Report Of The Directors And Management Discussion And Analysis
For the Financial Year Ended 31st March, 2013
Your Directors submit their Report for the financial year ended 31st March,
Growth in global economic output remained weak and below trend during 2012. According
to the International Monetary Funds April 2013 report, global output is estimated to
have grown by only 3.2% in 2012 -significantly lower than the 4% growth recorded in 2011.
The Advanced Economies remained on a declining growth trajectory recording only a 1.2%
growth in 2012 against 1.6% in 2011. Such weak performance is largely attributable to the
euro area which contracted by 0.6% during the year partially offset by a better showing by
the US which grew by 2.2% against 1.8% in 2011 and Japan which got back to growth
territory. The Emerging Market & Developing Economies, as a group, saw a marked
decline in growth rates - from 6.4% in 2011 to 5.1% in 2012 - with the major constituent
countries viz. China, India, Brazil, Russia all recording significant deceleration.
Optimism around better economic prospects gathered steam in recent months on the back
of the temporary resolution of the fiscal cliff and debt ceiling related
issues in the US, increased central bank activism such as the European Central Bank
promising unlimited bond buying to support the euro and the regions economy in
general and the Federal Reserves pledge to hold interest rates down until
unemployment rate falls below 6.5%, and improved quality of economic data especially from
China and US evidencing that growth may be accelerating. Consequently, key stock markets
have rallied to multi-year highs in recent months and capital flows to developing markets
have picked up reflecting a risk on sentiment.
That said, the world economy remains in a difficult phase with global output projected
to grow at 3.3% in 2013 which is expected to be a year of transition with both Advanced
Economies and Emerging Market & Developing Economies gradually approaching pre-crisis
trend rates of growth. As per IMF estimates, Emerging Market & Developing Economies
are estimated to grow at 5.3% in 2013 and 5.7% in 2014 while the US is forecast to grow at
1.9% in 2013 (after factoring the impact of fiscal consolidation accounting for 1.8% of
GDP) and 3% in 2014. Growth in the euro area, in contrast, is estimated at (-)0.3% and
1.1% in 2013 and 2014 respectively. With Germany expected to record a sub 1% growth for
the second year in succession and French economy forecast to contract in 2013, weakness in
the euro area is no longer confined to the peripheral countries like Italy and Spain which
remain in recession, and poses the single biggest risk to global recovery. A clear and
long-term roadmap for fiscal consolidation in the US and EU, the need to further
strengthen the banking system without weakening the sovereign in the EU, and bringing down
the relatively high levels of unemployment are some of the key challenges facing the
Advanced Economies. Emerging Market & Developing Economies, on the other hand, will
need to deal with the growth-inflation dynamic by aligning fiscal & monetary policy,
raise productivity through structural reforms, and rebuild social, fiscal and monetary
buffers that were largely consumed in the aftermath of the global financial crisis so that
if some of the risks prevailing in the world economy were to materialise, they are once
again in a position to respond effectively and protect their economies from any large
As aforementioned, the Indian economy slowed down considerably during the year with
Real GDP growth estimated at 5% for 2012-13 - a 10 year low. The slowdown in the pace of
growth is largely attributable to weakness in Industry which grew by only 3.1% during the
year. The Manufacturing sector, which accounts for 55% of Industry, recorded a dismal 1.9%
growth during the year. Growth in the Agricultural sector has also been weak partly due to
the sub-normal rainfall in the initial phases of the south-west monsoon. The pace of
growth in the Services sector - the key driver of economic growth over the last few years
- also decelerated to 6.6%, well below the trend growth levels. From a demand side
perspective, growth in Private Final Consumption Expenditure (PFCE), the largest component
of aggregate demand, moderated to 4.1% in 2012-13 Vs. the preceding 5 year average of 8.1%
while Investment growth decelerated from the last 5 years average of 9.2% and 4.4% in
2011-12 to 2.5% in 2012-13. The key causes for this sharp downturn include the cumulative
impact of persistently high and sticky inflation levels in the economy which led to the
RBI adopting a tight monetary policy, lack of political consensus on policy reforms, a
marked slowdown in the rate of capital formation and weak investor sentiments under the
backdrop of a sluggish global economy as discussed earlier.
Indias twin deficit challenge also came under the spotlight during
the year. The Current Account Deficit widened to an all-time high at 5.4% of GDP during
the first 9 months of 2012-13 Vs. 4.1% during the same period last year, mainly
contributed by high oil prices, subdued merchandise exports coupled with a marginal
decline in net services exports. On the other hand, the Fiscal Deficit, which seemed like
heading towards 6% of GDP in the middle of the year, was reined in by the Government to
5.2% of GDP (Budget 2013 Estimates) through aggressive compression in expenditure.
Several policy measures were announced by the Government during the year. Some of the
key interventions include the setting up of the Cabinet Committee on
Investments to ensure expeditious clearance and implementation of big-ticket
infrastructure projects, direct cash transfers of subsidies, Diesel and LPG subsidy
restructuring. Several regulatory reforms including the new Companies Bill, Land
Acquisition Bill, FDI in pension and insurance, the Direct Tax Code are on the anvil.
Headline WPI inflation levels (especially in non-food manufactured goods) have also
softened in recent months fuelling expectations of further rate cuts by the RBI in the
ensuing months. This, coupled with the policy interventions as stated above, augurs well
for a pick-up in growth in 2013-14.
As per RBI estimates, the Indian economy is expected to grow by 5.7% during 2013-14
representing only a modest improvement over the previous year. While agricultural growth
is expected to return to trend levels on the assumption of normal monsoons, the outlook
for industrial activity remains subdued given the slow pace of investments and structural
bottlenecks such as shortage of power, coal, natural gas and disruptions in mining
activity in some States. Growth in services and exports is also likely to be sub-par in
the backdrop of a sluggish world economy. WPI inflation during the year is expected to be
range-bound around 5.5% on the expectation of higher agricultural output and benign
commodity prices - a key positive. The Governments expenditure restructuring
initiatives including capping of subsidies and improved revenue growth are expected to
bring down the Fiscal Deficit to around 4.8% of GDP in 2013-14 (2013 Budget Estimates) as
compared to 5.2% in 2012-13. The Current Account Deficit, which touched an all-time high
during 2012-13, is estimated at around 5% of GDP in 2013-14, representing twice the
The true potential of the Indian economy was amply demonstrated during the period
2004-05 to 2007-08 when it grew at an average of appx. 9% per annum. The global economic
turmoil that unfolded in 2008 led to a slowdown in growth rates in 2008-09 followed by a
sharp recovery in 2009-10 and 2010-11 based on the Governments pro-active measures
to stimulate the economy. While India remains one of the fastest growing major economies
in the world, the slowdown in economic growth in 2011-12 and 2012-13 is a cause of
concern, being far below the desired levels and the countrys potential. Given the
low levels of per capita income and the fact that a significant proportion of our
population lives in poverty, it is imperative that the economy reverts to its 8% to 9%
growth trajectory sooner than later.
Domestic Consumption remains one of the key growth engines of the Indian economy. With
a large and growing population, significant additions to the working age population over
the medium to long-term, rising disposable incomes including in rural areas and the
Governments increasing spends on the social sector to foster inclusive growth - the
structural drivers for rapid growth in consumption are in place. Even so, the marked
slowdown in private consumption in 2012-13 is a cause of concern. Such deceleration of
growth is mainly attributable to the elevated levels of inflation in the economy
especially for food items due to the inadequate supply side response by the agricultural
sector in the face of growing demand for value-added items. The need of the hour is to
boost agricultural productivity and value addition by encouraging investments and adoption
of best practices in the agricultural value chains while simultaneously improving market
linkages. Besides, the recent slowdown in the manufacturing sector needs to be reversed at
the earliest since robust industrial growth is essential for creation of sustainable
livelihoods and absorption of the increasing working age population of the country. A
fillip to industrial growth would be a critical boosting factor for domestic consumption
The importance of capital formation remains paramount in economic development, more so
for a developing country like India. The strong Real GDP growth of appx. 9% p.a. witnessed
by the economy during the period 2004-05 to 2007-08 was driven by a surge in Gross Fixed
Capital Formation which grew at an average rate of 17.5% p.a. during that period. However,
growth in investments has slowed down considerably in recent years and the rising trend of
projects stalled and the lack of new project announcements is alarming and needs to be
reversed at the very earliest. In this context, the Governments recent actions to
fast-track implementation of large infrastructure projects is particularly laudable and
will go a long way in addressing the infrastructure deficit of the country.
Capital productivity has remained low and stagnant in India and there is an urgent need
to focus on enhancing productivity to match international standards across all sectors of
the economy. This calls for higher levels of investment and induction of world-class
technology and R&D to spur innovation.
An emerging economy like India needs a huge amount of financial resources to realise
its growth potential. However, Indias Tax-to-GDP ratio remains
sub-optimal and well below the world average. It is a well established principle of fiscal
policy that a moderate tax regime coupled with widening of the tax base leads to increase
in tax revenues. While the tax net has been progressively expanded to include a wider
range of services, service taxes constitute a mere 12.8% of Gross Tax Revenue (2012-13) -
disproportionately lower than the 60% share of GDP that the services sector constitutes.
The recent move to the Negative List regime to widen the range of services
under the ambit of Service Tax and the Governments efforts to introduce tax reforms
by implementing a uniform Goods & Services Tax and the Direct Tax Code at an early
date, would facilitate achieving the requisite buoyancy in revenues to the exchequer. The
Governments concerted efforts to embark on a fiscal consolidation roadmap is another
step in the right direction. Subsidy reforms announced recently will ensure that the
Governments resources are channelised more effectively towards increasing the
productivity of the economy.
With India accounting for over 17% of the worlds population but only 2.4% of
global land mass, 4% of the worlds freshwater resources and 1% of global forest
resources, the pressure of economic growth on the countrys natural capital will be
enormous. For a country like India with millions living below the poverty line, and nearly
12 million people entering the job market every year, the focus both at the national and
corporate level should be on fashioning strategies that foster sustainable, equitable and
inclusive growth. It would be imperative to align policies and regulations to encourage
the conduct of business in a manner that results in achievement of a positive carbon
footprint and supports the creation of sustainable livelihoods and societal capital.
Differentiated and preferential incentives, in the form of fiscal or financial benefits to
companies that adopt sustainable business practices would act as a force multiplier
towards achieving this critical national goal. It is your Companys belief that
businesses can bring about transformational change by pursuing innovative business models
that synergise the creation of sustainable livelihoods and the preservation of natural
capital with enhancing shareholder value. This Triple Bottom Line approach to
creating larger stakeholder value, as opposed to merely ensuring
uni-dimensional shareholder value, is the driving force that defines your
Companys sustainability vision and its growth path into the future.
Your Companys exemplary initiatives in the area of sustainable development have
won global recognition and have combined to make it the only enterprise in the world of
comparable dimensions to have achieved and sustained the three key global indices of
environmental sustainability of being water positive (for 11 years),
carbon positive (for 8 years), and solid waste recycling positive
(for 6 years). In this context, your Company was recently awarded the prestigious
World Business and Development Award 2012 at the historic Rio+20 UN Summit
2012 for its transformational rural initiatives in social and farm forestry programmes in
The following sections outline your Companys progress in pursuit of the
Triple Bottom Line.
Your Company posted another year of strong performance across all financial parameters,
leveraging its corporate strategy of creating multiple drivers of growth. This performance
is even more encouraging when viewed against the backdrop of the extremely challenging
business context in which it was achieved, namely, the continued economic slowdown, steep
increase in taxes /duties on Cigarettes, gestation costs relating to the new FMCG
businesses and recent investments in the Paperboards, Paper and Packaging and Hotels
Gross Revenue for the year grew by 19.9% to Rs. 41809.82 crores. Net Revenue at Rs.
29605.58 crores grew by 19.4% primarily driven by a 26.4% growth in the non-cigarette FMCG
segment, 26.4% growth in Agri business segment and 13.4% growth in the Cigarettes segment.
Profit before tax increased by 20.1% to Rs. 10684.18 crores while Net Profits at Rs.
7418.39 crores registered a growth of 20.4%. Earnings Per Share for the year stands at
Rs. 9.45 (previous year Rs. 7.93). Cash flows from Operations aggregated Rs.
9596.24 crores compared to Rs. 8333.56 crores in the previous year. Continuing with
your Companys chosen strategy of creating multiple drivers of growth, your Company
is today, the leading FMCG marketer in India, a trailblazer in green
hoteliering and the second largest Hotel chain in India, the clear market leader in
the Indian Paperboard and Packaging industry and the countrys foremost Agri business
player. Your Companys wholly-owned subsidiary, ITC Infotech India Limited, is one of
Indias fast growing Information Technology companies in the mid-tier segment. Your
Company is one of Indias most admired and valuable corporations with a current
market capitalisation of over Rs. 260000 crores and has consistently featured
amongst the top 10 private sector companies in terms of market capitalisation and profits.
Additionally, over the last 17 years, your Companys Net Revenue and Net Profit
recorded an impressive compound growth of 15.6% and 21.8% per annum respectively. During
this period, Return on Capital Employed improved substantially from 28.4% to 45.7% while
Total Shareholder Returns, measured in terms of increase in market capitalisation and
dividends, grew at a compound annual growth rate of over 26%, placing your Company amongst
the foremost in the country in terms of efficiency of servicing financial capital.
Such an impressive performance track record, delivered consistently over a long period
of time, won global recognition during the year with the Harvard Business Review ranking
your Companys Chairman Mr. Y.C.Deveshwar - under whose stewardship this was achieved
- as the 7th best performing CEO in the world. Your Directors are pleased to recommend a
Dividend of Rs. 5.25 per share (previous year Rs. 4.50 per share) for the
year ended 31st March, 2013. Total cash outflow in this regard will be Rs. 4853.49
crores (previous year Rs. 4089.04 crores) including Dividend Distribution Tax of Rs.
705.03 crores (previous year Rs. 570.75 crores).
Your Board further recommends a transfer to General Reserve of Rs. 750.00 crores
(previous year Rs. 650.00 crores). Consequently, your Board recommends leaving a
surplus in Statement of Profit and Loss of Rs. 3788.10 crores (previous year Rs.
FOREIGN EXCHANGE EARNINGS
Your Company continues to view foreign exchange earnings as a priority. All businesses
in the ITC portfolio are mandated to engage with overseas markets with a view to testing
and demonstrating international competitiveness and seeking profitable opportunities for
growth. The ITC groups contribution to foreign exchange earnings over the last ten
years amounted to nearly US$ 5.4 billion, of which agri exports constituted 56%. Earnings
from agri exports, which effectively link small farmers with international markets, are an
indicator of your Companys contribution to the rural economy.
During the financial year 2012-13, your Company and its subsidiaries earned Rs.
4388 crores in foreign exchange. The direct foreign exchange earned by your Company
amounted to Rs. 3807 crores, mainly on account of exports of agri-commodities. Your
Companys expenditure in foreign currency amounted to Rs. 1966 crores,
comprising purchase of raw materials, spares and other expenses of Rs. 1345 crores
and import of capital goods at Rs. 621 crores. Details of foreign exchange earnings
and outgo are provided in Note 31 to the Financial Statements.
PROFITS, DIVIDENDS AND SURPLUS
(Rs. in Crores)
|a) Profit Before Tax
|b) Tax Expense
| Current Tax
| Deferred Tax
|c) Profit for the year
|SURPLUS IN STATEMENT OF PROFIT AND LOSS
|a) At the beginning of the year
|b) Add : Profit for the year
| Transfer to General Reserve
| Proposed Dividend for the financial year
| Ordinary Dividend of Rs. 5.25 per ordinary share of Rs. 1/- each
(previous year Rs. 4.50 per share)
| Income Tax on Proposed Dividends
| Current Year
| Earlier years provision no longer required
|d) At the end of the year
A. FAST MOVING CONSUMER GOODS
Discriminatory and punitive taxation coupled with a growing incidence of smuggling and
illegal manufacture are the biggest challenges confronted by the domestic cigarette
industry. These challenges were further compounded during the year by the steep increase
of 22% in cigarette Excise Duty rates announced in the Union Budget 2012 and the arbitrary
increases in Value Added Tax (VAT) on cigarettes by some States. Such increases not only
undermine the legal domestic cigarette industry and sub-optimise revenue potential from
this sector but also fail to achieve the objective of tobacco control in the country.
The pattern of tobacco consumption in India is unique and is dominated by non-cigarette
products which are not only cheaper but also revenue inefficient. With over 17% of the
world population, India has a miniscule share of only 1.8% of global cigarette consumption
but accounts for about 90% of the global consumption of smokeless tobacco. According to
the Global Adult Tobacco Survey, 2010 conducted by Ministry of Health and Family Welfare,
Government of India, while 34.6% of all adults in India use tobacco in some form, only
5.7% of the adult population consume cigarettes. It is also pertinent to note that while
cigarettes account for less than 15% of the overall tobacco consumption (by weight) in the
country, they contribute about 75% of the total tax revenue from the tobacco sector
accruing to the exchequer. In contrast, other forms of tobacco are lightly taxed in India,
and in some cases are even tax exempt, leading to a high degree of potential tax loss.
According to various independent reports, there is a high degree of dual consumption
with an estimated 60% of cigarette consumers in India also consuming other forms of
tobacco. The high incidence of taxation on cigarettes coupled with a large differential in
Excise Duty rates between cigarettes and other tobacco products has rendered the demand
for cigarettes highly price elastic and are driving consumers to shift to cheaper and
revenue-inefficient forms of tobacco leading to sub-optimal revenue collections. The fact
that cigarette consumption is price elastic, while consumption of tobacco per se is not,
is borne out by the fact that the total tobacco consumption in the country increased from
406 million kg in 1981-82 to 475 million kg in 2010-11 even as the tobacco consumption in
the form of cigarettes declined from 86 million kg to 72 million kg during the same
period. Thus, while overall tobacco consumption is increasing in India, the share of
cigarettes in overall tobacco consumption has declined from 21% to 15%.
In fact, Indias annual per capita consumption of cigarettes is amongst the lowest
in the world.
The requirement therefore is an India-centric tax and policy framework for tobacco that
cognises for the unique consumption pattern in the country.
A cross-country study of cigarette prices and affordability based on evidence from the
Global Adult Tobacco Survey, and published in Tobacco Control (British Medical Journal),
found that the price of cigarettes was the highest in India relative to its income (in
terms of Purchasing Power Parity).
Interestingly, the Study also established the fact that bidis in India were extremely
affordable with a large price differential of more than 8 times as compared to cigarettes
on account of the high levels of taxation on cigarettes. At 2.25% of per capita GDP,
cigarette taxes (per 1000 cigarettes in most popular price category) in India are the
highest in the world. In comparison, tax incidence on cigarettes (per 1000 cigarettes in
most popular price category) as a percentage of per capita GDP in other countries such as
Japan (0.37%), Germany (0.62%), China (0.81%), Pakistan (0.85%), Thailand (1.20%) is much
lower. Such high taxes make cigarettes unaffordable to a large number of consumers.
The policy of high taxation narrowly focused on cigarettes has also led to the rapid
growth of the illegal cigarettes segment. This segment has grown exponentially from 11
billion sticks in 2004 to 22 billion sticks in 2012, of which, 2 billion sticks have been
added in the last one year alone. The illegal segment now accounts for 18% of cigarette
trade and India is now the 5th largest market in the world for illegal cigarettes
comprising smuggled foreign as well as domestic duty-evaded cigarettes. Most of these
illegal regular sized filter cigarettes are offered to consumers at a convenient and low
price of Rs. 1 per stick. Such low consumer prices are feasible only if taxes are
evaded, as the Excise Duty component alone on a regular size filter cigarette is
significantly higher than the price point.
Increasing volumes of smuggled foreign cigarettes also result in the decline in demand
for Indian tobaccos since these cigarettes do not use any tobacco grown by Indian farmers.
On the other hand, illegal cigarettes produced in India, use tobacco of dubious and
inferior quality. Consequently, the proliferation of duty-evaded cigarettes leads to a
drop in demand for high quality Indian tobaccos thereby adversely impacting the incomes of
farmers engaged in the cultivation of tobacco in the country. In addition, various media
reports have highlighted the link between cigarette smuggling and organised criminal
syndicates as well as terrorist organisations, which utilise the funds for anti-social and
unlawful activities. If not reined in quickly, illegal cigarette trade has the potential
of destroying the countrys social fabric.
