ITC Limited

One of India’s Most Valuable Corporations

1
 Performance Track Record- Snapshot
Rs crores
Cagr 95-96
95-96 08-09
to 08-09
Gross Turnover 5115 23,144 12.3%
N et Turnover 2536 15,388 14.9%
Market Capitalisation 5571 69,751 21.5%
PBDIT 584 5,393 18.7%
PBIT 536 4,844 18.4%
PBT 452 4,826 20.0%
PAT (After Exceptional Items) 261 3,264 21.4%
EPS Rs (Equalised for 95-96) 0.7 8.65 21.2%
N et Worth 1121 13,735 21.3%
Capital Employed 1886 14,780 17.2%
ROCE% 28.4 32.8
Total Shareholders Returns % 23.0

Rs. 1 crore= Rs. 10 million

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 ITC - Key Financials – Q2 09/10

Q2 09/10 Q2 08/09
Rs. Crs. Goly %
Actuals Actuals

Gross Turnover External 6309 5634 12.0

Net Turnover External 4293 3763 14.1
PBIT 1510 1192 26.7
PBT 1492 1189 25.5
PAT 1010 803 25.8
Capital Employed 17143 14495 18.3
 Q2 Segment Revenue
Rs. crores
Q2
2009-10 2008-09 Goly(%)
Segment Revenue (Net)
a) FMCG - Cigarettes 2200 1812 21.4
- Others 863 757 14.0
Total FMCG 3063 2570 19.2
b) Hotels 174 228 (23.8)
c) Agri Business 1028 864 19.0
d) Paperboards, Paper & Packaging 790 700 12.8
Total 5056 4362 15.9
Less : Inter segment revenue 763 599 27.4
Net sales / income from operns. 4293 3763 14.1

• Hotel industry continues to be impacted by slowdown

• Agri segment – robust leaf exports
 Q2 Segment Results
Rs. crores
Q2
2009-10 2008-09 Goly(%)
Segment Results
a) FMCG - Cigarettes 1252 1007 24.3
- Others -85 -117 27.1
Total FMCG 1167 890 31.0
b) Hotels 32 69 (54.1)
c) Agri Business 174 76 127.8
d) Paperboards, Paper & Packaging 186 122 52.3
Total 1559 1158 34.6
Less : i) Interest (Net) 18 3
ii) Other net un-allocable expenditure/ (income) 48 -34
Total PBT 1492 1189 25.5

• FMCG Others results reflect improvement in margins and favourable impact of cost
containment measures. Investment in brands continue
• Agri: Robust leaf exports with improvement in value capture
• Paper & Packaging : value capture on Paper and Pulp investments
 H1 Segment Revenue

Rs. crores
H1
2009-10 2008-09 Goly(%)
Segment Revenue (Net)
a) FMCG - Cigarettes 4345 3552 22.3
- Others 1621 1449 11.9
Total FMCG 5966 5001 19.3
b) Hotels 347 467 (25.8)
c) Agri Business 1969 2699 (27.0)
d) Paperboards, Paper & Packaging 1493 1306 14.3
Total 9775 9473 3.2
Less : Inter segment revenue 1399 1810 (22.7)
Net sales / income from operns. 8375 7663 9.3
 H1 Segment Results

Rs. crores
H1
2009-10 2009-10 Goly(%)
Segment Results
a) FMCG - Cigarettes 2377 1968 20.8
- Others -185 -239 22.7
Total FMCG 2192 1729 26.8
b) Hotels 62 154 (59.6)
c) Agri Business 274 153 79.1
d) Paperboards, Paper & Packaging 314 246 27.8
Total 2842 2282 24.6
Less : i) Interest (Net) 24 4
ii) Other net un-allocable expenditure/ (income) 9 -25
Total PBT 2810 2303 22.0
 Segment Capital Employed
Rs. crores
Q2
2009-10 2008-09 Goly(%)
Capital Employed
a) FMCG - Cigarettes * 3082 2816 9.5
- Others 1689 2403 (29.7)
Total FMCG 4772 5220 (8.6)
b) Hotels 2335 1979 18.0
c) Agri Business 858 754 13.8
d) Paperboards, Paper & Packaging 3607 3710 (2.8)
Total Segment Capital Employed 11572 11663 (0.8)

