ANNUAL REPORT 2011-2012
Your Directors submit their Report for the financial year ended 31st March,
After staging a smart recovery in 2010, growth in global economic output
slowed down considerably in 2011. Against a growth rate of 5.3% recorded in
2010 and a forecast of 4.4% at the beginning of the year, global output is
estimated to have grown by only 3.9% in 2011, according to the
International Monetary Fund`s April 2012 report. Growth in Advanced
Economies slowed down to 1.6% in 2011 against 3.2% in 2010 primarily due to
the sovereign debt crisis in the euro zone, contraction of the Japanese
economy and a sluggish recovery in the US. Growth in Emerging & Developing
economies also decelerated from 7.5% in 2010 to 6.2% in 2011 with China,
India and Brazil recording significant decline in growth rates. Capital
flows into Emerging and Developing economies declined and remained volatile
due to lower risk appetite caused by the financial uncertainty in the
developed world which also led to sharp fluctuations in the exchange rates
in many of these economies.
The world economy is passing through a very difficult phase and is expected
to grow by 3.5% in 2012. Despite a better than expected recovery shaping in
the US, the key reasons for the subdued growth forecast of 1.4% in the
Advanced Economies remain the sovereign debt crisis in the euro zone, focus
on fiscal consolidation and continued bank deleveraging. Growth in the
developing world is forecast to slow down further to 5.7% with the key
economies of China, India, Brazil and Russia - all expected to record lower
rates of growth.
As stated above, the Indian economy decelerated considerably during the
year, growing below 7% in 2011/12 as compared to 8.4% in 2010/11. The
cumulative impact of a tight monetary policy stance adopted by the Reserve
Bank in a bid to balance the growth-inflation dynamic, lower global demand
and hardening international prices of crude oil combined to lower the
growth rate to below 6% during the second half of the year. There was a
marked slowdown in the mining and quarrying, manufacturing and construction
sectors. The poor performance of the Industrial sector which grew below 4%
- a 10 year low - reflected a number of factors including a higher interest
rate regime, slackening external demand and a general decline in business
confidence. Of particular concern is the sharp fall in the Gross Fixed
Capital Formation which dropped below 30% of GDP during the year,
representing a decline of nearly 4 percentage points over the last 4 years.
The position on the `twin deficits` also worsened with the fiscal deficit
touching 5.9% of GDP and the current account deficit estimated at around 4%
of GDP. With a burgeoning current account deficit on the one hand and only
a small increase in net capital inflows on the other, the overall Balance
of Payments situation turned negative - the first time in 16 years
excluding 2008/09! This, amongst other factors, led to a sharp depreciation
of the Indian Rupee which fell to record lows. There was some good news on
the inflation front which, after staying close to 10% for an extended
period of 22 months, moderated to around 7% in recent months.
As per the RBI`s Monetary Policy Statement 2012/13 released in April 2012,
the Indian economy is projected to grow by 7.3% in 2012/13 assuming normal
monsoons. Significant downside risks to this baseline forecast include the
outlook for global commodity prices - especially of crude oil, slippages on
the fiscal front which could stoke inflation and lead to a crowding out of
private investment and the unsustainable current account deficit levels.
The inflation scenario remains challenging with oil prices ruling high,
incomplete pass-through of past price increases, suppressed inflation in
respect of coal and electricity and persisting structural issues especially
on the supply side. This leaves little flexibility in the near term on the
interest rates front after RBI`s 50 basis points repo rate cut in April
While a growth rate of around 7% per annum would sustain India`s position
as one of the fastest growing major economies in the world, it is far below
the desired levels and the country`s 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. Fortunately, India enjoys the unique advantage of having
multiple forces driving its economic growth engine in the form of a
favourable demographic profile of population, relatively high savings and
investment rates, a large domestic consumption base and the oft-quoted
entrepreneurial spirit of its people. Raising the growth bar to the desired
double-digit levels would however require, inter-alia, directing government
spending to more productive areas by reducing the various forms of
subsidies in a phased manner, investments towards augmentation of physical
and social infrastructure, skill development and job creation.
With India accounting for one-sixth of the world`s population but only 2.4%
of the global land mass, 4% of world`s freshwater resources and 1% of
global forest resources, the pressure of economic growth on the country`s
natural capital will be enormous. The focus, both at a national and
corporate level, must therefore be on fashioning strategies that foster
sustainable, equitable and inclusive growth. It is your Company`s 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 ITC`s sustainability
vision and its growth path into the future.
Your Company`s 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 10 years), `carbon positive` (for 7 years), and
`solid waste recycling positive` (for 5 years).
The following sections outline your Company`s progress in pursuit of the
`Triple Bottom Line` objectives.
Your Company posted yet another year of impressive results with strong
topline growth and high quality earnings, reflecting the robustness of its
corporate strategy of creating multiple drivers of growth. This performance
is particularly remarkable when viewed against the backdrop of the
extremely challenging business context in which it was achieved, namely, a
slowdown in the economy, high levels of inflation and the continuing
cascading impact of arbitrary increases in VAT on cigarettes.
Gross Revenue for the year grew by 14.2% to Rs. 34871.86 crores. Net
Revenue at Rs. 24798.43 crores grew by 17.2% primarily driven by a 23.6%
growth in the non-cigarette FMCG businesses, 20.0% growth in Agri business
and 16.6% growth in the Cigarettes segment. Profit before tax increased by
22.4% to Rs. 8897.53 crores while Net Profits at Rs. 6162.37 crores
registered a growth of 23.6%. Earnings Per Share for the year stands at Rs.
7.93 (previous year Rs. 6.49). Cash flows from Operations aggregated Rs.
8334 crores compared to Rs. 7528 crores in the previous year.
Continuing with your Company`s chosen strategy of creating multiple drivers
of growth, your Company is today, the leading FMCG marketer in India, the
second largest Hotel chain, the clear market leader in the Indian
Paperboard and Packaging industry and the country`s foremost Agri business
player. Your Company`s wholly owned subsidiary, ITC Infotech India Limited,
is one of India`s fast growing Information Technology companies in the mid-
tier segment. Additionally, over the last sixteen years, your Company`s
Gross Revenues and Net Profits recorded an impressive compounded growth of
12.7% and 21.8% per annum respectively. During this period, Return on
Capital Employed improved substantially from 28.4% to 45.4% while Total
Shareholder Returns, measured in terms of increase in market capitalisation
and dividends, grew at a compounded annual growth rate of 25.7% during this
period, placing your Company
amongst the foremost in the country in terms of efficiency of servicing
financial capital. Your Company today is one of India`s most admired and
valuable corporations with a market capitalisation of nearly Rs. 180000
crores and has consistently featured, over the last sixteen years, amongst
the top 10 private sector companies in terms of market capitalisation and
Your Directors are pleased to recommend a Dividend of Rs. 4.50 per share
(previous year - Rs. 4.45 per share including a Special Dividend Rs. 1.65
per share) for the year ended 31st March, 2012. Total cash outflow in this
regard will be Rs. 4089.04 crores (previous year Rs. 4002.09 crores)
including Dividend Distribution Tax of Rs. 570.75 crores (previous year
Rs. 558.62 crores) representing an increase in the payout over last year
that included Rs. 1484 crores as Special Dividend, including Dividend
Distribution Tax, declared to commemorate your Company`s 100th AGM.
Your Board further recommends a transfer to General Reserve of Rs. 650.00
crores (previous year Rs. 498.76 crores). Consequently, your Board
recommends leaving a surplus in Statement of Profit and Loss of Rs.1972.59
crores (previous year Rs. 548.67 crores).
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
group`s contribution to foreign exchange earnings over the last ten years
amounted to nearly US$ 4.9 billion, of which agri exports constituted 56%.
Earnings from agri exports are an indicator of your Company`s contribution
to the rural economy through effectively linking small farmers with
During the financial year 2011/12, your Company and its subsidiaries earned
Rs. 3072 crores in foreign exchange. The direct foreign exchange earned by
your Company amounted to Rs. 2621 crores, mainly on account of exports of
agri-commodities. Your Company`s expenditure in foreign currency amounted
to Rs. 1859 crores, comprising purchase of raw materials, spares and other
expenses of Rs. 1153 crores and import of capital goods at Rs.706 crores.
Details of foreign exchange earnings and outgo are provided in Note 28 to
the Financial Statements.
PROFITS, DIVIDENDS AND SURPLUS
(Rs. in Crores)
PROFITS 2012 2011
a) Profit Before Tax 8897.53 7268.16
b) Tax Expense
- Current Tax 2664.29 2263.71
- Deferred Tax 70.87 16.84
c) Profit for the year 6162.37 4987.61
SURPLUS IN STATEMENT OF PROFIT AND LOSS
a) At the beginning of the year 548.67 61.31
b) Add : Profit for the year 6162.37 4987.61
- Transfer to General Reserve 650.00 498.76
- Proposed Dividend for the financial year
* Ordinary Dividend of Rs. 4.50 per
ordinary share of Rs. 1/- each
(previous year - Rs. 2.80 per share) 3518.29 2166.68
* Special Dividend of Nil per
ordinary share of Rs. 1/- each
(previous year - Rs. 1.65 per share) - 1276.79
- Income Tax on Proposed Dividends
* Current Year 570.75 558.62
* Earlier year`s provision no (0.59) (0.60)
d) At the end of the year 1972.59 548.67
A. FAST MOVING CONSUMER GOODS
FMCG - Cigarettes
The cigarette industry in India continues to be impacted by a
discriminatory taxation and regulatory policy framework. The steep increase
in the tax rates on cigarettes, both at the Central and at the State level,
has led to the undesirable consequence of shifting consumption to lightly
taxed or tax evaded tobacco products like Bidi, Khaini, Chewing Tobacco and
Gutkha which are the most dominant forms of tobacco consumption in India
and constitute as much as 85% of total usage. The twin objectives of
revenue maximisation and tobacco control have been severely compromised by
this lopsided tax policy on cigarettes which now contributes over 74% of
tax revenue, whilst accounting for less than 15% of tobacco consumption.
Further, the tax arbitrage opportunities have fuelled the rampant growth of
The steep hike in Excise Duty rates announced in the Union Budget 2012 will
further exacerbate the problem of discriminatory and high taxation on
cigarettes within the tobacco industry.
The year under review also witnessed arbitrary and steep hikes in VAT rates
on cigarettes by many States. This is a complete departure from the
principles of uniform VAT rates enunciated by the Empowered Committee in
its White Paper on State level Value Added Tax. Further, several States
continued to levy discriminatory and higher rates of VAT on cigarettes
compared to other tobacco products, thereby widening the tax gap amongst
tobacco products. A plethora of 29 different tax rates are currently
applicable on cigarettes across States in India which has forced
manufacturers to adopt State specific pricing. Not only will this result in
unproductive costs in managing supply chain complexities but also lead to
potential disputes in the assessment of ad-valorem taxes. The imposition of
non-uniform VAT rates by States also goes against the tenets of the draft
National Competition Policy, which recommends a `single national market` in
line with the principle that fragmented markets impede competition. In
addition, the resultant attractive tax arbitrage opportunity promotes
illegal inter-State diversion of stocks by unscrupulous elements thus
depriving the Government of revenue and diverting trade away from
legitimate distribution channels.
The findings reported in the Global Adult Tobacco Survey (GATS) India,
2009-10 study, conducted under the aegis of the Ministry of Health & Family
Welfare, shows that whilst the consumer base of tobacco in India stands at
34.6% of all adults, the cigarette share is only 5.7%. About 75% of Indian
tobacco consumers consume nonsmoking tobacco products mainly in the form of
oral chewing products which constitutes the single largest consumer base
for tobacco products in India. It may be noted that India, with 17% of the
world population, accounts for 89% of global tobacco consumption in
smokeless form. Cigarette consumption in India, on the other hand,
constitutes only 1.9% of global consumption. This pattern of tobacco
consumption is contrary to global trends, including that of our
neighbouring countries, where cigarettes are the dominant form of tobacco
The domestic legal cigarette industry is faced with the growing menace of
illegal cigarettes. Independent research indicates that, in India, whilst
there is a fall in volumes of `duty paid` cigarettes by 4.4% during the
period 2005 to 2010, the `duty-not-paid` volumes grew by 49.3% during the
same period. India has now been recognised as one of the leading
destinations for illegal cigarettes.
Attractive tax arbitrage opportunities, as a result of high level of taxes
on the legal domestic cigarette industry in India, incentivises illegal
flow of cigarettes into the country, especially of internationally
advertised and known brands.
Another dangerous outcome of the increasing volume of illicit trade is that
it encourages the entry of organised criminal syndicates, which can have
serious law and order consequences for the country. Internationally, it has
been reported that illegal profits from cigarette smuggling have been used
to fund terrorist activities.