The introduction of a new segment of filter cigarettes of length not exceeding 65 mm
announced in the Union Budget 2012, was a positive step towards arresting the growth of
illegal cigarette trade. The industry has responded swiftly making significant investments
and launched several offerings in the new segment. While initial response from the market
has been encouraging, the high central Excise Duty rate of Rs. 689 per thousand
cigarettes applicable to this segment coupled with a steep increase in the rate and
incidence of VAT, have made it difficult for the legitimate industry to fully counter the
menace of illegal cigarettes.
An appropriate policy framework will enable the domestic legal cigarette industry to
offer viable products at competitive price points to consumers. It is a well-established
principle of fiscal policy that moderate taxes enable widening of the tax base and higher
compliance leading to enhanced buoyancy in tax collection. Your Company along with other
stakeholders and industry bodies will continue to engage with relevant authorities to
ensure the implementation of a pragmatic and equitable tax policy for the tobacco
industry. The imposition of discriminatory and punitive VAT rates by some States provides
an attractive tax arbitrage opportunity resulting in illegal inter-State diversion of
stocks by criminal elements thus depriving the State Governments of their legitimate
revenue share. Punitive tax rates on cigarettes have proved detrimental to revenue
collection and have led to multi-fold increase in illegal trade of cigarettes without any
visible decrease in overall tobacco consumption.
Till the introduction of VAT in 2007, cigarettes were subject to single point taxation
by the Central Government. As per the provisions of Additional Excise Duty (Goods of
Special Importance) Act, 1957, apart from Basic Excise Duty, tobacco products were subject
to an Additional Excise Duty (AED) in lieu of State level taxation. The proceeds from this
component were exclusively distributed among States.
For a revenue sensitive product like cigarettes, a revenue efficient single point
taxation system would provide the highest levels of certainty in tax collection. In
addition, it would help in removing inter-State trade distortions and barriers and is
aligned to the principles of the proposed National Competition Policy which seeks to
create a single unified national market. Several expert committees such as the Taxation
Reform Committee headed by Dr. Raja Chelliah and Indirect Tax Reform Committee headed by
Dr. Vijay Kelkar have recommended the single point taxation model for cigarettes.
If State level taxation of cigarettes needs to continue, it would be appropriate to
implement and adhere to the original principle enunciated by the Empowered Committee of
State Finance Ministers on VAT where all goods (other than goods that were exempt or
subjected to concessional rate) were to be taxed at a common Revenue Neutral Rate. Going
forward, the implementation of the proposed Goods and Service Tax (GST) should ensure that
revenue sensitive goods like cigarettes are subjected to uniform standard rate of tax
applicable to general category of goods. The combined incidence of Excise Duty and GST
should be revenue neutral i.e. maintained at current levels.
Despite such a challenging business scenario, your Company has successfully enhanced
its market standing through robust strategies and excellence in execution. Your Company
will continue to invest in development of products that are best-in-class and
offer superior and differentiated value propositions to consumers.
As part of its efforts to continuously ensure product integrity and consistently
deliver superior quality, your Company has deployed advanced tools like Six
Sigma and template based quality predictor systems. Modernisation of the factory in
Kolkata is also at an advanced stage and is expected to be completed during 2013-14.
With the long-term objective of enhancing skill availability, your Company has
established an in-house technical training centre in collaboration with experts in the
field of technical education. The first batch of trainees has commenced training at the
centre during the year. This intervention is expected to create a ready pool of technical
talent for your Companys operations in the years to come.
In line with your Companys pursuit of proactive employee relations management,
Long Term Agreements were successfully concluded at the Bengaluru and Kolkata factories
during the year. Systemic improvements were made in the areas such as grievance resolution
and better work practices were introduced in the factories to ensure harmonious and
Your Companys relentless focus on Safety, Health and Sustainability in its
operations led to several recognitions during the year. Your Companys Bengaluru,
Saharanpur, Kolkata and Ranjangaon factories have received the British Safety
Councils Sword of Honour award. The Munger factory received the
Shreshta Suraksha Puraskar from the National Safety Council of India, Mumbai.
The Bengaluru factory was conferred the award for Industrial Water Efficiency
at the prestigious Federation of Indian Chambers of Commerce and Industry (FICCI) Water
Awards. The Munger factory also received the Energy Efficient Unit award for
excellence in energy management from the Confederation of Indian Industry (CII).
Your Company is committed to the socio-economic upliftment of the farming community
through various Social Investments / Corporate Social Responsibility programmes primarily
in the economic vicinity of its operations towards making a meaningful contribution to
sustainable and inclusive growth. Fragmented land holding, poor infrastructure, restricted
access to scientific knowledge and endemic inefficiencies of the market have engulfed the
farmers in a vicious cycle of low risk taking ability, low productivity and low margins.
To address some of these challenges confronted by the farming community, your Company has
been involved in the creation of on and off-farm sustainable livelihood opportunities
which empower stakeholder communities to conserve and manage their resources. A recent
initiative in this direction has been the dairy development programme in Munger, Bihar.
This initiative focuses on enhancing milk production in the area, increasing productivity
by adopting scientific techniques and ensuring remunerative prices to farmers by creating
marketing opportunities for milk and milk products. A total of 87 Milk Producer Groups
(MPGs) with over 2,800 members were involved in the initiative during the year. The dairy
development programme also delivers a comprehensive package of extension services such as
veterinary care, breeding, supply of quality cattle feed and feed supplement, fodder
propagation and training to farmers.
The pilot has been well received by the community in Munger. In order to scale-up the
Dairy initiative, your Company is in the process of setting up a state-of-the-art Milk
Processing Plant at Munger with a capacity to handle upto 2 lakh litres of milk per day.
With steep Excise Duty hikes, discriminatory VAT taxes by various States, rising
illegal trade and heightened competitive intensity, the year ahead will indeed be
challenging. To serve the interests of all stakeholders, your Company, will continue to
engage with policy makers for a balanced regulatory and fiscal framework for tobacco,
equitable and harmonious VAT rates across States and implementation of a uniform GST rate.
Your Company remains confident that despite the severe pressures, its robust product
portfolio, world-class quality, innovation in processes and investments in cutting-edge
technology and superior execution of competitive strategies will enable it to sustain and
reinforce its market standing in the years to come.
FMCG - Others
The size of the Indian FMCG industry is estimated at around Rs. 250000 crores
representing nearly 2.5% of the countrys GDP. The industry has tripled in size over
the last 10 years and has grown at approximately 17% CAGR in the last 5 years driven by
rising income levels, increasing urbanisation, strong rural demand and favourable
demographic trends. These growth drivers, coupled with the low levels of penetration and
per capita usage in India, are expected to result in robust industry growth in excess of
15% per annum over the medium-term.
Your Company continues to rapidly scale up its new FMCG businesses leveraging its
institutional strengths viz. deep consumer insight, proven brand building capability, a
deep & wide distribution network, strong rural & agri-sourcing linkages, paper and
packaging expertise and cuisine knowledge.
The new FMCG businesses comprising Branded Packaged Foods, Personal Care Products,
Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and
Safety Matches have grown at an impressive pace over the past several years, crossing Rs.
7000 crores mark during the year. Your Companys new FMCG businesses have been rated
to be the fastest growing among top consumer goods companies operating in India as per a
recent Nielsen report.
Within a relatively short span of time, your Company has established several vibrant
consumer brands such as Aashirvaad, Sunfeast, Bingo!,
Yippee!, Candyman, mint-o, Kitchens of
India in the Branded Packaged Foods space; Essenza Di Wills, Fiama
Di Wills, Vivel and Superia in the Personal Care products
segment; Classmate and Paperkraft in Education & Stationery
products market; Wills Lifestyle and John Players in the Lifestyle
Retailing business; Mangaldeep in Agarbattis, Aim in Matches and
so on. In terms of annualised consumer spend, Aashirvaad and Sunfeast are today over Rs.
2000 crores each, Classmate at around Rs. 1000 crores while Bingo!, Candyman and
Vivel are more than Rs. 500 crores each. These world-class Indian brands, which
continue to gain increasing consumer franchise, support the competitiveness of domestic
value chains of which they are a part and create and retain value within the country.
The year under review saw a 26.5% growth in Segment Revenues and a significant
improvement in profitability as reflected by the positive swing of Rs. 114 crores
at the PBIT level. Segment Results reflect the gestation costs of these businesses largely
comprising costs associated with brand building, product development, R&D and
Your Companys relentless focus on quality, innovation and differentiation backed
by deep consumer insights, world-class R&D and an efficient and responsive supply
chain will further strengthen its leadership position in the Indian FMCG industry.
Highlights of progress in each category are set out below.
Branded Packaged Foods Businesses
Your Companys Branded Packaged Foods businesses continued on a high growth
trajectory recording impressive growth in market shares and enhanced market standing
across segments. The businesses accelerated investments in distributed capacities and
capabilities to meet anticipated growth and develop a differentiated and distinctive range
of products. Significant investments in R&D and product development coupled with deep
consumer insight have enabled launch of successful innovative products catering to the
varied regional tastes and preferences of consumers across the country. Your
Companys products continue to be best-in-class in terms of product
During the year, the Branded Packaged Foods businesses had to contend with high levels
of input costs. Global demand-supply dynamics, policy uncertainties and adverse currency
movement led to steep hike in prices of key commodities such as wheat, maida, edible oils,
packaging material and industrial fuels particularly during the first half of the year.
These cost pressures were however mitigated through a combination of improvements in
product and process efficiencies, smart sourcing and supply chain initiatives.
In the Bakery and Confectionery Foods business, the Biscuits and Confectionery
categories gained significant scale and market standing during the year.
Sunfeast biscuits sustained its robust growth trajectory, especially at the
value-added and premium end. Product range stood significantly augmented with the launch
of several first-to-market variants including Dark Fantasy Choco Fills
Coffee, Dark Fantasy Choco Meltz, Butterscotch Zing,
Kaju Badam Cookies. During the year, the brand emerged as the clear market
leader in the highly competitive premium cream biscuits segment. In the Confectionery
category, Candyman and mint-o continued to register strong growth
during the year. The business launched Creme Lacto and mint-o
Ultramintz a sugar-free extra-strong mint in select markets. These products
have met with encouraging consumer response.
In the Snack Foods business, your Company continued to enhance market standing
and expand scale in the fast growing Savoury Snacks, Noodles and Pasta categories. In the
Savoury Snacks category, the market standing of your Companys Bingo!
brand has significantly improved, leveraging an innovative product range, enhanced brand
building efforts, use of digital media to spur word-of-mouth and clutter-breaking
advertising campaigns. Your Companys new-to-market format of Snacks,
Bingo! Tangles, has been well received in target markets and is gaining
impressive consumer traction. In the Instant Noodles and Pasta category, your
Companys brand Sunfeast Yippee! has been well received by consumers and
is the second largest brand in the market. Focused market research, deep consumer insights
and innovative product formats under the Sunfeast Yippee! brand are expected
to further strengthen consumer franchise in this fast growing and highly competitive
In the Staples, Spices and Ready to Eat Foods business, your Companys
Staples and Ready to Eat categories continued to grow rapidly. In the Staples category,
Aashirvaad atta consolidated its leadership position aided by the strong
performance of Aashirvaad Multi-grain atta. The premium
Multi-grain and Select variants continued to grow rapidly with an
increasing proportion of consumers shifting to these value-added offerings.
The Branded Packaged Foods businesses continue to invest in manufacturing and
distribution infrastructure to support larger scale in view of the growing demand for
their products and maximise the benefits of distributed manufacture for efficient
servicing of proximal markets.
Buoyed by increasing consumer franchise for your Companys brands, it is expected
that the accelerated growth of the Branded Packaged Foods businesses will be sustained in
the years ahead. Your Company will continue to rapidly scale-up the Branded Packaged Foods
businesses drawing upon the agri-sourcing strength of the e-Choupals, in-house cuisine
knowledge, product development capabilities, packaging expertise and branding, sales &
distribution competencies to establish itself as the most trusted provider of food
products in the Indian market.
Personal Care Products
Your Companys Personal Care Products business continued to gain consumer
franchise during the year aided by a slew of new product launches in the Personal Wash,
Skin Care, Face Wash and Deodorants categories. The business continues to leverage the
umbrella brands, namely, Essenza Di Wills, Fiama Di Wills,
Vivel and Superia and is focused on addressing various consumer
benefits with the introduction of new variants.
The launch of the Couture Spa range of soaps under the Fiama Di
Wills brand was one of the key interventions during the year. The signature series,
created in alliance with fashion guru Wendell Rodricks, provides consumers an invigorating
bathing experience. The business also launched a Collectors Edition soap
series in association with the Lonely Planet Magazine under the Fiama Di Wills Mens
range. The six exciting Collectors Edition packs are inspired by various water
sports and destinations renowned for rejuvenating and revitalizing experiences, in line
with the brands value proposition of rejuvenation. The year also marked
your Companys foray into the high growth Deodorants market with the launch of
Aqua Pulse Deodorant Spray under the Fiama Di Wills Men franchise.
The Skin Care range was also expanded during the year with the launch of Vivel Cell
Renew Body Lotion, Hand Crme / Moisturizer and Vivel Perfect Glow Skin
Toner in target markets. The new product launches have received encouraging consumer
The business continues to increasingly leverage Laboratoire Naturel - the
state-of-the-art consumer and product interaction centre located in Bengaluru - to connect
the R&D and brand teams to the Indian consumer with a view to launching products with
unique and differentiated benefits. As in previous years, in recognition of excellence in
product quality and innovation, two of your Companys products - Fiama Di Wills
Men Aqua Pulse De-Stressing & Brightening Face Wash, and Vivel Cell Renew
Fortify & Repair Moisturiser - were voted Product of the Year in
their respective categories.
Innovative consumer engagement continues to be at the centre of your Companys
personal care strategy. Several new initiatives such as launch of the Couture Spa gel
bathing bar, and a unique consumer engagement programme - christened The Fabulous
Hair Show -were undertaken during the year. Your Company is at the forefront of
leveraging new age media for enhanced consumer engagement pioneering campaigns such as
Fiama Di Wills Men website launch via Google+ Hangout and Fiama Di Wills
Men - Face of the Year campaign, to name a few. A greater presence of your
Companys brands on traditional as well as digital media, direct consumer interaction
initiatives, and improved market presence contributed to your Companys products
being tried by over 7 crore households during the year (as per IMRB Household Panel survey
- January 2013). In addition, Vivel was voted as one of the Top 5 Most
Exciting Brands in Personal Care in India by Brand Equity and Nielsens Annual
Survey for Most Exciting Brands.
Your Companys Personal Care Products business continued to grow at a fast clip,
distinctly ahead of industry despite competitive pressures from entrenched players. This
was achieved through a combination of innovative and differentiated offers and by
leveraging the distribution network of your Company to reach target consumers.
Input materials, especially palm oil, witnessed significant levels of price volatility
during the year. The depreciation of the Indian Rupee against the US Dollar added to
inflationary pressure on other input materials for a major part of the year. The business
managed its raw material costs effectively by adopting a proactive sourcing strategy based
on deep understanding of market trends, developing alternate sources of supply, leveraging
enhanced scale of operations and prudent inventory management.
The Personal Care industry in India continues to be on a long-term growth path driven
by rising disposable incomes and changing consumer preference for enhanced personal
grooming. Your Company is well poised to seize the emerging opportunities in this rapidly
evolving industry and continues to invest in creation of vibrant brands, cutting-edge
products, flexible and responsive manufacturing and supply chain operations, and
development of high quality human capital to build sustainable competitive advantage.
Education & Stationery Products
The Stationery business recorded robust growth in revenues during the year,
consolidating your Companys position as the leading and fastest growing player in
the Indian Stationery market. Your Companys flagship brands - Classmate
for the student community and Paperkraft for office and executive requirements
-continue to gain increasing consumer franchise.
Continuing investments in a superior product range, effective consumer engagement and
an efficient and responsive supply chain network has enabled Classmate gain significant
market share. During the year, brand Classmate was strengthened through a series of
interventions resulting in improvement in brand health and market standing. A new
television commercial backed by on-ground activation and social media inputs, repositioned
Classmate as a brand that celebrates the uniqueness in every child. The business also made
good progress during the year in the non-paper categories comprising pens, wood-cased
& mechanical pens, mathematical instruments, art stationery & scholastic products.
Such complementary products are helping position Classmate as a complete student
Your Companys Social Investments Programme in primary education, that has
cumulatively benefited over 300,000 children, is showcased on the back cover of every
Classmate notebook. The Classmate notebook is itself an embodiment of the environmental
capital built by your Company in its paper business. While the cover is made from recycled
board sourced from your Companys Forest Stewardship Council (FSC) certified Kovai
mill, the inner pages are made from virgin pulp sourced from your Companys social
& farm forestry programme that has greened over 142,000 hectares -including
substantial tracts of private waste lands belonging to poor tribals and marginal farmers -
and provided 64 million person days of employment. Further, used notebooks are collected
from schools in the catchment areas of your Companys paper mill under the
Wealth Out of Waste (WOW) programme where they are converted to recycled
board. This sets in motion a virtuous cycle that continuously re-generates environmental
capital. Additionally, the collaborative supply chain established by the business
comprising 800 customers and 30 outsourced manufacturers provides indirect employment to
over 5,000 people. The small-scale manufacturers, with support from your Company, have
built impressive quality and delivery capability, resulting in a majority of them being
certified to ISO 9001:2008 standards.
The education & stationery products industry is poised for exponential growth
driven by large investments in the education sector, growing literacy and the increasing
scale of government initiatives in education. Your Company with its collaborative linkages
with small & medium enterprises and a strong product portfolio of notebooks &
writing instruments, is well poised to strengthen its leadership position in the Indian
During the year, your Companys Lifestyle Retailing business posted high growth in
revenues and continued to strengthen its position in the branded apparel market. While
revenue growth was impacted in the initial part of the year due to weak consumer
sentiment, there was a marked improvement as the year progressed. The restoration of
exemption of excise duty on branded readymade garments as announced in the Union Budget
2013, is expected to provide the much needed impetus for the industry.
In the Premium segment, Wills Lifestyle further strengthened its consumer
franchise on the back of significant improvements in product variety, enhanced
availability and impactful visibility. The retail footprint of the brand was expanded to
90 Exclusive stores across 40 cities and more than 500 shop-in-shops in
leading departmental stores and multi-brand outlets. During the year, the premium imagery
of the brand was reinforced through the association with Wills Lifestyle India
Fashion Week, the countrys most prestigious fashion & lifestyle event.
With the addition of a boutique store at the ITC Grand Chola, the brand is now
available in five ITC Hotels, thereby enhancing brand availability to high-end
business and leisure travellers. The Club ITC loyalty program, with over 1
lakh members, leveraged synergies between Wills Lifestyle and ITC Hotels to target and
strengthen bonding with the premium consumer.
Product appeal was enhanced through the introduction of differentiated offerings across
several premium product platforms. The Wills Classic formal range now offers
Wonderpress wrinkle-free shirts, Regalia superfine fabrics,
premium Ecostyle organic collection and Crme de Cotton supersoft
cottons. The Luxuria range of high-end formals with luxurious fabrics and
superior craftsmanship continued to receive positive consumer response. The Wills Sport
range, with its vibrant and fashionable portfolio, strengthened its appeal amongst the
youth segment, widening the consumer franchise. The Womens offering witnessed strong
growth energised by an extensive high-end range, stylised formals, trendy silhouettes and
premium accessories. The exclusive designer-wear offering, Wills Signature, co-created
with Indias leading designers, was strengthened with the launch of Ritu
Kumar creations, adding to the product equity.
In the Youth segment, John Players has established a strong pan-India
presence with availability in over 350 stores and 1,400 multi-brand outlets and
departmental stores. Brand reach was further augmented during the year with the launch of
nearly 100 stores, penetrating more markets and acquiring new franchise. The casual
portfolio registered strong growth as a result of an enhanced range, premium
differentiated washes and contemporary fits. The John Players Jeans brand strengthened its
positioning as a vibrant and fashionable denim offering with impactful communication and
the launch of exclusive John Players Jeans stores and improved availability through
shop-in-shops. Social media and e-commerce platforms were activated to engage with the
youth and expand reach to new consumers seeking affordable fashion.
