vested in the executive management is not
only not misused, but is used with care and responsibility to meet stakeholder aspirations and societal
expectations.

Cornerstones

From the above definition and core principles of Corporate Governance emerge the cornerstones of
ITC's governance philosophy, namely trusteeship, transparency, empowerment and accountability,
control and ethical corporate citizenship. ITC believes that the practice of each of these leads to the
creation of the right corporate culture in which the company is managed in a manner that fulfíls the
purpose of Corporate Governance.

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Trusteeship :

ITC believes that large corporations like itself have both a social and economic purpose. They
represent a coalition of interests, namely those of the shareholders, other providers of capital,
business associates and employees. This belief therefore casts a responsibility of trusteeship on the
Company's Board of Directors. They are to act as trustees to protect and enhance shareholder value,
as well as to ensure that the Company fulfils its obligations and responsibilities to its other
stakeholders. Inherent in the concept of trusteeship is the responsibility to ensure equity, namely, that
the rights of all shareholders, large or small, are protected.

Transparency :

ITC believes that transparency means explaining Company's policies and actions to those to whom it
has responsibilities. Therefore transparency must lead to maximum appropriate disclosures without
jeopardising the Company's strategic interests. Internally, transparency means openness in Company's
relationship with its employees, as well as the conduct of its business in a manner that will bear
scrutiny. We believe transparency enhances accountability.

Empowerment and Accountability :

Empowerment is an essential concomitant of ITC's first core principle of governance that

management must have the freedom to drive the enterprise forward. ITC believes that empowerment
is a process of actualising the potential of its employees. Empowerment unleashes creativity and
innovation throughout the organisation by truly vesting decision-making powers at the most
appropriate levels in the organisational hierarchy.

ITC believes that the Board of Directors are accountable to the shareholders, and the management is
accountable to the Board of Directors. We believe that empowerment, combined with accountability,
provides an impetus to performance and improves effectiveness, thereby enhancing shareholder
value.

Control :

ITC believes that control is a necessary concomitant of its second core principle of governance that
the freedom of management should be exercised within a framework of appropriate checks and
balances. Control should prevent misuse of power, facilitate timely management response to change,
and ensure that business risks are pre-emptively and effectively managed.

Ethical Corporate Citizenship :

ITC believes that corporations like itself have a responsibility to set exemplary standards of ethical
behaviour, both internally within the organisation, as well as in their external relationships. We
believe that unethical behaviour corrupts organisational culture and undermines stakeholder value.

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ITC’s CIGARETTE BUSINESS

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it
has a leadership position in every segment of the market. With three out of four
cigarettes consumed in India coming from its stable, ITC is a clear leader in the business.
ITC enjoys an84%share of the cigarette by market value. Its cigarette business accounts
for 83% of overall profit. Excise and other duties on cigarettes make up 58% of the
selling price and thus the pricing of cigarettes is largely driven by government policies.
ITC's three main competitors in the Indian cigarette industry are VST, Godfrey Phillips
and Golden Tobacco. Together the four firms account90%of the market share.
ITC has been able to reach the top position because of its single minded focus on value
creation for the consumers via its significant investments in product design, innovation,
manufacturing technology, quality, marketing and distribution. ITC's cigarettes are
produced in its state-of-the-art factories which are situated at Bangalore, Munger,
Saharanpur and Kolkata. These factories are known for their extremely high levels of
quality, contemporary technology and work environment.
The last two years though cigarette volumes remain under pressure (down 2-3 per cent
in H1, FY09) thanks to adverse changes in duty rates (excise duty raised, VAT imposed in
FY08, duty on non-filter cigarettes introduced). Even then, ITC has managed to grow its
sales and profits in this business, led by cost cutting measures, upgrading customers to
filter-cigarettes and price hikes.

Cigarette Industry at a Glance

India is the third largest producer and eighth largest exporter of tobacco and tobacco
products in the world. Asia and America, together account for 75% of world's
production of tobacco. China, USA and India are the three leading tobacco-producing
nations in the world. According to an industry estimate, the market for cigarettes in
India is worth around Rs. 22,000 crores. Cigarettes account for 85% of the country's
total tobacco exports.
Young India is a happy playground for advertisers who peddle smoking, with 50% of its
population under the age of 24. A study by the University of Texas' School of Public
Health, published in June 2008, titled 'Associations between Tobacco Marketing and
Use among Urban Youth in India', says that smoking is becoming increasingly popular
Among Indian children, some as young as sixth-graders.
Even as the smoking population is dropping in developed countries, the numbers in
India and China are on the rise. Tobacco cuts across the rural-urban divide, with bidis
currently accounting for 70% of the smoked tobacco market. Cigarettes account for
only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged
punitive taxation.
Though the consumption of Cigarette is low as compared to other forms of tobacco
consumption like bidi, zarda, tambakhu, the revenues generated by Cigarette is way far
more because of the high excise duty which accounts for58%of the overall selling price.
In India, taxes consists of VAT (12.5% of selling price), which state government collects,
and excise duties collected by the central government (specified in Rs. / per stick and on
the length of the stick). Cigarettes (15% of tobacco consumption) contribute nearly85%
of Revenue to the Exchequer from tobacco sector.