Coupled with our porous borders, cigarette imports under Open General
License (OGL) make it extremely difficult to monitor and regulate the
inflow of illegal stocks. Further, with the domestic cigarette industry
being strictly regulated, including compulsory licensing under the
Industrial (Development & Regulation) Act, 1951, a liberal import policy is
contrary to the Government`s tobacco control policies. This is also
detrimental to the interests of Indian tobacco farmers, as it directly
impacts the demand for indigenous tobacco by the domestic industry.
The demographic construct of India`s population calls for multiple price
points to meet the needs of the country`s diverse consumer segments. The
growth of illegal cigarettes is also aided by the vacuum created at lower
price points, where legal industry has been unable to operate, due to a
disproportionately high tax burden. Further, the lacunae in the provisions
of the Industrial (Development & Regulation) Act, 1951 encourages `fly by
night` operators to manufacture illegal cigarettes without obtaining
requisite licenses and clandestinely clear them without payment of taxes.
The industry had recommended that the Excise Duty rate at the entry level
segment be reduced to Rs. 200 per thousand cigarettes to enable the
domestic legal industry to effectively counter illegal cigarettes with
competitively priced products. Whilst, the length prescribed for the filter
cigarette segment at the lowest end has been revised from `length < 60mm`
to `length < 65mm`, the Excise Duty on the segment has been retained at Rs.
689 per thousand cigarettes. Coupled with alarmingly high State VAT and
local taxes, the legitimate, duty paid, industry will still be unable to
match the prices of product offers of the illegal industry, at the current
Excise Duty level.
The implementation of Goods and Services Tax (GST) with a unitary standard
rate of tax across the Indian common market will be an important milestone
in the near future. As stated earlier, cigarettes, by virtue of being very
highly taxed, offers a lucrative tax arbitrage opportunity and is
vulnerable to large scale smuggling. Consequently, it is imperative that
GST on cigarettes is levied in an appropriate manner i.e. at the uniform
standard rate applicable to the general category of goods across the
country, with availability of input tax credit. Central Excise Duty should
continue to be levied only at specific rates. It is critical to note that
any increase in the overall tax rate on cigarettes, will widen the
arbitrage opportunity between legitimate cigarettes and illegal, tax evaded
cigarettes. It is, therefore, critical that the combined incidence of
Excise Duty and GST on cigarettes remains revenue neutral (i.e., kept at
Your Company, along with other stakeholders and industry bodies continues
to represent to the regulatory authorities seeking a non-discriminatory tax
and regulatory policy on tobacco products in the interest of the Government
exchequer, domestic farmer community and industry.
Despite a difficult operating environment in the market place, it is
gratifying to report that your Company further improved its market standing
during the year. Your Company`s uncompromising commitment to continuous and
consistent offerings of value-added, world class products has been
reinforced through innovations in product development and launch of
differentiated offers. The portfolio continues to be strengthened through
strategic investments in product quality and technology.
A premium line of hand-rolled cigars launched by your Company in 2010 under
the brand name `Armenteros` has gained significant consumer franchise,
competing against world renowned Cuban and other cigar brands. The
Armenteros range of cigars is now available in premium outlets across key
cigar markets and is expected to further consolidate and grow its
During the year, a state-of-the-art, flexible, Primary Plant designed to
cater to future product development requirements was successfully
commissioned at Ranjangaon, Pune. The uncompromising focus on quality,
investments in best-in-class technology and embedding of best practices has
ensured the continued delivery of products of international quality.
Structured problem solving methodologies like Six Sigma and several
initiatives that foster innovation have been deployed to ensure sustained
improvements in quality and productivity of all resources.
In line with your Company`s commitment to building sustainable
environmental capital, the business continues to invest in renewable
sources of energy. A 6.3 megawatts (MW) wind energy facility has been
commissioned in Maharashtra during the year. Solar panels have been
installed for boiler feed water and furnace oil preheating systems at
Bengaluru and Munger factories respectively. All units also maintained the
highest standards of Environment Health and Safety (EHS) and won
recognition by way of numerous awards. Saharanpur and Bengaluru factories
were the first in India to obtain Platinum Green Factory Building Rating
from the Indian Green Building Council as part of a holistic approach
towards sustainability. Munger, Bengaluru, Saharanpur and Kidderpore
factories have won the RoSPA Gold Award for Occupational Health and Safety.
Munger factory was awarded the `Shreshtha Suraksha Puraskar` from National
Safety Council of India under Safety Award scheme 2010 (Manufacturing
sector), and Certificate of Appreciation at the CII Eastern Region Energy
Conservation Awards. The Bengaluru factory won the Energy Efficient Unit
award under CII National Energy Award 2011, Energy Conservation Initiative
Award by Centre for Sustainable Development, Innovative Rainwater
Harvesting Project in the National Awards for Excellence in Water
Management by CII, `Unnatha Suraksha Puraskara` by National Safety Council-
Karnataka Chapter, Karnataka Renewable Energy Development Limited (KREDL)
award for achievements in Energy Conservation and Certificate of
Appreciation under CII Southern Region Excellence Award in Environment,
Health & Safety. The Kidderpore factory won the Water Efficient Unit Award
under CII National Award for Excellence in Water Management 2011 and
Certificate of Appreciation under CII Eastern Region Safety, Health and
Environment (SHE) Award.
Your Company`s Cigarettes business faces the daunting challenges of an
unprecedented high incidence of taxation, complex tax structure, rising
illegal trade and a discriminatory regulatory climate. Despite these
challenges, the relentless pursuit of excellence in building robust, world
class brands, innovation in processes and investment in world class
technologies will enable your Company to further consolidate its market
standing. Your Company believes that both the objectives of maximisation of
the economic potential of tobacco and the tobacco control can be achieved
through rationalisation of taxes on cigarettes, minimisation of
discriminatory taxes between different classes of tobacco products and a
regulatory framework that addresses the genuine concerns of all the
stakeholders of the tobacco industry. The need is for a balanced agenda on
tobacco, both fiscal and regulatory.
FMCG - Others
The Indian FMCG industry is estimated to be over Rs. 160000 crores in size
and accounts for nearly 2.2% of the GDP of the country. 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 robust economic growth, rising income
levels, increasing urbanisation and favourable demographic trends. These
growth drivers are expected to continue to favourably impact the industry
which is estimated to reach Rs. 400000 crores by 2020 (Source: CII, FMCG
Roadmap to 2020). According to a recent study by the consultancy firm
Boston Consultancy Group, the Indian consumer market is poised to grow at a
compounded annual growth rate of 15% between 2010 and 2020, faster than
most other emerging markets.
Given these positive fundamentals, your Company has been rapidly scaling up
its new FMCG businesses comprising Branded Packaged Foods, Personal Care
Products, Education and Stationery Products, Lifestyle Retailing, Incense
Sticks (Agarbattis) and Safety Matches with Segment Revenues growing at an
impressive compound annual growth rate of nearly 40% since 2005-06.
Within a relatively short span of time, your Company has established
several strong consumer brands in the Indian FMCG market. Segment Results
reflect the gestation costs of these businesses largely comprising costs
associated with brand building, product development, R&D and infrastructure
creation. The year under review saw a 24% growth in Segment Revenues and a
significant improvement in Segment Results which recorded a positive swing
of Rs. 102 crores at the PBIT level.
Your Company`s unwavering 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
Your Company`s Branded Packaged Foods business grew significantly during
the year, recording growth in market shares and enhanced market standing
across segments. A robust range of well-differentiated products, supported
by significant investments in product development, innovation,
manufacturing technology and unmatched distribution infrastructure continue
to enhance the market standing and consumer franchise of your Company`s
brands. Continuing investments in R&D and product development have enabled
your Company launch successful and innovative products. The quality of your
Company`s products continues to be `best-in-class` in the industry across
all segments. Value capture was improved through cost optimisation across
the supply chain and optimal capital deployment.
During the year, the business witnessed inflationary pressures on input
costs. Supply side constraints coupled with growing demand caused prices of
edible oil, packaging material and industrial fuel to remain at inflated
levels. These cost pressures were mitigated through a combination of
improvements in product and process efficiencies, smart sourcing and supply
Your Company ventured into the Instant Noodles category towards the end of
2010. The product has been well received by consumers and is already the
second largest Instant Noodle brand in the country. Focused market
research, deep consumer insights and innovative product formats under the
`Sunfeast Yippee!` brand is expected to further strengthen consumer
traction in a fast growing and highly competitive industry segment.
In the Staples category, `Aashirvaad` atta consolidated its leadership
position aided by the strong performance of Aashirvaad `Multi-grain` atta.
Premium offerings of Aashirvaad `Multi-grain` and `Select` brands continued
to grow rapidly aided by an increasing proportion of consumers shifting to
these value-added propositions.
The Biscuits industry witnessed impressive growth during the year and your
Company`s `Sunfeast` brand continued to do well across product platforms.
Portfolio enrichment was driven through the launch of Sunfeast Dark Fantasy
Choco Fills and Sunfeast `Dual` Dream Cream. These two innovative, `first
to market` flavours created excitement amongst consumers and significantly
enhanced the consumer franchise of the `Sunfeast` brand.
In the Confectionery category, `Candyman` and `mint-o` continued to
register strong growth during the year. The category witnessed two launches
with mint-o GOL Green and mint-o Strong. The continued success of
Toffichoo, Lacto and Choco-Double eclairs provided further impetus to the
overall growth of the Confectionery business.
In the Savoury Snacks segment, the market standing of your Company`s
`Bingo!` brand has significantly improved through enhanced brand building
efforts. Use of digital media, word of mouth and clutter breaking
advertisements improved brand salience. The product portfolio was further
strengthened during the year with the launch of a new product format -
`Tangles` and a new innovative variant - `Mad Angles Masti Chaat`.
The business continues to invest in manufacturing and distribution
infrastructure to support larger scale and improve reach and availability.
Supply Chain improvements to enhance product freshness, optimal servicing
of proximal markets and margin expansion continue to receive significant
Buoyed by increasing consumer franchise for your Company`s brands, it is
expected that the accelerated growth of the Branded Packaged Foods business
will be sustained in the years ahead. The growth momentum of the Foods
business will continue to be driven by focus on product quality, innovative
product development, multi-point contact with consumers and high quality of
service to all segments of trade.
Personal Care Products
Your Company`s Personal Care Products business continued to make
significant strides in strengthening its portfolio through a slew of new
launches and extensions in the Soaps, Shampoos and Skin Care categories.
The business continues to roll out its product offerings under the `Essenza
Di Wills`, `Fiama Di Wills`, `Vivel` and `Superia` brands across new
geographies and is focused on addressing various consumer benefits with the
introduction of new variants.
The year saw the successful introduction of a new range of soaps under the
`Vivel` franchise with the launch of `Vivel Luxury Creme` variant and a new
offering `Vivel Clear 3-in-1` in the transparent soap segment. Your Company
continues to receive accolades for its product innovation initiatives. In
continuation of previous years` trends, this year, the `Vivel Clear 3-in-1`
transparent soap was voted `Product of the Year` in the soaps category.
The business entered the Talcum Powder category during the year with the
launch of 3 variants under the Fiama Di Wills brand. During the year, the
business also made a foray into the fast growing Face Wash category with
offerings under the Fiama Di Wills and Vivel brands. The fairness cream
portfolio was augmented with the introduction of a new variant under the
Superia brand. The new product launches as aforementioned have received
encouraging consumer response and are being rolled out across target
The business continued to grow at a healthy rate despite the high degree of
competitive intensity especially from entrenched players. The strategy of
developing products on the basis of deep consumer insights and superior
quality has helped your Company gain market standing in a short span of
The year under review witnessed sharp escalation and volatility in the
prices of key inputs. Your Company used a mix of smart sourcing strategies,
value engineering and cost control measures to mitigate the impact thereof
and enhance margins.
During the year, the factory at Manpura received certifications for ISO
9001 (Quality Management System), ISO 14001 (Environment Management System)
and OHSAS 18001 (Occupational Health & Safety Assessment System) from
Messrs. Det Norske Veritas (DNV). With this, the main production units of
the business are certified for their quality management systems. A
business-wide programme using `Lean` and `Six Sigma` methodologies, which
was launched last year, was further broad-based during the current year in
pursuit of process excellence.
Sustained investment in R&D over the years has resulted in a healthy
pipeline of new and innovative products. Product innovation and quality
continue to be focus areas that are expected to provide the requisite
competitive advantage and impetus for growth in the near future. These
interventions, together with investments in world class manufacturing
processes and technology will enable the business to further strengthen its
portfolio of value-added products.
The Personal Care industry in India continues to be on a long term growth
path, with rising disposable incomes and changing consumer preference for
enhanced personal grooming. The business is well poised to actively
participate in the emerging growth opportunities in this sector and
continues to leverage its strengths in the rapidly transforming landscape
of beauty and personal care products in India.