Product portfolio was strengthened with new designs in the core range and
region-specific collections, robust replenishment infrastructure and processes. During the
year, the business operationalised its new state-of-the-art product development facility
in Manesar, Haryana. Initiatives were undertaken to enhance range vitality, supply chain
responsiveness and superior customer service for a delightful shopping experience. The
business continued to receive industry recognition during the year. While Wills Lifestyle
was accorded Superbrand status, John Players was rated amongst the top 10
Most Trusted Apparel Brands 2012 by The Economic Times.
The business continues to focus on enhancing the premium quotient of its offerings and
strengthen processes for creation of winning designs and enhancing supply chain
responsiveness on the basis of a deep understanding of consumer preferences.
Safety Matches and Incense sticks (Agarbattis)
The Agarbatti category recorded an impressive growth in revenues well ahead of the
industry, driven by increasing consumer franchise for the Mangaldeep brand and
enhanced distribution reach. Product portfolio was augmented during the year with the
launch of variants such as Fragrance of Temple series and Dhoop
4-in-1, under the umbrella brand Mangaldeep. The business maintained its
market leadership in the Safety Matches category aided by continued consumer preference
for its strong brand portfolio across all market segments.
The Matches & Agarbatti business continues to contribute to your Companys
commitment to the Triple Bottom Line supporting over 18,000 livelihoods,
mainly amongst rural women. The business sources its products from over 50 small-scale and
cottage sector units as well as womens self-help groups. It continues to provide
support to such units through the introduction of scientific methods to enhance
productivity and product quality. Business initiatives of introducing enabling tools and
technology in the rural communities continue to enhance product quality and increase the
earning potential of agarbatti rollers. These initiatives, along with the continuing
association with various State Governments for setting up sourcing centres, are creating
sustainable livelihood opportunities for rural women through agarbatti rolling. Your
Company continues to partner the small-scale sector by sourcing a significant portion of
its Safety Matches requirement from multiple units in this sector. Your Company is helping
improve the competitive ability of these units by providing technical inputs towards
strengthening systems and processes.
While the manufacture of Agarbattis is reserved for the small-scale & cottage
sector in India considering its importance in employment generation, imports of raw battis
(the principal raw material) are freely allowed at low Customs Duty rates. This is
resulting in bulk of the raw batti consumption in India being of imported origin leading
to a loss of livelihood creation opportunities. Suitable policy changes in arresting this
trend would go a long way in creating sustainable livelihoods especially among rural
Indian women and tribals in the North-East.
The domestic tourism industry remained sluggish during the year in the backdrop of a
weak global and domestic economic environment. While growth in foreign tourist arrivals
slowed down to 2.8% during the year versus 9.9% in 2011-12, domestic air travel recorded
de-growth. Industry performance was also affected due to the significant increase in room
inventory in some of the key domestic markets.
Such a challenging business environment adversely impacted business performance leading
to a muted growth in Segment Revenues during the year. While your Companys Hotels
business maintained its leadership position in terms of operating margins, Segment Results
were adversely impacted largely by the relatively weak pricing scenario and the gestation
costs relating to ITC Grand Chola, which commenced operations in September 2012.
Your Companys Hotels business continues to be rated amongst the fastest growing
hospitality chains with 93 properties at 64 locations in India operating under 4 brands
ITC Hotel at the luxury end, WelcomHotel in the 5 star
segment, Fortune in the mid market to upscale segment and
WelcomHeritage in the heritage leisure segment. In addition, the business has
licensing and franchising agreements for two brands The Luxury
Collection and Sheraton with the Starwood Hotels & Resorts.
During the year, your Company unveiled its latest offering in the super premium segment
- ITC Grand Chola in Chennai. The hotel is part of the ITC Hotel brand and has
522 plush hotel rooms and suites, 78 service apartments, 60,000 sq. ft. of conference
& banqueting facilities, 10 Food & Beverage outlets and the award winning spa
Kaya Kalp. The hotel has achieved the distinction of being the worlds
largest Leadership in Energy and Environmental Design (LEED) Platinum rated
hotel under the New Construction category and Indias first 5 Star Green Rating
for Integrated Habitat Assessment (GRIHA) rated luxury hotel by the Ministry of New
and Renewable Energy, thereby bolstering the unique positioning of ITC Hotels
as the greenest luxury hotel chain in the world. The Food & Beverage segment remains a
major strength of your Company and its iconic brands Bukhara, Dum
Pukht and Dakshin continue to garner coveted international awards and
accolades. Other signature F&B brands viz. West View, Kebabs &
Kurries, Edo and Pan Asian have firmly established
themselves and continue to sustain leadership position in their respective cities. During
the year, the business launched 2 new signature F&B offerings
Ottimo and Royal Vega focusing on exquisite Italian cuisine
and delectable vegetarian food from the magnificent royal kitchens of India, respectively.
In line with your Companys commitment to the Triple Bottom Line,
investments have been made in renewable energy to provide clean power to your
Companys hotels in Bengaluru (ITC Windsor and ITC Gardenia), Chennai (ITC Grand
Chola), Mumbai (ITC Maratha) and Jaipur (ITC Rajputana). With these investments, your
Companys Hotels business met over half of its energy requirements from clean and
During the year, the business leveraged the recently launched pan-ITC consumer loyalty
programme Club ITC to enhance revenues. The business seeks to position
Club ITC - targeted at the premium clientele of Wills Lifestyle
and ITC Hotels - as the greenest and most admired customer loyalty programme
over the next few years.
In view of the positive long-term outlook for the Indian Hotel industry, your Company
continues to sustain its investment-led growth strategy. Construction activity of two new
luxury properties at Kolkata and at Classic Golf Resort near Gurgaon is progressing
satisfactorily. During the year, your Company invested in a newly formed wholly-owned
subsidiary incorporated in Sri Lanka which acquired a prime plot of land in Colombo on a
99-year lease from the Government of Sri Lanka, for developing a mixed-use project
including a 5-star luxury hotel. Further, several new projects, including joint ventures
and management contracts, are on the anvil to rapidly scale up the business across all
The Fortune brand which caters to the mid-market to upscale
segment continued its expansion by forging new alliances, taking the total number of
hotels in its fold to 69 with an aggregate inventory of over 5,000 rooms. Of these, 30
properties are under various stages of development with 3 hotels slated for commissioning
in the coming year. The WelcomHeritage brand continues to be the
countrys most successful and largest chain of heritage hotels with 39 operating
properties, spread across 13 States in India.
Your Companys Hotels business, with its globally benchmarked levels of product
and service excellence and customer centricity, is well positioned not only to sustain its
leadership status in the industry, but also emerge as the largest hotel chain in the
country over the next few years.
C. PAPERBOARDS, PAPER AND PACKAGING
During the year, the Paperboards, Paper and Packaging segment recorded a growth of 9%
in revenues aided by higher volumes and product mix enrichment. The relatively lower
growth in Segment Results during the year, reflects the steep hike in input prices
particularly of wood, coal and chemicals.
Paperboards & Specialty Papers
Global demand for paper & paperboard de-grew by 0.5% in 2012 primarily due to the
continuing weak economic environment prevailing in Western Europe and the US. The domestic
market also recorded a slowdown with demand decelerating to around 5.9% during 2012-13
against 6.1% in the previous year.
The global paper market continues to witness a structural shift with emerging
economies, particularly in Asia such as China and India, driving the demand growth. While
such structural shift in demand and the relatively low levels of per capita consumption in
India offers attractive opportunities going forward, the Indian market is also getting
increasingly competitive drawing large investments especially from global players. Though
growth in demand is expected to absorb the additional capacity, increasing market share
and sustaining margins will be a challenge in the short-term.
Further, reduction of import duties under various Regional Free Trade Agreements
especially with ASEAN is impacting the profitability of the domestic paper industry and
the economic viability of the small paper mills. With the US and EU imposing anti-dumping
duties against import of paper / paperboards from China / Indonesia to protect their
domestic industries, the additional capacities created in these countries are increasingly
finding their way into India given the lower levels of import duty. Clearly, there is a
need to ensure that the current duty structures are, at the very least, kept unchanged.
The domestic paperboard industry is expected to grow at around 7.5% per annum over the
medium-term. During the year, your Company consolidated its pre-eminent position in the
industry through new product launches like Carte Lumina with
best-in-class whiteness suited for high-end FMCG and over-the-counter products
and Nanobev for the small paper cups segment. Paperboards developed for
high-end cigarette packaging needs are running seamlessly on the high speed packaging
machines at your Company`s cigarette factories. The business also strengthened its
distribution network with the addition of new distributors, authorised stockists and
market development partners for improved market servicing.
Your Company continues to focus on the value-added product segment in which it is a
clear market leader. The market for value-added paperboard is expected to grow faster at a
compound annual growth rate of 12% driven by higher demand for branded packaged products
in the FMCG and Pharma sectors, increasing number of product categories catering to
aspirational lifestyles, higher rural demand, higher penetration of organized retail and
increasing salience of packaging in driving brand awareness. Towards this end, your
Company successfully commissioned a state-of-the-art and highly energy efficient paper
machine with an installed capacity of over 1 lakh tonnes per annum at the Bhadrachalam
plant during the year. With this, the total capacity of the Bhadrachalam plant stands at
over 5.5 lakh tonnes per annum, thereby sustaining its position as the single largest
integrated pulp and paperboard/ paper unit in the Indian industry. Your Company has also
invested in a new 25 MW Turbine Generator and 130 tonnes per hour (TPH) Boiler to meet the
energy requirements of this expansion.
The Writing and Printing paper segment, currently estimated at 3.8 million
tonnes per annum, is projected to grow at a compound annual growth rate of around 7% over
the medium term. Growth in the value-added writing and printing paper segment will
continue to be fuelled by initiatives like Sarva Shiksha Abhiyan and Right of Children to
Free and Compulsory Education as well as by rising literacy levels, changing demographic
profiles and GDP growth. The business, with its strong forward linkages with your
Companys Education and Stationery Products, has emerged as a leading player in this
Your Company continues with its strategy of promoting social forestry plantations for
pulpwood as access to adequate supplies of pulpwood at competitive prices remains a major
challenge for the paper industry. The industry is currently facing an acute shortage of
pulpwood especially in Andhra Pradesh, which is largely attributable to the enhanced
demand from new pulp capacities that have been set up without adequate investments in
pulpwood plantations and diversion of supplies for alternative usage such as commercial
poles, bio-fuel etc. With demand far exceeding supplies, pulpwood procurement prices
witnessed steep hikes during the year, adversely impacting industry margins.
Your Company expects the current demand-supply skew to be corrected over the next
couple of years on the back of additional plantations by farmers due to the prevailing
remunerative price levels and renewed efforts by pulp mills in promoting plantations in
their core areas. In the short to medium term, the business is exploring several options
including procurement of wood from other states, use of bamboo in a limited scale etc.
with a view to mitigating the cost pressure.
Your Company remains focused on promoting pulpwood plantations in its core area of
operations. During the year, the business sold / distributed high quality saplings / seeds
to farmers that enabled planting of over 110 million saplings in 17500 hectares of
plantations. With this, your Companys bio-technology based research initiatives have
cumulatively resulted in the planting of about 656 million saplings leading to significant
wasteland development and greening of over 142,000 hectares and generation of over 64
million person days of employment for poor tribals and marginal farmers. With a view to
accelerating the pace of plantation activity, the business commissioned a state-of-the-art
clonal sapling production facility during the year. The facility has a capacity to produce
25 million saplings with improved survival rates and higher productivity and will go a
long way in supporting your Companys endeavour to augment pulpwood availability.
Your Companys research on clonal development has resulted in the introduction of
high yielding and disease resistant clones which are adaptable to a wide variety of
agro-climatic conditions. Besides securing the long-term supply of fibre at competitive
costs, this initiative also assists in generating farm incomes by utilisation of marginal
wastelands. Your Companys continued focus on clonal plantations in core areas is
expected to yield significant competitive advantage in the years to come. Your
Companys Life Sciences & Technology team is actively collaborating with several
expert agencies to further leverage bio-technology for enhancing farm productivity, wood
yields and improving fibre and pulp properties.
Your Company continues to promote agro-forestry in pulpwood plantations on wasteland as
well as on land where mono-cropping is practised. In Andhra Pradesh, mono-cropping is
currently practised in cultivation of cotton, tobacco, maize and pulses in more than 30
lakh hectares. During the year under review, your Company facilitated the introduction of
agro-forestry models, in about 1,800 hectares, incorporating inter-cropping practices
where eucalyptus trees are grown adjacent to agricultural crops. By integrating tree
growing with crop production, the problems of poor agricultural production, worsening wood
shortages and environmental degradation can be simultaneously addressed. Furthermore,
inter-cropping technologies / practices also help in reducing the pressure on the
remaining natural forests and increases the diversity of vegetation on existing farms.
Your Companys initiatives under this model currently extend to nearly 2,500 hectares
assuring wood and food security to the farmer from the same unit of land addressing
long-term sustainability. The area covered under this model is proposed to be
substantially increased in the years to come.
Hitherto, in India, the subject domain of Biodiversity has remained with the Ministry
of Environment and Forests. For the first time in the Indian paper industry, your Company
has proactively attempted a biodiversity conservation project on private lands. On a pilot
basis, 11.52 hectares of farmer lands in Andhra Pradesh were selected and afforestation,
reforestation, reclamation, rehabilitation, protection and conservation of biological
resources were attempted. Further, your Company promoted natural regeneration, enrichment
planting with native species and conserved threatened and endemic species. In order to
sustain these efforts, your Company is promoting local stewardship for biodiversity
through awareness programmes which will go a long way in reversing the impact created by
anthropogenic pressures, integrating it with agriculture, pulpwood plantations, fishery,
apiculture, medicinal plants and creating sustainable livelihood to the tribal farmers. As
a responsible Corporate Citizen, your Company is willing to participate in initiatives of
this nature towards preserving biodiversity on an ongoing basis.
In India only 25% of the paper consumed is recovered for recycling as against about 70%
in the western countries. Your Companys collaborative initiative, christened
Wealth Out of Waste (WOW), continues to promote and facilitate waste paper
recycling, with a view to conserving scarce natural resources. The waste paper industry is
largely unorganised and a lot of effort has gone into establishing processes and systems
in the operational areas of collection, sorting and grading of waste paper as well as on
accounting, compliances and controls. It is expected that such efforts would assist in the
availability of quality fibre on a sustainable basis at competitive prices. About 48,000
tonnes of waste paper were collected during the year and with continued focus on building
capability it is expected that the entire waste paper requirements of the business would
be sourced through this initiative within the next few years. In this context, the second
anniversary of National Recycling Day was celebrated in Chennai on 1st July 2012 with
widespread participation of the general public and 14,000 school children. This initiative
won CIIs Best environmental project of the year 2012 and Most
Useful Environmental Project awards.
Your Company has the distinction of being the first paper company in India to have
obtained the Forest Stewardship Council - Forest Management (FSC-FM) certification
covering 8,000 hectares of social forestry plantations involving about 9,000 farmers with
another 14,000 hectares awaiting certification. FSC-FM certifies that the plantation
activities of an organisation are economically, socially and environmentally viable. To
the extent of pulp produced from such certified plantations, your Company will be able to
commit to its customers, FSC certified paper & paperboard. Environmentally conscious
customers are already beginning to show keenness to source such green products
which in turn will further increase the competitiveness of the business. Plans are afoot
to steadily increase coverage over the next few years. All four manufacturing units of
your Company have obtained the FSC Chain of Custody certification.
Your Company has made significant investments in contemporary technologies including
environment-friendly Elemental Chlorine-Free (ECF) and Ozone bleaching for pulp thereby
improving the environmental standards of its manufacturing operations. Such investments
are expected to provide customers with sophisticated products, way ahead of legislation,
thereby creating new benchmarks in environmental stewardship. The Industry would welcome
policies that lay down environmental benchmarks in tune with other industries such as
automotives etc. and suitably reward those who achieve or exceed such parameters.
Your Company continues to focus on recycling initiatives including solid waste
recycling. While all manufacturing units have already achieved near 100% solid waste
recycling by its usage for making products like lime, fly ash bricks, grey boards, egg
trays etc., the procurement and recycling of about 120,000 tonnes of waste paper during
the year has further consolidated the businesss overall positive solid waste
recycling footprint. The Bhadrachalam unit is the first in India to have been awarded the
GreenCo Gold certificate by CII in June 2012. The unit also won the
Excellent Energy Efficient, Excellent Water Efficient and
Appreciation prize State Energy Conservation awards. The Bollaram unit
won Silver for FICCI Safety System Excellence award in manufacturing while the
Kovai unit won Best Water Efficient award at 9th National Water Management
meet. The business also won IPMA Environmental award for Cleaner Technologies.
The above have been made possible as a result of continuous focus on various safety
initiatives including induction of safety stewards, strengthening systems, spreading
awareness and integrating environment, health and safety (EHS) as part of the overall
Total Productive Maintenance (TPM) initiative. With regard to energy consumption,
strategies to contain usage across units continue to be pursued. Further, the business is
also investing in a new high pressure fuel efficient boiler in its Tribeni unit, which
will enable significant reduction in coal consumption and usage of lower grades of coal.
The 7.5 MW wind energy farm in Coimbatore, continues to operate at optimum levels
providing clean energy to the Kovai unit. It is expected that energy efficiency coupled
with greater use of renewable sources of energy will enable your Company to derive
benefits from sale of Renewable Energy Certificates (RECs) under the Electricity Act 2003
as well as obtain benefits from newer initiatives like Perform, Achieve and Trade (PAT)
under the Energy Conservation Act 2001.
The year under review witnessed steep hikes in the cost of chemicals and coal as well
as curtailment in supplies of coal by the Government through the reduction of allocations,
forcing the industry to buy high cost coal in the open market. These factors, together
with the sharp depreciation of the Indian Rupee, adversely impacted the industry. However,
your Company with its integrated operations and strategic cost management actions was able
to minimise the adverse impact of such cost escalations.
The integrated nature of the business model - access to high-quality fibre from the
economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the-art
manufacturing facilities, focus on value-added paperboards and a robust forward linkage
with the Education and Stationery Products business - strategically positions your Company
to further consolidate and enhance its leadership status in the Indian paperboard and
Packaging and Printing
Your Companys Packaging and Printing business continues to provide contemporary
and superior packaging solutions facilitated by its state-of-the-art technology and
processes. The business provides strategic support to your Companys FMCG businesses
through innovative packaging solutions, faster speed-to-market for new launches and
security of supplies in addition to delivering benchmarked international quality at
The business continued to leverage its multiple packaging platforms to offer a wide
range of packaging solutions and expand business both in domestic and export markets. Your
Company continues to be a leading supplier of value-added packaging in cartons and
During the year, the business augmented the capacity and capability of its Haridwar
plant with the successful commissioning of a new state-of-the-art line for cigarette
packaging, expansion of carton line capacity and other downstream conversion facilities
towards meeting the growing demand from the northern markets. The business also made
investments in backward integration for key raw materials in the flexibles segment,
thereby enhancing competitiveness. These in-house capabilities have enabled quicker
turnaround of designs, pack changes and reduced product launch timelines for your
Companys FMCG businesses, thereby providing a source of competitive advantage in the
The business won several awards during the year for operational excellence, innovation
and creativity. These include three World Star Awards from the World Packaging
Organisation, several India Star Awards from the Indian Institute of Packaging
and Golden Peacock Award instituted by Institute of Directors for innovative
product / services.
The 14.1 MW wind energy farm in Tamil Nadu, set up in 2008, continues to operate at
optimum levels providing clean energy to the Chennai unit. This initiative is a certified
project under the Clean Development Mechanism of the Kyoto Protocol and is in line with
your Companys commitment to reduce the carbon footprint of its operations.