Initiating Coverage ITC LTD.

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CIGARETTE TAX STRUCTURE

Cigarettes of various lengths are taxed at different specific rates, by the Centre. However, the
tax burden on the unorganized sector is negligible. There are difficulties in regulating the
consumption of tobacco products through tax policy because over 80 per cent of tobacco
consumption is in the unorganized sector.
Raising the price of tobacco products is the most effective means of reducing tobacco
consumption. Governments can do this directly through raising the excise duty on tobacco
and limiting duty-free product sales.

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OTHER FMCG BUSINESS

ITC entered FMCG space in the year 2001 and was able to grab the market share from its
rivals in a short span of time with the help of strong distribution and brand leveraging.
The company is incurring losses due to the huge advertisement expenditure to position
the brand in the minds of the consumers and ITC had tasted the success by grabbing the
market share from its key competitors in the snacks, biscuit, and soap segment. The
company also entered into the lifestyle business with the name of Wills Lifestyle and
John Players.
ITC made its entry into the branded & packaged Foods business in August 2001 with the
launch of the Kitchens of India brand. A more broad-based entry has been made since
June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.
ITC has over the last 98 years established a very close business relationship with the
farming community in India and is currently in the process of enhancing the Indian
farmer's ability to link to global markets, through the e-Choupal initiative, and produce
the quality demanded by its customers. This long-standing relationship is being
leveraged in sourcing best quality agricultural produce for ITC's Foods business.

The Foods business is today represented in 4 categories in the market by ITC. These are:
it provides a range of ready-to-eat cuisines under the brand
name of “kitchens of India”
ITC entered the branded Atta market with the launch of Aashirvaad Atta in
Jaipur and Chandigarh on 26thMay 2002. The product is now available all over India. In
less than four years of its launch Aashirvaad atta has become the leader in its category
with more than50%market share in branded market.
ITC currently has two brands in the confectionery segment - 'mint-o'
and 'Candyman'. ITC launched 'mint-o Fresh' in October 2004 & 'Candyman' range of
confectioneries in August 2002.
its advertisement budget to counter the PepsiCo's Frito lay.
The Company has flavours such as Masala Chaas, Chatpata Nimbu and Paneer Tikka, it has
variants with truly Indian flavours. Though Frito Lay has had flavours like the recently launched
Mint Magic and others like Latino, Spanish Tomato Tango, Cilantro, ITC has chosen to go the
Indian way with success. The segmentation was mainly done on basis of the age of the
people. The primary target for Bingo is 18-30 year old people, who are willing to try out new
flavours more easily than the small kids. Bingo is positioned as a youthful and innovative
snack.
As of now Indian snack industry is about 2500 crores. Frito Lays has 48%, Haldiram has 25%
market share and ITC bingo has 14% share. Rest of the market is dominated by few regional
players like Balaji.
In July 2003, ITC forayed into the Biscuits market with the Sunfeast range
of Glucose, Marie and Cream Biscuits. The Sunfeast product portfolio was expanded in
early 2005 to include healthy snacking options as well. Sunfeast Pasta Treat, a whole
wheat based instant pasta was introduced as a healthy snacking option for children
and young adults. ITC launched Bingo! in March 2007 and entered into the fast growing
branded snack foods segment. Bingo's portfolio includes an array of products in both
Potato Chips&Finger Snacks segment.
The branded packaged snack food industry is average over crowded category with ITC foods
which is a new entrant having a 14% market share. The Company is planning to double its
distribution.

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INDIAN PACKAGED FOOD INDUSTRY

The Indian food market, according to the 'India Food Report 2008' by Research and
Markets is estimated at over US$ 182 billion, and accounts for about two thirds of
the total Indian retail market. Further, according to consultancy firm McKinsey &
Co., the retail food sector in India is likely to grow fromaround US$ 70 billion in 2008
to US$ 150 billion by 2025, accounting for a large chunk of the world food industry,
whichwould growto US$ 400 billion fromUS$ 175 billion by 2025.
According to research firm Nielsen, growth `for packaged in value terms was in the
range of 17-18 per cent for the calendar year 2008, as consumers continued to
spend on packaged goods.

Snacks and Confectionery

The Indian market holds enormous growth potential for snack food, which is
estimated to be a market worth US$ 3 billion. The market is clearly and equally
divided into the organized and unorganized sector. The organized sector of the snack
food market is growing at 15-20 per cent a year while the growth rate of the
unorganized sector of US$ 1.56 billion is 7-8 per cent. BMI has predicted a 22 per
cent growth in value terms in India's confectionery market till 2012.