Education & Stationery Products
Your Company is the leading and fastest growing player in the Indian
stationery market. The flagship brand `Classmate` is India`s leading
student notebook brand with a distribution footprint of over 75,000
stationery retail outlets across the country. Besides notebooks, the
`Classmate` brand offers a wide range of products that includes ball and
gel pens, wood cased and mechanical pencils, mathematical instruments,
erasers, sharpeners and scales. `Classmate` also endorses `Colour Crew`, an
art stationery brand, with a range of wax crayons, colour pencils and
sketch pens for children.
The Classmate range of products is sourced from small scale manufacturers,
who have over the years continuously improved their delivery and quality
capabilities. A majority of them, with your Company`s assistance, are ISO
9001:2008 certified. Paper and recycled board are sourced from your
Company`s mills at Bhadrachalam and Kovai respectively. The paper used in
Classmate notebooks leverages your Company`s world class fibre line at
Bhadrachalam which is India`s first ozone treated elemental chlorine free
facility. Every Classmate notebook also carries a powerful social message
that reflects your Company`s commitment to improving the quality of primary
education in rural India.
During the year, the business took significant steps to strengthen
`Paperkraft`, its executive and office supplies stationery brand. Working
in tandem with the Paperboards & Specialty Paper business, your Company has
positioned `Paperkraft` as the finest green paper for business applications
viz. copy-scan-print-fax. Paperkraft`s green credentials are supported,
among other factors, by your Company`s membership of the prestigious Global
Forest & Trade Network.
The education and stationery products industry continues to grow on the
back of massive government and private investments in the education sector.
The government`s flagship Sarva Shiksha Abhiyan programme coupled with the
mid-day meals initiative is successfully enhancing enrolment and reducing
dropouts at the primary school level. Likewise, it is expected that
enrolment ratios at the secondary and tertiary levels will also improve.
Progressive reforms will enable flow of private sector investments into
capacity building and quality enhancement in education delivery. Further,
the Right of Children to Free and Compulsory Education Act, 2009, will
further accelerate growth in the education and stationery supplies sectors.
Your Company`s strong brands - `Classmate` and `Paperkraft` - with
increasing consumer franchise, widening high quality product range and
excellent distribution infrastructure is advantageously positioned to
respond to this opportunity.
During the year, your Company`s Lifestyle Retailing business posted strong
growth in revenues and continued to strengthen its position in the branded
apparel market. After a buoyant first half, industry growth moderated in
the second half due to the slowing down of the domestic economy and price
increases effected by most industry players consequent to the introduction
of Excise Duty on branded apparel in the Union Budget 2011 and rising input
costs. The business`s focus on strategic cost management actions and
improvements in operational efficiencies helped to partly offset the
adverse impact of tax and cost increases.
In the Premium segment, Wills Lifestyle with its superior product variety
and richer product mix continued to enjoy strong consumer franchise. The
retail footprint of the brand was expanded to 86 exclusive stores across 40
cities and more than 300 `shop-in-shops` in leading departmental stores and
multi-brand outlets. Significant improvements were achieved during the year
in terms of product range, enhanced availability and impactful visibility
resulting in volume growth across channels.
Product appeal was enhanced through the introduction of differentiated
offerings across several premium product platforms - `Wonderpress` wrinkle
free fabrics, `Ecostyle` organic collection and `Creme de Cotton` supersoft
cottons. The `Luxuria` range of Men`s super-premium formals, finely crafted
from luxurious Egyptian cotton with high-end trims and superior garmenting
continued to receive positive consumer response. The Women`s range was
energised by offering an extensive, high-end designer wear range, stylised
formals, a variety of trendy silhouettes and a premium range of
In the Popular segment, `John Players` has established a strong pan-India
presence with over 340 flagship stores and 1,100 multi brand outlets and
departmental stores. During the year, the retail footprint was expanded
significantly, with nearly 100 new stores being launched, increasing brand
reach, penetrating more markets and acquiring new franchise. The denims
category registered strong growth as a result of an enhanced range, premium
differentiated washes and contemporary fits while continuing to receive
positive consumer and trade response.
Wills Lifestyle continued to receive recognition from the industry,
including the `Superbrand` certification, and is the first Indian brand to
receive the prestigious `Oeko-Tex Standard 100 Certification`.
Business processes for creation of winning designs and efficient supply
chain were strengthened during the year.
Improving retail and manufacturing productivity were pursued vigorously
with continued focus on strengthening capability through training,
knowledge and skill inputs.
The business will continue to increase the premium quotient of its
offerings on the basis of deeper understanding of consumer preferences, and
delivering products benchmarked to world class quality standards. Further
investments are planned to enhance range vitality, supply chain
responsiveness and superior customer service to delight the customer with
an international shopping experience.
Incense sticks (Agarbattis)
Your Company`s Agarbatti business recorded an impressive growth in revenues
and enhanced market standing during the year, driven by increasing consumer
franchise for the `Mangaldeep` brand combined with deeper distribution
reach and innovative consumer offerings. Mangaldeep is the second largest
national brand in the industry.
During the year, the business launched several new variants under the
umbrella brand `Mangaldeep`. These variants have received wide consumer
acceptance and are being rolled out across India.
The business continues to contribute to your Company`s commitment to the
`Triple Bottom Line` by providing livelihood opportunities to more than
12,000 people through small and medium scale entrepreneurs and NGOs / Self
Help Groups across India. 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`s Safety Matches business maintained its market leadership
aided by continued consumer preference for its strong brand portfolio
across all market segments.
With sustained escalation in the prices of raw materials like wood,
paperboard and key chemicals, industry margins remained under severe
pressure during the year. Your Company mitigated the adverse impact of
these input costs through a series of strategic cost management actions.
Your Company continues to focus on enhancing market standing through the
launch of high quality and value-added products.
Your Company continues to partner the small scale sector by sourcing a
significant portion of its requirement from multiple units in this sector.
Your Company is helping to improve the competitive ability of these units
by providing technical inputs to strengthen their systems and processes.
Technology induction in manufacturing is crucial for the long term
sustainability of this industry. A uniform taxation framework which
provides a level playing field to all manufacturers is necessary to enable
the required investments for modernising this industry. This would not only
help the industry in improving its competitiveness but also provide a safer
working environment for the large number of people employed in this
The hospitality industry in India continued to be impacted by the slowdown
in the domestic economy and adverse economic environment in the
international feeder markets of the US and Europe. While the US market
appears to be on the path of slow recovery, the European market is yet to
come out of its debt problems and recession. As a result, both
international and domestic business segments for the luxury hotels remained
In the backdrop of these challenging circumstances, your Company`s Hotels
business registered a marginal growth in revenues and profits, while
maintaining its leadership position in terms of operating margins.
Your Company`s Hotels business continues to be rated amongst the fastest
growing hospitality chains with 94 properties at 67 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.
Recognising the changing preferences of the business traveller, your
Company launched a new brand under the `Fortune` brand this year viz. `My
Fortune` which is designed to cater to the upscale business traveller. The
first `My Fortune` hotel was launched in Chennai during the year and
further expansion is on the anvil.
During the year, your Company`s premier hotel at Jaipur has been upgraded
to an `ITC Hotel` with `The Luxury Collection` co-branding. The hotel is
now known as `ITC Rajputana` in line with other luxury properties of the
Food and Beverage (F&B) remains a major strength of your Company and its
iconic brands `Bukhara`, `Dum Pukht` and `Dakshin` continue to garner
coveted international awards and accolades. The renovated Dum Pukht
Restaurants at ITC Maurya and ITC Maratha have been highly appreciated by
its patrons and generated healthy business during the year. Other signature
F&B brands viz. `West View`, `Kebabs & Kurries` and `Pan Asian` have firmly
established themselves and continue to sustain leadership position in their
respective cities. The business`s first Japanese cuisine brand `Edo` has
established itself as the benchmark for traditional Japanese cuisine in
Bengaluru and is fast gaining recognition.
In pursuit of your Company`s `Triple Bottom Line` commitment, investments
have been made in renewable energy to provide clean power to your Company`s
hotels in Bengaluru (ITC Windsor and ITC Gardenia), Mumbai (ITC Maratha)
and Jaipur (ITC Rajputana). During the year, further investments in wind
energy were made in Tamil Nadu to cater to the needs of the newly built ITC
Grand Chola at Chennai. With these investments, your Company`s Hotels
business will meet nearly two-thirds of its energy requirements from clean
and renewable sources.
Your Company remains committed to its `Responsible Luxury` ethos and is the
greenest luxury hotel chain in the world. With ITC Rajputana having
obtained the `Leadership in Energy and Environment Design` (LEED) Platinum
rating during the year, all premium ITC Hotels now have this coveted
During the year, your Company launched a unique pan-ITC consumer loyalty
programme - `Club ITC` -targeted at the premium clientele of `Wills
Lifestyle` and `ITC Hotels`.
In view of the positive long term outlook for the Indian Hotel industry,
your Company continues to sustain its investment-led growth strategy.
Construction of the new super luxury property, ITC Grand Chola, at Chennai
is now complete and slated to open in early 2012-13. 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 and banqueting facilities, 10 Food
and Beverage outlets and the award-winning spa brand `Kaya Kalp`.
Construction activity of two new luxury properties at Kolkata and at
Classic Golf Resort near Gurgaon is progressing satisfactorily. In
addition, 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 67 with an aggregate room inventory of over 5,000.
Of these, 27 properties are under various stages of development. The
`WelcomHeritage` brand continues to be the country`s most successful and
largest chain of heritage hotels with 40 operating properties, spread
across 13 States in India.
Your Company`s Hotels business, with its globally benchmarked levels of
product and service excellence and customer centricity, represented by its
four brands is well positioned to sustain its leadership status in the
industry and poised to emerge as the largest hotel chain in the country
over the next few years.
C. PAPERBOARDS, PAPER AND PACKAGING
The Paperboards, Paper and Packaging segment recorded yet another year of
steady growth in revenues and profits. Segment Revenues grew by 13% over
the previous year to touch Rs. 4130 crores. Segment Results at Rs. 937
crores reflect a growth of 14%.
Paperboards & Specialty Papers
The global demand for paper & paperboard slowed down to 1% in 2011 as
against a 6% growth in 2010. Even in India, demand decelerated to around
6.5% during 2011-12 against 7.1% in the previous year.
The global paper market continued to witness a structural shift with
emerging economies, particularly in Asia such as China and India, driving
the demand growth.
Though India has 17% of the world`s population, it consumes only about 2%
of global paper production. Per capita consumption in India is very low at
only 9 kgs compared to a global average of 55 kgs, 65 kgs in China and 215
kgs in Japan.
Shift in demand to Asia and the low levels of per capita consumption in
India offers Indian paper manufacturers exciting opportunities in the years
to come. Though there is considerable scope for growth in the Indian paper
market, competition, including from key global players, has also increased
and the industry is witnessing large capital investments. Though growth in
demand is expected to absorb the increased capacity, increasing and
maintaining market share as well as protecting margins will be challenging.
Further, reduction of import duties under various Regional Free Trade
Agreements especially with ASEAN has started impacting the profitability of
the domestic paper industry. In line with the representations made by the
Indian Paper Manufacturers Association, it is imperative that the current
duty structures are kept unchanged.
The domestic paper and paperboard industry is currently estimated at 11.6
million tonnes per annum, out of which paperboards is 2.2 million tonnes
per annum which is expected to grow at around 8% per annum aided by value-
added paperboard at 12% per annum.
The growth potential of the paperboard industry is anchored on expectations
of higher GDP growth, increase in demand from rural markets, branded
packaged products and organised retail. Further, the need for
differentiated packaging coupled with change in lifestyles will continue to
drive demand for paperboard. Your Company is the market leader in the
paperboard segment with focus on the value-added products. To further
consolidate its pre-eminent position in the industry, the business has
invested in a state-of-the-art machine which is expected to be operational
by early 2013.
The `Writing and Printing` paper segment, estimated at 3.1 million tonnes,
grew by 6.2% in the year under review. This segment produces papers for use
in copiers, desktop printers, advertising and promotional materials,
notebooks, books and annual reports. The 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 Act, 2009 as well as by increasing literacy levels, changing
demographic profiles and GDP growth. This segment is expected to grow at
around 8% per annum during the next 5 years, with higher growth expected in
the Copier and Fine Paper categories at 16% per annum. The business with
its strong forward linkages with your Company`s Education and Stationery
Products business has emerged as a leading player in the segment.
Specialty papers, with an estimated market size of 4.7 lakh tonnes, is
expected to grow at 9.4% per annum over the next 5 years, with increased
spends on infrastructure and construction driving demand for quality decor
and insulating grades. Your Company is a market leader in decor grades and
is the largest manufacturer of cigarette tissue in India.