The factories at Chennai, Haridwar and Munger continued to maintain the highest
standards in Environment, Health and Safety (EHS). The Chennai unit was certified for BRC
IoP (British Retail Consortium, Institute of Packaging, global food packaging standard),
SA 8000 (Social Accountability Certification), and FSC (Forest Stewardship Council
Certification - Sustainable Forestry Practices). The Haridwar unit was accredited with ISO
9001:2008, ISO 14001:2004, OHSAS 18001:2007 for the new plant within six months of
commissioning and also received the 13th Annual Greentech Environment Award in
the Silver category. The Munger unit won the Suraksha Puraskar at the National
level from National Safety Council and International Safety Award with Merit
from British Safety Council.
With substantial investments in world-class technology & quality systems, and
distributed & diversified manufacturing capability, the business is well poised to
sustain its position as one of the foremost packaging houses in the country.
D. AGRI BUSINESS
While overall global leaf tobacco crop output saw a decline in 2012, the prevalent high
levels of uncommitted inventory continued to limit demand for the fresh crop. Global
cigarette demand remained muted due to the weak global economic scenario, regulatory
pressures, enhanced levels of taxation and growth in illegal trade. Cigarette-type tobacco
crop production in India was lower during 2012 mainly on account of the severe drought
that adversely impacted Mysore crop output and quality. Your Companys focused crop
development efforts at the farm level towards ensuring adequate availability of seedlings,
educating the farmers on crop management and post harvest product management techniques
helped revive the crop substantially thereby improving livelihoods particularly in the
drought affected areas in rural Karnataka.
Notwithstanding a sluggish global demand scenario, your Company recorded robust growth
in export volumes and revenues by servicing customers based on their specific needs and
leveraging strengths in crop development, superior sourcing and processing capabilities.
The business not only strengthened its presence in existing markets but also accessed
customers in new markets. The business also made progress during the year in growing the
smokeless tobacco segment through customized offerings. The business continued to provide
strategic sourcing support to your Companys cigarette business.
Achieving enhanced productivity continues to be a focus area of research and crop
development initiatives of the business. Substantial progress has been made in
strengthening the pipeline of new hybrid combinations for deployment in growth zones.
Your Company continues to engage in a pioneering role in promoting sustainable
agriculture practices in the tobacco growing regions in Andhra Pradesh and Karnataka. Key
interventions such as farm mechanisation, soil health management, water conservation and
seedling production technologies through well researched dissemination models continue to
support the farmer towards enhancing quality of produce and optimising costs. Your
Companys efforts in this area have been recognised in a number of international
forums. The approach on dissemination models of farm mechanisation has been published in
the International Journal of Sustainability Japan, while the float seedling production
initiative has been recognised by the World Academy of Science, Engineering &
Technology (WASET), Amsterdam for its sustainability features & economic suitability
to the farming community. These efforts are not only helping secure global demand for
Indian leaf tobacco by providing enhanced value to global customers but also in improving
the socio-economic status of the small / tribal farmer. Capitalising on your
Companys R&D efforts on varietal improvement, the area under coverage of
flue-cured virginia hybrids was substantially increased in collaboration with the Central
Tobacco Research Institute and the Tobacco Board of India.
Your Companys newly commissioned Green Leaf Threshing plant in Mysore has
stabilized and exceeded benchmarks on all operating parameters of throughput, processing
yield and quality. This investment has enhanced the processing capability of the business
and reduced transportation costs given the factorys proximity to the tobacco growing
areas in Karnataka. The business is also actively engaged in augmenting its warehousing
capacities and re-engineering its supply chain towards driving operational efficiencies
and reducing costs.
Further, in line with your Companys commitment to sustainable business practices,
the business is investing in wind energy in Karnataka to increase usage of renewable
sources of energy. With this, 100% of the energy requirements of the newly commissioned
plant at Mysore will be met through renewable energy sources.
Your Company with its unmatched R&D capability, state-of-the-art facilities, unique
crop development and extension expertise, deep understanding of customer and farmer needs,
is well poised to leverage emerging opportunities for Indian leaf tobacco and sustain its
position as a world-class leaf tobacco organisation.
Other Agri Commodities
Food grain production in India is estimated to have declined by around 1.5% to about
255 million tonnes during 2012-13 as compared to the record 259 million tonnes in 2011-12.
Output of major food grain items such as rice and wheat are expected to be lower in
2012-13. While wheat output is estimated to be lower by 1% at 94 million tonnes, rice
output at about 104 million tonnes represents a decline of 1% over the previous year.
While overall oilseed production during 2012-13 is expected to remain at about 31 million
tonnes, soya production is expected to be higher at 14 million tonnes vis-a-vis 12 million
tonnes in 2011-12.
Adverse weather conditions in the major global wheat producing regions of Black Sea
(Ukraine, Russia), South America (Brazil, Argentina) and Australia led to a dip in world
production by about 40 million tonnes to about 656 million tonnes. Given the shortage in
global markets as aforementioned, the business successfully leveraged the wheat export
opportunity recording robust growth in revenues and asset turns. On the domestic front,
the business continued to expand its presence with brand owners, private labels, food
processors and millers.
Global soya bean production, estimated at 270 million tonnes during the current season,
represents an increase of 12.5% over the previous season. The increase is mainly
attributable to higher output in South American origins offset by a reduction in output in
the United States. Such a global oversupply situation coupled with higher domestic crop
production led to a steep correction in domestic soya prices. Consequently, market
arrivals of the domestic crop remained weak with farmers holding back sale of soya bean in
anticipation of improved realisations.
Your Companys uniquely structured commodity sourcing business model with strong
competencies in multi-location sourcing, logistics and supply chain management enabled
achieving enhanced scale and value capture in the wheat and soya market.
The business continued to source identity preserved and special varieties of wheat
through its e-Choupal network for your Companys Branded Packaged Foods businesses.
The continuous focus on cost-quality optimisation through varietal and geographical
arbitrage and driving supply chain and logistics efficiencies provided a competitive
advantage to your Companys Aashirvaad Atta brand.
In the area of potato sourcing, the business continued to support your Companys
Bingo! brand of potato chips by procuring the highest quality chip stock potatoes at
competitive prices. The endeavour of partnering with farmers to source locally grown
potatoes in close proximity to manufacturing units helped minimise logistics costs. The
business continued to engage with the farming community towards enhancing the quality and
variety of chip stock seed usage, adoption of best farming practices and improving yields.
India is the worlds largest producer, consumer and exporter of spices. The
growing concerns around food safety and product integrity have resulted in the increased
demand for suppliers with end-to-end capabilities having complete custody of
the supply chain, supported by appropriate technology, quality assurance and traceability
management systems. Your Company is well poised to garner an increasing share of the fast
growing domestic and export spices market leveraging its processing unit which is
certified to the highest grade of global food safety standards under the BRC (British
Retail Consortium) Food certification regime and an embedded IT enabled farm to
fork traceability system. The business continues to provide support to your
Companys Aashirvaad range of spices.
An integrated and holistic view of the agricultural value chain is essential towards
providing the necessary fillip to stagnating agricultural growth in the country. This
requires a joint participatory approach from all stakeholders such as farmers, input
vendors, traders, processors and the government agencies. Your Company plays a critical
role as a catalyst in integrating farmers, input vendors and government agencies besides
facilitating the necessary market linkages. Through its Choupal Pradarshan
Khet initiative, the business works with various government and private bodies to
promote new seed varieties, adoption of farm technologies and practices among farmers
towards improving productivity of crops (food grains, oilseeds, cereals etc.) while
deepening relationship with the farming community. During the year, new soya seed
varieties with high yield, high protein and high oleic acid were identified by your
Companys Life Sciences & Technology Centre in association with the Directorate
of Soybean Research, India. A number of farmer training programmes along with farm field
demonstration of new technology (seed varieties and process) were conducted in more than
730 villages covering over 22,000 farmers towards yield enhancement in soybean, barley and
wheat. Promotion of sustainability practices through the use of bio-fertilizers in paddy
and bajra in western UP were also taken up.
Your Company will continue to leverage the unique e-Choupal platform towards achieving
the superordinate goal of enhancing agricultural growth and productivity in the country
enmeshed with a strong socio-economic model for rural development and sustainability even
as it provides structural and sustainable competitive advantage to the Branded Packaged
NOTES ON SUBSIDIARIES
The following may be read in conjunction with the Consolidated Financial Statements
enclosed with the Accounts, prepared in accordance with Accounting Standard 21. In view of
the general exemption granted by the Ministry of Corporate Affairs, the report and
accounts of subsidiary companies are not required to be attached to your Companys
Accounts. Shareholders desirous of obtaining the report and accounts of your
Companys subsidiaries may obtain the same upon request. The report and accounts of
the subsidiary companies will be kept for inspection at your Companys registered
office and those of the subsidiary companies. Further, the report and accounts of the
subsidiary companies will also be available under the Shareholder Value
section of your Companys website, www.itcportal.com, in a downloadable format.
ITC Global Holdings Pte. Limited, Singapore (Global), a subsidiary of your
Company, is under winding up in terms of the Order of the High Court of the Republic of
Singapore dated 30th November, 2007. Consequently, your Company is not in a position to
consolidate the accounts of Global for the financial year ended 31st December, 2012 or to
make available copy of the same for inspection by shareholders.
Surya Nepal Private Limited
During the year the operating environment in Nepal continued to remain uncertain with
the Constituent Assembly being dissolved in May 2012. The caretaker Government has since
made way for a new Council of Ministers headed by the Chief Justice of Nepal, entrusted
with the mandate of conducting the Constituent Assembly elections.
On the economic front, the GDP for the year ended 15th July 12 grew by 4.6%
against 3.8% in the previous year on the strength of increased agricultural production and
growth in the services sector. However, there was a marked slowdown in industrial
production which decelerated to 1.6% from 2.9% in the previous year. The company continues
to engage with policy makers for a pragmatic and purposeful policy and regulatory
framework that will fuel long-term investment and growth in the countrys industrial
sector including the operating segments of the company.
Despite these challenging circumstances, the company continued to make good progress
and deliver superior performance. In the twelve-month period ended 13th March 2013 (30th
Falgun 2069), the company recorded a 15% growth in sales with Gross Turnover (net of VAT)
increasing to Nepalese Rupees (NRs.) 1665 crores from NRs. 1443 crores in the previous
year. Profit after Tax at NRs 370 crores increased by 29% over the previous year. The
company continues to be one of the largest contributors to the exchequer accounting for
about 16% of excise collections and 3.3% of the total revenues of the Government of Nepal.
The company further consolidated its leadership position in the cigarette market
through continued investment in product quality and value addition to its product
portfolio. Its focus on remaining contemporary through the induction of new generation
technology platforms and the enhancement of internal capabilities has strengthened the
competitiveness of the business and reinforced market standing. A Long Term Agreement with
employees of the Simara factory, premised on the companys philosophy of harmonious
employee relations management, was concluded during the year. The second cigarette factory
near Pokhara is in an advanced stage of construction and will improve market servicing in
In the branded apparels business, the company focused on enhancing its market standing,
distribution infrastructure and supply chain of John Players and
Springwood. In the safety matches business, the companys brand
Tir continued to gain consumer franchise.
The company remains committed to supporting and investing in endeavours that augment
social and economic capital in alignment with the stated priorities of the Government of
Nepal. Consistent with such commitment, several initiatives that are expected to provide
long-term multiplier benefits have been initiated and sustained during the year.
Accordingly, the company:
(a) Continued to partner with Tobacco farmers in Nepal to ensure higher productivity
and quality enhancement at the farm level through the induction of agricultural best
practices. The adoption of such practices and other inputs provided by the company has led
to a consistent improvement in quality of domestic grades of tobacco thereby improving
marketability of the crop and farmer returns.
(b) Initiated a programme to assist village farmers, proximate to the Simara factory,
in the plantation of high quality Poplar saplings to improve farmer earnings.
(c) Supported an initiative in the animal husbandry sector by providing extension
services that will drive yield improvement and higher returns for underprivileged farmers.
(d) Partnered with Nepal Tourism Board in hosting Nepals premier professional
golf tournament -the Surya Nepal Private Limited Masters, with the objective
of promoting Nepal as an attractive golfing destination.
(e) Continued to sponsor the Surya Nepal Private Limited Asha Social
Entrepreneurship Awards, to recognize entrepreneurs who have created employment
opportunities amongst local communities.
The company declared a dividend of NRs. 139/- per equity share of NRs. 100/- each for
the year ended 15th July 2012 (31st Ashad 2069).
ITC Infotech India Limited
A weak global economic scenario, particularly in the US and Europe, continued to impact
technology spends during the year. Although growth of the Indian IT industry has slowed
down in recent years given the economic uncertainties, favourable exchange rates and
market share gains during the year enabled it to grow ahead of earlier estimates.
The companys consolidated Total Revenue grew well above the industry average,
clocking a growth of 23% to Rs. 1017.80 crores while its Net Profit grew by 33% to Rs.
66.93 crores. This robust performance is an outcome of the successful strategies adopted
by the company in (i) building world-class capabilities in each of its service lines, (ii)
investing in new technologies, (iii) building solutions and capabilities around the
products of global software vendors and partnering with them to take the products to the
market, and (iv) rapidly growing the high potential accounts by putting in place
geographical and technological expansion plans.
For the year under review:
(a) ITC Infotech India Limited registered a Total Revenue of Rs. 706.65 crores
(previous year Rs. 566.23 crores) and a Net Profit of Rs. 68.73 crores
(previous year Rs. 28.69 crores);
(b) ITC Infotech Limited, UK, (I2B) a wholly owned subsidiary of the company,
registered a Total Revenue of GBP 25.03 million (previous year GBP 24.35 million) and a
Net Profit of GBP 1.86 million (previous year GBP 2.13 million). During the year, I2B paid
an Interim Dividend of GBP 3 (previous year : Nil) per Ordinary Share of GBP 1 each on
685,815 shares, amounting to GBP 2,057,445 (previous year: Nil) to the company;
(c) ITC Infotech (USA), Inc., (I2A) a wholly owned subsidiary of the company, together
with its wholly owned subsidiary Pyxis Solutions LLC, registered Total Revenues of US63.20
million (previous year US49.85 million) and a Net Profit of US0.91 million (previous year
During the year, the company achieved an all-time high and best-in-class
Customer Satisfaction Score based on a survey conducted by a reputed external agency. Such
a rating validates the companys world-class quality of service and stands testimony
to its commitment to continuously raise the levels of service to meet growing market
Apart from expanding the companys existing in-house domain solution capabilities,
specific development programmes were implemented to embrace disruptive technologies such
as cloud computing, social media and mobile computing.
The company continued to enhance and strengthen its partnerships with leading
Independent Software Vendors (ISVs) by building niche solutions to address white spaces
and joint go-to-market initiatives. In this regard, a number of initiatives were
progressed during the year including the launch of operations in new geographies, offering
of turnkey services - from licence sales to implementation, becoming Authorised Training
Partner in India and a consortium partner in Customer Experience and Comprehensive Trade
During the year the companys renewed focus on Middle-East, Africa, India and the
larger Asia-Pacific region resulted in significant traction in new customer acquisition,
particularly in India and Middle-East. The company has set up a branch office in Dubai to
increase market penetration in the region. The company is also extending its service lines
to specific markets in Western Europe.
In addition, as an important milestone in the evolution of its delivery capability, the
company commissioned a new Development Centre at Trivandrum during the year.
The service delivery capability of the company continued to earn global recognition.
The company has featured for the 7th consecutive year amongst the Leaders Category in the
2012 Global Outsourcing Top 100 by the International Association of
Outsourcing Professionals (IAOP). The company also featured for the 8th consecutive year
in the Global Services 100 survey, conducted by Global Services and Neo Advisory. The
company achieved ISO 9001:2008 re-certification for all its locations with its Pune centre
getting certified within six months of its commissioning.
On the talent management front, the approach and strategy were continuously refined,
realigned and revitalised in line with changing business dynamics and the enhanced global
operating footprint of the company. Employee engagement, in particular, continues to
receive the necessary thrust and impetus to enable an interactive and knowledge pooling
environment. The company also embarked on development of new centres in the country with a
view to accessing specific skills and talent and driving efficiencies in service delivery.
Going forward, the company will continue to review and reinforce its strategies and
action plans to rapidly scale up its global footprint. Building additional technology
niches remains a key focus area, and SMAC (Social media, Mobility, Analytics and Cloud
computing) is currently at the forefront of this technology ecosystem. The company,
accordingly, continues to invest in SMAC technologies and in a new industry leading
While the outlook for the IT industry remains soft in the near term, the company is
poised for significantly superior growth in the coming years aided by its strategies to
expand to new markets, offer a portfolio of differentiated solutions, provide superior
customer experience and deliver through strong project management capabilities, knowledge
management, solution accelerators and a robust quality system.
Russell Credit Limited
During the year, the company registered a Total Revenue of Rs. 69.66 crores
(previous year Rs. 40.58 crores) and a Net Profit of Rs. 58.96 crores
(previous year Rs. 31.43 crores).
As stated in the Report of the Directors of the previous years, a petition was filed by
an individual in the High Court at Calcutta, seeking an injunction against the
companys counter offer to the shareholders of VST Industries Limited, made in
accordance with the Securities and Exchange Board of India (Substantial Acquisition of
Shares & Takeovers) Regulations, 1997, as a competitive bid to a Public Offer made by
an Acquirer in 2001.
During the year, the High Court at Calcutta, vide Order dated 22nd June, 2012,
dismissed the aforesaid petition. Similar petitions filed in the High Court of Delhi at
New Delhi and High Court of Judicature of Andhra Pradesh at Hyderabad had earlier been
dismissed by the respective High Courts.
The company, post dismissal of the aforesaid petition by the High Court at Calcutta,
sold its entire holding in VST Industries Limited to your Company.
The company achieved a Net Revenue of Rs. 165.62 crores during the year
(previous year Rs. 169.70 crores) and posted a Net Profit for the year of Rs. 1.90
crores against Rs. 45.99 crores loss in the previous year which included a one-time
cost of Rs. 36.87 crores primarily towards restructuring its operations. During the
year, the company allotted to Russell Credit Limited the unsubscribed portion of the
Rights Issue of shares made in the previous year, thereby raising Rs. 1.69 crores.
Margins in the Safety Matches business continued to remain under pressure mainly due to
escalation in prices of raw materials like wood, splints, paperboard, key chemicals and
the continuing high tax differential between the mechanised and non-mechanised sector. The
company continues to focus on cost rationalisation and margin improvement.
During the year, the Agri (Forestry) business revenues grew by around 25%. Availability
of critical raw materials like wood at competitive prices remain crucial for the success
of the Safety Matches business. Towards this end, the Agri (Forestry) business supplied
high quality poplar ETPs (Entire Transplants) and eucalyptus saplings to farmers in
northern India to enhance availability at competitive prices. Apart from creating a
long-term sustainable supply of a critical raw material, the companys initiative is
helping create employment and livelihood opportunities while improving the green cover in
The Engineering business revenues grew by 6% during the year driven mainly by improved
value capture through continuous product development in packaging machinery. The company
plans to leverage new and improved product design to offer superior packaging solutions to
The initiatives taken by the company during the past few years to restructure its
operations are expected to enhance operating performance in the years to come.
Srinivasa Resorts Limited
During the financial year ended 31st March, 2013, the company recorded a Total Revenue
of Rs. 50.62 crores (previous year Rs. 57.66 crores) and a Profit Before Tax
of Rs. 5.54 crores (previous year Rs. 11.89 crores). Net Profit for the year
stood at Rs. 4.44 crores (previous year Rs. 9.40 crores).
The challenging environment in the State of Andhra Pradesh continues to have an adverse
impact on the performance of the companys hotel ITC Kakatiya, Hyderabad. The hotel
continued to focus on superior guest experience and strategic cost management to sustain
market standing and protect margins.
For the fourth time in a row, the hotel received the Times Food Guide
awards for Kebabs & Kurries (Best North Indian) and Dakshin
(Best South Indian) with both being rated as the best restaurants in their
respective categories. During the year, the hotel also received the Best Landscaping
Management Award from the Department of Horticulture, Andhra Pradesh.
The Board of Directors of the company has recommended a dividend of Rs. 1.00 per
equity share of Rs. 10/- each for the year ended 31st March, 2013.
