Wednesday, August 6, 2008

ITC - Bingo

I like the way ITC is evolving after running through its annual report. The company has been continuously de-risking itself from the tobacco business into other areas over the last few years.

The tobacco business continues to be the cash cow in the portfolio that generates the cashflow to be invested into the other business segments. The net income of the company has grown from Rs 4353 crores in 2001 to about Rs 14558 crores in 2008. I have taken net income as cigarettes have very high excise duties and levies and tends to skew the topline.

The interesting part is that Non cigarette income has grown from Rs 900 corores which was about 20% of Net turnover to about Rs 7300 crores which is over 50% of the net turnover.

ITC effectively today has a bigger non tobacco business than the tobacco business. It’s a dramatic metamorphosis of such large corporation. The company is doing some very interesting things in the agri domain which could potentially become a huge play for the corporate sector as Indian agriculture open ups.

A brief snapshot of the various business divisions and the brand portfolio that the company has built.

1) Cigarettes / Tobacco
The company is clearly the numero uno in this business and is the cash cow for the company. The company has no great competition in the domain and will maintain its marketshare in this business. The biggest challenge arises from the fact that finance ministers love cigarettes or atleast the revenues that come out of it. So it remains the favourite whipping boy in terms of taxes being levied.

2) FMCG - Food
a) Branded Packaged Foods
The company has built up a significant share in this segment. Both Aashirwad and Sunfeast are 1000 crore brands. The company launched the “Bingo” range of chips last year and is beginning to give Lays a run for its money.
b) Confectionaries
The confectionaries business grew by 40% last year. The company has 2 strong brands Minto and Candyman in the segment.
c) Ready to Eat Segment
The company sells products like Sunfeast Pasta, Aashirvaad Instant Mixes and has a strong export business where it markets under the “ Kitchens of India” brand.

3) Personal Care
The company entered the personal care business last year and has brands like Fiama Di Wills, Vivel Di Wills, Vivel & Superia. This is a 20,000 crore market with HUL being the big daddy of this business.

4) Hotels
It has emerged as the second largest hotel chain in India offering over 90 hotels across 77 destinations under 4 different brand propositions – ITC Hotels, Welcom Hotel, Fortune, Welcome Heritage & the Sheraton Franchisee aggregating about 6000 rooms. Turnover crossed the 1000 crore mark this year.

5) Lifestyle Clothing
The company has managed to carve a niche in the premium segment of the lifestyle retailing segment with the Wills Lifestyle range. The company has added a popular segment brand John Players to expand its portfolio.

6) Paperboards & speciality Paper
The paperboard segment delivered a growth of 13% last year with revenues of Rs 2364 crores

7) Safety Matches / Aroma Sticks
The company is the largest manufacturer of safety matches after it acquired Wimco Ltd. It also has a strong presence in the incense sticks segment with brands like Mangaldeep.

8) Agri Trading
This is clearly ITC’s pioneering work in terms of addressing and working closing the Indian agricultural economy. Its e-choupal model is a acknowledged case study in this domain and is today replicated by other organsiations. The divisions performance got hampered due to the ban on exports of agri commodities. However the company has constantly expanded its portfolio from tobacco to high value frozen foods, potatoes, spices, staples etc.

Will continue in my next post in terms of my take on ITC and whether it is a good bet at current prices.


Anonymous said...


I think you missed out ITC Infotech.


Ninad Kunder said...

Hi Pankaj

You are right about that. I missed the infotech business and their stationary business.

Was planning to add that in the follow up post that i was going to do on ITC.