Given that pulpwood availability is a major challenge for the paper
industry, your Company continues with its policy of promoting social
forestry plantations for pulpwood. During the year, over 57 million high
quality saplings were sold/distributed to farmers. 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
This initiative, besides securing the long term supply of fibre at
competitive costs, also assists in generating farm incomes through
utilisation of marginal wastelands. Enhanced R&D activity has resulted in
the development of high yielding eucalyptus and subabul clones and your
Company`s continued focus on clonal plantations in core areas is expected
to yield significant competitive advantage in the years to come. Your
Company`s R&D team is actively collaborating with several expert agencies
to further leverage bio-technology for enhancing farm productivity and wood
In the last 15 years, your Company`s bio-technology based research
initiatives have resulted in the planting of about 545 million saplings
covering nearly 1,25,000 hectares of plantations, including around 11,000
hectares planted during the year. These pioneering initiatives have
generated over 56 million person days of employment opportunities over this
period for small farmers and poor tribals. Your Company plans to accelerate
the plantation activity and is in the process of setting up a new state-of-
the-art clonal saplings production capacity in Bhadrachalam to facilitate
Your Company continues to promote agro-forestry in pulpwood plantations on
waste land as well as on land where mono-cropping is practised. This will
generate additional income to farmers, provide wood security for the
industry and also help in conservation of the environment. 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 which incorporate 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 to
take pressure off the remaining natural forests and increases the diversity
of vegetation on existing farms. During the year under review, a small
beginning was made by your Company
by promoting agro-forestry plantations in 600 hectares and this is proposed
to be substantially increased in the years to come.
Your Company continues to represent to policy makers on the need to
introduce appropriate amendments to the Forest (Conservation) Act, 1980 and
related Rules, to permit industry to use degraded forest land for
afforestation linked to the end-use of such wood. An enabling policy
framework that encourages public-private partnerships for the development
of degraded forestlands would serve the multiple objectives of enhancing
the competitiveness of the Indian paper and paperboard industry, reducing
import dependence, creating sustainable livelihoods in rural India and
contributing to the national objective of enhancing the country`s green
In India only 15% of the paper consumed is recovered for recycling as
against about 70% in the western countries. Your Company`s collaborative
initiative called `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 this effort would
assist in the availability of quality fibre on a sustained and long term
basis at competitive prices.
During the year about 26,000 tonnes of waste paper was collected 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
over time. The first anniversary of National Recycling Day was celebrated
in Hyderabad on 1st July 2011 with large participation from school children
and general public. Your Company also launched the `Save 100000 Trees`
initiative during the year.
During the year, your Company achieved the distinction of being the first
paper company in India to obtain the Forest Stewardship Council - Forest
Management (FSC-FM) certification covering 8,000 hectares of social
forestry plantations involving about 9,000 farmers.
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 papers & paperboards.
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.
During the year, the Tribeni and Bollaram units also obtained the FSC Chain
of Custody Certification ensuring that all four paper manufacturing units
of your Company now have this 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 1,10,000 tonnes of waste paper during the year has further
consolidated the business`s overall positive solid waste recycling
Your Company continues to work on various Clean Development Mechanism (CDM)
projects. Your Company`s unique social forestry project is the first of its
kind in India to be registered with the United Nations Framework Convention
on Climate Change (UNFCCC) as a CDM project. About 3,100 hectares of social
forestry plantations involving around 3,400 farmers have already been
covered and the net benefits from this project will be passed on to the
partnering farming communities.
During the year, the following awards of the British Safety Council were
received by respective units - The `Sword of Honour` by Tribeni and
Bollaram units, the `Globe of Honour for Environment` by Bhadrachalam and
Kovai units, 5 Star rating for Safety & Health by Kovai, Tribeni and
Bollaram units and 5 Star rating for Environment by Bhadrachalam and Kovai
units. In addition, Bhadrachalam unit won the CII - National Award for
Excellence in Energy Management and Kovai unit won the CII - National award
for Excellence in Water Management. The business also won the CII -
Environmental Best Practices Award 2012 for its `WOW` initiatives.
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. In addition, all units have taken proactive steps to
comply with the revised norms expected to be announced by the Central
Pollution Control Board for water consumption and effluent discharge. 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
use of inferior grades of coal and also significantly reduce coal
consumption. Your Company is also committed to increasing the share of
energy consumed from non-conventional and renewable sources and towards
this has commissioned 5 windmills close to Coimbatore to generate 7.5 MW of
electricity for use at 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 TPM initiative has now been extended to all units and apart from
yielding significant financial benefits will also help institutionalise
best-in-class systems, processes and work methods. The success of this
initiative is attributable to the whole hearted support and participation
of all employees across the business.
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 these 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 paper industry.
Packaging and Printing
Your Company`s Packaging and Printing business continues to provide
contemporary and superior packaging solutions facilitated by its state-of-
the-art technology and processes. The business continues to provide
strategic support to your Company`s FMCG businesses by providing innovative
packaging solutions and security of supplies in addition to delivering
benchmarked international quality at competitive costs.
The business continued to leverage its multiple packaging platforms to
expand business in the domestic and export markets, and grew volumes both
from existing customers as well as from enlargement of its customer base.
Your Company continues to be a leading supplier of value-added packaging to
the Consumer Electronics and FMCG sectors.
During the year, the business continued to invest in contemporary
technologies in flexibles and paperboard packaging at the Haridwar and
Chennai facilities. These in-house capabilities have enabled quicker
turnaround of designs, pack changes and reduced product launch timelines
for your Company`s FMCG businesses, thereby providing a source of
competitive advantage in the market place.
Your Company undertook expansion projects at Haridwar and Chennai, during
the year, to address growing opportunities in external trade and to enable
manufacture of a full range of packaging solutions from both locations. The
expansion programme includes the addition of a carton line for meeting the
growing needs of customers based in the northern region and balancing
investment in flexibles packaging for enhancing competitiveness.
The business won several awards during the year for operational excellence,
innovation and creativity. These include two `World Star Awards` from the
World Packaging Organisation, three `Asia Star Awards` from the Asian
Packaging Federation and thirteen awards instituted by Indian Flexible
Packaging and Carton Manufacturers Association (IFCA) for excellence in
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, flowing from your Company`s commitment to the `Triple Bottom
Line`, is a certified project under the Clean Development Mechanism of the
Kyoto Protocol. Further, this initiative is generating carbon credits and
contributing to a reduction in your Company`s carbon footprint.
The factories at Chennai, Haridwar and Munger continued to maintain the
highest standards in Environment, Health and Safety (EHS). Also, the Munger
unit won the British Safety Council`s International Safety Award during the
Continuing investments in world class technology, best-in-class quality
management systems and processes, dispersed manufacturing footprint and a
diversified packaging solutions portfolio, the business is well poised to
service all the requirements of your Company`s FMCG businesses and to
rapidly grow its external trade.
D. AGRI BUSINESS
Cigarette Leaf Tobacco
While the end of 2010 marked a significant shift in the global supply-
demand scenario triggered by declining sales of major global cigarette
manufacturers and excess leaf production in major origins, 2011 witnessed a
further continuation of this declining trend of global cigarette
production, impacted by the downturn in the global economy. The downward
correction in leaf tobacco demand led to world supplies moving to a surplus
situation and a rapid build up of uncommitted stocks. Consequently, farm
and export prices of Indian flue-cured crop witnessed significant declines.
In line with subdued trends across the globe, Indian unmanufactured leaf
exports degrew by about 20% in volume terms since 2009.
The position for Indian flue-cured virginia tobaccos gets further vitiated
by the decrease in domestic demand due to high differential taxes on the
end use products, namely, cigarettes vis-a-vis other types of tobacco. This
gets further aggravated by the large scale import of cigarettes, both legal
and contraband, into India which do not use domestic flue-cured virginia
In the short term, supply side corrections are anticipated in key origins
after a period of consecutive increases in global flue-cured leaf
production driven by muted demand and manufacturers seeking to lower their
inventory durations. In the medium term, demand is expected to pick up
gradually with the anticipated revival of the global economy coupled with
growing consumption in Asia, Middle East, parts of Europe and Africa. It is
also estimated that the consumption of other forms of tobacco like Roll-
Your-Own (RYO), Snus and Hubble Bubble will grow at a faster rate, albeit
on a smaller base.
Despite these adverse conditions, your Company was able to sustain the
demand for Indian tobaccos through focused strategies leveraging its
sources of competitive advantage in crop development, product integrity,
strategic sourcing and superior processing capability. Significant volumes
of flue-cured tobaccos were garnered through superior understanding of
customer requirements and delivering committed quality and value to the
customer. Your Company continues to focus on superior quality and varietal
offerings to customers in the burley segment through collaborative and
customised programmes. The business also engaged with potential customers
across the globe and actively explored market opportunities in the growing
smokeless tobacco segment through customised offerings.
The business continued to provide strategic sourcing support to your
Company`s Cigarettes 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. Significant milestones were achieved in the
development of a new curing regime for tobacco and further experimental
trials are underway to create a unique product portfolio.
Your Company`s pioneering R&D efforts on varietal improvements in leaf
tobacco were further fortified with the development of various burley and
oriental type tobaccos. These initiatives such as improved nursery
management designed for higher efficiencies in seed use, optimised usage of
crop production chemicals and other agronomic practices are helping improve
the potential of newly developed varieties. 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 Company`s 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 Company continues to focus on maintaining the highest quality and
safety standards at all its units. During the year, the Chirala and
Anaparti factories received the International Safety Award from the British
Safety Council for ensuring `Best Safety Management` systems and the
Anaparti unit was awarded the `National Level Excellence in Water
Management Award`, as `Excellent Water Efficient Unit` by CII.
To further enhance quality and improve supply chain efficiencies, your
Company commissioned a new facility in Karnataka with a capacity of 35
million kgs per annum. This investment will not only enhance in-house
processing capacity but is also expected to reduce supply chain costs given
the factory`s proximity to the tobacco growing regions in Karnataka. The
business is also actively engaged in augmenting its warehousing capacities
and reengineering its supply chain from a strategic cost management
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
The Indian food grain production for the year is estimated at a record high
of over 250 million tonnes mainly on account of increase in production of
rice and wheat. Wheat output estimates are at an all-time high of about 90
million tonnes. Rice production, at around 103 million tonnes, was higher
than 96 million tonnes in the previous year. Overall oil seed production
was also on the higher side at about 30 million tonnes. However, India
still continues to import nearly 50% of its requirement of edible oil.
The international soya bean market reflected a slowdown in arrival of
quantities with all major producers showing a dip in production. Overall
global production was about 8% lower than the previous year. While Brazil,
Argentina and the US all reported lower crop outputs, demand from China was
on the upswing. Although the Indian crop grew in terms of volume, it
suffered in terms of quality due to pre-monsoon showers in the growing
areas and as such was not able to leverage the uptrend in global prices.
Your Company`s uniquely structured commodity sourcing business model with
strong competencies in multi-location sourcing, logistics and supply chain
management was able to leverage its strengths to improve value capture in
the soya market and significantly expand business scale.
Your Company continued to source identity preserved, special varieties of
wheat through its e-Choupal network channel for its Branded Packaged Foods
business. The continuous focus on minimising bridging costs of wheat for
Aashirvaad atta, while seeking to capitalise on geographical and varietal
arbitrage opportunities, provided a competitive advantage to your Company`s
Foods business. The external wheat business successfully catered to a wider
range of customers, such as brand owners, private labels, food processors
In the area of potato sourcing, the business continued to support the Foods
business by procuring the highest quality chip stock potatoes for your
Company`s Bingo! brand of potato chips. The endeavour of partnering with
farmers to source locally grown potatoes (closer to manufacturing units)
helped minimise logistics costs. Trials for the development of new
varieties and new areas continued during the year and such extension
efforts helped significantly increase potato crop this year in Gujarat.
India is the world`s largest producer, consumer and exporter of spices.
Export of spices from India has been growing at 23% per annum over the last
5 years. The growing concerns of food safety and product integrity have
increased demand for suppliers with `end-to-end` capabilities having
complete custody of the supply chain, supported by appropriate technology,
quality practices and augmented with traceability management systems to
provide the required product assurance. Your Company seeks to harness this
opportunity by building a business model based on customised products and
services with requisite crop development, state-of-the-art infrastructure
and tailor-made products and processes to garner an increasing share of the
fast growing domestic and export spices market. During the past five years,
the business, apart from providing support to your Company`s Aashirvaad
range of spices has also gained considerable market standing amongst large
domestic and export customers as a supplier of assured quality with
customised processes and infrastructure and with a significantly high level
of `source credibility`.
