ITC Limited

One of India’s Most Valuable

Corporations

1
 Performance Track Record- Snapshot
Rs. Crs
1995-96 2006-07
Cagr %
Actuals Actuals
GROSS TURNOVER 5115 19505 12.9
NET TURNOVER 2536 12369 15.5
PBDIT 584 4293 19.9
PBIT 536 3930 19.9
PBT 452 3927 21.7
PAT (before exceptional items) 261 2700 23.7
Earnings Per Share (Rs) 0.7 7.2 23.4
NETWORTH 1121 10425 22.5
CAPITAL EMPLOYED 1886 11125 17.5
ROCE % 28.4 35.3

Total Shareholder Returns: 25%

Rs. 1 crore= Rs. 10 million

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 Key Financials:2006/07

Rs. Crs.
GTO 19505 ↑ 20.2
NTO 12369 ↑ 26.3
PBT 3927 ↑ 20.1
PAT 2700 ↑ 18.4
PAT (after Exceptional Items) 2700 ↑ 20.8
Balance Sheet Size 11125 ↑ 17.0

Non Cigarettes Business 52% of NTO

(48% LY)

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 Segment Revenues: FY 06/07
Rs. Crores

FY FY
Goly (%)
2006-07 2005-06

1. Segment Revenue
a) FMCG - Cigarettes 12834 11330 13.3
- Others 1704 1013 68.2
Total FMCG 14538 12343 17.8
b) Hotels 986 784 25.7
c) Agri Business 3691 2678 37.8
d) Paperboards, Paper & Packaging 2100 1896 10.8

Total 21315 17701 20.4

Less : Inter-segment revenue 1810 1476 22.6

Gross sales / Income from operations 19505 16224 20.2

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 Segment Results: FY 06/07
Rs. Crores

FY FY
Goly (%)
2006-07 2005-06

2. Segment Results

a) FMCG - Cigarettes 3172 2709 17.1

- Others (202) (172) (17.6)
Total FMCG 2970 2537 17.1

b) Hotels 351 258 35.9

c) Agri Business 123 91 35.4
d) Paperboards, Paper & Packaging 417 351 18.6

Total 3861 3237 19.3

Lessi): Interest (Net) 3 12 (72.5)

ii) Other un-allocable expenditure net (69) (44) -

of un-allocable income

Profit Before Tax 3927 3269 20.1

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Segment Capital Employed: FY 06/07

Rs. Crores

FY FY
Goly (%)
2006-07 2005-06

3. Capital Employed

a) FMCG - Cigarettes* 2019 1464 37.9

- Others 940 489 92.2
Total FMCG 2959 1953 51.5

b) Hotels 1467 1374 6.8

c) Agri Business 1480 1060 39.7
d) Paperboards, Paper & Packaging 2559 1908 34.1

Total Segment Capital Employed 8465 6295 34.5

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 ITC - Key Financials – Q2 07/08

Rs crs Q2 07/08 Q2 06/07 Goly %

Gross Turnover External 5023 4603 9.1

Net Turnover External 3273 2866 14.2
PBIT 1134 961 18.0
PBT 1133 958 18.3
PAT 771 680 13.4
Capital Employed 12860 10886 18.1

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 ITC - Key Financials – H1 07/08

Rs crs H1 07/08 H1 06/07 Goly %

Gross Turnover External 10170 9207 10.5

Net Turnover External 6567 5685 15.5
PBIT 2262 1929 17.3
PBT 2262 1925 17.5
PAT 1554 1332 16.6
Capital Employed 12860 10886 18.1

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 Segment Revenues: Q2 07/08
Rs. crores
Q2 GTO Q2 NTO
2007/08 2006/07 Goly 2007/08 2006/07 Goly
Actuals Actuals % Actuals Actuals %
1. Segment Revenue
a) FMCG - Cigarettes 3272 3102 5.5 1574 1410 11.6
- Others 587 410 43.3 587 410 43.3
Total FMCG 3859 3511 9.9 2161 1819 18.8
b) Hotels 226 201 12.5 208 184 13.2
c) Agri Business 741 847 (12.5) 741 847 (12.5)
d) Paperboards, Paper & Packaging 615 522 17.7 560 476 17.6
Total 5440 5081 7.1 3669 3326 10.3
Less : Inter segment revenue 417 478 396 460
Gross sales / income from operns. 5023 4603 9.1 3273 2866 14.2

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 Segment Results: Q2 07/08

Rs. crores
Q2
2007/08 2006/07 Goly
2. Segment Results
a) FMCG - Cigarettes 864 787 9.8
- Others (37) (49) 25.4
Total FMCG 827 738 12.2
b) Hotels 66 58 14.3
c) Agri Business 10 46 (78.4)
d) Paperboards, Paper & Packaging 126 111 13.3
Total 1029 952 8.0
Less : i) Interest (Net) 1 3
ii) Other un-allocable income net of un-allocable expenditure (105) (9)
Total PBT 1133 958 18.3