Personal Care
The Indian personal hygiene market generated total revenues of $1.5 million in 2007,
representing a compound annual growth rate (CAGR) of 4.9% for the period spanning 2003-
2007.
ITC's Personal Care portfolio under the 'EssenzaDi Wills', 'Fiama Di Wills', 'Vivel Di Wills' 'Vivel
UltraPro', 'Vivel' and 'Superia' brands.
In the branded toilet soap, ITC has 3% market share, the market for which is estimated to be
valued at Rs. 6500 crores where as HUL has the highest market share of 51.6% and Godrej has
around 10% of market share in this segment. ITC has come out with soaps for all the
segments, and has a strong distribution channel ;we believe that the companywould be able
to penetrate largely not only in the urban market but also in the rural market in the coming
years and also increase its market share in the respective segment.
ITC has launched Vivel Ultrapro Anti-Dandruff shampoo in the Kolkata markets. Vivel Ultrapro
comes in 4 convenient SKUs - The 200 ml and 100 ml bottles of MRP Rs. 129 and 69
respectively and two sachet sizes to enable easy & convenient access to a wider segment of
the population.

LIFESTYLE RETAILING BUSUNESS

At present, the branded ready-to-wear industry in India is worth Rs 20,000 crores, within
which, the premium segment (in which Wills Lifestyle operates) is estimated at Rs 2,000
crores. The mid-market segment (in which sub-brand John Players is positioned) is Rs 4,000
crores. The Wills Lifestyle currently has 50 stores owned by ITC and John Players has 200
stores which are in a franchise format.
In the premium segment, the business continued to expand consumer franchise with strong
sales growth across its portfolio, viz. the 'Classic' range of formal wear, 'Wills Sport' relaxed
wear and 'Wills Clublife' eveningwear.
The business continued to post significant improvements in several operating indices such as
average realizations, footfalls/conversion and sell through rates. The 'Wills Lifestyle' range is
currently available in 39 large format retail stores and 156 multi-brand outlets apart fromthe

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39 exclusive 'Wills Lifestyle Stores'. The company will launch 50newstores in upcoming malls
to enhance its retail footprint over the next two years.

The brand's association with high fashion and imagery stood reinforced with the
resounding success of the 'Wills Lifestyle India Fashion Week' (WIFW). To bring alive the
association to consumers the business had introduced a high-end WIFW special
occasion wear created by leading Indian designers. These product offerings have met
with excellent response from discerning consumers.
John Players was launched in January 2002, targeting the younger section who is
economical in spending but at the same time want to look fashionable.
We expect a 20% growth for its premium Wills Lifestyle brand in 2009-10. Despite the
current economic slowdown, the company has lined up a slew of initiatives that include
focusing more on the product side, concentrating on loyalty programmes in a big way,
trying to convert more people and increase the transaction size. On the product side,
Wills Lifestyle will now be offering a wider assortment of ranges with a shorter product
lifecycle of 6-8 weeks, as opposed to 3-4 months earlier, so that customers find
differentiation, newness and variety in the brand.
To target consumers and give them more reason to shop,Wills Lifestyle is setting up
boutique stores, in the hotel chain of Welcome group. The company has opened a 1,500
sq ft store in ITC Maurya, New Delhi, and is planning similar stores at other ITC hotels.
On the cost front Wills Lifestyle has been successful in getting rental revisions by as
muchas 30-40%.We feel that this will add up to the bottom– line of the company and
will help in improving the operating margins of the company.

INDIAN FASHIONINDUSTRY

At present, the Indian fashion industry accounts for only 0.3 percent of the
international fashion industry. Currently, the global designer wear market is worth
about Rs.1,800 billion and is growing at 10-10.5 percent every year. Indian consumers
are becoming more fashion conscious and this will drive the growth further and would
continue to set the growth trend for its fashion industry.
According to CRISIL Research the domestic apparel market is estimated to grow at a
CAGR of 13%, from Rs. 885 billion in 2007 to Rs. 1637 billion in 2012. CRISIL Research
estimates India's garment exports to grow by CAGR of 12%, from Rs. 450 billion in 2007
to Rs. 791 billion in 2012.

Page | 18
ITC HOTEL BUSINESS

Second Largest Hotel Chain in India - Presence across Segments

The ITC Welcome group is the second largest hotel chain in India, following leader Indian Hotels.
The ITC Welcome group has a presence in the premium, budget and heritage segments, either
directly or through subsidiary and joint ventures. The hotels are branded under the four main
categories - ITC prefixed hotels in the super deluxe category, the Welcome Hotel brand for 5 - star
hotels. Fortune Hotels is for the mid market segment and Welcome Heritage for palaces, forts, havelis
and resort at leisure tourist destination. It operates under the ITC Luxury collection, ITC Welcome
Group Sheraton, Welcome Hotel, Fortune and Welcome Heritage.

Hotel Margins will be under pressure

The Hotel industry has taken a hit in October to December quarter which is considered to be the peak
season for the hotel industry due to 26/11 terrorist attack, which resulted into the lower number of
tourists coming into India. We believe that going forward, the Hotel business will experience a major
hit in the margins due to the cancellation of IPL in India and rescheduling it in South Africa, which
further reduces the number of tourists coming in India. So, for the next two quarters, we don't see
major improvement in the hotel business. The hotel industry is also under pressure due to the setback
in the capacity expansion of hotel industry as a whole. ITC's Hotel business is already feeling the
effect, with EBIT growth slowing to 2% in Q3 FY09. Hence, we have assumed a moderate growth of
CAGR 5% from 2009-2011.