Enhancing productivity and establishing effective linkages to markets lies
at the root of revitalising agriculture. In this context, effective
agricultural extension services are crucial to enabling effective
absorption of technology and best practices at the farm level. Through the
`Choupal Pradarshan Khet` initiative, the agri services vertical has been
focusing on improving productivity of crops (food grains, cereals, oil
seeds and horticulture) while deepening relationship with the farming
community. During the year, linkages with Indian Agriculture Research
Institute (IARI) were strengthened through an MOU to provide transfer of
new varieties of wheat seeds to farmers under Public Private Partnership
(PPP). A number of farmer training programmes along with farm
demonstrations were also undertaken. Demonstrations of remunerative
horticulture crops which provide a higher income have also benefitted
farmers across the States of Madhya Pradesh, Tamil Nadu, Uttar Pradesh and
Provision of rural health services through the e-Choupal platform has also
been initiated by your Company. A `Market Based Partnership for Health`
programme was started on a pilot basis in the previous year specifically
focusing on improvement of maternal and child health and hygiene. In
alliance with the United States Agency for International Development
(USAID), village health champions were identified and given specific inputs
and training for dissemination and creation of awareness among women. In
alliance with partnering companies in the health space, the village health
champions also market the related health and hygiene products which in turn
provide them with an avenue for income. With the successful consolidation
of this project in Gonda and Chandauli districts of Uttar Pradesh, your
Company now seeks to replicate the same across other areas covered by the
These initiatives will progressively transform the e-Choupal network into
an all-weather venture - relatively de-risked from regulatory uncertainties
and market volatility - even as it continues to provide strategic sourcing
support to your Company`s Branded Packaged Foods business as well as to
serve as an efficient model for rural development.
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 Company`s Accounts.
Shareholders desirous of obtaining the report and accounts of your
Company`s subsidiaries may obtain the same upon request. The report and
accounts of the subsidiary companies will be kept for inspection at your
Company`s 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 Company`s website,
www.itcportal.com, in a downloadable format.
ITC Global Holdings Pte. Limited, Singapore (`ITC 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 ITC Global for
the financial year ended 31st December, 2011 or to make available copy of
the same for inspection by shareholders.
Surya Nepal Private Limited
The operating environment in Nepal continued to remain uncertain during the
year under review. The spate of disruptions in economic activity, as a
result of the disturbed industrial climate and political instability, has
resulted in deceleration in economic growth and employment generation and a
slowdown in investments. The GDP growth for the financial year ended mid
July 2011 was at 3.5% against 4% in the previous year with Industry growing
only at 1.4% compared to 3.3 % last year.
Amidst the challenging operating environment, the company maintained its
growth trajectory during the year under review. In the twelve-month period
ended 13th March, 2012 (30th Falgun 2068), the company recorded a 15%
growth in sales with Gross Revenue (net of VAT) increasing to Nepalese
Rupees (NRs.) 1426 crores from NRs. 1244 crores in the previous year. Net
Profit at NRs. 286 crores increased by 21% over the previous year. The
company retained its status as the single largest private sector
contributor to the exchequer accounting for about 16% of excise collections
and 3.5% of the total revenues of the Government of Nepal.
The company consolidated its leadership position in the cigarette market
through unrelenting focus on providing consumers a wide range of product
choices of superior quality. On the manufacturing front, the company
continued to invest in new technology cigarette packing lines and
development of human talent to reinforce its market standing. The
construction of a second factory near Pokhara is in progress and will
position the company well for meeting consumer demand in the longer term.
The disturbed industrial relations situation prevailing in Biratnagar
Industrial belt, led to frequent disruption of operations at the garments
manufacturing unit. This rendered export operations unviable and the
company was constrained to close down the facility. In the domestic branded
apparel industry, the supply chain and distribution infrastructure for
`John Players` and `Springwood` brands were further strengthened during the
In the Safety Matches business, revenues of the company`s brand `Tir`, have
grown by nearly 36% during the year, evidencing its strong and growing
The company continued to partner with tobacco farmers in Nepal for
productivity and quality enhancement at the farm level through the
induction of agricultural best practices. Such efforts are expected to
result in sustainable benefits for both the farmer community and the
company. The company`s commitment to its role as a responsible corporate
citizen was further reinforced with initiatives such as the construction of
a school building for the local community proximate to the site of its
second factory near Pokhara and the institution of the `Surya Nepal Pvt.
Ltd. Asha Social Entrepreneurship Awards`. At Simra, the company continued
to support multiple local community development programmes including health
camps and irrigation development.
The company declared a dividend of NRs. 111.50 per equity share of NRs.
100/- each for the year ended 16th July, 2011 (32nd Ashad 2068).
ITC Infotech India Limited
The global IT services industry continued to be impacted in 2011 by
macroeconomic uncertainties, particularly in Europe, which adversely
impacted technology spends. Under these challenging circumstances, the
company`s consolidated Total Revenue grew by over 30% to Rs. 830 crores,
which is well above the industry average and Net Profit grew by over 170%
to Rs. 50 crores.
This robust performance is an outcome of the successful strategies adopted
by the company in (i) domain-led differentiation across identified industry
verticals, (ii) geographic expansion to leverage emerging growth
opportunities aligned to capabilities and (iii) sharp focus on delivery
excellence, designed to demonstrate continuous value addition to clients
while enhancing service productivity.
For the year under review:
(a) ITC Infotech India Limited registered a Total Revenue of Rs. 566.23
crores (previous year Rs. 426.42 crores) and a Net Profit of Rs. 28.69
crores (previous year Rs. 7.46 crores);
(b) ITC Infotech Limited, UK, (I2B) a wholly owned subsidiary of the
company, registered a Total Revenue of GBP 24.35 million (previous year GBP
22.22 million) and a Net Profit of GBP 2.13 million (previous year GBP 1.03
(c) ITC Infotech (USA), Inc., (I2A) a wholly owned subsidiary of the
company, together with its wholly owned subsidiary Pyxis Solution LLC,
registered Total Revenues of US$ 49.85 million (previous year US$ 38.43
million) and a Net Profit of US$ 0.3 million (previous year US$ 0.01
With a view to securing the future, apart from expanding the company`s
existing in-house domain solution capabilities, specific development
programmes have been implemented to embrace disruptive technologies such as
cloud computing, social media and mobile computing. Further, as in the
past, there was a selective expansion of market presence in high potential
geographies to leverage market opportunities and also to serve as a measure
of risk mitigation in the event of economic challenges in other markets.
Continuing the trend, during the year, branches were set up in Hong Kong,
France, Germany and South Korea.
In addition, an important milestone in the evolution of the company`s
delivery capability has been the commissioning of a new Development Centre
at Pune during the year.
While the quality of delivery continues to delight global customers, the
company has also been contributing in a meaningful manner towards enhancing
the competitiveness of your Company`s other businesses. The implementation
of `Club ITC` - a pan-ITC loyalty programme for your Company - on Siebel
technology, is believed to be the first of its kind in the world.
The company launched its first software product in the Indian market during
the year. Named `OptSustain`, this assists customers in managing and
reporting corporate sustainability performance. This is a notable addition
to the portfolio of intellectual property.
An externally administered customer satisfaction survey indicates that
customers have awarded the company high scores, which are ranked amongst
the top few in the industry. While the scores validate the world class
quality of service, retaining such scores for the second year stands
testimony to the commitment to continuously raising the levels of service
to meet growing market expectations.
The overall service delivery capability of the company continues to earn
global recognition. The company was featured for the sixth consecutive year
in the 2011 Global Services 100 survey, conducted by Global Services and
Neo Advisory. Leading analyst firms such as Gartner and Forrester Research
continue to highlight the company`s capabilities in industry and technology
On the talent management front, the company has implemented and
continuously refines sharply focused initiatives encompassing recruitment,
training, engagement and retention. The broad spectrum of services, coupled
with growing client engagements across the world, has created workplace
challenges necessary to motivate employees, offer attractive career growth
opportunities and minimise attrition.
While uncertain economic conditions continue to persist, particularly in
developed markets which account for about 80% of IT services spends, with a
portfolio of differentiated solutions, strong customer relationships,
expanding market presence and excellence in delivery, the company is
confident of sustaining its robust growth.
Russell Credit Limited
During the year, the company registered a Total Revenue of Rs. 40.58
crores and a Net Profit of Rs. 31.43 crores.
The company, during the year under review, sold its entire holding in
Ordinary Shares of Technico Pty Limited, Australia and in Equity Shares of
Wimco Limited to your Company. Consequent to the sale, both these companies
became direct subsidiaries of your Company.
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 company`s Counter Offer to the shareholders of VST
Industries Limited (VST), made in accordance with the Securities and
Exchange Board of India (Substantial Acquisition of Shares & Takeovers)
Regulations, 1997, as a competitive bid, pursuant to a Public Offer made by
an Acquirer, which closed on 13th June, 2001.
The High Court at Calcutta did not grant an injunction. However,
transaction in the shares of VST pursuant to the Counter Offer by the
company and the other Acquirer is subject to the final Order of that Court,
which is awaited.
Similar petitions filed by an individual and two shareholders, in the High
Court of Delhi and High Court of Judicature of Andhra Pradesh at Hyderabad,
had earlier been dismissed by the respective High Courts.
The company achieved a Net Revenue of Rs. 170 crores during the year and
posted a net loss for the year of Rs. 45.99 crores against Rs. 59.65
crores loss in the previous year, primarily as a result of one-time
separation costs and steep increases in input costs. During the year the
company has raised Rs. 59.56 crores through Rights issue of shares.
Margins in the Safety Matches business continued to remain under pressure
mainly due to escalation in prices of raw materials like wood, splints,
paperboard and key chemicals. The business initiated several cost
management measures to rationalise costs and improve margins in this highly
Availability of critical raw materials like wood at competitive prices is
crucial for the success of the Safety Matches business. The Agro Forestry
business of the company is taking steps towards this end by supplying high
quality poplar sapling to farmers in Northern India. Apart from creating a
long term sustainable supply of a critical raw material, the company`s
initiative of creating sustainable and meaningful linkages across the
farmer community is helping to create employment and livelihood
opportunities while improving the green cover in the region.
The recent Union Budget 2012 accentuated the already disadvantaged position
of the mechanised Safety Matches industry by further increasing the
differential in excise duties between the mechanised and non-mechanised
sectors. This has forced the company to evaluate alternatives to arrive at
a viable business model. In continuation of last year`s action to enable
better leveraging of the underlying asset base, a voluntary separation
scheme was effected at the Kolkata factory during the year.
The Engineering business revenues grew by 19% during the year driven mainly
by improved value capture through continuous product development in
packaging machinery. The business plans to leverage new and improved
product design to offer superior packaging solutions to its customers.
The initiatives taken by the company during the year to restructure its
operations are expected to yield positive results in the years to come.
Srinivasa Resorts Limited
During the financial year ended 31st March, 2012, the company recorded a
Total Revenue of Rs. 57.66 crores (previous year Rs. 56.04 crores) and a
Profit Before Tax of Rs. 11.89 crores (previous year Rs. 12.85 crores).
Net Profit for the year stood at Rs. 9.40 crores (previous year Rs. 9.26
The challenging environment in the State of Andhra Pradesh is adversely
impacting the financial performance of the company`s hotel ITC Kakatiya,
Hyderabad. The hotel continued its focus on cost containment to maintain
profitability in a year of intense market competition and high inflation.
During the year, ITC Kakatiya obtained the prestigious Leadership in Energy
and Environment Design Platinum certification from the United States Green
The hotel received the `Times Food Guide` awards for `Kebabs & Kurries` and
`Dakshin` - with both being rated as the best restaurants in their
respective categories for the third time in a row. In addition, the `Marco
Polo` bar received the award for best outlet in its category.
The Board of Directors of the company has recommended a dividend of Rs.2/-
per equity share of Rs. 10/- each for the year ended 31st March, 2012.
Fortune Park Hotels Limited
During the financial year ended 31st March, 2012, the company recorded a
Total Revenue of Rs. 20.78 crores (previous year Rs. 18.01 crores) and
earned a Net Profit of Rs. 4.96 crores (previous year Rs. 4.12 crores).
The company 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 67 with an aggregate room inventory of over 5,000. The
`Fortune` brand now has 40 operating hotels and another 4 hotels are slated
to be commissioned in the next financial year. The remaining 23 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 was awarded the Hospitality India Award for
the `Best First Class Hotel Chain, 2011` and Satte award for `Leading Mid -
Market chain, 2012`. Fortune Select Exotica, Navi Mumbai was awarded the
`World Luxury Hotel Award` for the year 2010 and 2011.
The Board of Directors of the company has recommended a dividend of Rs.