Fortune Park Hotels Limited
During the financial year ended 31st March, 2013, the company recorded a Total Revenue
of Rs. 23.22 crores (previous year Rs. 20.78 crores) and earned a Net Profit
of Rs. 5.97 crores (previous year Rs. 4.96 crores).
The companys Fortune hotel chain that caters to the mid-market to
upscale segment continued its expansion by forging new alliances, taking the total
number of hotels in its fold to 69 with an aggregate room inventory of over 5,000. The
Fortune brand now has 39 operating hotels and another 3 hotels are slated to
be commissioned in the next financial year. The remaining 27 hotel projects are under
various stages of development. The brand remains a frontrunner in its operating segment
and is well positioned to sustain its leadership position in the industry.
The company is well known for providing quality products and services which have helped
position Fortune as the premier value brand in the Indian
hospitality sector. The My Fortune brand, representing a stylish
lifestyle with efficient personalised service, is the latest addition to the bouquet
of brands offered by Fortune Hotels.
During the year, the company bagged the Best First Class Business Hotel
Chain award at the Todays Traveller Awards 2012, SATTE Award for leading
Mid Market Hotel Chain and Best First Class Full Service Business Hotel
Chain in India by PATWA, ITB Berlin.
The Board of Directors of the company has recommended a dividend of Rs. 12.50
per equity share of Rs. 10/- each for the year ended 31st March, 2013.
Bay Islands Hotels Limited
During the financial year ended 31st March, 2013, the company recorded a Total Revenue
of Rs. 1.52 crores (previous year Rs. 1.37 crores) and Net Profit of Rs. 0.97
crores (previous year Rs. 0.92 crores).
The companys hotel, Fortune Resort Bay Island in Port Blair, commands patronage
in the city primarily due to its fabulous location, excellent architectural design and
superior service quality. The company is in the process of undertaking a comprehensive
renovation and expansion programme with a view to enhancing the market standing of the
The Board of Directors of the company has recommended a dividend of Rs. 70.00
per equity share of Rs. 100/- each for the year ended 31st March, 2013.
Landbase India Limited
The company owns and operates the Classic Golf Resort, a Jack Nicklaus Signature
Course, near Gurgaon. As reported in the previous years, golf based resorts present
attractive long-term prospects in view of their growing popularity all over the world. The
work towards creating a destination luxury resort hotel at the Classic Golf Resort is now
underway and the project is progressing satisfactorily.
During the financial year ended 31st March, 2013, the company recorded a Total Revenue
of Rs. 11.82 crores (previous year Rs. 10.57 crores) and Net Loss of Rs. 3.81
crores (previous year Rs. 3.22 crores). During the year, the company issued and
allotted to your Company, 30,00,000 Redeemable Preference Shares of Rs. 100/-each
for cash at par, aggregating Rs. 30 crores. The proceeds from the Preference Share
issue are being utilised by the company for the construction of the destination luxury
WelcomHotels Lanka (Private) Limited
During the year, WelcomHotels Lanka (Private) Limited (WLPL) was
incorporated in Sri Lanka as a wholly-owned subsidiary of your Company with the objective
of constructing, building and operating a mixed-use development project
(Project) including a luxury hotel at Colombo. The Board of Investment of Sri
Lanka provided about 5.86 acres of prime sea facing land in Colombo to the company on a
99-year lease for this purpose. The Project has been declared as a Strategic Development
Project under the Strategic Development Projects Act No. 14 of 2008 of Sri Lanka.
Your Company has invested about US75 million in WLPL by way of equity and loan and WLPL
is in the process of finalizing the design and product configuration of the proposed
Technico Pty Limited
The company continued to focus on upgradation and commercialisation of TECHNITUBER
Technology and field multiplication through its wholly owned subsidiaries in different
geographies. The company is also engaged in the marketing of TECHNITUBER seeds to global
customers from the production facilities of its subsidiaries in India, China and Canada.
The companys leadership in the production of early generation seed potatoes and
strength in agronomy continue to be leveraged by your Company not only for sourcing chip
stock for the Bingo! brand of your Companys Branded Packaged Foods
businesses but also for servicing the seed potato requirements of the farmer base of your
Companys Other Agri Commodities business.
For the year under review:
a) Technico Pty Limited, Australia registered a Turnover of Australian Dollar (A) 1.39
million (previous year A1.13 million) and a Net Profit of A0.14 million (previous year
A0.11 million). Turnover and Net Profit have improved due to higher TECHNITUBER seed
volumes and better price realization.
b) Technico Agri Sciences Limited, India registered a Net Revenue of Rs. 64.04
crores (previous year Rs. 48.20 crores) and a Net Profit of Rs. 17.48 crores
(previous year Rs. 7.83 crores). Strong demand and firm prices coupled with the
strength of the companys brand, product quality, on field performance and trade and
customer relationships drove a 33% increase in Net Revenue and 75% improvement in Profit
Before Tax. The company has taken credit for deferred tax assets of Rs. 3.80 crores
in the year under review (previous year : Nil).
c) Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada
and Technico Horticultural (Kunming) Co. Limited, China There were no significant
events to report with respect to the above companies.
King Maker Marketing, Inc.
King Maker Marketing Inc. (KMM) is a wholly owned subsidiary of your Company registered
in the State of New Jersey, USA. It is engaged in the distribution of your Companys
tobacco products in the US market.
During the year, the cigarette industry in the US continued to witness persistent
volume decline compounded by tax increases and the continuing growth of Other Tobacco
Products, several of which are as yet unregulated by the US Food and Drug Administration
(FDA). A larger thrust by major cigarette manufacturers into the value segment coupled
with increase in illicit sales driven by tax differentials between the States, contributed
further to an extremely challenging business environment for the company. During the year,
the company maintained steady volumes through enhanced sales and marketing inputs while
Revenue declined by 2% due to pricing pressure. The resultant higher costs of sales and
marketing were offset by lower contributions under the Master Settlement Agreement (MSA).
Further, a favourable Arbitral Award, memorializing a Partial Settlement between certain
states and the Participating Manufacturers to the MSA, on payments disputed in previous
years, increased the companys earnings during this year.
As a result, the company recorded Net Sales of US26.37 million (previous year US26.95
million) and earned a Net Income of US1.20 million (previous year US0.48 million) during
the financial year ended 31st March 2013. During the year, KMM paid a Dividend of US1.0
million to your Company.
Government regulations in the tobacco sector continue to take shape and it is expected
that the industry will consolidate further as US Food and Drug Administration regulations
evolve, including in the Other Tobacco Product categories like Pipe Tobaccos and Cigars.
The company will continue to customise its strategies based on emerging regulations in
ITC Global Holdings Pte. Limited
The Judicial Managers had been conducting the affairs of ITC Global Holdings Pte.
Limited (Global) since 8th November, 1996 under the authority of the High
Court of Singapore. Pursuant to the application of the Judicial Managers, the Singapore
Court on 30th November, 2007 ordered the winding up of Global, appointed a Liquidator and
discharged the Judicial Managers.
As stated in the previous years Reports, the Judicial Managers of Global had
filed a Writ against your Company in November 2002 before the Singapore High Court
claiming approximately US18.10 million. Based on legal advice, your Company filed an
appropriate application for setting aside the said Writ. On 2nd March, 2006 the Assistant
Registrar of the Singapore High Court set aside the service of Writ of Summons on your
Company and some individuals. Subsequently in November 2006, your Company received a set
of papers purportedly sent by Global including what appeared to be a copy of the earlier
Writ of Summons. Your Company filed a fresh Motion in the Singapore High Court praying for
setting aside the said Writ of Summons, which was upheld by the Assistant Registrar of the
Singapore Court on 13th August, 2007. Global filed an Appeal against this Order before the
High Court of Singapore, which on 30th January, 2009, set aside the order giving leave to
Global to serve the Writ out of Singapore against your Company and also dismissed the said
appeal. Thereafter on 14th December, 2009, your Company received a binder purportedly sent
by Global including what appeared to be a copy of the same old Writ of Summons. Based on
legal advice, your Company again filed a Motion in the Singapore High Court praying for
setting aside the said Writ of Summons. On 18th November, 2010, the Assistant Registrar of
the Singapore High Court passed an order dismissing your Companys motion to set
aside the Writ of Summons. Your Company filed an appeal against the Assistant
Registrars decision which appeal was dismissed by the Singapore High Court. Pursuant
to legal advice, your Company has since filed its defence in the trial proceedings.
BFIL Finance Limited
The company continues to focus its efforts on recoveries through negotiated settlements
including property settlements and pursuit of legal cases against various defaulters. The
company has no external liabilities outside the ITC group. The company will examine
options for further business opportunities at the appropriate time.
Gold Flake Corporation Limited, Wills Corporation Limited, Greenacre Holdings Limited,
ITC Investments & Holdings Limited and MRR Trading & Investment Company Limited
There were no major events to report with respect to the above companies.
NOTES ON JOINT VENTURES
ITC Filtrona Limited
For the year ended 31st December 2012, ITC Filtrona Limited recorded a Gross Revenue of
Rs. 229.40 crores (Rs. 180.99 crores in 2011) and Pre-tax profits of Rs. 19.39
crores (Rs. 15.63 crores in 2011). While the Cigarette Filter industry had to
contend with a steep hike in raw material prices and adverse foreign exchange rates, the
company saw an overall improvement in sales volume along with a better product mix.
Continuous investment in filter making technology has enabled the company maintain its
leadership position, enhance its technological edge over competition and cater to growth
both in terms of product mix and volumes.
In continuation with its philosophy of balancing the need to scale up capacity and
capability to service the growing demand and the return expectation of shareholders, the
Directors of the company have recommended a dividend of Rs. 9.00 per ordinary share
of Rs. 10/- each for the year ended 31st December, 2012.
The company strives to be the quality benchmark in cigarette filters, offer superior
filter solutions to its customers and be the most preferred supplier to its customers.
With excellent product and market development support from its joint venture partners, the
company is well positioned for the future.
Maharaja Heritage Resorts Limited
Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana
Heritage Resorts Private Limited, currently operates 39 heritage properties across 13
States in India. The companys brand portfolio comprising Legend,
WelcomHeritage Hotels and Nature Resorts, provides uniquely
differentiated propositions to guests in the cultural, heritage and adventure tourism
During the financial year ended 31st March, 2013, the company recorded a Total Revenue
of Rs. 3.86 crores (previous year Rs. 3.36 crores) and Net Profit of Rs.
0.44 crores (previous year Net Loss Rs. 0.26 crores).
The company has 9 properties under the upmarket Legend brand which has
carved a niche for itself on the basis of superior service delivery and brand standards.
The company also has 11 properties under the Nature Resorts brand and 19
properties under the WelcomHeritage Hotels brand which was recently awarded
the Best Heritage Hotel Chain by Todays Traveller Awards 2012.
Espirit Hotels Private Limited
In July 2010, your Company had entered into a joint venture for developing a luxury
hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your
Company acquired 26% equity stake in the joint venture company, Espirit Hotels Private
Ltd. (EHPL) and will, inter-alia, provide hotel operating services to EHPL under an
Operating Services Agreement upon commissioning of the hotel. Your Companys
investment in EHPL stood at Rs. 46.51 crores as at 31st March, 2013.
While the site preparatory activity is underway, the company is in the process of
finalising the design and product configuration of the proposed development.
Logix Developers Private Limited
In September 2011, your Company entered into a joint venture for developing a luxury
hotel-cum-service apartment complex at Sector 105 in NOIDA. Under the terms of the Joint
Venture Agreement, your Company acquired 26% equity stake in the joint venture company,
Logix Developers Private Ltd. (LDPL) at an initial investment of Rs. 36.84 crores.
Your Company will, inter-alia, provide hotel operating services to LDPL under an Operating
Services Agreement, upon commissioning of the hotel.
The company is in the process of finalising the design and product configuration of the
As a diversified enterprise, your Company has always had a system-based approach to
business risk management. Backed by strong internal control systems, the current risk
management framework consists of the following elements:
The Corporate Governance Policy clearly lays down the roles and responsibilities
of the various entities in relation to risk management. A range of responsibilities, from
the strategic to the operational, is specified in the Governance Policy. These role
definitions, inter-alia, are aimed at ensuring formulation of appropriate risk management
policies and procedures, their effective implementation and independent monitoring and
reporting by Internal Audit.
The Corporate Risk Management Cell works with the businesses to establish and
monitor the specific profiles including both strategic risks and operational risks. The
process includes the prioritisation of risks, selection of appropriate mitigation
strategies and periodic reviews of the progress on the management of risks.
A combination of centrally issued policies and divisionally-evolved procedures
brings robustness to the process of ensuring business risks are effectively addressed.
Appropriate structures have been put in place to proactively monitor and manage
the inherent risks in businesses with unique / relatively high risk profiles.
A strong and independent Internal Audit function at the Corporate level carries
out risk focused audits across all businesses, enabling identification of areas where risk
management processes may need to be improved. The Audit Committee of the Board reviews
Internal Audit findings, and provides strategic guidance on internal controls. The Audit
Compliance and Review Committee closely monitors the internal control environment within
your Company and ensures that Internal Audit recommendations are effectively implemented.
At the business level, Divisional Auditors continuously verify compliance with
laid down policies and procedures, and help plug control gaps by assisting operating
management in the formulation of control procedures for new areas of operations.
A robust and comprehensive framework of strategic planning and performance
management ensures realisation of business objectives based on effective strategy
implementation. The annual planning exercise requires all businesses to clearly identify
their top risks and set out a mitigation plan with agreed timelines and accountability.
Businesses are required to confirm periodically that all relevant risks have been
identified, assessed, evaluated and that appropriate mitigation systems have been
The combination of policies and processes as outlined above adequately addresses the
various risks associated with your Companys businesses. The senior management of
your Company periodically reviews the risk management framework to maintain its
contemporariness so as to effectively address the emerging challenges in a dynamic
AUDIT AND SYSTEMS
Your Company believes that internal control is a necessary concomitant of the principle
of governance that freedom of management should be exercised within a framework of
appropriate checks and balances. Your Company remains committed to ensuring an effective
internal control environment that provides assurance on the efficiency of operations and
security of assets.
Well established and robust internal audit processes, both at business and corporate
levels, continuously monitor the adequacy and effectiveness of the internal control
environment across your Company and the status of compliance with operating systems,
internal policies and regulatory requirements. In the networked IT environment of your
Company, validation of IT security continues to receive focused attention of the internal
audit team which includes IT specialists.
The Internal Audit function consisting of professionally qualified accountants,
engineers and IT specialists reviews the quality of planning and execution of all ongoing
projects involving significant expenditure to ensure that project management controls are
adequate to yield value for money.
Your Companys Internal Audit function is certified as complying with ISO
9001:2008 quality standards in its processes.
The Audit Committee of your Board met nine times during the year. It reviewed,
inter-alia, the adequacy and effectiveness of the internal control environment and
monitored implementation of internal audit recommendations including those relating to
strengthening of your Companys risk management policies and systems. It also engaged
in overseeing financial disclosures.
HUMAN RESOURCE DEVELOPMENT
Your Companys unique talent brand Building Winning Businesses. Building
Business Leaders. Creating Value for India backed by its strong corporate equity,
has enabled the attraction and retention of high quality talent. This talent pool and its
strong alignment with your Companys Vision, has contributed to enhancing your
Companys standing as one of Indias most valuable corporations. The innovative
engagement initiatives with premier campuses and effective use of social media has enabled
your Company showcase the career and leadership opportunities available and has attracted
both high quality entry-level talent from premier technology and management institutes as
well as talent from the market for middle and senior-level opportunities. Your
Companys unique Management Trainee programme has over the years, developed a robust
talent and leadership pipeline that has enabled rapid growth of existing businesses and
entry into new businesses as well. In addition, your Companys comprehensive talent
development strategy has enabled the enhancement of the competitive capability of each
Your Company believes that the achievement of its growth objectives will depend largely
on the ability to innovate continuously, connect closely with the customer, and create and
deliver superior and unmatched customer value. Towards this end, your Company has
assiduously built a culture of continuous learning, innovation and collaboration across
the organisation by providing cutting-edge learning and development inputs to its
employees, along with a judicious blend of coaching, mentoring and on the job training.
Your Company has been able to galvanise its human resource to become more agile, leverage
change, stay ahead of competition and win in the market.
Your Companys human resource management systems and processes are designed to
empower employees and enable them adopt innovative approaches to creating enduring value.
These processes aim to create a responsive, customer-centric and market-focused culture
that enhances organisational capability and vitality, so that each business is
internationally competitive and equipped to exploit emerging market opportunities. The
strategy of organisation lays great emphasis on developing and supporting distributed
leadership and this has ensured that each of your Companys businesses is managed by
a team of competent, passionate and inspiring leaders, capable of building an organisation
anchored in a culture of learning, innovation and world-class execution. Your
Companys performance management system has been instrumental in creating a strong
Your Company firmly believes that alignment of all employees to a shared vision and
purpose is vital to win in the market. Your Company also recognizes the mutuality of
interests of key stakeholders and is committed to building harmonious employee relations.
During the year under review, your Company successfully concluded long-term agreements at
several of its manufacturing units and hotel properties and also ensured smooth
commencement of operations at greenfield locations. The collaborative spirit across all
sections of employees has resulted in significant enhancement in quality and productivity,
further bolstered by continuous investment in contemporary management practices and
Your Companys human resource believes that the drive for progress is in being
never satisfied with the status quo. Your Company is confident that every one of its over
25,900 employees will relentlessly strive to deliver world-class performance, innovate
newer and better ways of doing things, uphold human dignity and foster team spirit and
discharge their role as trustees of all stakeholders with true faith and
allegiance. Your Company is committed to perpetuate this vitality of ITC its growth
in physical terms and also its growth as a great institution so that your Company
will continue to grow and succeed in its never-ending pursuit of value creation.
SUSTAINABILITY CONTRIBUTION TO THE TRIPLE BOTTOM LINE
Your Companys Vision to subserve larger national priorities and create enduring
societal value is the inspiration for its multi-dimensional sustainability initiatives
that are today acknowledged as global exemplars. Your Companys sustainability
strategy aims to significantly enhance national wealth through superior Triple
Bottom Line performance that builds and enriches the countrys economic,
environmental and societal capital. It is premised on the belief that the transformational
capacity of business can be very effectively leveraged to create significant societal
value through a spirit of innovation and enterprise. Your Companys Triple
Bottom Line contribution is manifest in the creation of innovative business models
that not only generate new sources of competitive advantage for its businesses, but also
in the process enables the replenishment of natural capital and augmentation of
It is a matter of humble pride that your Companys sustainable business models and
value chains have supported the creation of 5 million sustainable livelihoods, a majority
of them for the weakest in society. It has sustained its position as the only company in
the world to have achieved the global environmental distinctions of being carbon positive
(for 8 consecutive years), water positive (for 11 years in a row) and solid waste
recycling positive (for 6 years successively). Your Companys renewable energy
portfolio enables over 41% of its power requirements to be met from such clean sources - a
significant achievement given the large manufacturing base of your Company. Further, all
the premium luxury hotels and several factories of your Company are LEED (Leadership in
Energy & Environmental Design) certified at the highest Platinum level by the US Green
Building Council / Indian Green Building Council.
Your Company published its 9th consecutive Sustainability Report during the year that
detailed the progress made across all dimensions of the Triple Bottom Line for
the year 2011-12. The report which is independently assured by Ernst & Young, is in
accordance with the G3 Guidelines of the Global Reporting Initiative (GRI) and is
validated by GRI at the highest A+ level. The 10th Sustainability Report
covering the sustainability performance of your Company for the year 2012-13 is in an
advanced stage of finalisation and will be available to you shortly. This report also
supports your Companys first Securities Exchange Board of India (SEBI) mandated
Business Responsibility Report, which forms part of this Report and Accounts.
Social Investments/Corporate Social Responsibility (CSR)
Your Company believes that Corporate Social Responsibility delivered in the context of
its businesses makes it more effective, impactful, scalable and sustainable. Your
Companys overarching aspiration to create meaningful societal value is manifest in
your Companys strategy to enhance the competitiveness of value chains of which it is
a part. It is therefore a conscious strategy to design and implement Social Investments /
CSR programmes in the context of your Companys businesses, by enriching value chains
that encompass the most disadvantaged sections of society, especially those residing in
rural India, through economic empowerment based on grass-roots capacity building.