Performance Indicators

Source:HVS International&Nirmal BangResearch

Page | 19
ITC Paper Business

ITC's Paperboards and Specialty Papers Division is India's largest and most technologically advanced
paper and paperboards business. ITC caters to a wide spectrum of packaging, graphic,
communication, writing, printing and specialty paper requirements through its four world-class mills
in India. Together, these units produce more than 500000 TPA of paper and paperboards that meet
stringent quality requirements across the world.The average per head usage of disposable cups in
India is estimated at 40 per year. This includes plastic, paper and ceramic. The total consumption of
disposable cups is 40 billion as per estimates. The turnover is of the order of Rs.1100 crores, of this
paper cups alone make up about Rs. 200 crores.
The sector has been growing at a rate of30%in the last few years.The ITC's paper business has
doubled its pulping capacity and thus, achieves cost competitiveness and will able to meet future
growth requirements. ITC, which is a leading producer of specialty paper, has set up a plant at
Bollaram, on the outskirts of Hyderabad, with an investment of Rs. 35 crores. Though the turnover
from the paper cup segment is only Rs. 90 crores of the total Rs. 2200 crores turnover of ITC.

Page | 20
Packaging Business

India‟s packaging industry across all materials is estimated at Rs 20,000 crores. ITC‟s
paperboards, speciality papers & packaging divisions, collectively contribute about
15%to its total turnover.

ITC has added one more feather in its packaging business by inking pact with the
Nokia business for global packaging deal. ITC is now the principal supplier of value added
packaging material and box cartons for every Nokia cell phone that gets
shipped to as many as 50 countries from the Finnish telecom giant's Chennai
factory.

ITC imports 20000 tonnes of waste paper. Apart from that, ITC has strong backward
integration by having a 87000 hectares of planted area which is a sustainable source
of high-quality raw material for the business.

Page | 21
 ITC`s AGRI-BUSINESS

ITC‟s Agri – business has two key product segments – tobacco and other commodities.
ITC enjoys a pre – eminent position in the agriculture sector. It is one of the largest exporters
of Agri products from the country; ITC sources the finest of Indian Feed Ingredients, Food
Grains, Edible Nuts, Marine Products, Processed Fruits, Coffee and Spices. In addition to
supplying the tobacco requirement to the cigarette division, ITC also exports leaf tobacco to
50 countries, the opportunity is fuelled by global shortage in the leaf tobacco that has led to
spike in tobacco prices. ITC is the largest buyer, processor and exporter of leaf tobaccos in
India - creating a global benchmark as the single largest integrated source of quality tobaccos.
Products in our Agri business are primarily sold on a B2B basis and are labelled to meet
customer requirements on quality, shipping marks or importing country labelling
requirements. Where required we provide phytosanitary certificates, surveyor quality and
quantity reports, Chamber of Commerce Certificates, etc. We comply with all statutory
requirements for exports. Customers specify the labeling requirements in our Leaf Tobacco
business. All the packages are bar coded. Our Units have advanced systems to monitor strict
adherence to process and packing specifications and product traceability in tobacco supply
chain from farm to customer. In the following chart you can see the revenue Break-up of
Agri_Business in FY09

Page | 22
 Revenue Break-up of Agri - Business
in FY09
2%

13% 21%
9%

7% 16%
Unmanufactured Tobacco
Soya Extraction
21% 11% Soya Oil
Soya Seeds
Rice
Coffee
Others
Marine Products

In the above chart you can see that unmanufactured tobacco and soya seeds contributes the
highest percent in the revenue of Agri-Businesss i.e.21%.The soya extraction contributes
16% which is the second highest.

ITC entered into the Agri- Business on the account of strengthening back-end in terms of
quality and quantity of products. In the above chart the revenue of the Agri-Business is
increasing continuously from the FY2005 to FY2009. Earning before interest and tax(EBIT)
is also increasing in all the following year. Earning before interest and tax margins% has
dropped and ITC will try maintaining the margin at 4%.ITC's unique strength in this business
is the extensive backward linkages it has established with the farmers. The Agri-business has
registered an EBIT margins 4% and we believe the company will maintain its margin going
forward. Agri business has adopted a voluntary code for advertising and communication duly

Page | 23
approved by Divisional Management Committee. All external communication is also vetted
by the divisional legal resource. In the Agri business, products are sold or exported entirely as
per customer specifications and requirements. Products in Choupal Saagars are sourced from
reputed companies as per statutory norms while Choupal Fresh products are sourced from
farmers and mandis. Stringent process control norms are in place to ensure the quality of all
products. Our Leaf Tobacco business manufactures products as per customer specifications.
“Hygiene and Infestation Management Systems” to control Infestation levels and “Mould
Prevention and control systems” to eliminate mould formation are in place. Our Agri
Extension Services are designed to ensure “Seed Integrity”, “Pesticide Residue level
monitoring”, “Non Tobacco Related Matter Elimination”, thereby promoting Product
Hygiene Standards. Anaparti and Chirala leaf threshing plants are certified in accordance
with ISO 9001 and International Quality Rating System (IQRS) Level 7– International
Quality Management Systems.
ITC and E Choupal, e-commerce in villages