10/- per equity share of Rs. 10/- each for the year ended 31st March,
Bay Islands Hotels Limited
During the financial year ended 31st March, 2012, the company recorded a
Total Revenue of Rs. 1.37 crores (previous year Rs. 1.12 crores) and a
Net Profit of Rs. 0.92 crores (previous year Rs. 0.76 crores).
The Board of Directors of the company has recommended a dividend of Rs.65/-
per equity share of Rs. 100/- each for the year ended 31st March, 2012.
Land base 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 as per schedule.
During the year, the company issued and allotted to your Company, 23,00,000
Redeemable Preference Shares of Rs. 100/- each for cash at par,
aggregating Rs. 23 crores. The proceeds from the Preference Share issue
are being utilised by the company for the construction of the destination
Technico Pty Limited
The company continued to focus on upgrading the TECHNITUBER. Technology and
consequent commercialisation 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.
During the year under review, your Company acquired from its wholly owned
subsidiary, Russell Credit Limited, the entire shareholding of the company.
The company`s 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 Company`s
Branded Packaged Foods business but also for servicing the seed potato
requirements of the farmer base of your Company`s Other Agri Commodities
For the year under review:
a) Technico Pty Limited, Australia registered a turnover of Australian
Dollar (A$) 1.13 million (previous year A$ 1.58 million) and a Net Profit
of A$ 0.11 million (previous year A$ 0.10 million). The lower turnover was
due to reduced orders by a large customer as well as the strengthening of
the Australian Dollar against the US Dollar and Euro which are the
company`s invoicing currencies. The company`s property at Paddy`s River,
Australia, held for sale for some years, was disposed off during the year
and the sale proceeds along with the available cash balance were utilised
to repay all outstanding loans of the company.
b) Technico Agri Sciences Limited, India registered a Net Revenue of Rs.
48.20 crores (previous year Rs. 47.65 crores) and a Net Profit of Rs.
7.83 crores (previous year Rs. 7.02 crores). During the year under review,
production of potato in India, estimated at 37.5 million tonnes, recorded
an all-time high leading to surplus stocks and low prices. As a result, the
demand for seed potato and its prices were also depressed. Consequently,
the company experienced a muted growth in turnover. However, the company
leveraged its market standing, product quality, on-field performance and
strong trade and customer relationship, to drive a price premium for its
seed potatoes and deliver 11.5% growth in profits over the previous year.
During the year, the company also repaid its outstanding loan from Russell
Credit Limited in accordance with agreed terms.
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
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 Company`s tobacco products in the US market.
During the financial year ended 31st March, 2012, the company recorded Net
Sales of US$ 26.95 million (previous year US$ 35.55 million) and earned Net
Income of US$ 0.48 million (previous year US$ 0.52 million).
During the year under review, KMM continued to face a challenging operating
environment, post the Federal Excise Tax increases of the previous year,
which resulted in a decline of cigarette sales volumes and revenues. The
year also saw the major multinational companies solidify their foray into
the discount segment in which the company operates, with tighter loyalty
programmes, as consumers pursued value. Growth of Pipe tobaccos as a
substitute for `Roll Your Own Tobacco`, cigarette manufacturing machines at
retail, presence of flavoured little cigars akin to cigarettes, discount
cigarettes manufactured in Native American reservations sans State taxes,
and illicit trade all challenged the company`s ability to drive volume
upturns. Consequently, KMM`s pricing power was stagnant. Improved cost
metrics nevertheless led to enhanced profitability.
Government regulations in the tobacco sector continue to take shape. We
believe that the industry will consolidate further as US Food and Drug
Administration regulations evolve, including in the Other Tobacco Product
(OTP) categories like Pipe Tobaccos and Cigars. The company will continue
to attune its strategies based on emerging opportunities in the market.
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 US$ 18.10 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 Company`s motion to set aside the Writ of Summons. Your
Company filed an appeal against the Assistant Registrar`s 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 & MRR Trading and Investment Company Limited
There were no major events to report with respect to the above companies.
NOTES ON JOINT VENTURES ITC
The Gross Revenue of ITC Filtrona Limited for the year ended 31st December,
2011 was at Rs. 181 crores (Rs. 139 crores in 2010). Pre-tax profits for
the year were at Rs. 15.6 crores 12.1 crores in 2010). The year saw an
overall improvement in sales volume along with a better product mix. The
company has been continually engaging in upgradation of its filter making
technology which has enabled the company maintain its leadership position
and technology edge over competition and cater to growth both in product
mix and volumes.
In order to strike a balance between the need to sustain investments and
growth in the future and the expectation of shareholders for growing
income, the Directors of the company have recommended a dividend of Rs.
9.00 per ordinary share of Rs. 10.00 each for the year ended 31st
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
Maharaja Heritage Resorts Limited
Maharaja Heritage Resorts Limited, a joint venture of your Company with
Jodhana Heritage Resorts Private Limited, currently operates 40 heritage
properties and is in the process of adding 9 more properties across 14
States in India. The company`s `WelcomHeritage` portfolio has been
rationalised and now offers `Legend`, `WelcomHeritage Hotels` and `Nature
Resorts` brands, thereby providing uniquely differentiated propositions to
guests in the cultural, heritage and adventure tourism segments
The company has 9 properties under the `Legend` brand categorised as up-
market and known for providing superior service delivery and brand
standards. The company also has 10 properties under the `Nature Resorts`
brand and 21 properties under the `WelcomHeritage Hotels` brand.
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.
The company is in the process of finalising the design and product
configuration of the proposed development. Preparatory activity at the site
is underway with a view to commencing excavation work shortly.
Logix Developers Private Limited
During the year, 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)
and will, inter-alia, provide hotel operating services to LDPL under an
Operating Services Agreement, upon commissioning of the hotel.
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
- 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
- Appropriate structures have been put in place to proactively monitor and
manage the inherent risks in businesses with unique / relatively high risk
- 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
- 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 Company`s 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 business environment.
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
Your Company`s Internal Audit function is certified as complying with ISO
9001:2008 quality standards in its processes.
The Audit Committee of your Board met ten 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 Company`s
risk management policies and systems. It also engaged in overseeing
HUMAN RESOURCE DEVELOPMENT
Your Company`s human resource management systems and processes are designed
to enhance employee engagement, organisational capability and vitality so
as to ensure that each of the businesses is world class, is positioned for
competitive superiority and capable of achieving your Company`s ambitious
plans for growth. A key component of your Company`s human resource strategy
is the unique strategy of organisation that ensures that each business is
enabled to focus on its own product market while at the same time,
leverages the synergies of a multi-business conglomerate. This unique
strategy of organisation also focuses on developing and nurturing
distributed leadership and ensures that each of your Company`s businesses
is managed by a team of competent, passionate and inspiring leaders,
capable of building a future-ready organisation through continuous
learning, innovation and world class execution.
Your Company is recognised and acknowledged for its world class human
resource practices and enjoys strong equity in the talent market that makes
it an `employer of choice` anchored in its ethos - `Building winning
businesses, Building business leaders, Creating value for India.` The human
resource philosophy, strategy and processes of your Company have been
designed to attract and retain quality talent and nurture workplace
challenges that keep employees highly engaged, motivated and committed to
innovation and customer delight. This talent has, through strong alignment
with your Company`s vision, successfully built and sustained your Company`s
standing as one of India`s most valuable corporations.
Your Company fosters a culture that rewards performance, continuous
learning, collaboration and capability development across the organisation,
to be future-ready and meet head-on the challenges posed by ever-changing
market realities. Your Company`s unflagging commitment to investing in
talent development ensures performance and achievement of the highest
Your Company`s unswerving belief in the mutuality of interests of key
stakeholders, binds all employees to a shared vision and purpose, thus
providing it with the vital force to win in the market place. During the
year under review, your Company successfully concluded long term agreements
at several of its manufacturing units and hotel properties, strengthening
the collaborative spirit across all sections of employees. This has
resulted in significant enhancement in quality and productivity, at the
core of which is an abiding commitment to continuous investment in
contemporary management practices and manufacturing systems.
Your Company`s aspiration to sustain and enhance its position as one of
India`s most valuable corporations committed to making a significant
contribution beyond the market is anchored in the quality and dynamism of
its human resource. Their unflinching commitment is the driving force
behind your Company`s purpose of creating enlarged societal value. The
Directors of your Company deeply appreciate the spirit of its dedicated
team of over 25,000 employees.
SUSTAINABILITY - CONTRIBUTION TO THE `TRIPLE BOTTOM LINE`
Corporate Social Responsibility (CSR)
Economic progress and long term sustainability of business is today
challenged by two major global threats. On the one hand are the societal
challenges arising out of widespread hunger and poverty with severe
inequity in distribution of wealth. On the other is the alarming
environmental degradation and impact of global warming and climate change.
These global threats, mirrored in India in perhaps larger dimensions, can
severely constrain human development and economic progress. To address the
challenges emerging from these threats, your Company continues to pursue a
`Triple Bottom Line` approach that subserves national priorities by
creating larger societal value encompassing the creation of economic,
environmental and social capital.
It is your Company`s 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 synergistic manner.
- 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 Company`s 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 Company`s operations with the national objective of
inclusive growth and employment generation by leveraging your Company`s
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 pursuance of these polices, your Company has crafted innovative business
models that create larger and enduring value by not only generating new
sources of competitive advantage for its businesses, but also in the
process augmenting natural capital and sustainable livelihoods for the
Your Company published its 8th consecutive Sustainability Report during the
year that detailed the progress made across all dimensions of the `Triple
Bottom Line` for the year 2010-11. 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 9th Sustainability Report covering the sustainability
performance during the year 2011-12 is in the process of preparation.
Your Company is today acknowledged as a global exemplar in sustainable
business practices. This is manifest in its distinction of being the only
company in the world of comparable dimensions, to be carbon positive, water
positive and solid waste recycling positive. These milestones, which are a
result of significant efforts in building natural and social capital, are
positive dimensions contributing to the missions of the National Action
Plan on Climate Change.
Environment, Health & Safety
Your Company has proactively pursued a low carbon growth strategy that
addresses climate change mitigation and adaptation through several
innovative and pioneering initiatives. These include continuous efforts
towards energy conservation and efficiency, increasing use of renewable
energy in its operations, establishing green buildings, extensive
integrated watershed development programmes, promotion of sustainable
agricultural practices and carbon sequestration through large-scale
Your Company continues its participation in market-based mechanisms for
mitigating the impact of climate change under the Clean Development
Mechanism (CDM) developed by United Nations Framework Convention on Climate
Change (UNFCCC). Several CDM projects registered with the UNFCCC are
already earning carbon credits while more projects are at various stages of
registration. Your Company is also uniquely positioned to participate in
other India specific schemes such as Perform, Achieve and Trade (PAT) and
Renewable Energy Certificates (RECs) promoted by Government of India.
Given its abiding commitment to reduce dependence on fossil fuel based
energy, your Company has progressively made significant investments in
renewable sources of energy. In addition to the 43.6 MW wind power projects
and a 90 Tonnes Per Hour biomass fired boiler already in operation for over
a year, your Company has installed additional 13.8 MW wind energy
generators in Maharashtra and Tamil Nadu. These investments along with
improved utilisation of the biomass fired boiler have led to 38.5% of your
Company`s total energy requirements being met from renewable sources.
Recognising that water will be an increasingly serious area of 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 Company`s operations. The Watershed Management
programme of your Company now covers nearly 90,000 hectares of water
Your Company led the green building movement in India and takes justifiable
pride that all its premium luxury hotels are now LEED (Leadership in Energy
and Environment Design) Platinum certified making it the `greenest luxury
hotel chain` in the world. The ITC Green Centre in Gurgaon which was
earlier declared the largest LEED Platinum rated office space in the world
in 2004, was during the recent re-certification, identified as the world`s
highest rated green building with Platinum certification by the US Green
Building Council. The ITC Gardenia, certified LEED Platinum in 2010, is
also the world`s largest hotel rated in this category. Your Company has
been spearheading the progressive implementation of validated
green/sustainability standards for existing hotels and factories. As a
further manifestation of these values, during the year under review, your
Company`s factories at Saharanpur and Bengaluru have also received the LEED
Platinum rating from the Indian Green Building Council.
Your Company`s `WOW - Wealth Out of Waste` -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 benefits from
the generation of sustainable raw material sources at competitive prices,
whilst conserving scarce environmental resources and generating
considerable livelihood opportunities.
All units of your Company are mandated to achieve total recycling of waste
generated by their operations. All the units have made significant progress
in achieving this target, enabling your Company to recycle over 99.9% of
waste generated by its operations during the year. The Paperboards and
Specialty Papers business, which accounts for nearly 91% of the total waste
generated in your Company, has recycled 99.9% of the total waste generated
by its operations. This business has also recycled an additional 1,15,414
tonnes of externally sourced post-consumer waste paper, thereby creating
yet another positive environmental footprint.