* Local Tax Provision not incl. 601 565 6.4

• Segment ROCE improves from 40% to 54%

• Reduction in segment capital employed a/c lower Working Capital (Inventory) partly
offset by planned capex

Details
 Headline Financials: 08/09

Rs. Crs.
GTO 23144  8.4
NTO 15388  10.3
PBT 4826  5.6
PAT 3264  4.6
Balance Sheet Size* 14782  15.3

Non Cigarettes Business 51% of NTO

(52% SPLY)

Underlying PAT Goly at 5.5% (in line with PBT growth)

 Segment – Full Year
Revenue
(Rs Crores)
GTO NTO
Segment Revenue
2009 2008 Goly% 2009 2008 Goly%
a) FMCG - Cigarettes 15115 13826 9% 7557 6635 14%
- Others 3014 2511 20% 3006 2510 20%
Total FMCG 18129 16337 11% 10562 9145 16%
b) Hotels 1020 1100 -7% 935 1012 -8%
c) Agri business 3846 3868 -1% 3846 3868 -1%
d) Paperboards, Paper & Packaging 2822 2364 19% 2647 2158 23%
Total 25817 23670 9% 17991 16183 11%
Less: Inter segment Revenue (2674) (2314) 16% (2603) (2235) 16%
Sales / Income from Operations 23144 21356 8% 15388 13948 10%

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 Segment – Full Year
Results (Rs Crores)
Segment Results 2009 2008 Goly%
a) FMCG - Cigarettes 4184 3634 15%
- Others (483) (264) -83%
Total FMCG 3700 3371 10%
b) Hotels 316 411 -23%
c) Agri business 256 129 98%
d) Paperboards, Paper & Packaging 509 453 12%
Total 4781 4364 10%
Less:
Eliminations 102 36 185%
Unallocable Expenditure (Net) 177 132 34%
Interest Paid 18 5 297%
Interest / Income from investments (342) (381) -10%
Total PBT 4826 4572 6%

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 Segment – Full Year
Capital Employed
(Rs Crores)
Segment Capital Employed 2009 2008 Goly%
a) FMCG - Cigarettes 3077 2315 33%
- Others 2087 1827 14%
Total FMCG 5164 4141 25%
b) Hotels 2189 1865 17%
c) Agri business 1038 1469 -29%
d) Paperboards, Paper & Packaging 3771 3264 16%
Total Segment Capital Employed 12162 10740 13%
* Local Tax Provisions a/c Corporate 575 598 -4%

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 ITC
One of India’s most valuable corporations
 One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004

Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are
rated as the ‘most attractive companies for investors’
 Only Indian FMCG Company to feature in Forbes 2000 List

A comprehensive ranking of world’s biggest companies measured by a composite of
sales, profits, assets & market value
 Among top in :

Sustained value creation (BT-Stern Stewart survey)

Operating profits

Cash Profits
 Ranks No. 4 among Indian listed Private Sector Companies by market cap. (@ April 09)