There are four kinds of e-Choupals tailored for shrimps, coffee, wheat and soya beans. The
focus is on creating internet access for global market information to guide production and
supply decisions. It provides price information and thus, price certainty to the farmers. In
addition, the farmers get access tope rational information, developed by ITC experts,
pertaining to cropping, seeds, fertilizers etc. The initial benefits of the ITC effort include a
substantial reduction in transaction costs, from 8 per cent to just 2 percent. These gains are
shared roughly equally between ITC and individual farmers. The longer-term goal is to use e-
Choupals as sales points for soya bean oil and a range of other consumer goods. ITC has also
set up its first rural mall near Bhopal, where it distributes products of other FMCG majors as
well. Hence, incomes generated through e-Choupals will be targeted by the FMCG major to

Page | 24
drive their product sales. By helping the farmer identify and control his inputs and farming
practices and by paying more for better quality, ITC is able to improve the quality of produce
that it purchases. That's their new differentiator! Moreover, ITC is now able to customize its
products to local tastes, and to identify sources of inputs currently. As an extra, the e-Choupal
network is also used to sell ITC and third-party products to the villages. It is also being used
to provide services such as rural market research to those interested. And, soon, e-Choupal
could provide IT enabled services, like health advisories, education and e-governance. The
business impact is huge; turnover has grown from Rs. 300 crores to Rs. 2000 crores, as well
as profits. There are currently 5300 e-choupals covering 33000 villages and over 3 millions
farmers. IBD is adding six new choupals every day, and the intent is to reach 100 000
villages in 15 states. Rural malls (Choupal sagars) could also be implemented, to serve a
farming community needs.

In addition, through a concerted effort to develop innovative value-chains across our diverse
businesses, we are today instrumental in creating and sustaining livelihoods for nearly 5
million people, many of whom represent the weakest sections in rural India. The ITC e-
Choupal and Choupal Saagar infrastructure - a combination of digital, human and physical
assets - already serve over 4 million farming families and is acknowledged in the
Government of India‟s Economic Survey as an efficient delivery channel for rural
development and public private partnership. Similarly, ITC‟s social farm forestry strategy
enables the creation of substantial employment both on-farm and off-farm. Besides
converting private wastelands into productive assets, it simultaneously addresses serious
issues relating to climate change, biomass depletion, soil erosion, water security, ecological
balance and biodiversity.

Page | 25
 CHOUPAL SAAGARS

ITC has taken the role of a Network Orchestrator in this meta-market by bringing together an
end-to-end solution by synergizing and unleashing the power of partnerships in public,
private and not-for-profit sectors through e-Choupal. Farmers selected from within the
community, designated as "Choupal Sanchalaks", manage these kiosks. Sanchalaks help
farmers' access different agricultural crop-specific websites that ITC has created in relevant
local languages. The content includes best farm practices (including videos), prevailing prices
and price trends for crops in Indian and world markets, intricacies of risk management/farm
insurance, local weather forecast. Farmers can also order, through Sanchalak, high-quality
agricultural inputs such as seeds, fertilizers offered by the participating partner companies.
Finally, e-Choupal goes beyond mere knowledge-connectivity and enables farmers to
exercise the informed choice by connecting them to local and global markets. Thus, the
human and the digital infrastructure at the village is complemented and completed with a
physical infrastructure in the form of 'Choupal Saagars', each at the centre of a cluster of 40
e-Choupals. Saagars offer multiple services under one roof - a marketing platform, store front
for agri-equipment and personal consumption products, insurance counters, pharmacy &
health center, agri-extension clinic, fuel station and a food court.

An international study has shown that the farmers income have increased by 20%. The
productivity has increased from 14% to 29%. In three years, some 87% of the farmers in the
e-Choupal areas have learned about the e-Choupal services, and 78% have used it. As of May
2007, e-Choupal services reach more than 4 million farmers in about 40,000 villages through
more than 6500 Choupals across 8 States of India. ITC intends scaling up the initiative to
reach 10 million farmers in 100,000 villages by 2012. ITC estimates a payback period of
seven years on its total investments in the e-Choupal initiative with full bouquet of services to
the farmers and rural customers.

In this process, ITC has innovated a win-win situation for the farmers and the share holders
of ITC by linking the farm operations directly to their agri-export business through e-
Choupal. The system has avoided the middlemen and also ensured quality product reaching
the national and international markets with quality certification needed by the importing
countries. The efficiencies and the capacities built by e-Choupal for agri-communities is
attracting the rural youth to re-consider agriculture & agri-services as a viable occupation and
encouraging them to take to it with confidence.