Your Company continued with its commitment towards 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 and
state-of-art fire safety measures, which are regularly checked and
monitored through rigorous internal audits. With the objective of
sustaining the improving trend in accident statistics, your Company has
embarked on an ambitious Behavioural Safety Culture programme to further
embed Safety as a key value, across all levels of employees. It is expected
that this significant investment by your Company will create long term
benefits. 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.
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 6th Sustainability
Summit: `Sustainability Solutions, 2011`, attracted over 350 participants
representing experts from industry, government and civil society from India
and several countries across the world and over 25 exhibitors participated
in the first-ever Sustainability Exhibition. 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. It is heartening that the number of aspirants
for the Award is steadily increasing year on year.
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 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. During the year, the Centre introduced three new service lines in
the areas of Social Responsibility based on ISO 26000, Green House Gas
Emissions Inventories and Verification based on ISO 14064 and business
model innovation. It is the only certified trainer for sustainability
assurance professionals in South-East and South Asia.
Your Company`s overarching aspiration to create meaningful societal value,
inspired by a vision to subserve a larger national purpose and abide by the
strong value of Trusteeship, is manifest in ITC`s strategy to enhance the
competitiveness of value chains of which it is a part and, in particular,
those that encompass the most disadvantaged sections of society, especially
in rural India, through economic empowerment based on grassroots capacity
building. Your Company`s Social Investments Programme continues to be
influenced by the needs and concerns of rural communities with whom your
Company`s agri-businesses have forged a long and enduring partnership, and
the communities (both rural and urban) residing in close proximity of its
Consequently, (a) For rural communities, the attempt is to diversify
farming systems 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
creating livelihoods through agarbatti production and developing social
capital to prepare the beneficiaries for relevant and contemporary skills.
The footprints of your Company`s 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
Your Company`s pioneering initiative of wasteland development through the
Social Forestry Programme currently covers 24,196 hectares in 1,321
villages, impacting nearly 30,000 poor households. This is an integral part
of the Social & Farm Forestry initiative that covers a total of over
1,25,000 hectares today. This initiative is aligned to its 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 has been the introduction of the Agro Forestry model. Another
significant achievement of the year was the successful completion of the
FSC - FM (Forest Stewardship Council - Forest Management) Certification
The coverage of your Company`s Soil and Moisture Conservation programme,
designed to assist farmers in identified moisture-stressed districts,
increased by an additional 24,992 hectares. 442 water-bodies were created
during the year. The total area covered under the watershed programme
cumulatively stands at 89,491 hectares. Your Company signed two new MOUs
with the Government of Rajasthan for promoting sustainable livelihoods
through watershed development in the districts of Bundi and Pratapgarh
The Improved Agricultural Programme this year focussed on two new
initiatives: the direct recharge of defunct wells, with a coverage of 61
wells and improved agricultural practices through 37 farmer schools with
918 farmer students and demonstration plots to ensure methodical and
The Sustainable Livelihoods initiative of your Company strives to create
alternative employment for surplus labour and thereby decrease pressure on
arable land by promoting non-farm incomes. The programme for genetic
improvements of cattle through artificial insemination to produce high-
yielding crossbred progenies has been given special emphasis because it
reaches out to the most impoverished and has the potential to enable them
to live with social and economic dignity. 83 new Cattle Development Centres
were established during the year, taking the total to 293 centres covering
more than 5,000 villages, which provided 2.32 lakhs artificial
inseminations during the year thus taking the total to 8.07 lakhs
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.
The Women`s Empowerment Programme covered over 16,000 women through 1,380
self-help groups (SHG) with total savings of Rs. 285 lakhs. Cumulatively,
nearly 40,000 women were gainfully employed either through micro-
enterprises or assisted with loans to pursue income generating activities.
Over 19,000 new students were covered through Supplementary Learning
Centres and Anganwadis. Of these, 952 first generation learners were
enrolled into formal schools for the first time in their lives. 919 youth
were covered this year by the skills development initiative.
The advances made towards contributing to India`s sustainable development
goals have been possible, in large measure, to your Company`s 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 India`s most challenging
problems of development in the years to come.
Societal Capability Development
In line with its core value of Trusteeship, ITC supports various
initiatives that build capability of India`s rich human resources to
empower the nation`s fast growing working-age population. It also helps
preserve India`s rich cultural heritage enhancing the spirit embodied in
its credo of "Let`s Put India First."
To cater to the need for professionally trained human resources in the fast
growing hospitality industry, your Company contributed to the setting up of
the Welcomgroup Graduate School of Hotel Administration (WGSHA) together
with the Dr. TMA Pai Foundation in 1987. WGSHA`s training and development
activities are recognised by the International Hotel Association, Paris.
The college has been ranked amongst the top universities in the sector over
the years. Graduates of the college are today part of several leading hotel
chains of the world. WGSHA`s 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 sent to ITC Hotels to
understand the `Best Practices` employed at the hotels. A significant
number of WGSHA students are sent for 6-months` internship 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 world`s 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 a mission of preservation and
propagation of Hindustani Classical Music. With a galaxy of 9 pre-eminent
Gurus and 50 Scholars today, from 20, three years ago, 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 capabilities.
R&D, QUALITY AND PRODUCT DEVELOPMENT
Your Company continues to invest in a comprehensive Research & Development
(R&D) programme to develop a unique source of sustainable competitive
advantage and build future readiness by leveraging contemporary advances in
several relevant areas of science and technology and blending the same with
classical concepts of product development.
Your Company`s R&D team has set about addressing the challenging task of
creating a culture of science-led, product innovation in your Company by
appropriately identifying the required set of core competencies in areas of
science such as, Plant Breeding and Genetics, Agronomy, Microbiology, Cell
Biology, Genomics, Proteomics, Silviculture and several disciplines of
Chemistry. Presently, your Company`s R&D team is staffed with world class
scientists and is continuing to identify top talent for creating Centres of
Excellence in its chosen areas. The R&D centre is equipped with state-of-
the-art equipment for carrying out research and securing proprietary
technologies for your Company`s businesses.
The Agrisciences R&D team has continued its efforts in evaluating and
introducing several germ plasm lines of tobacco and eucalyptus to increase
the genetic and trait diversities in these crops, which in turn will
strengthen the research programmes for developing new varieties with higher
yields, better quality and other relevant traits, for your Company`s
businesses. Several research collaborations have been initiated with
globally recognised Centres of Excellence to fast track its journey towards
`proof of concepts`. These collaborations include: University of
Agricultural Science, Bengaluru; CSIRO, Australia and CSIR, South Africa
and cover both tobacco and eucalyptus and are structured in a manner to
ensure that your Company gains fundamental insights into several technical
aspects of plant breeding and genetics of both species. This will
accelerate your Company`s R&D efforts in creating future generations of
these crops with greater genetic and trait diversity, which the crops
Your Company`s Biosciences R&D team continued to pursue strategies to
leverage the potential of convergence of agricultural science, food science
and the scientific dimensions of its personal care products portfolio.
During the year under review, the R&D team continued to progress several
long term research platforms, which over time, will form the basis for
launching new and competitively superior products.
Your Company`s R&D strategy is anchored on a clear vision and road map and
is supported by a well-crafted Intellectual Property strategy. With scale,
speed, science and sustainability considerations, your Company`s R&D is
poised to deliver long term competitive advantage and play a leading role
in creating significant business impact.
Pursuing your Company`s relentless commitment to quality, each business is
mandated to continuously innovate on processes and systems to deliver
superior competitive capabilities. During the year, your Company`s Hotels
business extended its `Lean` and `Six Sigma` programmes to cover more
business processes. This will further enhance capability to create superior
customer value through a service excellence framework. The Paperboards,
Paper & Packaging business has implemented the `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.
Almost all contract manufacturing units in the Foods business and hotels
have stringent food safety and quality systems 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 year`s 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
Commissioner`s 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 has 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
Department`s 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 been discharged.
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
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 28 (v) in the Notes to the Financial Statements and Note 28 (iv)
in the Notes to the Consolidated Financial Statements.
As mentioned in earlier years, the Hon`ble 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 State`s 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 State`s petition is being contested.
RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE
You are aware that your Company had secured from the District Court of New
Jersey, USA, a decree for US$ 12.19 million together with interest and
costs against Suresh and Devang Chitalia of USA 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 Company`s treasury operations continued to remain
focused on deployment of temporary surplus liquidity and managing the
foreign exchange exposures within a well-defined risk management framework.
The year under review was characterised by rising interest rates and tight
liquidity conditions in the monetary system. Against the backdrop of high
inflation and the consequent policy rate increases by the Central Bank,
interest rates hardened across maturities. In this environment your
Company, by appropriately managing portfolio durations, 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. Investments
were preferred in shorter duration assets like Debt Mutual Funds and Bank
Fixed Deposits. Your Company`s 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 significantly
during second half of the year and was witness to periods of very high
volatility. In order to manage volatility, the Reserve Bank of India not
only had to intervene in the market but also enforce additional regulations
restraining active management of exposures by companies. In a scenario of
high volatility and stricter regulations, 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 Company`s Internal Audit department.
As mentioned in the Report of the Directors of earlier years, your Company
had obtained Stay Orders from the Hon`ble 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 Hon`ble 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
Your Company`s Public Deposit Scheme closed in the year 2000. As at 31st
March, 2012, 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 government agencies.
There was no failure to make repayments of Fixed Deposits on maturity and
the interest due thereon in terms of the conditions of your Company`s
INVESTOR SERVICE CENTRE
The Investor Service Centre (`ISC`) of your Company maintains its position
as an exemplar in investor servicing. The level 5 rating, the highest
rating level, accorded by Messrs. Det Norske Veritas, for the third year in
a row, stands testimony to the excellence achieved by ISC in its service
standards, systems and processes. ISC, accredited with ISO 9001:2008
certification, has a committed team of professionals supported by
The `Investor Relations` section in your Company`s corporate website serves
as a user friendly online reference for investors in respect of share
Mr. Serajul Haq Khan was appointed as Non-Executive Director of your
Company with effect from 27th July, 2007 and his present term will expire
on 26th July, 2012. The Board of Directors of your Company (the `Board`) at
its meeting held on 25th May, 2012 recommended for the approval of the
Members the re-appointment of Mr. Khan as Non-Executive Director of your
Company, liable to retire by rotation, with effect from 27th July, 2012.
Notice has been received from a Member of your Company under Section 257 of
the Companies Act, 1956 for the re-appointment of Mr. Khan, who has filed
his consent to act as Director of your Company, if appointed.
Appropriate resolution seeking your approval to his re-appointment is
appearing in the Notice convening the 101st Annual General Meeting (AGM) of
In accordance with the provisions of Article 91 of the Articles of
Association of your Company, Mr. Anthony Ruys, Mr. Dinesh Kumar Mehrotra,
Mr. Sunil Behari Mathur, Mr. Pillappakkam Bahukutumbi Ramanujam and Mr.
Anil Baijal will retire by rotation at the ensuing AGM of your Company and
being eligible, offer themselves for re-election. The Board has recommended
Your Company`s 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 Mr. P. Raju Iyer, Cost Accountant, Chennai, as
Cost Auditor, with the approval of the Central Government, for audit of
cost records maintained by the Paperboards and Specialty Papers business of
your Company for the financial year ended 31st March, 2011. The Cost Audit
Report was filed by the Cost Auditor on 28th September, 2011 within the due
date of 30th September, 2011.
In respect of the financial year ended 31st March, 2012, your Company, with
the approval of the Central Government, 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 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. The due date for filing the Cost
Audit Reports is 30th September, 2012.
EMPLOYEE STOCK OPTION SCHEME
Under your Company`s Employee Stock Option Schemes, 8,02,80,020 Ordinary
Shares of Rs. 1/- each, were issued and allotted during the year upon
exercise of 80,28,002 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, 2012 stands
increased to Rs. 781,84,24,300/- divided into 781,84,24,300 Ordinary
Shares of Rs. 1/- each.
Details of the Options granted up to 31st March, 2012 under the various
Employee Stock Option Schemes, including the ITC Employee Stock Option
Scheme -2011 which became effective from 26th August, 2011, 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 Company`s Auditors, Messrs. Deloitte Haskins & Sells, have certified
that your Company`s 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 having:
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 Boards.
The total number of employees as on 31st March, 2012 stood at 25,165.
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,
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 Report.
There were 72 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, 2012.
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 Company`s Board and employees are inspired by the Vision of sustaining
your Company`s position as one of India`s most admired and valuable
companies through world class performance, creating enduring value for all
stakeholders, including the shareholders and the Indian society. 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 Company`s adaptive capability and provides the intrinsic
ability to effectively manage business risk. The vision of enlarging your
Company`s 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 of the entire value chain of which they are a
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.