It is your Companys policy:
To pursue a corporate strategy that enables realisation of the twin goals of
shareholder value enhancement and societal value creation in a mutually reinforcing and
To align and integrate Social Investments / CSR programmes with the business
value chains of your Company and make them outcome oriented. To support creation of on and
off-farm sustainable livelihood sources thereby empowering stakeholder communities to
conserve and manage their resources.
To implement Social Investments / CSR programmes primarily in the economic
vicinity of your Companys operations with a view to ensuring the long-term
sustainability of such interventions.
To contribute to sustainable development in areas of strategic interest through
initiatives designed in a manner that addresses the challenges faced by the Indian society
especially in rural India.
To collaborate with communities and institutions to contribute to the national
mission of eradicating poverty and hunger, especially in rural areas, through agricultural
research and knowledge sharing, superior farm and agri-extension practices, soil and
moisture conservation and watershed management, conservation and development of forest
resources, empowering women economically, supplementing primary education and
participating in rural capacity building programmes and such other initiatives.
To align your Companys operations with the national objective of inclusive
growth and employment generation by leveraging your Companys diversified portfolio,
manufacturing bases, supply chains and distribution channels, to infuse an appropriate mix
of capital and technology to further social business initiatives such as e-Choupal, animal
husbandry, agarbatti rolling etc. and support organisations / institutions engaged in
building linkages with local, regional and urban communities and markets.
To sustain and continuously improve standards of Environment, Health and Safety
through the collective endeavour of your Company and its employees at all levels towards
attaining world-class standards and support other programmes and initiatives, internal or
external, for the prevention of illness and combating of diseases as may be considered
appropriate from time to time.
To encourage the development of human capital of the Nation by expanding human
capabilities through skills development, vocational training etc. and by promoting
excellence in identified cultural fields.
In the social sector, the two most important stakeholders for your Company are:
(a) the rural communities with whom your Companys agri-businesses have forged a
long and enduring partnership through their crop development and procurement activities.
These households operate in rain-fed conditions in some of the most moisture-stressed
regions of the country; and
(b) the communities residing in close proximity of your Companys production
units, who are unable to realise their full potential due to poor social infrastructure in
the areas of education and health.
In line with the stakeholder needs, the thrust of your Companys social sector
investment is on the following:
(a) Diversification of farming systems of the rural communities by broad-basing the
farm and off-farm based livelihoods portfolio of the poor through an integrated approach
that includes the development of wastelands, watersheds, agriculture and animal husbandry,
(b) In the catchment habitations of manufacturing units, the focus is on the economic
empowerment of women and developing social capital to prepare the beneficiaries for
relevant and contemporary skills.
The footprints of your Companys Social Investments Programme now extends to 60
districts in the States of Andhra Pradesh, Bihar, Karnataka, Kerala, Madhya Pradesh,
Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal.
Your Companys pioneering initiative of wasteland development through the Social
Forestry Programme currently covers 33,448 hectares in 1,717 villages, impacting nearly
40,000 poor households. This is an integral part of your Companys overall Social
& Farm Forestry initiative that covers a total of over 142,000 hectares today. This
initiative is aligned to the pulpwood supply chain to create a sustainable source of raw
material for your Company and also to meet the energy requirements of rural households.
The highlight of this year was the incorporation of bio-diversity conservation as an
integral part of the Social Forestry programme, which aims for in situ conservation of the
local flora and fauna by protecting and improving production conditions in the selected
The coverage of your Companys Soil and Moisture Conservation programme, designed
to assist farmers in identified moisture-stressed districts, increased by an additional
26,637 hectares. 470 water-bodies were created during the year. The total area covered
under the watershed programme cumulatively stands at 116,127 hectares. Your Company signed
three new MOUs with the Government of Rajasthan for promoting sustainable livelihoods
through watershed development in the districts of Bundi, Jhalawar and Pratapgarh under the
governments Integrated Watershed Management Programme. With this, the total area to
be brought under soil and moisture conservation through public-private-partnership
projects has increased to over 144,000 hectares.
With the objective of providing a major thrust to creating a sustainable agricultural
base, the year saw significant increases in all major interventions in this area. The
number of Farmer Field Schools increased from 37 to 162. There was an almost three-fold
increase in the number of farmers (5,129) and the demonstration plots (4,733) covered. The
number of compost units increased nearly four-fold (503 in 2012-13) during the year. 18
new Agri Business Centres were formed during the year, taking the total to 51, to provide
extension services to farmers. These centres provided agri-inputs worth Rs. 85.61
lakhs to nearly 3,211 farmers during the year.
Your Company gave equal emphasis to milch animals, the other important asset of rural
households. The programme for genetic improvements of cattle through artificial
insemination to produce high-yielding crossbred progenies is implemented through 303
Cattle Development Centres (CDCs) covering nearly 5,000 villages. These CDCs provided 2.75
lakh artificial inseminations during the year, thus taking the total to 10.82 lakh
artificial inseminations performed till date.
Taking the next step in the development of a viable livestock economy, Dairy
Development in Munger was a major focus area this year. Project Gomukh was launched in
Munger to cater to the needs of veterinary services and to provide comprehensive
techno-management support to dairy farmers. The overarching objectives of the Project are
to achieve significant improvement in milk productivity and quality, thereby raising farm
incomes. The milk procurement network was increased to 87 Milk Producer Groups (MPGs) with
over 2,800 members. The average procurement in Munger was nearly 10,000 litres per day
(lpd) with a peak of over 17,000 lpd. Dairy development in Saharanpur was initiated in two
hubs. Comprehensive milk mapping studies have been completed at two other locations to
enable planning for expansion of the dairy-led CSR in other locations.
The Womens Empowerment Programme covered over 18,791 women through 1,557
self-help groups (SHG) with total savings of Rs. 340 lakhs. Cumulatively, over
40,000 women were gainfully employed either through micro-enterprises or assisted with
loans to pursue income generating activities. Agarbatti production received further
impetus during the year with the introduction of 1,326 pedal machines in the states of
Bihar, Uttar Pradesh, Tamil Nadu, Rajasthan, Andhra Pradesh, Madhya Pradesh and
Maharashtra. This has led to high productivity gains, translating into significant
increase in incomes for poor rural women. As a result, raw agarbatti production more than
doubled from the previous year to 834 tonnes during 2012-13, and helped create livelihoods
for more than 3,300 women. The agarbatti scenting unit located at Munger, owned and
managed by women, also saw a significant increase in dispatches - up from 235 million
sticks in 2011-12 to 367 million sticks in 2012-13 - thus enabling women to capture even
greater value from this micro-enterprise.
Over 40,000 new students were covered through Supplementary Learning Centres and
Anganwadis. Of these, 264 first generation learners were enrolled into formal schools for
the first time in their lives. 964 government primary schools have so far been provided
infrastructure support, which includes benches, classrooms, toilets, electrical fixtures,
compound walls and gates. 627 youths were covered this year by the skills development
initiative. In the area of sanitation, a total of 3,847 low cost sanitary units have been
constructed cumulatively by the end of 2012-13.
The advances made towards contributing to Indias sustainable development goals
have been possible, in large measure, due to your Companys partnerships with some
globally renowned NGOs like BAIF, Dhan, FES, MYRADA, Pratham, SEWA, SRIJAN, DSC and WOTR
amongst others. These partnerships, which bring together the best-in-class
management practices of your Company and the development experience and mobilisation
skills of NGOs, will continue to provide innovative grassroots solutions to some of
Indias most challenging problems of development in the years to come.
Environment, Health & Safety
The strategic objective of your Companys Environment, Health & Safety
programmes is to move towards greenest and safest operations across all ITC Units,
optimisation of natural resource usage, sustainability measurement and monitoring as well
as safety of all its people and assets. Towards this, significant efforts are targeted
towards ensuring resource security through optimisation of resource-use and replenishment
of natural resources, aligning strategy with the National Action Plan on Climate Change to
help create sustainable livelihoods, enable adaptation and mitigation in agriculture
whilst safeguarding operations and assets. Your Companys proactive processes for
inculcating a safe and green culture are supported by regular audits based on EHS Audit
guidelines that incorporate the latest standards and regulatory requirements.
Your Company is committed to ensuring a safe and healthy workplace for all employees,
guests and visitors, by maintaining the highest levels of safety and occupational health
standards. All units of your Company have best-in-class infrastructure,
competent resources, management systems based on international standards as well as
state-of-the-art fire and life safety measures, which are regularly monitored through
rigorous audits. Your Companys approach entails consideration of safety as a
value-led concept which drives behaviour change and supports the creation of a safety
culture fully integrated with business improvement processes. In line with this
philosophy, Behavioural Safety Culture Programs have been initiated in several of your
Companys units which have already brought about tangible change in behaviour and
perceptions on safety. Accordingly, this initiative will be rolled out across other
business units in a progressive manner. The progress and commitment made by your Company
in this vital area to protect its valued human resources have been reaffirmed by numerous
national and international safety awards and certifications.
Your Company has addressed the critical area of climate change mitigation and
adaptation through several innovative and pioneering initiatives. These include continuous
improvement in energy conservation and efficiency, enhanced usage of renewable energy,
creating a green built environment, waste reduction, maximising its reuse and recycling
and increasing use of post consumer waste as raw material. Extensive integrated watershed
development programmes, promotion of sustainable agricultural practices, and carbon
sequestration through large-scale forestry initiatives extend these efforts down the value
Several projects of your Company earn carbon credits leveraging the market-based
mechanism for mitigating climate change, namely, the Clean Development Mechanism developed
by United Nations Framework Convention on Climate Change (UNFCCC). Your Company is also
well positioned to benefit from India specific schemes such as Perform, Achieve and Trade
(PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India.
In line with your Companys commitment to reduce dependence on fossil fuel based
energy, significant progress has been made in enhancing the renewable energy portfolio.
Improved utilisation of biomass and additional wind mills have led to over 41% of your
Companys total energy requirements being met from renewable sources, compared to
38.5% during the year 2011-12. A systemic approach is being developed to ensure that your
Company progressively moves towards a benchmark of utilising at least 50% of its total
energy requirements from renewable sources in the near future.
Recognising that water resources will increasingly become an area of serious concern,
your Company has made significant investments in water conservation and harvesting
initiatives to enhance its positive water footprint. These include adopting best available
technologies and benchmarked practices to achieve zero effluent discharges, providing
treated wastewater for irrigation as an alternative for farmers in water stressed areas
and enhancing rainwater harvesting both within units and across watershed catchment areas.
All these initiatives have resulted in the creation of rainwater harvesting potential that
is over two times the net water consumption of your Companys operations. Sustained
efforts are made to ensure that your Company achieves the best international practices in
this critical area as well as aligns itself with the National Water Policy that is
presently under finalization.
Reaffirming your Companys commitment to the ethos of Responsible
Luxury, all luxury Hotels of your Company are LEED Platinum certified making it the
greenest luxury hotel chain in the world. ITC Grand Chola, the newly launched
premium luxury hotel in Chennai, has secured a 5 Star Green Rating for Integrated Habitat
Assessment (GRIHA) - the highest national rating for Green Buildings in India. The ITC
Grand Chola is also the worlds largest LEED Platinum certified (Indian Green
Building Council) green Hotel. All new constructions by your Company incorporate green /
sustainability standards and existing buildings are also progressively implementing
validated green attributes.
The Bombay Stock Exchange recently instituted 2 indices titled GREENEX
& CARBONEX evaluating several green operational parameters as well as
carbon performance. It is a matter of immense pride that your Company has been assigned
the highest weightage in both the indices. Further, during the year, a detailed
computation of greenhouse gas (GHG) inventory was carried out as per ISO 14064 standards,
which was then assured at the highest Reasonable Level by Lloyds
Register Quality Assurance Ltd. a unique achievement considering the scale and
spread of your Companys operations.
All units of your Company have made significant progress in achieving total recycling
of waste generated by their operations, making your Company attain over 99.8% of waste
recycling in 2012-13. The Paperboards and Specialty Papers business, which accounts for
nearly 91% of the total waste generated in your Company, recycled 99.9% of the total waste
generated by its operations. This business also recycled an additional 118,462 tonnes of
externally sourced post-consumer waste paper, thereby creating yet another positive
Your Companys Wealth Out of Waste (WOW) programme continues to create
significant awareness amongst the public on the benefits of the
Reduce-Reuse-Recycle paradigm. This initiative, which also contributes to the
protection of environment, improvement in civic amenities, public health and hygiene, has
received rich accolades from the Government, NGOs, commercial institutions and the public
at large. Your Company thereby supports the generation of sustainable raw material inputs
for its processes, whilst generating considerable livelihood opportunities for the
During the year, an Integrated Sustainability Data Management System was implemented
for effective monitoring & review of business specific Key Performance
Indicators whilst providing a single platform across your Company for all reporting
requirements such as Global Reporting Initiative, SEBI Business Responsibility Report and
Carbon Disclosure Project. This System will improve management of sustainability issues
and drive increasing efficiencies across your Companys business units.
Creating Thought Leadership in Sustainability
The CII ITC Centre of Excellence for Sustainable Development, set up
by your Company jointly with the apex national chamber Confederation of Indian Industry
(CII) in 2006, continues its endeavours to promote sustainable business practices amongst
corporates across the country. During the year, the Centre trained and raised awareness of
over 2,000 business managers on various sustainability issues. It has expanded its gamut
of activities to meet the core objectives of creating awareness, promoting thought
leadership and building capacity amongst Indian enterprises in their quest for sustainable
growth and business solutions. The 7th Sustainability Summit, held in October 2012,
continued its legacy of bringing together thought provoking leaders to share the
challenges, long-term strategies and best practices for sustainable and inclusive
development. It featured senior politicians, bureaucrats, best brains of Indian industry
and MNCs around the globe. The Summit and Exhibition were attended by over 300
participants. The CII ITC Sustainability Awards, instituted to
recognise excellence in sustainability performance, have honoured a large number of
leading Indian companies and provided encouragement to many others. The winners of the
Sustainability Awards 2012 were announced at an imposing function in Vigyan Bhawan, New
Delhi on January 14, 2013 amongst an audience of 1,500 people. The occasion was graced by
the Honble President of India Shri Pranab Mukherjee as the Chief Guest.
The Centre is today playing a major role in engaging with policy makers to create an
environment that encourages the adoption of sustainable business practices. The Centre has
been engaged with various stakeholders for advocacy on Clause 135 of the new Companies
Bill 2012, which refers to the CSR activities of a company. The Centre is a consulting
partner in several policy interventions such as Green Guidelines for Public Procurement,
Low Carbon Expert Group of the Planning Commission, National Innovation Council, Ministry
of Corporate Affairs on CSR Policy, National Awards for Prevention of Pollution, Rajiv
Gandhi Environment Awards for Clean Technology and Technology and Finance Committee under
the Montreal Protocol. It is also represented on the Board of the Central Pollution
Control Board and other bodies.
Societal Capacity Enhancement
In line with its core value of trusteeship, your Company supports various
initiatives that build the capability of Indias rich human resource pool thereby
empowering the nations fast growing working-age population. It also helps preserve
Indias rich cultural heritage, enhancing the spirit embodied in its credo of
Lets Put India First.
To cater to the need for professionally trained human resources in the fast growing
hospitality industry, your Company contributed to setting up the Welcomgroup Graduate
School of Hotel Administration (WGSHA) together with the Dr. TMA Pai Foundation in 1987.
WGSHAs training and development activities are recognised by the International Hotel
Association, Paris. The college has been ranked amongst the top educational institutions
in the sector over the years. Graduates of the college are today part of several leading
hotel chains of the world. WGSHAs mission is to mould young men and women into
competent and responsible professionals with the potential to emerge as future leaders in
the hospitality industry. As part of its efforts to remain contemporary, WGSHA faculty
members are positioned in ITC Hotels to understand Best Practices employed at
the hotels. A significant number of WGSHA students are sent for 6-month internships to
various ITC Hotels. The college started with an annual intake of 30 students which has
increased to 100 students over the years.
The ITC Sangeet Research Academy (ITC SRA) is a true embodiment of sustained corporate
commitment to a priceless national heritage. It is a unique institution recognised for
being the finest repository of Hindustani classical music. With a commitment that has
remained consistent for over 35 years, ITC SRA is the worlds first and only
professionally managed modern Gurukul, blending modern day research methods with the
purity of the age old "Guru-Shishya" tradition. ITC SRA has as its mission the
preservation and propagation of Hindustani Classical Music. With a galaxy of 9 preeminent
Gurus and 50 scholars, the Academy is presently engaged in carrying the message of
Hindustani Classical Music across our country from the metros to rural India. Recent
forays into neighbouring Bangladesh have brought home another dimension of the shared
Your Company also supports a number of initiatives for vocational training within the
catchment areas of its operations that have proven to be effective in empowering youth
with requisite skills to increase their employability in the market. Employment
opportunities have also been created for differently-abled people suited to their
R&D, QUALITY AND PRODUCT DEVELOPMENT
Your Company continues to invest in a comprehensive Research & Development
programme leveraging its world-class infrastructure, benchmarked processes,
state-of-the-art technology and a business-focused R&D strategy.
As your Company moves into its second century, your Company seeks not only to create
world-class products but also improve the quality of life and deliver care and wellness to
consumers. In order to reflect this change your Companys erstwhile ITC R&D
Centre has been transformed into ITC Life Sciences & Technology Centre.
ITC Life Sciences & Technology Centre (LSTC) has a mandate to develop unique
sources of competitive advantage and build future readiness by harnessing contemporary
advances in several relevant areas of science and technology and blending the same with
classical concepts of product development and leveraging cross business synergies. This
challenging task of driving science-led product innovation has been carefully addressed by
appropriately identifying the required set of core competency areas of science such as
Plant Breeding and Genetics, Agronomy, Microbiology, Cell Biology, Genomics, Proteomics,
Silviculture and several disciplines of Chemistry. Presently, the LSTC team has evolved
with over 250 world-class scientists and is creating Centres of Excellence in these areas.
LSTC is carrying out research and securing proprietary technologies for your
The Agrisciences R&D team has continued its efforts in evaluating and introducing
several germplasm lines of identified crops including Casuarina and Eucalyptus to increase
the genetic and trait diversities in these species, towards developing new varieties with
higher yields, better quality and other relevant traits for your Companys
businesses. LSTC has initiated several research collaborations with globally recognized
Centres of Excellence to remain contemporary and fast track its journey towards
demonstrating multiple proofs of concept. These collaborations, covering
identified species, are designed in a manner that enables your Company in gaining
fundamental insights into several technical aspects of plant breeding and genetics and the
influence of agro-climatic conditions on the growth of these species. Such interventions
will accelerate LSTCs efforts in creating future generations of these crops with
greater genetic and trait diversities and leading to significant benefits for your
Companys businesses. Further, these outcomes have a strong potential to contribute
towards augmenting the nations ecological capital as well.
Recognising the unique construct of your Company in terms of its strong presence in
agriculture, food and personal care businesses, a convergence of R&D capabilities is
being leveraged to deliver future products aimed at nutrition, health and well-being.
Advances in biosciences are creating a convergence of these areas and it is
likely that several future developments in these businesses and their products are heavily
influenced by convergence. In this context, LSTC has created a Biosciences
R&D team to design and develop several long-term research platforms evolving
multi-generation product concepts and associated claims that are fully backed by
scientific evidence for the Foods and Personal Care businesses. In addition, LSTC has
evolved a strategy in building a new value chain called, Nutrition with a
special focus on Indianness and health and well-being founded on
the basis of value added agriculture (VAA). The initial activities related to VAA have
already commenced with a focus on Soya.
LSTC has a clear vision and a road map for long-term R&D, to ensure an outstanding
journey in to the next century backed by a well-crafted Intellectual Property Strategy.
With scale, speed, science and sustainability considerations, LSTC is poised to deliver
long-term competitive advantage and play a lead role in creating significant business
impact for your Company.