Page | 26
FINANCIALOVERVIEW

ITC was formerly known primarily for its strong presence in the cigarette segment
and marginal presence in the hotel industry. Over the past few years, the company
has transformed itself into a diversified entity with strong presence in
the agricultural sector. Its integrated development approach and aggressive
penetration in the FMCG and foods sector has left many established players
astounded.
This diversification is reflected in the fact that the net standalone revenues for FY09
stood at Rs. 23678.46 crores which grew by 8%, driven by a robust 9%growth in the
Cigarette businesses, and a robust 19.4% growth in the paperboards, paper and
packaging segments. The other FMCG business revenues grew by 20%, where as
Hotels & Agri Business were down by 7% & 1%respectively. The consolidated Sales
of the company stood at Rs. 24875.73 crores as against Rs. 22894.73 crores in FY08 a
growth of 8.7%.
The consolidated operating profits of the company grew to Rs.5595.4 crores from
Rs.5182.9 crores in FY08 a growth of 8%. The operating margins stood at 34.3% as
against 35.41% in FY08. This was basically on account of increased spending on
Advertisements on the Food business, which resulted in operating losses in the
Other FMCG segment.
The Consolidated Net Profit stood at Rs. 3324.6 crores in FY09 as against Rs.3147.3
crores in FY08, a growth of 5.6%. The Net margins stood at 20.35% as against
21.50% in FY08. The net profit was down because of higher Depreciation costs on
account of new capacity additions in food businesses &a huge capex of Rs.2000
crores in the Fy09.
The look at segmental contribution of ITC, cigarettes still contribute a substantial
chunk of the revenues to the overall business, contributing 59% in FY09 as against
58% in FY08. The other major contributor was the Agri business, contributing 15%
of the revenues as against 16% in FY08. Other FMCG business including food
business Personal care products contributes around 12% of the total revenues as
against 11% in FY08. Paper business gained momentum in the current year
contributing 11% of the revenues as against 10% last year & Hotel industry
contributed4%as against 5%in Fy08.

Snapshot:-
ITC has a diversified presence in Cigarettes, Hotels, and Paperboards & Specialty
Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information
Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other
FMCG products. While ITC is an outstanding market leader in its traditional
Businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is
Rapidly gaining market share even in its nascent businesses of Packaged Foods &
Confectionery, Branded Apparel, Personal Care and Stationery.

Investment Rationale:-
The Company's diversification in to segments other than cigarette & heavy
investments in segments like food, personal care & Paper, will reduce
company's dependence on Cigarettes business going forward, which we
believe will come down to 50% levels in next 2-3 years time. This will insulate the
company against any potential danger to the cigarette business due to government
intervention or taxation policies.

Page | 27
 The Other FMCG business which is reporting losses since its inception is
Expected to turnaround by last quarter of FY10 & is expected to contribute to profits
from FY11. The company in its initial years has spent huge amounts on
advertisements to gain market share & now with the company gaining substantial
market share in each of the FMCG segment the company can leverage this position to
turn profitable.

The Cigarette business of ITC, where it commands a leadership position in the market
with 84% market share is expected to remain stable & we believe will grow at 6-7%
going forward. We believe the company will raise prices of few of its brands which
will translate in to better margins.

The hotel business of the company is expected to give a major boost to the
earnings of the company on the back of events like Common Wealth Games in 2010
& Cricket World Cup in 2011. We believe going forward, the hotel business will
improve margins.

In the paper business ITC commands a premium in all its specialty products of paper,
Paper Boards Packaging materials. This segment has grown at 21% in the current year
as against the paper industry growth of 9-10%.

The company enjoys higher operating margins in this segment at 19.5% which is
considered to be way above the industry margins. The paper business will grow at a
CAGR of 13% from FY10E to FY11E going forward on account of capacity
expansion, backward integration and better product mix.

KEY TRIGGERS :-

Reduction in FMCG Losses :-

The company was able to minimize losses inQ3FY08,
but it again experienced increase in Q4 Fy08 and even in Q4 FY09, partly on account
of increased in ITC's spending on new launches and entry into personal care segment
and partly due to the spiraling commodity and crude oil prices. This loss was also
accompanied by delay in price hikes in the FMCG product portfolio by the ITC which
resulted into the increase in FMCG losses. But, with the company finally raising the
prices, cooling of commodity and crude prices and ITC being able to penetrate in the
market with increase in market share of its various products, we feel that the company
would be able to break even in the FMCG profile in the
coming next 12-15months.

Growth in Cigarette Volume :-

After the extraordinary increase of 140% to 390% in the rates of excise duty on non-
filter cigarettes in the 2008 Union budget, the non-filter segment is almost dead. This
has lead to the shifting of smokers from bidi‟s to non-filter to filter segment and thus,
enabled the Company to sustain its leadership position in the cigarette industry. The
company has discontinued its non – filter cigarette from Q1 FY09. The company
discontinued some non-filter cigarettes as a result, and raised the prices of some
brands by as much as 10% in June 08. With around 20% volumes from non-filter and
more than 10% of profits, the filter business accounts for bulk volumes for ITC.