25th May, 2012 On behalf of the Board
37 J L Nehru Road
Kolkata 700071 Y. C. DEVESHWAR - Chairman
India P. V. DHOBALE - Director
ANNEXURE TO THE REPORT OF THE DIRECTORS
Statement as at 31st March, 2012, 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 Company`s Employee Stock Option
ITC Employee Stock ITC Employee Stock
Option Scheme Option Scheme-2006
During Cumulative During Cumulative
(i) (ii) (iii) (iv)
(A)(i) Number of Options: 11,00,988 1,09,91,558 6,79,412 2,08,02,953
(ii) Number of Bonus - 27,75,263 - 1,74,50,295
(iii) Total number of : 11,00,988 1,37,66,821 6,79,412 3,82,53,248
ITC Employee Stock Total
Option Scheme - 2010
During Cumulative During Cumulative
(v) (vi) (i)+(iii) (ii)+(iv)
(A)(i) Number of Options: 41,75,525 41,75,525 59,55,925 3,59,70,036
(ii) Number of Bonus - - - 2,02,25,558
(iii) Total number of : 41,75,525 41,75,525 59,55,925 5,61,95,594
* Bonus Options were allocated in 2005-06 and 2010-11 in the same ratio as
Bonus Shares issued (i.e. in the ratio of 1 Bonus Share for every 2
Ordinary Shares & in the ratio of 1 Bonus Share for every 1 Ordinary Share,
respectively) in accordance with the ITC Employee Stock Option Schemes read
with the Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
(C) Total number of : 1,16,93,812 2,65,62,933 - 3,82,56,745
(D) Total number of : 1,11,69,757 1,41,06,658 - 2,52,76,415
(Each Option represents 10
Ordinary Shares of
Rs. 1/- each)
(E) Total number of : 11,16,97,570 14,10,66,580 - 25,27,64,150
Ordinary Shares of
Rs.1/- each arising as
a result of exercise of
(F) Total number of : 14,96,076 21,75,551 46,360 37,17,987
(G) Variation of terms
of Options : Nil
(H) Money realised by : Rs.1247.48 Rs.1388.30 - Rs. 2635.78
exercise crores crores crores
(I) Total number of : 11,00,988 2,19,71,039 4129165 2,72,01,192
Options in force
(J) Details of Options granted to
(i) Senior managerial personnel : As provided below -
No. Name No. of Options granted
during the financial
1. Y. C. Deveshwar 2,70,000
2. N. Anand 1,35,000
3. P. V. Dhobale 1,35,000
4. K. N. Grant 1,35,000
5. A. Baijal 10,000
6. S. H. Khan 10,000
7. S. B. Mathur 10,000
8. H. G. Powell 10,000
9. P. B. Ramanujam 10,000
10. A. Ruys 10,000
11. K. Vaidyanath 10,000
12. S. M. Ahmad 23,000
13. N. Arif 32,000
14. P. Banerjea 15,400
15. S. Basu 30,600
16. M. S. Bhatnagar 23,000
17. A. Chand 23,000
18. S. Chandrasekhar 23,000
19. L. C. Chandrasekharan 32,000
20. B. B. Chatterjee 40,000
21. C. Dar 40,000
22. C. S. Das 30,600
23. D. Haksar 30,600
24. M. Ganesan 21,280
25. S. Guha 16,000
26. S. Kaul 30,600
27. S. Kumar 21,280
28. S. Ganesh Kumar 21,280
29. U. Lall 23,000
30. H. Malik 30,600
31. A. K. Mukerji 30,600
32. A. Nayak 56,250
33. A. R. Noronha 30,600
34. R. Parasuram 23,000
35. A. Pathak 23,000
36. K. T. Prasad 16,000
37. S. Puri 40,000
38. R. Rai 30,600
39. V. L. Rajesh 30,600
40. V. M. Rajasekharan 21,280
41. A. Rajput 40,000
42. T. V. Ramaswamy 40,000
43. S. Rangrass 30,600
44. S. Janardhana Reddy 23,000
45. A. Seth 21,280
46. R. Senguttuvan 30,600
47. S. K. Singh 30,600
48. S. Sivakumar 56,250
49. R. Sridhar 30,600
50. B. Sumant 30,600
51. K. S. Suresh 40,000
52. R. Tandon 40,000
(ii) Any other employee who received a : None
grant in any one year of Options
amounting to 5% or more of the
Options granted during that year.
(iii) Identified employees who were : None
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 : Rs. 7.84
pursuant to issue of Ordinary Shares on
exercise of Options calculated in
accordance with Accounting Standard
(AS) 20 `Earnings Per Share`.
(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 Company`s Employee
Stock Option Schemes. The employee compensation cost as per the intrinsic
value method for the financial year 2011-12 is Nil.
(ii) Difference between the employee : Rs. 308.33 crores
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.
(iii) The impact of this difference on profits and on Earnings Per Share of
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
As reported 6,162.37
Add: Intrinsic Value Compensation Cost Nil
Less: Fair Value Compensation Cost 308.33
(Black Scholes model)
Adjusted Profit 5,854.04
Earnings Per Share Basic (Rs.) Diluted (Rs)
As reported 7.93 7.84
As adjusted 7.53 7.44
(M) Weighted average exercise prices and weighted average fair values of
Options granted for Options whose exercise price either equals or exceeds
or is less than the market price of the stock.
Weighted average exercise price per Option : Rs. 2,023.50
Weighted average fair value per Option : Rs. 529.57
(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
(i) Risk-free interest rate 8.18%
(ii) Expected life 3.2 years
(iii) Expected volatility 30.04%
(iv) Expected dividends 1.76%
(v) The price of the underlying Rs. 1,968.50
shares in market at the time of
(One Option = 10 Ordinary Shares)
On behalf of the Board
Y. C. DEVESHWAR Chairman
P. V. DHOBALE Director
Kolkata, 25th May, 2012
ANNEXURE TO THE REPORT OF THE DIRECTORS
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
efficiency and increase contribution from renewable sources of energy.
Various key performance indicators like specific energy (energy consumed
per unit of production), specific energy cost and renewable energy
contribution were continuously tracked to monitor progress in line with the
organisation`s overall carbon strategy. Innovative ways and new technology
were constantly explored to bring about better alignment with the
Government of India`s National Action Plan on Climate Change. Some of the
measures adopted across your Company were:
I. Obtaining the LEED (Leadership in Energy and Environment Design)
Platinum rating for Saharanpur and Bengaluru factories and ITC Rajputana
Hotel at Jaipur, as part of a holistic approach towards sustainability.
This has helped achieve significant reduction in energy consumption.
II. Installation of new renewable energy sources like wind turbine
generators and harnessing of solar energy using thermal and photovoltaic
III. Optimisation in energy consumption by replacing aircooled chillers
with higher efficiency water-cooled chillers, installing high efficiency
burners in existing boilers and improving waste heat recovery.
IV. Improvement in energy usage efficiency of lighting systems by
installation of automated lighting controls and sensors, changing over to
higher efficiency lighting solutions such as Light Emitting Diodes and
increased daylight harvesting.
V. Appropriate fuel switching measures to alternative fuels across
different business units.
VI. Retrofitting measures and replacement of motors, pumps, boilers, air
compressors, cooling towers, harmonic filters and transformers by high
efficiency systems across different business units.
VII. Improved air handling and dust extraction systems.
b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:
I. Renewable energy sources such as wind turbines and micro hydel projects.
II. Process improvements across different factories and installation of
more energy efficient technology.
III. Solar pre-heating arrangement for boiler feed water and furnace oil at
IV. Replacement of pumps, motors, compressors, blowers etc. with higher
V. Installation of harmonic filters and capacitor sets to improve power
factor of electrical system.
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 have resulted in savings on energy costs for
your Company which helped to partially offset the impact of higher fuel
costs and poorer quality of coal. Continued focus on energy conservation
has resulted in reduction of specific energy consumption per unit of
production. The specific steam consumption for Paperboards & Specialty
Papers business has reduced by more than 8% and specific power consumption
by 1% which are significant considering that this business accounts for
most of your Company`s energy consumption. Across all businesses the direct
reduction in electrical consumption exceeds 2 Gigawatt Hours (GwH) which
has reduced costs as well as your Company`s carbon 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
A) POWER AND FUEL CONSUMPTION
Relating to Paperboards & Paper
For the Year ended 31st March,
a) Purchased Units (KwH in Lakhs) 340 230
Total Amount (Rs. in Lakhs) 2259 1714
Rate/Unit (Rs.) 6.65 7.47
b) Own Generation
i) Through Diesel Generator
Units (KwH in Lakhs) 5 6
Units/Litre of Diesel Oil 3.35 3.03
Cost/Unit (Rs.) 12.56 12.60
ii a) Through Steam Turbine/
Generator-Coal fired Boilers
Units (KwH in Lakhs) 3796 4115
Units/Kg. of Coal 1.48 1.45
Cost/Unit (Rs.) 3.28 2.76
b) Through Steam Turbine/
Generator-Soda Recovery Boilers
Units (KwH in Lakhs) 2419 2188
Units/Kg. of Black Liquor Solids 0.43 0.42
Cost/Unit (Rs.) Nil - Internally generated #
# since it is a by-product and no significant value is attributable to it.
For the Year ended For the Year ended
31st March, 2012 31st March, 2011
Process Power Total Process Power Total
B/C/D/E/F Grades Coal
Quantity (MT) 364802 256091 620893 398260 284708 682968
Total Cost (Rs.in Lakhs) 15002 13809
Average Rate (Rs. per MT) 2416 2022
3. Furnace Oil
Quantity (KL) 8240 11947
Total Amount (Rs. in Lakhs) 3340 3548
Average Rate (Rs. per KL) 40537 29696
4. Others/Internal Generation
De Oiled Bran,
Saw Dust etc.
Quantity (MT) 148397 118118
Total (Rs. in Lakhs) 2794 2402
Rate/Unit (Rs.) 1883 2034
Black Liquor Solids
Quantity (MT) 569024 519243
Total (Rs. in Lakhs)
Rate/Unit (Rs.) Nil - Internally generated #
# since it is a by-product and no significant value is attributable to it
Quantity (MT) 1228 1100
Total (Rs. in Lakhs) 684 516
Rate/Unit (Rs.) 55722 46880
B) CONSUMPTION PER UNIT OF PRODUCTION
For the Year ended 31st March,
Products (Paper in MT) 622880 602099
Electricity (KwH) 1026 1036
Coal C/ F Grade (MT) 0.64 0.71
Black Liquor Solids (MT) 0.91 0.86
Furnace Oil (Litre) 16 30
Others - De Oiled Rice Bran/ 0.18 0.10
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. Product development and process improvement for packaged foods viz.,
biscuits - split cream products; snack foods - Tangles.
II. Development of new product technologies and product development in the
areas of soaps, shampoos and skin care.
III. Development of eco-friendly paper, food grade paper, premium printing
papers and coated papers and paperboards with superior packaging
characteristics with better print aesthetics.
IV. Development of site specific and disease resistant clones of
eucalyptus, casuarina and subabul trees.
2. Benefits derived as a result of the above R&D:
I. Improved consumer benefits and development of products with unique value
II. Cost reduction, import substitution, safer environment and strategic
III. High survival and growth of clonal plantations of eucalyptus,
casuarina and subabul resulting in increased productivity of wood biomass
and higher returns to farmers.
3. Future Plan of Action:
I. Product development with nutritional and health benefits in the packaged
foods and personal care segments.
II. Reduction in specific fuel consumption and reduction in carbon
III. Continuing research on improvement of pulp yield of eucalyptus,
casuarina, subabul and other pulp wood trees.
IV. Enhanced packaging through increased use of eco-friendly materials.
For the year ended
31st March, 2012
4. Expenditure on R&D : (Rs. in Lakhs)
i) Capital 1312.55
ii) Recurring 8784.01
iii) Total 10096.56
iv) Total R&D Expenditure as a % of
- Gross Turnover 0.29%
- Net Turnover 0.41%
Technology Absorption, Adoption and Innovation:
I. Establishment of wind energy farms in Tamil Nadu, Rajasthan and
Maharashtra for efficiency and productivity across businesses.
II. Operating state-of-the-art printing and conversion equipment for
III. Development of IT enabled security system for Hotels.
IV. Induction of contemporary technology and continuous improvement
projects across businesses towards reducing process variability, cycle time
and wastage while enhancing manufacturing productivity.
I. Reduction in carbon foot print through fuel conservation / switch and
reduction in emissions.
II. Secured environment for hotel guests.
III. Improved productivity and process control.
IV. World-class quality and differentiated products.
On behalf of the Board
Y. C. DEVESHWAR Chairman
P. V. DHOBALE Director
25th May, 2012.