No. 1 in FMCG Sector
 Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey
2006)
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 Awards & Accolades (1)
• ‘ITC received the FICCI Outstanding Vision Corporate Triple Impact Award 2007 for invaluable
contribution to the triple bottom line benchmarks of building economic, social and natural capital
for the nation.
• Sustainability Leadership Award 2007 conferred on Chairman Y C Deveshwar by the Sustainability
Forum, Zurich and SAM/SPG at the International Sustainability Leadership Symposium
• Business Today Award for the Best Managed Company – Retail and Consumer Products, has
been conferred on ITC in recognition of its outstanding initiatives in the consumer products segment.
• Ryutaro Hashimoto Incentive Prize 2007 for Environment & Development from the Asia Pacific
Forum
• In the first of its kind S&P Environmental, Social and Corporate Governance (ESG) ratings
released recently, ITC ranked second among top Indian companies.
• The Company has won the Corporate Social Responsibility Crown Award for Water Practices
from UNESCO and Water Digest for its distinguished work carried out in the water sector in India.
• ITC Limited won the top UNIDO award at the International Conference on Sharing Innovative
Agribusiness Solutions 2008 at Cairo in recognition for its initiatives in agri business.
• ITC has been conferred the ICAI Award for Excellence in Financial Reporting with its Annual
Report and Accounts, adjudged as a commendable entry under the “Manufacturing and Trading
Enterprises” category.
• The Best Corporate Social Responsibility Practice Award 2008 jointly instituted by the Bombay Stock
Exchange, Times Foundation and the NASSCOM Foundation.
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 Accolades & Awards (2)
• e-Choupal initiative wins global recognition:
– Stockholm Challenge Award 2006 in the Economic Development category which
recognises initiatives that leverage Information Technology to improve living
conditions and foster economic growth in all parts of the world.
– First Indian Company to win the Development Gateway Award 2005 for the most
exemplary contribution in the field of Information & Communication Technologies
(ICT) for development during the last 10 years
– World Business Award 2004: International Chamber of Commerce & the HRH
Prince of Wales & International Business forum
– Harvard University case study
– Recognised in World Development Report 2008 published by World Bank
– Applauded by President of India Dr APJ Kalam in his “special address during
the national symposium to commemorate 60th year of independence”

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 ITC - Business Portfolio

ITC

FMCG: Agri Business Paperboard

Cigarettes Hotels Leaf Tobacco Paper &
Other FMCG Agri Commodities Packaging

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 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

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 Corporate Strategies
 Sustain multiple drivers of growth, matching internal capabilities
with emerging market opportunities
 Pursue World class competitiveness in all businesses and across
the entire value chain
 Best-in-class in terms of:
 Internal Vitality
 Market Standing
 Profitability
 Strategy of Organisation and Governance processes geared to
manage multiple businesses
 Blend core competencies and leverage ITC umbrella strengths to
create new avenues of growth
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FMCG - Cigarettes

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 ITC’s Cigarettes Business

 Market leadership
 Powerful brands across segments
 Leadership in all segments - geographic & price
 Extensive FMCG distribution network
 Direct servicing of 1,00,000 markets & 2 million retail outlets
 World-class state-of-the-art technology and products
 Investment - Rs.10 billion in six years
 Exciting long term growth potential

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 Cigarettes: Growth potential
 Cigarettes account for only 15% of tobacco consumed in India unlike
world pattern of 85% due to prolonged punitive taxation
 Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the Exchequer from tobacco sector
 Of the 58% of adult Indian males who consume tobacco, barely 15%
can afford cigarettes
 Biri : Cigarettes ratio = 10 : 1
 Annual per capita adult cigarette consumption in India is appx. one
tenth world average : 85
 Future growth depends on relative rates of growth of per capita
income and moderation in taxes
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 Whilst Per Capita Consumption of Tobacco in India
Highest in Region (gms per year)

1256
1145

743

438 461 468

China USA Pakistan Nepal India World

Source:World Cigarettes – ERC Statistics, Tob Board & Industry Estimates – gms/Yr

Per Capita consumption is ~ 60% of World Average

23
 Cigarettes: Challenges
 Competitive context
• Competition including international majors becoming more active
• Domestic illegal volumes still very strong. Along with smuggled
contraband, emerges as substantive segment

 Regulatory & Taxation

• Pictorial Graphic warnings in place w.e.f. June 09.
• VAT hikes in Maharashtra, Delhi, Rajasthan & Pondicherry- threatening
the concept of the ‘Indian Common Market’.