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 Segment Revenues: H1 07/08

Rs. crores
H1 GTO H1 NTO
2007/08 2006/07 Goly 2007/08 2006/07 Goly
Actuals Actuals % Actuals Actuals %
1. Segment Revenue
a) FMCG - Cigarettes 6713 6261 7.2 3211 2830 13.5
- Others 1129 769 46.8 1129 769 46.8
Total FMCG 7843 7030 11.6 4341 3599 20.6
b) Hotels 447 400 11.9 412 366 12.5
c) Agri Business 2127 1928 10.3 2127 1928 10.3
d) Paperboards, Paper & Packaging 1141 1023 11.5 1038 932 11.4
Total 11558 10381 11.3 7918 6825 16.0
Less : Inter segment revenue 1388 1174 1351 1139
Gross sales / income from operns. 10170 9207 10.5 6567 5685 15.5

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 Segment Results: H1 07/08

Rs. crores
H1
2007/08 2006/07 Goly
2. Segment Results
a) FMCG - Cigarettes 1803 1602 12.5
- Others (81) (107) 24.3
Total FMCG 1722 1495 15.2
b) Hotels 130 115 13.0
c) Agri Business 64 93 (30.9)
d) Paperboards, Paper & Packaging 212 215 (1.6)
Total 2129 1919 10.9
Less : i) Interest (Net) 0 4
ii) Other un-allocable income net of un-allocable expenditure (134) (10)
Total PBT 2262 1925 17.5

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 Segment Capital Employed

Rs. crores
H1
2007/08 2006/07 Goly
3. Capital Employed
a) FMCG - Cigarettes * 2273 1689 34.6
- Others 1547 911 69.9
Total FMCG 3820 2600 46.9
b) Hotels 1686 1386 21.7
c) Agri Business 1067 971 9.9
d) Paperboards, Paper & Packaging 2847 2047 39.1
Total Segment Capital Employed 9421 7004 34.5

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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. 12 among Indian listed Private Sector Companies by market cap. (@23/10/07)

No. 1 in FMCG Sector
 Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey
2006)
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 Accolades & Awards (1)
• Golden Peacock Global Award for Corporate Social Responsibility in Emerging
economies for 2005 by World Council for Corporate Governance for the e-choupal and
social & farm forestry initiatives
• 2005 Golden Peacock Award for Excellence in Corporate Governance
• ITC Centre,Gurgaon awarded Platinum Green building rating by US Green Building
Council -Leadership in Energy and Environmental Design
– largest Platinum rated building in the world; 7th such building in the world
• Bhadrachalam paperboard unit :
– adjudged ‘Greenest paper mill in India’ by The Centre for Science & Environment;
won the Greentech Environment Excellence Gold Award
• ‘John Players’ adjudged the ‘Most Admired Shirt Brand of the Year’ at the Lycra®
Images Fashion Awards (LIFA) awards in Jan’06
• SAM/SPG Sustainability Leadership Award conferred at the International Sustainability
Leadership Symposium, Zurich
• Business Leadership Award for the Best Food Company, organised by NDTV Profit 15
 Accolades & Awards (2)
• e-Choupal initiative continues to win 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

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 ITC - Business Portfolio

ITC

FMCG: Agri Business Paperboar

Cigarettes Hotel Leaf Tobacco d
Other FMCG s Agri Paper &
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 (8)
 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 : 141
 Future growth depends on relative rates of growth of per capita
income and moderation in taxes
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 Per Capita Adult Cigarette Consumption
(Sticks)

1753
1662

1190

561
488

141

USA China Pakistan Nepal India World Avg.

Source : Based on Cigarette consumption data(2003) from

“World Cigarettes”,ERC Group plc.

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Hotels & Tourism

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 Hotels & Tourism industry
 Foreign arrivals into India: 4.4 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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Economic impact of the Travel & Tourism Sector

% Share of World Travel &Tourism Travel &Tourism Economy

Travel &Tourism Economy as % of Jobs as % of Total
Demand^ Total GDP Employment

WORLD 100.0 10.4 8.3

China 6.2 12.2 9.4
India 0.9 5.4 5.5
Malaysia 0.5 13.3 11.4
Singapore 0.5 10.7 8.8
Thailand 0.7 14.9 11.3
^ Travel &Tourism Demand => Economic activity
Source: The 2007 Travel & Tourism Economic Research of the World Travel &
Tourism Council

Full potential yet to be harnessed in the Indian context

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 ITC’s Hotel Business
 ITC-Welcomgroup : a leading hotel chain in India
• Strategy to establish presence in key business locations to complete the chain
achieved in end 2004
• Over 5200 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"

 Capacity expansion underway at Bangalore and Chennai; plans for other locations
also being progressed
 Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income
@ 45%) amongst the 3 leading chains
 Leverages unique service proposition and international alliance with Starwood
Hotels & Resorts
• ‘Luxury Collection’ / ‘Sheraton’
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 ITC’s Hotel Business

• Manages 18 full service mid-market properties (2650 rooms)

under the Fortune Hotels brand
– 100% subsidiary company : Fortune Park Hotels Ltd.
• Also operates 51 properties under the ‘WelcomHeritage’
brand
– Maharaja Heritage Resorts Ltd. 50% JV with Marudhar
Hotels (P) Ltd.

