ITC Ltd.

Introduction

COMPANY OVERVIEW:
FOUNDED ON: 24 August 1910
CHAIRMAN:Yogesh Ch andler Deveshwar
HEADQUATERS: Kolkata
WEBSITE:ITCportal.com
NO. OF EMPLOYEES: 26150

ITC is one of India's foremost private sector companies wit h a market

capitalization of over US $ 22 billion and a turnover of US $ 6 billion .* ITC is rated
among the World's Best Big Companies, Asia's 'Feb 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 ranks among India's `10 Most Valuable (Company) Brands', in
a study conducted by Brand Finance and published by the Economic times. ITC
also ranks among Asia's 50 best performing companies compiled by Business
Week.

ITC has a diversified presence inCigarettes, Hotels, Paperboards & Specialty

Papers, Packaging, Agri-Business, PackagedFoods &Confectionery, Information
Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and

otherFMCG products. While ITC is an outstanding market leader in its traditional

businesses ofCigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is
rapidly gaining market share even in its nascent businesses of PackagedFoods &

ITC started its journey long back in 1910 under the name of ‘Imperial Tobacco Company of India
Limited’. During the first few decades of its operation the focus of the company revolved around
Cigarettes and Leaf Tobacco businesses. But during the seventies the company ventured into
different businesses including hotels and paperboards. During the nineties the company started  Agri
Business Division and the new millennium saw ITC venturing into Greetings Card, Lifestyle
Retailing, Information Technology, Packaged Food, Matches, Agarbattis (incense sticks) and many
more. In the last few years ITC expanded its portfolio to include snacks and personal care products
as well. So, over the years the company has become a truly diversified business house with interests
spanning across industries. We included ITC in this document as being a FMCG leader but our basic
objective is to study the marketing and advertising in Indian context – so along with FMCG, we will
analyse the other business in which ITC has key presence. The ITC financial statements divide its
business into four main categories which are shown in below diagram:

HISTORY
OF ITC
TC 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
 RATIO ANALYSIS

Liquidity Ratio
● Current Ratio = current assets / current liabilities

current assets = 8127.08

current liabilities = 8048.24

current Ratio = 1.00

Interpretation:- According to thumb rule the current ratio of 2:1.the company recommend as a good,but
current ratio is 1.00:1 times says that the Liquidity position of the company is not good.

● Quick Ratio = quick assets / current liabilities

quick assets = 3578.01

current liabilities = 8048.24

Quick Ratio = 0.44

Interpretation:- The small ‘Quick ratio’, i.e. 0.44 times says that the company's financial strength is
not so strong. In general, a quick ratio of 1 or more is accepted by most creditors; however, quick
ratios vary greatly from industry to industry and ITC does not have as such any worries in getting
creditors.
● Absolute liquid Ratio = Absolute liquid assets / current liabilities

Absolute liquid assets = 1126.28

current liabilities = 8048.24

Absolute liquid Ratio = 0.13

Interpretation:- The cash ratio of 0.13 times says that the company is not in the position to very
quickly liquidate its assets and cover short-term liabilities. But there is no such liquidity need for to
the company and so the small value of the ratio has no such important implications. (The ratio is of
interest to short-term creditors)

Profitability Ratio
 Gross profit Ratio = gross profit / net sales * 100

Gross profit = 6015.31

Net sales = 18153.19

Gross profit Ratio = 33.13%

Interpretation:- The ratio between the profit before interest and taxes (equal to the operating
income, in our case) to that of the sales for the given period during which the profit has been earned
is a measure of the profitability of the company for that period.
The Profit ratio of 33 .13 % is quiet impressive and the company is making
good profits.

 Net profit Ratio = Net profit / Net sales * 100

Net profit = 4061.00.
Net sales = 18153.19
Net profit Ratio = 22.37%

Interpretation:- PAT or, the profit after tax is directly correlated with the profit before tax. The
interest component is the sole parameter that can differentiate the trend followed by the ratio above
and this one.
The net ratio of 22 .37 % is quiet impressive, and the company is performing
well.
  Operating Ratio = operating cost / Net sales * 100

operating cost = 12132.55

Net sales = 18153.19

Operating Ratio =66.83%

Interpretation:- According to the company rule operating Ratio is in between 75% to 80%. This
operating show the 66.83%. it is average for the company,so the ITC must improve operating
ratio.

 Return on investment(ROI) = Net Profit / Shareholder Fund *100

Net Profit = 4061.00

Shareholder Fund = 14064.38

ROI = 28.87%

Interpretation:- It is good return on investment ,it increase the reputation of the company in the
eye of investors, it also increase the share value of company.

 Return on Equity (ROE) = Net Profit – preference Dividend / Equity shareholder

fund * 100

SORRY I can not find share equity.

 Earnings Per Share (EPS) = Net Profit – preference Dividend / number of equity
share of outstanding *100

SORRY I can not find this data.

Turnover / Activity Ratio

 Inventory turnover Ratio = sales / Average stock

Sales = 18153.19
Average stock = 4549.07
Inventory turnover Ratio = 3.99

Inventory Conversion period = 365 / ITO

Inventory Conversion period = 91

Interpretation:- The ratio of 3.99 times signifies that the company is efficient in selling its stock. 91
days or about four months periods for the liquidation of stocks is quiet efficient

 Debtors turnover Ratio = Net credit Sales / Average Debtors

SORRY I can not find this data.

 Creditors turnover Ratio = Net credit Purchase / Average Creditors

SORRY I can not find this data.

Solvency Ratio
 Debt to Equity Ratio = Debt / Equity

Debt = 107.71
Equity = 14064.38

Debt to Equity Ratio = 0.007

Interpretation:- The debt-to-equity ratio offers one of the best pictures of a company's Solvency.
The higher the figure, the higher is the solvency the company enjoys.
The ratio of 0.007 times, which means that the company has not been aggressive in financing its
growth with debt. Thus its earnings are stable. The company has better support from the
shareholders.
Over the years, ITC Limited has shown a mix-match of the debt-equity ratio.

Coverage Ratio
 Interest Coverage Ratio = EBIT / Interest charges

EBIT = 6015.31

Interest charges = 1954.31

Interest Coverage Ratio = 3.12

Interest collection period = 365 / ITR

Interest collection period =116

Interpretation:- The interest coverage ratio is a measurement of the number of times a

company could make its interest payments with its earnings before interest and taxes. Lower the
ratio, higher is the company’s debt burden. This is measured as the ratio between the profit before
interest and taxes to the interest amount paid that year.

The ratio of 116 times is magnificently very high and hence the company has very sound financial
position. It has no tension of paying interests over its loans.
 FUND FLOW STATEMENT ANALYSIS

Particular Rs.(Crores)
Working capital 78.84
Sources of Fund
Share Holders fund
Capital 381.82
Unsecured Loan 107.71
Reserve and surplus 13682.56
Total 14172.09
Application of Funds
Fixed Assets 9151.39
Investment 5726.87
Cash & Bank Balance 1126.28
Other Current Assets 288.39
Total 16292.93

Interpretation:- As mentioned in the above table the working capital of the company increases because of
the company has enough assets than liabilities that meet the obligation of the companies. The company
shareholders fund increase every year that means every year the companies capital increases rapidly due to
its increase in net profit margin. The company has more unsecured loans. The company more invest to
increase its assets. Company also invest in other sectors.

Company rising more funds from issuing share than loan. Reserves and surpluses also high of the company,
it means company did well in previous year.

Company doing well year by year, their applications of funds decision is rising appropriate funds to meet the
obligations of the company.