Pursuing your Companys relentless commitment to quality, each business is
mandated to continuously innovate on processes and systems to deliver superior competitive
capabilities. During the year, your Companys Hotels business leveraged its
Lean and Six Sigma programmes to improve business process
efficiencies. This will further enhance capability to create superior customer value
through a service excellence framework. The Paperboards, Paper & Packaging business
continued to pursue Total Productive Maintenance (TPM) programmes in all
units, resulting in substantial cost savings and productivity improvements.
All manufacturing units of your Company have ISO quality certification. All
manufacturing units of the Branded Packaged Foods businesses (including contract
manufacturing units) and hotels have stringent food safety and quality systems. All
Company owned units / hotels and almost all contract manufacturing units of the Branded
Packaged Foods businesses are certified by an accredited third party in
accordance with Hazard Analysis Critical Control Points (HACCP) methodology.
Additionally, the quality of all FMCG products of your Company is regularly monitored
through Product Quality Ratings Systems (PQRS).
As mentioned in the previous years Report of the Directors, a demand for Rs.
27.58 crores made by Central Excise Department, Bengaluru, in respect of a period prior to
March 1983, was set aside by the Commissioner (Appeals), Bengaluru, by his Order dated
22nd November, 1999, which order was confirmed by the CEGAT, Chennai vide its order dated
18th December, 2003. The Department has filed an appeal before Supreme Court, which is
With respect to the Munger factory, proceedings for finalisation of assessments for the
period prior to March 1983 resulted in the Deputy Commissioners Orders dated 29th
August, 2002 and 8th October, 2002 demanding Rs. 13.09 crores and Rs. 1.73
crores for clearances of cigarettes and smoking mixtures respectively. These were
confirmed by the Commissioner (Appeals), Patna vide his orders dated 22nd December, 2004,
against which your Company has preferred appeals before CESTAT, Kolkata, which are
pending. Your Company had made pre-deposits of Rs. 2 crores and Rs. 0.55
crores against the aforesaid demands at the stage when its appeals were pending before
Commissioner (Appeals), Patna.
Although your Company, in a spirit of settlement, paid the differential Excise Duty
that arose out of an Order of the Director General dated 10th April, 1986, as early as in
March, 1987, and although the Excise Departments aforesaid Demands had either been
quashed or stayed, the Collectorates in Meerut, Patna and Bengaluru, during the year 1995,
filed criminal complaints in the Special Court for Economic Offences at Kanpur, Patna and
Bengaluru, charging your Company and some of its Directors and employees who were employed
with your Company during the period 1975 to 1983 with offences under the Central Excises
& Salt Act, 1944, purportedly on the basis of the Order of the Director General dated
10th April, 1986. Your Directors are advised that no prosecution would lie on the basis of
the aforesaid Order of the Director General dated 10th April, 1986. As earlier reported,
the criminal case in respect of the Bengaluru factory was quashed by the Court. In the
proceedings relating to Saharanpur and Munger factories, the individuals concerned have
In all the above instances, your Directors are of the view that your Company has a
strong case and the Demands and the Complaints are not sustainable.
Since your Company is contesting the above cases and contending that the Show Cause,
the Demand Notices and the Complaints are not sustainable, it does not accept any
liability in this behalf. Your attention is drawn to the Note 31(iv) in the Notes to the
Financial Statements and Note 28(iv) in the Notes to the Consolidated Financial
As mentioned in earlier years, the Honble Supreme Court declared the various
State luxury tax levies on cigarettes and other goods as unconstitutional. The Court
further directed that if any party, after obtaining a stay order from the Court, had
collected any amount towards luxury tax from its customers / consumers, such amounts
should be paid to the respective State governments. Since your Company had not charged or
collected any amounts towards luxury tax during the relevant period, there is no liability
on your Company in this regard. However, the State of Andhra Pradesh has filed a contempt
petition in the Supreme Court claiming a sum of about Rs. 323.25 crores towards
luxury tax, and a further sum of about Rs. 261.97 crores towards interest, on the
allegation that your Company had charged and collected luxury tax from its customers, but
in view of a stay order passed by the Court on 1st April, 1999, did not pay the tax to the
government. The States contention is baseless, contrary to facts and is also
contrary to the assessment orders passed by the State luxury tax authorities consistently
holding that your Company, right from 1st March, 1997, did not charge or collect any
amount towards luxury tax from its customers. Accordingly, the States petition is
RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE ENFORCEMENT
You are aware that your Company had secured from the District Court of New Jersey,
U.S.A, a decree for US12.19 million together with interest and costs against Suresh and
Devang Chitalia of U.S.A and their companies, and that the Chitalias had filed Bankruptcy
Petitions before the Bankruptcy Court, Orlando, Florida, which are yet to be determined.
As explained in the previous reports of the Directors, though your Company has written
off the export dues in foreign exchange from the Chitalias with the approval of the
Reserve Bank of India, your Company continues with its recovery efforts in the Indian suit
against the Chitalia associates. The suit is in progress.
In the proceedings initiated by the Enforcement Directorate, in respect of some of the
show cause memoranda issued by the Directorate, after hearing arguments on behalf of your
Company, the appropriate authority has passed orders in favour of your Company, and
dropped those memoranda.
Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been
quashed by the Calcutta High Court while others are pending.
During the year, your Companys treasury operations continued to focus on
deployment of temporary surplus liquidity and manage the foreign exchange exposures within
a well-defined risk management framework.
The year under review was characterized by falling interest rates with the Reserve Bank
of India reducing Policy rates by a cumulative 100 basis points. However, tight liquidity
conditions in the Banking system brought about intermittent spikes in money market
interest rates. In this environment your Company, by appropriately managing portfolio
duration continued to improve its treasury performance.
All investment decisions in deployment of temporary surplus liquidity continued to be
guided by the tenets of Safety, Liquidity and Return. The portfolio mix during the year
was constantly rebalanced in line with changing interest rate scenario which helped
enhance yields. Further, by the year end, in line with expectations of lower interest
rates, the portfolio was rebalanced with exposures in long-dated Fixed Maturity Plans and
Bank Fixed Deposits. Your Companys risk management processes ensured that all
deployments were made with proper evaluation of underlying risk while remaining focused on
capturing market opportunities.
In the foreign exchange market, the Indian Rupee depreciated during the year and was
witness to bouts of high volatility. In a scenario where Rupee was under continuous
pressure, your Company adopted an appropriate forex management strategy, which included
use of foreign exchange forward contracts and plain vanilla options, to protect business
margins and reduce risks / costs.
As in earlier years, commensurate with the large size of the temporary surplus
liquidity under management, treasury operations continue to be supported by appropriate
control mechanisms, including an independent check of 100% of transactions, by your
Companys Internal Audit department.
As mentioned in the Report of the Directors of earlier years, your Company had obtained
Stay Orders from the Honble Calcutta High Court in respect of the Income Tax notices
for re-opening the past assessments for the period 1st July, 1983 to 30th June, 1986. This
status remains unchanged.
As stated in the Report of the Directors of earlier years, in respect of similar Income
Tax notices for re-opening the past assessments for the period 1st April, 1990 to 31st
March, 1993, the Honble Calcutta High Court had admitted the Writ Petitions and
ordered that no final assessment orders be passed without the leave of the Court. This
status also remains unchanged.
Your Companys Public Deposit Scheme closed in the year 2000. As at 31st March,
2013, there were no deposits due for repayment except in respect of 2 deposit holders
totalling Rs. 20,000 which have been withheld on the directives received from
There was no failure to make repayments of Fixed Deposits on maturity and the interest
due thereon in terms of the conditions of your Companys erstwhile Schemes.
INVESTOR SERVICE CENTRE
The Investor Service Centre (ISC) of your Company, accredited with ISO 9001:2008
certification, provides best-in-class investor services through an experienced
team of professionals. ISC continues to upgrade its infrastructure, systems and processes
to provide exemplary services to the shareholders and investors of the Company. The level
5 rating, the highest possible rating, accorded by Messrs. Det Norske Veritas for the
fourth consecutive year, stands testimony to the excellence achieved by ISC in providing
quality investor services.
ISC, in its constant endeavour to further improve its services, requests feedback on
your experience as a shareholder or investor. The Shareholder Satisfaction Survey
questionnaire for this purpose is being sent to the Members. This questionnaire can also
be accessed from the Companys corporate website www.itcportal.com under the section
Investor Relations and can be submitted online.
Mr. Kurush Noshir Grant, a Wholetime Director of your Company since 20th March, 2010,
completed his term on 19th March, 2013. The Board of Directors of your Company (the
Board) at its meeting held on 18th January, 2013, appointed Mr. Grant as
Additional Director with effect from 20th March, 2013, and subject to the approval of the
Members, also as Wholetime Director for a period of five years from 20th March, 2013.
Ms. Meera Shankar and Mr. Sahibzada Syed Habib-ur-Rehman were appointed by the Board at
its meeting held on 27th July, 2012 as Additional Non-Executive Directors of your Company
with effect from 6th September, 2012 and 27th July, 2012, respectively. By virtue of the
provisions of Article 96 of the Articles of Association of your Company and Section 260 of
the Companies Act, 1956, Ms. Shankar and Mr. Rehman will vacate office at the ensuing
Annual General Meeting (AGM) of your Company.
Your Board at its meeting held on 17th May, 2013, recommended for the approval of the
Members the appointment of Ms. Shankar and Mr. Rehman as Non-Executive Directors of the
Company, liable to retire by rotation, with effect from the date of the ensuing AGM of
Mr. Dinesh Kumar Mehrotra, Mr. Sunil Behari Mathur and Mr. Pillappakkam Bahukutumbi
Ramanujam were appointed as Non-Executive Directors of your Company with effect from 30th
July, 2008 and their present term will expire on 29th July, 2013. Your Board at its
meeting held on 17th May, 2013 recommended for the approval of the Members the
re-appointment of Messrs. Mehrotra, Mathur and Ramanujam as Non-Executive Directors of the
Company, liable to retire by rotation, with effect from 30th July, 2013.
Notices, under Section 257 of the Companies Act, 1956, have been received from Members
of the Company for the appointment / re-appointment of Ms. Shankar, Messrs. Grant, Rehman,
Mehrotra, Mathur and Ramanujam, who have filed their consents to act as Directors of the
Company, if appointed.
Appropriate resolutions seeking your approval to the aforesaid appointments /
re-appointments are appearing in the Notice convening the 102nd AGM of your Company.
In accordance with the provisions of Article 91 of the Articles of Association of the
Company, Mr. Shilabhadra Banerjee, Mr. Angara Venkata Girija Kumar, Mr. Hugo Geoffrey
Powell, Dr. Basudeb Sen and Mr. Balakrishnan Vijayaraghavan will retire by rotation at the
ensuing AGM of your Company and being eligible, offer themselves for re-election. The
Board has recommended their re-election.
Your Companys Auditors, Messrs. Deloitte Haskins & Sells, retire at the
ensuing AGM and, being eligible, offer themselves for re-appointment. Since not less than
25% of the Subscribed Share Capital of your Company is held collectively by Public
Financial Institutions, the re-appointment of Auditors is being proposed as a Special
Resolution in accordance with Section 224A of the Companies Act, 1956.
Your Company had appointed (i) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost
Auditor for audit of cost records maintained by the Paperboards and Specialty Papers
business and (ii) Messrs. Shome & Banerjee, Cost Accountants, Kolkata, for cost
records in respect of Paper products other than the cost records maintained by
the Paperboards and Specialty Papers business for the financial year ended 31st March,
2012. The Cost Audit Report was filed by the Cost Auditor on 23rd January 2013 within the
due date of 28th February 2013.
In respect of the financial year ended 31st March, 2013, your Company, has appointed
(i) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost records
maintained by the Paperboards and Specialty Papers business (ii) Messrs. Shome &
Banerjee, Cost Accountants, Kolkata, for cost records in respect of Paper
products other than the cost records maintained by the Paperboards and Specialty Papers
business. They were also appointed as the Cost Auditors in respect of Plastics &
Polymers, Apparel, Edible Oil Seeds & Oil, and Plantation products. (iii) Messrs.
S.Mahadevan & Co., Cost Accountants, Chennai, were appointed as the Cost Auditors for
Packaged Food products. The due date for filing the Cost Audit Reports is 27th September,
EMPLOYEE STOCK OPTION SCHEME
Under your Companys Employee Stock Option Schemes, 8,34,08,810 Ordinary Shares of
Rs. 1/- each, were issued and allotted during the year upon exercise of 83,40,881
Options; such shares rank pari passu with the existing Ordinary Shares of your Company.
Consequently, the Issued and Subscribed Share Capital of your Company as at 31st March,
2013 stands increased to Rs. 790,18,33,110/- divided into 790,18,33,110 Ordinary
Shares of Rs. 1/- each.
Details of the Options granted up to 31st March, 2013 and other disclosures as required
under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the SEBI
Guidelines) are set out in the Annexure to this Report.
Your Companys Auditors, Messrs. Deloitte Haskins & Sells, have certified that
your Companys Employee Stock Option Schemes have been implemented in accordance with
the SEBI Guidelines and the resolutions passed by the Members in this regard.
DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm
a) followed in the preparation of the Annual Accounts, the applicable accounting
standards with proper explanation relating to material departures if any;
b) selected such accounting policies and applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair view of the
state of affairs of your Company at the end of the financial year and of the profit of
your Company for that period;
c) taken proper and sufficient care for the maintenance of adequate accounting records
in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets
of your Company and for preventing and detecting fraud and other irregularities; and
d) prepared the Annual Accounts on a going concern basis.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with Accounting Standard 21 -Consolidated Financial Statements, ITC Group
Accounts form part of this Report & Accounts. These Group Accounts also incorporate
the Accounting Standard 23 - Accounting for Investments in Associates in Consolidated
Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in
Joint Ventures as notified under the Companies (Accounting Standards) Rules, 2006. These
Group accounts have been prepared on the basis of audited financial statements received
from Subsidiary, Associate and Joint Venture Companies, as approved by their respective
The total number of employees as on 31st March, 2013 stood at 25,959.
The certificate of the Auditors, Messrs. Deloitte Haskins & Sells confirming
compliance of conditions of Corporate Governance as stipulated under Clause 49 of the
Listing Agreement with the Stock Exchanges in India, is annexed.
Particulars as required under Section 217(1)(e) of the Companies Act, 1956 relating to
Conservation of Energy and Technology Absorption are also provided in the Annexure to this
There were 83 employees, who were employed throughout the year and were in receipt of
remuneration aggregating Rs. 60 lakhs or more or were employed for part of the year
and were in receipt of remuneration aggregating Rs. 5 lakhs per month or more
during the financial year ended 31st March, 2013. The information required under Section
217(2A) of the Companies Act, 1956 and the Rules thereunder, in respect of the aforesaid
employees, is provided in the Annexure forming part of this Report.
This Report contains forward-looking statements that involve risks and uncertainties.
When used in this Report, the words anticipate, believe,
estimate, expect, intend, will and other
similar expressions as they relate to the Company and/or its businesses are intended to
identify such forward-looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information,
future events, or otherwise. Actual results, performances or achievements could differ
materially from those expressed or implied in such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements that speak only
as of their dates. This Report should be read in conjunction with the financial statements
included herein and the notes thereto.
Your Companys Board and employees are inspired by the Vision of sustaining
ITCs position as one of Indias most admired and valuable companies, creating
enduring value for all stakeholders, including the shareholders and the Indian society.
Your Company has created multiple drivers of growth by developing a portfolio of
world-class businesses which have synergised to deliver Total Shareholder
Returns at a compound annual growth rate of over 26% during the 17 year period from
1996 to 2013. Each business within the portfolio is continuously engaged in upgrading
strategic capability to effectively address the challenge of growth in an increasingly
competitive market scenario. Effective management of diversity enhances your
Companys adaptive capability and provides the intrinsic ability to effectively
manage business risk. The vision of enlarging your Companys contribution to the
Indian economy is manifest in the creation of unique business models that foster
international competitiveness of not only its businesses but also the entire value chain
of which they are a part.
Inspired by this Vision, driven by Values and powered by internal Vitality, your
Directors and employees look forward to the future with confidence and stand committed to
creating an even brighter future for all stakeholders.
|17th May, 2013
||On behalf of the Board
|37 J L Nehru Road
||Y. C. DEVESHWAR
||P. V. DHOBALE
Annexure to the Report of the Directors
Statement as at 31st March, 2013, pursuant to Clause 12 (Disclosure in the
Directors Report) of the Securities and Exchange Board of India (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 in respect of Options
granted under the Companys Employee Stock Option Schemes
||ITC Employee Stock Option Scheme (Introduced in 2001)
||ITC Employee Stock Option Scheme 2006
||ITC Employee Stock Option Scheme 2010
||Cumulative # (i)
||During 2012-13 (ii)
||During 2012-13 (iv)
||During 2012-13 (ii)+(iv)
|(A) (i) Number of Options granted
|(ii) Number of Bonus Options allocated*
|(iii) Total number of Options granted / allocated
* Bonus Options were allocated in 2005-06 and 2010-11 in the same ratio as Bonus
Shares issued in these years (i.e. 1 Bonus Share for every 2 Ordinary Shares & 1 Bonus
Share for every 1 Ordinary Share, respectively).
# Under the ITC Employee Stock Option Scheme (introduced in 2001), no Options
were granted during 2012-13.
|(B) Pricing Formula :
||The Pricing Formula, as approved by the Shareholders of the Company, is such price
which is no lower than the closing price of the Companys Share on the National Stock
Exchange of India Limited (the NSE) on the date of grant, or the average price
of the Companys Share in the six months preceding the date of grant based on the
daily closing price on the NSE, or the Market Price as defined from time to
time under the Securities and Exchange Board of India (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999, as determined by the Compensation
||The Options were granted at the Market Price as defined under the
||In the financial year 2012-13, Options were granted at Rs. 2,494.50 per Option.
|(C) Total number of Options vested
|(D) Total number of Options exercised (Each Option represents 10 Ordinary Shares of Rs.
|(E) Total number of Ordinary Shares of Rs. 1/- each arising as a result of
exercise of Options
|(F) Total number of Options lapsed
|(G) Variation of terms of Options
|(H) Money realised by exercise of Options
|(I) Total number of Options in force
|(J) Details of Options granted to
|(i) Senior managerial personnel
||As provided below -
||No. of Options granted during the financial year
||No. of Options granted during the financial year
||Y. C. Deveshwar
||S. Ganesh Kumar
||P. V. Dhobale
||K. N. Grant
||A. K. Mukerji
||S. H. Khan^
||S. B. Mathur^
||A. R. Noronha
||H. G. Powell^
||P. B. Ramanujam^
||K. T. Prasad
||S. M. Ahmad
||V. M. Rajasekharan
||V. L. Rajesh
||M. S. Bhatnagar
||T. V. Ramaswamy
||L. C. Chandrasekharan
||S. Janardhana Reddy
||B. B. Chatterjee
||C. S. Das
||S. K. Singh
||K. S. Suresh
|(ii) Any other employee who received a grant in any one year of Options amounting to
5% or more of the Options granted during that year.
|(iii) Identified employees who were granted Options during any one year, equal to or
exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the
Company at the time of grant.
|(K) Diluted Earnings Per Share pursuant to issue of Ordinary Shares on exercise of
Options calculated in accordance with Accounting Standard (AS) 20 Earnings Per
^ Non-Executive Director
|(L) (i) Method of calculation of employee compensation cost.
||The employee compensation cost has been calculated using the intrinsic
value method of accounting for Options issued under the Companys Employee Stock
Option Schemes. The employee compensation cost as per the intrinsic value method for the
financial year 2012-13 is Nil.
|(ii) Difference between the employee compensation cost so computed at (i) above and
the employee compensation cost that shall have been recognised if it had used the fair
value of the Options.
||Rs. 360.99 crores
|(iii) The impact of this difference on profits and on Earnings Per Share of the
||The effect on the profits and earnings per share, had the fair value
method been adopted, is presented below:
||Profit After Tax
||Rs. in Crores
||Add: Intrinsic Value Compensation Cost
||Less: Fair Value Compensation Cost
||(Black Scholes model)
||Earnings Per Share
||Basic ( Rs.)
|(M) Weighted average exercise prices and weighted average fair values of Options
granted whose exercise price either equals or exceeds or is less than the market price of
||Weighted average exercise price per Option
||Weighted average fair value per Option
|(N) A description of the method and significant assumptions used during the year to
estimate the fair values of Options.
||The fair value of each Option is estimated using the Black Scholes Option Pricing
model after applying the following key assumptions on a weighted average basis:
|(i) Risk-free interest rate
|(ii) Expected life
|(iii) Expected volatility
|(iv) Expected dividends
|(v) The price of the underlying shares in market at the time of Option grant (One
Option = 10 Ordinary Shares)
||On behalf of the Board
||Y. C. DEVESHWAR
|Kolkata, 17th May, 2013
||P. V. DHOBALE
Annexure to the Report of the Directors
For the Financial Year Ended 31st March, 2013
Particulars of Employees under Section 217(2A) of the Companies Act, 1956 and forming
part of the Report of the Directors
||Designation/ Nature of Duties
||Experi- ence (Years)
||Date of Commence- ment of Employment
||Previous Employment/ Position Held
|Employed throughout the year and in receipt of remuneration aggregating Rs.