 Cost table increasing with increase in leaf costs

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Hotels & Tourism

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 Hotels & Tourism industry
 Foreign arrivals into India: 5 million appx. Vs. 35 million in China
• The two nations were on par 2 decades ago at 750,000 arrivals
 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
80000
70000
60000
50000
40000
30000
20000
10000
0
HongKong Singapore India

Source: Compendium of Tourism statistics, WTO

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 Indian hotel industry

 Current supply – appx. 110,000 rooms of which 5 Star category

accounts for appx. 30%
 India needs an additional 50,000 rooms in the next 2/3 years to service
projected tourist arrivals
 Present mismatch between supply and demand expected to persist over
the short term
 As infrastructure for trade & commerce improves - growing potential
for leisure tourism

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 ITC’s Hotel Business
 ITC-Welcomgroup : a leading hotel chain in India
• Established presence in key business locations
• Over 6000 rooms under 4 distinct brands
Category Brand Positioning
Luxury ITC Hotel: Luxury Collection "Mansions of Luxury"
Upper upscale WelcomHotel: Sheraton "Passion for Quality"
Upscale - mid-scale Fortune Hotels "Promise of True Value"
Heritage WelcomHeritage "Unique Experiences"

 Bangalore 292 room luxury hotel soft launched

 Capacity expansion underway at Chennai & Kolkata; plans for other locations also
being progressed. Positions on land taken at other locations such as Hyderabad and
Ahmedabad
 Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income
@ 40%) amongst the 3 leading chains
 Leverages unique service proposition and international alliance with Starwood
Hotels & Resorts - ‘Luxury Collection’ / ‘Sheraton’ 28
 ITC’s Hotel Business

• Manages 27 full service mid-market properties (2000 +

rooms ) under the Fortune Hotels brand
– 100% subsidiary company : Fortune Park Hotels Ltd.
• Also operates 60 properties under the ‘WelcomHeritage’
brand in 19 states - Maharaja Heritage Resorts Ltd. 50% JV with
Marudhar Hotels (P) Ltd.
• Business growth expected to be impacted by financial
meltdown/terror strike
– Lower corporate travel, travel advisories in place, lower foreign traffic
– Early signs of recovery in 2nd half. Full blown recovery expected only in
FY11.
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Paperboards, Paper
&
Packaging

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 Indian paperboard market

 Annual paperboard demand – appx. 1.1 million tonnes

 Fragmented capacity & obsolete technology

 Low per capita usage at around 7 kgs p.a. (world average – over 55
kgs p.a.)
 Indian paperboard market growing at 7% p.a.

 Value Added Coated board - the fastest growing segment (15% p.a.) in
India driven by the growing sophistication of the consumer

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 ITC’s Paperboards Business
 Market leader in growth segment - value added coated boards
 World-class contemporary technology
• Ozone bleached Pulp Mill fully operational – only one of its kind in
Asia meeting world-class environmental standards
 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 >
1,00,000 hectares
 Fully integrated operations with in-house pulping capacity at appx.
2.20 lac MT
• Expansion completed; source of sustainable competitive advantage

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 ITC’s Paperboards & Packaging businesses
 Capacity expansion projects installed – at optimum capacity utilization

• 120000 TPA Pulp Mill – Machine stabilised

• 100000 TPA paper machine (to support Stationery business growth plans)
Machine stabilized
 ITC’s packaging SBU -India’s largest converter of paperboard into high
quality printed packaging
• Leading supplier to Indian FMCG and Consumer Electronic segments

• Provides superior packaging solutions to the cigarettes and new FMCG

businesses

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Agri Businesses
- Leaf Tobacco
- Agri Commodities

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 Indian Leaf Tobacco industry
 India – the third largest producer of tobacco
 However, India’s share is only 7% in world tobacco trade
 Upgradation of tobacco consumption from other formats to cigarettes
will enable:
• growing domestic base
• larger opportunities for value added exports
 ITC – India’s largest buyer, processor, consumer & exporter of
cigarette tobaccos.
 Captured significant incremental volumes as well as margins