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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 6 kgs p.a. (world average – over 50
kgs p.a.)
 Indian paperboard market growing at 7% p.a.

 Value Added Coated board - the fastest growing segment (20% p.a.)
in India driven by the growing sophistication of the consumer

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 Paperboard Demand Projections - Asia

 Asian region demand (excluding Japan) growing by 0.5

million tonnes per annum
 Significant export opportunities for high quality Indian
manufacturers
• ITC paperboards exports - Rs. 2 billion appx.

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 ITC’s Paperboards Business
 Market leader in growth segment - value added coated boards
 World-class contemporary technology
• Elemental Chlorine Free (ECF) Pulp Mill fully operational – only one
of its kind in India 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
nearly 68,000 hectares
 Fully integrated operations with in-house pulping capacity at appx.
1.10 lac MT
• Expansion programme underway; source of sustainable competitive
advantage
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 ITC’s Paperboards & Packaging businesses

 Capacity expansion projects underway

• 120000 TPA Pulp Mill

• 100000 TPA paper machine (to support Stationery business growth plans)

 ITC’s packaging SBU -India’s largest converter of paperboard into high

quality printed packaging
• Leading supplier to Indian FMCG segment

• 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
 Pioneering cultivation of flavourful Flue-cured, superior Burley and
Oriental tobaccos in India

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 ITC’s Agri Commodity Business

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

Coffee etc.
 Unique CRM programme in commodity exports
 Leveraging IT for the transformational ‘e-Choupal’ initiative
 Rural India’s largest Internet-based intervention
 Over 38000 villages linked through around 6400 e-Choupals servicing
over 3.5 million farmers
 Distinctive sourcing capability for ITC’s Foods business

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 e-Choupal - Recognition
• Stockholm Challenge Award 2006 – Economic Development Category
• World Business Award – ICC-UNDP
• Enterprise Business Transformation Award -Wharton Infosys
• Harvard Business School – case study
• Showcased at ICT4D*, Geneva – UN

* Information and Communication Technologies for Development

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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
• 18 Choupal Saagars operational
• Rapid expansion planned in identified rural markets and Tier 3 & 4 towns (pop 2.5
to 10 lacs)
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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

41
 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
 4 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, Aashirvaad ReadyMeals, Aashirvaad Instant Mix,
Sunfeast Pasta 42
 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
• Number of innovative products in the pipeline leveraging the capabilities
of the ITC R&D Centre

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 FMCG Business Initiatives
Lifestyle Retailing
 Leverages trade mark and services expertise of hotels
 Relaxed wear market growth > 25% p.a
 Upmarket product range available in exclusive Wills Lifestyle stores
and multi-branded outlets/ large format retail stores across the country
 State-of-the-art Master Facility aids speed of execution
 Outsourced JIT plant for ‘quick response’ manufacturing
 Product and brand range being expanded
• 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’

44
 FMCG Business Initiatives
Greetings, Gifting & Stationery

 Leverages print and paper know-how

 An emerging market in India - growth driven by increasing cross-
cultural exposure
 ITC’s ‘Expressions’ range commenced with greeting cards; now
widened to include stationery & gifting
 Robust distribution network in place to scale up the Stationery business
significantly
• ‘Classmate’ brand already the most widely distributed brand in India
 Serves to expand the width of ITC’s FMCG distribution capability with
negligible incremental investment

45
 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
 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 (shareholding as
at 31/03/07: 94.25%)
• Key brands: Homelites, Ship, Cheetah Fight etc.

46
 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

47
 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
 … hosted on ITC’s Virtual Private Network
 ITC awarded the best IT user in FMCG category by Nasscom

48
 Future Positioning of ITC
A leading FMCG player in India

VPN providing SCM, ERP & CRM

F capability M
A e-choupal rural two-way A
R fulfillment capability R
M K
Cigarette Trade Marketing capability E
E
R
Expanded FMCG distribution capability T
S S
Greetin
Brande Lifestyl Matches
g
d e &
cards/s
Foods retailin Agarbat
tatione
g tis
ry
basis for strategic partnerships with other FMCG brand owne
49
 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
50
and other statutes, and the ability to attract and retain high