60,00,000/- or more per annum.
||V.P. - Corporate Communications
||Indian Chamber of Commerce, Secretary General
||Head of Internal Audit
||A.C.A., F.C.A. (Eng. & Wales)
||Whinney Murray & Co., London, Audit Asst.
|Bhatnagar M S
||V.P. - Growth & Development (HD)
||Divisional Chief Executive (LRBD)
||Godfrey Philips (I) Ltd., Mktg. Exec.
||Services on Loan to Subsidiary Co.
|Charraudeau Phillippe Herve
||V.P. & General Manager - ITC Grand Chola (HD)
||B.E.P.C., (Rehaul Rebout), C.A.P.
||Movenpick Hotels & Resorts, Saudi Arabia, G.M.
|Chandrasekharan L C (Dr.)
||Chief Scientist - Research & Technology Innovation (LS & T)
||G.E. India, Director, Mfg. Engg.
|Chatterjee B B
||Executive V.P. & Company Secretary
||B.Com. (Hons.), F.C.A., F.C.S., LL.B.
||Wacsgen, Deputy Mgr.
||Divisional Chief Executive (FD)
||B.Tech. (Hons.), P.G.D.M.
||Tata Eng. & Loco. Co., Shift Supvr.
|Das C S
||SBU Chief Executive (ESPB)
||B. Tech. (Hons.), M.B.A.
||Larsen & Toubro Ltd., Trainee
|Deveshwar Y C
||Air India Ltd., Chairman & M.D.
|Dhobale P V
||Executive V.P. - Finance, Procurement & IT (FD)
||B.Com., A.C.A., A.C.S.
|Ganesh Kumar S
||Executive V.P. - Staples & Snacks (FD)
|Grant K N
||B.A. (Hons.), M.B.A.
||DCM Ltd., Mgmt. Trainee
||Italian Chef - ITC Grand Chola (HD)
||M.N. E.F.S.M.P. (New York Academy), H.S.(Milan), C.S.(Lausanne)
||G Mgmt., Bangkok, Thailand, Exec. Chef
||Head of Corporate Taxation
||B.Com. (Hons.), A.C.A., D.M.A.(I.C.A.)
||Hindustan Lever Ltd., Group Audit Manager
||Chief Operating Officer (HD)
|Janardhana Reddy S
||Executive V.P. - Corporate Affairs
||SBU Chief Executive (PCPB)
||Services on Loan to Tobacco Institute of India
||PARCO, Officer on Spl. Duty
||Services on Loan to Subsidiary Co.
||B.Com. (Hons.), A.C.A., A.C.S.
||Services on Loan to Subsidiary Co.
||Chief Operating Officer (ITD)
|Mukerji Arup K
||Corporate Financial Controller
||B.Com. (Hons.), A.C.A.
||Gupta Chowdhury & Ghose, Jr. Officer
||Master Chef - WelcomHotel New Delhi (HD) 65,64,476
||Graduate from Nihon University
||The Metropolitan Hotel Nikko, Exec. Chef
||Executive V.P. and Head - Corporate Human Resources
|Noronha A R
||Executive V.P. - Projects (HD)
||Executive V.P. - Finance & MIS (ITD)
||B.Com. (Hons.), A.C.A.
||Executive V.P. - Finance (HD)
||B.Com. (Hons.), F.C.A.
||Divisional Chief Executive (ITD)
||TELCO Ltd., Trainee
|Rai R K
||Chief Operating Officer (ABD)
||B.A. (Mktg.), P.G.D. in Export & Imports
||Britannia Industries Ltd., Commercial Officer
|Rajesh V L
||Executive V.P. - Marketing (FD)
|Rajput A K
||Senior V.P. - Corporate Affairs
|Ramaswamy T V
||Group Head - LS & T, Projects, EHS
||Divisional Chief Executive (ABD - ILTD)
||SBU Chief Executive (PPB)
||Asian Paints, Purchase Exec.
||Executive V.P. - Finance & MIS (PSPD)
||B.A. (Hons.), A.C.A., P.G.D.B.M.
|Singh S K
||Divisional Chief Executive (PSPD)
||Divisional Chief Executive (ABD)
||B.Sc., P.G. Dip. in Rural Mgmt.
||Gujarat Co-op Oil Seeds Growers Fed. Ltd., Mgr. Mktg.
||Executive V.P. - Human Resources (ITD)
||B.Sc., P.G. Dip. in P.M. & I.R.
||Services on Loan to Subsidiary Co.
|Suresh K S
||B.A., B.L., P.G.D.P.M., I.R. & L.W.
||Chambers of Sri C.S. Venkata Subramaniam, Advocate
||Chief Financial Officer
||Triveni Handlooms Ltd., Finance Mgr. & Secy.
|Venkateswaran Krishnan (Dr.)
||Chief Scientist - Product Development (PCPB)
||B.Sc., M.Sc., Ph.D.
||Hindustan Lever Ltd., Head - Skin, Cleansing & Care
||General Manager - Marketing (ITD)
|Employed for a part of the year and in receipt of remuneration aggregating Rs.
5,00,000/- or more per month.
|Achar Sudhir (Dr.)
||Principal Scientist - New Product Development (PCPB)
||B.Sc., M.Sc., Ph.D.
||Unilever Research Centre, Bangalore, Principal Scientist, Polymers
|Ahmad S M
||Executive V. P. - Marketing (ITD)
||ANZ Grindlays Bank Plc., Mgmt. Trainee
|Balakrishnan K P (Dr.)
||Principal Scientist - Product Development (PCPB)
||B.Sc., M.Sc., Ph. D.
||Soma Technologies - Incharge
||Executive V.P. - Risk Management & Strategic Initiatives
||B.Sc., M.Sc., F.C.A., F.I.C.W.A.
||Shaw Wallace & Co. Ltd., Financial Accountant
||Sous Chef (HD)
||B.Sc.,Dip in Hotel Mgmt. & Catering Technology
||Asst. - Technical (PPB)
||B. Tech., M.Tech. (Dual Degree)
|Biddappa K C
||V.P. - Marketing and R & D (ABD - ILTD)
|Chitteth Rohit G
||Divisional Manager - Retail Operations (LRBD)
|Das K C Jithin
||Customer Associate (LRBD)
||McDonald, Trainee Manager
|Desai G D
||Senior Executive Chef - ITC Maratha (HD)
||Dip. in Hotel Mgmt. & Catering
||Front Office Manager (HD)
|Dutta Bishnu Pada
||Chief Manager (PSPD)
||Rama Newsprint & Papers Ltd., Sr. Manager
|Evans John Wyn
||Exec. Pastry Chef, ITC Grand Chola (HD)
||Cake Design & Decoration., Advanced Pastry & Basic Catering (North Wales)
||J W Marriott, Bangkok
||Process Engineer - CPD (ITD)
||Project Executive - Electrical
||Chief Scientist (ITD)
||B. E., B. Tech., M.E., M. Tech., Doctorate
||Neos Therapeutics, Project Manager
|Jayanthi R V
||Manager- Knowledge Centre
||B. Sc., M. Sc.
||Asst. Manager - Maintenance (ILTD)
||Asst. Manager - Finance
||Singhi & Co., Article Asst.
||Asst. Manager - Secondary (ITD)
||Finance Superintendent (ITD)
||Baxter India Pvt. Ltd., Accounts Executive
||V.P. - Corporate Affairs
||M. Com., LL.B.
|Lal Manoj Kumar
||Dy. Manager (PSPD)
||Bilt Graphic Paper Products Ltd., Dy. Manager
||Asst. Manager - F & B (HD)
||Dip. in Hotel Mgmt. & Catering Technology
||Asst. Manager - Finance (ABD)
||Article Clerk, Audit
|Raghuvanshi Dharmendra Singh
||Asst. Manager - Projects
||Asst. Marketing (PPB)
||B Shankar & Co., Business Associate
|Rao A Babu
||Dy. Manager (PSPD)
||Asst. Brand Manager (FD)
|Reddy M Ramana
|Sharma Navin Kumar (Dr.)
||Chief Scientist - Agri Sciences
||B.Sc., M.Sc., Ph.D.
||Hindustan Lever Ltd., Principal Scientist
||Area Executive (ITD)
||Works Manager (PPB)
||Agro Tech Foods Ltd., Head, Manufacturing
|Singh Bhati Satyapal
||F & B Executive (HD)
||Dip. in Hotel Mgmt. & Catering Technology
|Sinha Lal Ranjan
||Manager - Operations (ITD)
||B. Sc. (Hons.)
||SAIL, Metallurgical Asst.
||Triveni Engg. & Industries Ltd., Sr. Chemist
|Vishwanadham P V G K
||Manager - Quality Control (ABD- ILTD)
||B. Sc., P.G.D.P.M.
|Abbreviations denote :
||India Tobacco Division
||Paperboards & Specialty Papers Division
||Printing & Packaging Business
||Lifestyle Retailing Business Division
||Education & Stationery Products Business
||Agri Business Division
||Personal Care Products Business
|ABD - ILTD
||Agri Business, Leaf Tobacco
||Life Sciences & Technology
@ Previously employed with ITC Hotels Ltd. which was merged with the Company on March
# Previously employed with ITC Bhadrachalam Paperboards Ltd. which was merged with the
Company on March 13, 2002
1. Remuneration includes salary, performance bonus, allowances & other benefits /
applicable perquisites except contribution to the approved Group Pension under the defined
benefit scheme and Gratuity Funds and provisions for leave encashment which are
actuarially determined on an overall Company basis. The term remuneration has
the meaning assigned to it in Section 198 of the Companies Act, 1956.
2. Net remuneration comprises cash income less : a) income tax & education cess
deducted at source. b) manager s own contribution to Provident Fund.
3. All appointments are/were contractual in accordance with terms and conditions as per
4. None of the above employees is a relative of any Director of the Company.
||On behalf of the Board
||Y. C. DEVESHWAR
|Kolkata, 17th May, 2013
||P. V. DHOBALE
CONSERVATION OF ENERGY:
INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES
(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING
PART OF THE DIRECTORS REPORT
a) Energy conservation measures taken:
All business units continued their efforts to improve energy usage efficiencies and
increase contributions from renewable sources of energy. Various key performance
indicators like specific energy (energy consumed per unit of production), specific energy
costs and renewable energy contributions were continuously tracked to monitor alignment
with the Companys overall carbon strategy. Innovative ways and new technologies were
constantly explored to bring about alignment with the Government of Indias National
Action Plan on Climate Change. Some of the measures adopted across the Company were:
I. 5 Star GRIHA rating, the highest national rating for Green Buildings in India, for
the ITC Grand Chola, the 600-key super premium integrated luxury hotel complex in Chennai,
which is also the worlds largest LEED Platinum certified Green Hotel.
II. Improvement in energy usage efficiencies of lighting systems by changing over to
higher efficiency lighting solutions such as Light Emitting Diodes and increased daylight
III. Reduction in lighting and air conditioning loads by installation of automated
controls & sensors.
IV. Installation of furnace oil atomization system for better combustion efficiency in
V. Replacement of existing pumping, compressed air, vacuum and air conditioning systems
with higher efficiency equipment.
VI. Enhanced implementation of schemes for waste heat recovery from processes.
VII. Recovery of waste heat from chillers for hot water generation.
VIII. Use of producer gas for baking ovens, which is a by-product of the waste
treatment process, in lieu of fossil fuels.
IX. Replacing DG sets with Uninterrupted Power Systems (UPS) as backup power source.
X. Installing chilled water condensate recovery systems in Air Handling Units for
boiler feed water supply.
b) Additional investments and proposals, if any, being implemented for reduction of
consumption of energy:
I. Installation of additional wind, solar and bio mass residue based power plants
II. Installation of small hydro electric plants to meet electrical energy demands of
ITC facilities in northern India.
III. Optimization of vacuum system for paper machines.
IV. Replacement of existing pumps and motors with higher efficiency class systems.
V. Replacement of existing lighting systems with higher efficiency systems and maximize
natural day lighting.
VI. Install variable frequency drives to match output of drives to changing load
patterns and thereby optimize energy consumption.
c) Impact of measures of (a) and (b) above for reduction of energy consumption and
consequent impact on the cost of production of goods:
Energy conservation measures taken have resulted in savings in Energy costs and helped
partially offset the inflationary trend in fuel / electricity. Significant reductions in
specific energy consumption have been recorded across businesses with commensurate
reduction in costs. These improvements in specific energy consumption have resulted in a
reduction in overall electrical energy consumption exceeding 3 giga watt hours (GWH),
across all ITC units. This reduction in turn, combined with the increased usage of
renewable energy has correspondingly resulted in reduced GHG emissions.
d) Total energy consumption and energy consumption per unit of production as per Form A
of the Annexure in respect of industries specified in the Schedule thereto:
A. POWER AND FUEL CONSUMPTION
Relating to Paperboards & Paper
||For the Year ended 31st March 2013
||For the Year ended 31st March 2012
|a) Purchased Units (KWH in Lakhs)
|Total Amount (Rs. in Lakhs)
|Rate / Unit (Rs.)
|b) Own Generation
|i) Through Diesel Generator
|Units (KWH in Lakhs)
|Units / Litre of Diesel Oil
|Cost / Unit (Rs.)
|ii) Through Wind Turbine / Generator
|Units (KWH in Lakhs)
|Cost / Unit (Rs.)
|iii) a) Through Steam Turbine /
|Generator-Coal Fired Boilers
|Units (KWH in Lakhs)
|Units / Kg. of Coal
|Cost / Unit (Rs.)
|b) Through Steam Turbine /
|Generator - Soda Recovery Boilers
|Units (KWH in Lakhs)
|Units / Kg. of Black Liquor Solids
|Cost / Unit (Rs.)
||Nil - Internally generated #
# since it is a by-product and no significant value is attributable to it.
||For the Year ended 31st March, 2013
||For the Year ended 31st March, 2012
|B/C/D/E/F Grades Coal
|Total Cost (Rs. in Lakhs)
|Average Rate (Rs. per MT)
|3. Furnace Oil
|Total Amount (Rs. in Lakhs)
|Average Rate (Rs. per KL)
|4. Others/ Internal Generation De Oiled Bran, Saw Dust etc.
|Total (Rs. in Lakhs)
|Rate / tonne (Rs.)
|Black Liquor Solids
|Total (Rs. in Lakhs)
||Nil - Internally generated #
|Rate / tonne (Rs.)
|# since it is a by-product and no significant value is attributable to it
|Total (Rs. in Lakhs)
|Rate / tonne (Rs.)
B. CONSUMPTION PER UNIT OF PRODUCTION
||For the Year ended 31st March, 2013
||For the Year ended 31st March, 2012
|Products (Paper in MT)
|Coal C / F Grade (MT)
|Black Liquor Solids (MT)
|Furnace Oil (Litre)
|Others - De Oiled Rice Bran Saw Dust/ Raw Lignite/ LP Gas etc.(MT)
INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES
(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING
PART OF THE DIRECTORS REPORT.
Research & Development
1. Specific areas in which R&D was carried out by your Company :
I. Method Development and Quality Assurance for packaged foods, viz. biscuits, chips.
II. Development of Innovative washes and surface Treatments for Denim Collection.
III. Development of blends for flat knits in garments.
IV. Development of new products such as face washes, skin creams / lotions and
mens grooming products.
V. Development of sustainable Agro-forestry models for food and wood security.
VI. Vertical growth for farm prosperity through the use of Hybrids and stress tolerant
2. Benefits derived as a result of the above R&D :
I. Improved Consumer benefits and development of products with unique value
II. Differentiated products and enhanced Market standing.
III. Sustained availability of pulpwood for the expanding business.
IV. Improved farm productivity in Eucalyptus, Casuarina and Tobacco leading to higher
returns to farmers.
3. Future Plan of Action :
I. Enhanced analytical capabilities with more areas under ISO 17025 accreditation.
II. Enhanced packaging through eco-friendly materials.
III. Product development with nutritional and health benefits in the packaged foods and
Personal care business.
||For the year ended 31st March, 2013
|4. Expenditure on R&D :
||(Rs. in Lakhs)
|Total R&D Expenditure as a % of
| Gross Revenue
| Net Revenue
Technology Absorption, Adoption and Innovation
I. Establishment of wind energy farms in Karnataka.
II. Induction of state of the art printing and conversion equipment for packaging.
III. IT based systems for guest convenience in the Hotels.
IV. Induction of contemporary technology and continuous improvement projects across
businesses towards reducing process variability, cycle time and wastage while enhancing
I. Reduction in carbon foot print through fuel conservation / switch and reduction in
II. Customer delight for Hotel guests.
III. Improved productivity and process control.
IV. World-class quality and differentiated products.
||On behalf of the Board
||Y. C. DEVESHWAR
|17th May 2013
||P. V. DHOBALE
CERTIFICATE OF COMPLIANCE FROM AUDITORS AS STIPULATED UNDER CLAUSE 49 OF THE LISTING
AGREEMENT WITH THE STOCK EXCHANGES IN INDIA
To the Members of ITC Limited
We have examined the compliance of conditions of Corporate Governance by ITC Limited
for the year ended on 31st March, 2013, as stipulated in clause 49 of the Listing
Agreement of the said company with stock exchanges in India.
The compliance of conditions of Corporate Governance is the responsibility of the
management. Our examination was limited to procedures and implementation thereof, adopted
by the company for ensuring the compliance of the conditions of Corporate Governance. It
is neither an audit nor an expression of opinion on the financial statements of the
In our opinion and to the best of our information and according to the explanations
given to us, we certify that the company has complied with the conditions of Corporate
Governance as stipulated in the above-mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future
viability of the company nor the efficiency or effectiveness with which the management has
conducted the affairs of the company.
||For Deloitte Haskins & Sells
||(Firm Registration No. 302009E)
||P. R. Ramesh
|Kolkata, 17th May, 2013
||(Membership No. 70928)
CEO and CFO Certification
We, Y. C. Deveshwar, Chairman, P. V. Dhobale, Executive Director and R. Tandon, Chief
Financial Officer certify that :
a) We have reviewed the financial statements and cash flow statement for the year ended
31st March, 2013 and to the best of our knowledge and belief :
i) these statements do not contain any materially untrue statement or omit any material
fact or contain statements that might be misleading;
ii) these statements together present a true and fair view of the Companys
affairs and are in compliance with existing Accounting Standards, applicable laws and
b) To the best of our knowledge and belief, no transactions entered into by the Company
during the year ended 31st March, 2013 are fraudulent, illegal or violative of the
Companys code of conduct.
c) We accept responsibility for establishing and maintaining internal controls for
financial reporting and we have evaluated the effectiveness of internal control systems of
the Company pertaining to financial reporting. Deficiencies in the design or operation of
such internal controls, if any, of which we are aware have been disclosed to the auditors
and the Audit Committee and steps have been taken to rectify these deficiencies.
i) There has not been any significant change in internal control over financial
reporting during the year under reference;
ii) There has not been any significant change in accounting policies during the year
requiring disclosure in the notes to the financial statements; and
iii) We are not aware of any instance during the year of significant fraud with
involvement therein of the management or any employee having a significant role in the
Companys internal control system over financial reporting.
||Chief Financial Officer
||P. V. DHOBALE
|17th May, 2013
||Y. C. DEVESHWAR