 Pioneering cultivation of flavourful Flue-cured, superior Burley and

Oriental tobaccos in India
 Export business - robust export volumes with improvement in
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realization
 ITC’s Agri Commodity Business

 Farm linkages in 14 states covering Soya, Wheat, Marine products,

Coffee etc. Focus on value added agri commodities
 Unique CRM programme in commodity exports
 Leveraging IT for the transformational ‘e-Choupal’ initiative
 Rural India’s largest Internet-based intervention
 Over 40000 villages linked through around 6500 e-Choupals servicing
over 3.5 million farmers
 Distinctive sourcing capability for ITC’s Foods business

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 e-choupal:Strategic Thrust
 Procurement: cost & quality optimisation
• strategic sourcing support to the Foods business (support creation of
verticals in wheat, soya, corn, potato etc.)
• cost-effective sourcing for exports/domestic external business
 Rural Distribution
• ‘last mile connectivity’: 100 partnering companies
• diverse range of goods/services : FMCG, consumer durables,agri-inputs,
paid extension services etc.
 Financial Services
• insurance (focus: weather)
• credit (focus: Kisan credit card scheme)
 Rural retail
• 24 Choupal Saagars operational

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Future Growth & Value Capture

New FMCG Initiatives

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 Strategic Rationale
 Blend multiple competencies residing within the ITC Group to create
new avenues of growth
 Best fit between internal capabilities and emerging market opportunities

 Each segment enhances the depth and width of ITC’s FMCG

distribution capability
 Business model retains critical elements of value chains within ITC with
other elements outsourced
• Contributing to the competitiveness of SMEs

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 FMCG Business Initiatives
Branded Packaged Foods
 Leverages:
 Unique Agri sourcing skills
 ITC Welcomgroup’s specialist cuisine & bakery knowledge
 FMCG distribution synergies
 ITC R&D Centre, Bangalore
 5 chosen categories:
 Staples
– Aashirvaad Atta, Salt, Spices
 Biscuits
– Sunfeast
 Salty Snacks
– Potato chips, Bridge products : Bingo!
 Confectionery
– Candyman, Mint-o
 Ready to Eat
– Kitchens of India (Ready to Eat, Conserves & Chutneys and Frozen
Foods), Aashirvaad (Instant Mixes & Cooking Pastes), Sunfeast Pasta 40
 FMCG Business Initiatives
Branded Packaged Foods

• Aashirvaad Atta:
– Current market leader amongst national branded players; leverages the e-
choupal network for cost-quality optimisation and region specific
offerings
• Sunfeast Biscuits:
– Differentiated & innovative products; continues to build consumer
franchise; distributed & outsourced supply chain being ramped up
– Targeted cost management actions shore up margins
• Number of innovative products in the pipeline leveraging the capabilities
of the ITC R&D Centre
• Business working on improving product mix and supply chain efficiencies

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 FMCG Business Initiatives
Lifestyle Retailing
 Leverages trade mark and services expertise of hotels
 Relaxed wear market growth > 20% p.a
 Upmarket product range available in exclusive Wills Lifestyle stores (~ 50) and
multi-branded outlets/ large format retail stores across the country
 Product and brand range being expanded
• Designer association with leading Indian designers – ‘Wills Signature’ line
• Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’
relaxed wear and ‘Wills Clublife’ evening wear
• Strong distribution network in place for the mid-market brand ‘John Players’
• Wills Lifestyle rated amongst the top 5 Luxury brands in the country in a Global
Luxury Survey conducted by TIME Magazine
• Cost management actions implemented. Stores rationalization/relocation and rental
renegotiations carried out/underway. Operating costs also being targeted
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 FMCG Business Initiatives
Education & Stationery Products Business
 Leverages print and paper know-how. Forward linkages with new paper capacity
(already commissioned).
 An emerging (currently Rs 9000 cr stationery) market in India - growth driven by
increasing cross-cultural exposure
 Mostly commoditized. Offers opportunity for branding
 Robust distribution network in place to scale up the Stationery business significantly
• ‘Classmate’ brand already the most widely distributed brand in India. Scholastic products
launched
• Branded Copier Paper ‘Paperkraft’ footprint being enhanced. Enthusiastic customer response
based on green credentials.
 Serves to expand the width of ITC’s FMCG distribution capability with negligible
incremental investment
 Comprehensive portfolio approach with new variant/category launches