Page | 28
 Enjoys pricing power in Cigarette:-
With the hike in excise duty, ITC enjoys the pricing power and was able to pass on its
hike in excise duty in the form of increase in cigarette prices. ITC have increased the
prices by around 10% and able to maintain its EBIDTA margin.

Possibility of BAT acquiring SUUTI's stake:-

The strategic holdings of UTI-I or the specified undertaking of the UTI (SUUTI) in
blue chip companies like ITC, Larsen & Toubro, besides UTI Bank is set to be
divested with the government signing off the selloff process which is expected to
exceed the time limit of April 2009 Going by the decision taken recently by the
government and communicated to the administrator of UTI-I, the holding of 11.18 %
in ITC is proposed to be sold to domestic financial institutions and banks. The
government, however, wants to continue to retain indirect control and wants the
buyers of ITC shares from SUUTI to retain the shares as part of their core portfolio as
such the sale of UTI's stake in the company to an outsider has been ruled out as it
could pose a threat of a complete take over by BAT which already enjoys 32% stake
in ITC. We believe that due to government interference, the BAT will not be able to
increase its controlling stake in ITC.

Shareholding Pattern 31stMarch2009:-

Company Details:-

Page | 29
Balance Sheet Consolidated (Rs. in crores)

Sources of Funds

FY2007 FY 2008 FY2009E FY 2010E FY 2011E

Shareholders' Equity 376.2 376.9 377.4 377.4 377.4

Reserves 10270.4 11910.9 13590.7 16423.6 19869.5
Share Holders Funds 10646.6 12287.8 13968.1 16801.1 20246.9
Minority Interest 107.6 113.2 154.7 196.2 237.7
Secured Loans 60.8 15.0 20.0 20.0 20.0
Unsecured Loans 140.1 209.9 210.0 210.0 210.0
Total Debt 200.9 224.9 230.0 230.0 230.0
Net Deferred Tax 470.7 543.2 543.2 543.2 543.2
Total Liabilities andquity 11425.8 13169.1 14896.0 17770.4 21257.8
Application Of Funds
Gross Fixed Assets 7795.2 9819.5 11819.5 13819.5 15819.5
Less:Depreciation 2686.6 3148.4 3732.6 4501.8 5391.0
Net Fixed Assets 5099.9 6662.8 8086.9 9317.7 10428.6
Investments 2505.9 2607.9 2700.0 3000.0 3200.0
WIP 876.1 1156.5 797.8 850.0 875.0
Curent Assets, Loans &
Adv 1086.5 776.8 1448.1 2671.1 4995.4
Cash 746.4 893.0 1022.3 1156.7 1340.0
Receivables 3934.7 4268.3 4770.6 5398.1 5806.7
Inventories 1180.3 1409.5 1533.4 1696.5 1876.0
Loans and Advances 6947.9 7347.5 8774.3 10922.5 14018.1
Total Current Assets
Current Liabilities & 2562.0 2984.3 3550.9 4032.6 4635.1
Prov 1442.0 1621.3 1912.0 2287.2 2628.8
Current Liabilities 4004.0 4605.6 5463.0 6319.8 7263.9
Provisions 2943.9 2741.9 3311.3 4602.7 6754.2
Total Curr.Liabs & Prov. 11425.8 13169.1 14896.0 17770.4 21257.8
Net Current Assets
Total Assets

Page | 30
Initiating Coverage

FY 2007 FY 2008 FY2009EFY 2010E FY 2011E

Sh 32,606.8
Sale 20,003.8 22,308.5 24,875.1 28,147.2
Excise 7,408.1 7,670.5 8,539.6 9,570.0 11,086.3
Net Sales 12,595.7 14,638.0 16,335.5 18,577.1 21,520.5
Other Income 377.2 607.7 512.0 700.0 700.0
Total Income 12,972.9 15,245.7 16,847.5 19,277.1 22,220.5
Cost Of Raw Material 5,259.1 5,924.8 6,542.2 7,318.3 8,314.7
Stock Adjustment (245.7) (2.9) (148.2) - -
Employee Expenses 863.2 1,067.7 1,325.8 1,294.8 1,499.9
Power, Oil & Fuel 272.6 331.6 398.0 422.2 485.8
Selling & Administrative 1,376.5 1,689.7 1,865.6 2,040.7 2,347.7
Expenses
Other Operating expenses 298.5 332.5 447.8 422.2 489.1
Misc. Expenses 681.9 719.5 820.9 900.7 1,027.1
Total Expenditure 8,506.1 10,062.8 11,252.1 12,398.8 14,164.4
EBITDA 4,466.8 5,182.9 5,595.4 6,878.3 8,056.1
Interest 17.3 27.0 18.7 25.3 23.0
Depreciation & Amortization 393.8 472.9 584.3 769.2 889.2
Profit Before Tax 4,055.7 4,683.0 4,992.5 6,083.8 7,143.9
Total Taxes 1,274.7 1,497.0 1,632.5 1,764.3 2,071.7
Net Income After Taxes 2,781.0 3,186.0 3,359.9 4,319.5 5,072.2
Minority Interest in Income 25.7 28.3 41.5 41.5 41.5
Extraordinary Items 5.0 10.5 (6.1) - -
Adjusted Net Profit 2,750.3 3,147.3 3,324.6 4,278.0 5,030.7
Preferred Dividends - - - - -
Net Income Available to EqSh 2,750.3 3,147.3 3,324.6 4,278.0 5,030.7
holders 7.4 8.5 8.9 11.4 13.4
Earnings Per Share (Rs) 1,166.3 1,319.0 1,329.8 1,497.3 1,609.8
Total Common Dividends 376.2 376.9 377.4 377.4 377.4
Shares Outstanding (Diluted) 1,584.0 1,828.2 1,994.7 2,780.7 3,420.9
Retained Earnings