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 FMCG Business Initiatives
Safety Matches
 Current industry consumer spend estimated at Rs. 1250 crores p.a. for 24
billion match boxes
 Fragmented supply base arising from policy of reservation for small scale
industry
 Mass market moving from 0.50 p price point to Re 1.00.
 ITC markets its brands with value added products across each price point
• Support SMEs with complementary marketing strengths
 ‘AIM’ – India’s largest selling Safety Matches brand
 Successful acquisition of WIMCO Ltd. by Russell Credit
• Key brands: Homelites, Ship, Cheetah Fight etc.

44
 FMCG Business Initiatives
Incense sticks (Agarbattis)

 Current industry consumer spend estimated at over Rs. 900 crores p.a.
 Fragmented supply base arising from policy of reservation for small
scale industry
 ITC markets its brands with value added products across each price
point
 Support cottage sector with complementary marketing strengths
 ‘Mangaldeep’ : the only National brand in the country

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 FMCG Business Initiatives
Personal Care Products
 Current industry consumer spend estimated at over Rs. 21000 crores p.a.
(growing at 12%)
 Brand wise Highlights
– Essenza Di Wills (Super Premium) – Portfolio’s premium imagery
augmented with launch of ‘Aqua’ for men in fine fragrances and
grooming range
– Fiama Di Wills (Premium) – Launched with Shampoos/Soaps/Shower
Gels/Conditioners
– Vivel Di Wills and Vivel (Mid) – Soaps and Shampoos
– Superia (Popular) – Soaps and Shampoos
 Products well received in the market, gaining customer acceptance
 Supported by investments in brands – celebrity endorsements
 Investments being made in Research & Development and strategic tax
incentivised manufacturing sites 46
 FMCG business initiatives…….

 Concurrently, ITC’s IT subsidiary assists in web-enabling business

processes
 CRM initiatives
 ERP transaction processing systems
 SCM including the e-choupal capability
 SMIS system for efficient supply chain management of FMCG
products
 … hosted on ITC’s Virtual Private Network

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 Positioning of ITC
A leading FMCG player in India

VPN providing SCM, ERP & CRM capability

F M
A e-choupal rural two-way fulfillment A
R capability R
M K
Cigarette Trade Marketing capability E
E
R Expanded FMCG distribution capability T
S S

Branded Matches Personal

Lifestyle Education
Foods & Care
retailing Stationery
Agarbattis Products

A basis for strategic partnerships with other FMCG brand owners

48
 Forward-looking Statements
Statements in this presentation describing the Company’s objectives, future
prospects, estimates, expectations etc. may be “forward looking statements”
within the meaning of applicable securities laws and regulations. Investors
are cautioned that “forward looking statements” are based on certain
assumptions of future events over which the Company exercises no control.
Therefore there can be no guarantee as to their accuracy. These statements
involve a number of risks, uncertainties and other factors that could cause
actual results to differ materially from those that may be projected or implied
by these forward looking statements. Such risks and uncertainties include, but
are not limited to: growth, competition, acquisitions, domestic and
international economic conditions affecting demand, supply and price
conditions in the various businesses in the Company’s portfolio, changes in
Government regulations, tax regimes and other statutes, and the ability to
attract and retain high quality human resource.

49