Income Statement

Consolidated (RS. in crores)

Page | 31
Balance of Last Five Years (in corers):-

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share
Capital 248.22 375.52 376.22 376.86 377.44
Equity Share
Capital 248.22 375.52 376.22 376.86 377.44
Share
Application
Money 1.21 0 0 0 0
Preference
Share Capital 0 0 0 0 0

Reserves 7,586.28 8,626.79 10,003.78 11,624.69 13,302.55

Revaluation
Reserves 59.9 59.17 57.08 56.12 55.09

Networth 7,895.61 9,061.48 10,437.08 12,057.67 13,735.08

Secured
Loans 88.69 25.91 60.78 5.57 11.63

Unsecured
Loans 156.67 93.82 140.1 208.86 165.92

Total Debt 245.36 119.73 200.88 214.43 177.55

Total
Liabilities 8,140.97 9,181.21 10,637.96 12,272.10 13,912.63

Page | 32
 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Application
Of Funds
Gross Block 5,746.27 6,227.17 7,134.31 8,959.70 10,558.65
Less: Accum.
Depreciation 1,795.51 2,065.44 2,389.54 2,790.87 3,286.74
Net Block 3,950.76 4,161.73 4,744.77 6,168.83 7,271.91
Capital Work
in Progress 186.15 399.97 1,130.20 1,126.82 1,214.06
Investments 3,874.68 3,517.01 3,067.77 2,934.55 2,837.75

Inventories 2,002.99 2,636.29 3,354.03 4,050.52 4,599.72

Sundry
Debtors
Cash and Bank Balance
Total Current
Assets 2,583.20 3,251.72 4,094.26 4,940.79 5,337.12
Loans and
Advances 1,150.25 1,188.42 1,390.19 1,949.29 2,150.21
Fixed
Deposits 3.21 788.35 796.62 416.91 963.66
Total CA,
Loans &
Advances 3,736.66 5,228.49 6,281.07 7,306.99 8,450.99
Deffered
Credit 0 0 0 0 0
Current
Liabilities 2,499.10 2,736.95 3,113.01 3,619.76 4,121.59
Provisions 1,108.18 1,389.04 1,472.84 1,645.33 1,740.49
Total CL &
Provisions 3,607.28 4,125.99 4,585.85 5,265.09 5,862.08
Net Current
Assets 129.38 1,102.50 1,695.22 2,041.90 2,588.91

Page | 33
Discounting Of ITC By Market:-

Market Cap (In Cr.) :- 92,879.01

Book Value :- 36.24

EPS ( F.Y.10) :- 8.88

Trading Rate :- 245

Fair Value :- 318.91

Fair Value = 36.24 * 8.88 = 318.91

Recommendations:-

BSE weightage 5.4 %

i.e If Market Moves Up ITC Supports to market by 5.4 bases point and vice versa.

Future Value Discounted as per EPS

F.Y 10 36.24 * 11.3 = 318.91

F.Y 11 36.24 * 13.3 = 481.92

Future of ITC:-

ITC is that it continues to have elasticity in pricing for some of its cigarette
brands(gold flake filter, scissors filter).Next price increase can fetch additional
revenue of 100cr!

VAT IS GOING TO BE REPLACED WITH GST.(Goods & Service Tax) That

means no immediate increase in excise duty.

"Ultimately we hope to see a convergence or a chain link between the farm products
and the branded end."

Page | 34
Weblog-Bibliography :-

1. http://www.itcportal.com/
2. http://www.itcportal.com/sets/echoupal_frameset.htm
3. http://www.itcportal.com/sets/shareholder_frameset.htm
4. http://www.itcportal.com/sets/investreln_frameset.htm
5. http://www.moneycontrol.com/financials/itc/balance-sheet/ITC
6. http://www.moneycontrol.com/annual-report/itc/directors-report/ITC
7. http://www.moneycontrol.com/competition/itc/comparison/ITC
8. http://www.moneycontrol.com/company-article/itc/news/ITC
9. http://www.toodoc.com/itc-word.html
10. http://www1.bseindia.com/stockreach/stockreach_ak.htm?scripcd=500875

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