Diversified firm ITC Ltd will invest Rs 20,000 crore in the next five years, largely on its FMCG vertical for capacity augmentation, modernisation and innovation, company Chairman Sanjiv Puri has said.
From a larger trend perspective, green shoots are becoming visible in the rural markets, although it remains a “monitorable”, with the forecast of a better monsoon this year, he said in a conference call on Friday.
“Our confidence in India is unwavering and is reflected in your company’s investment outlay of about Rs 20,000 crore in the medium term,” Puri said earlier in the day, while addressing the shareholders during the annual general meeting.
About the details of the investment, he said, “As far as Rs 20,000 crore is concerned, a larger component would go into FMCG, which is roughly about 35-40 per cent and another one third or little bit less than would go into paperboard and packaging and the balance would go into other businesses as in agri, our traditional business also get into certain corporate investment that happens.” Puri further said, “The investments are largely for capacity augmentation, and will also have for upgrade and modernisation and bringing in more variety and innovation… All of these will be the principles around which the investments will happen.” ITC plans to set up a new greenfield unit for its paperboards and specialty papers as its exiting Paper Mill at Bhadrachalam, according to Puri is fairly saturated.
The company is now looking of a new site, he added.
Asked about the demand situation, he said, “The larger trend is that there are green shoots in rural (India), having said that it still remains a monitorable. We are hopeful that things should get better because monsoons are coming in.” Monsoons are expected to be better than last year, he added.
Despite the headwinds, ITC has invested across all businesses to enhance structural competitiveness and build an enterprise of the future, he added.
On the hotels business, Puri said the demerger is on track and expect this to be completed in the next few months.
Puri also added that he expects the demerger of the hotel business to complete in the next 5-6 months and to get listed by the end of this year.
ITC is also expanding its play in the rural markets by expanding its sales network in those areas, said Puri.
Asked if ITC will go for portfolio expansion for rural areas, he said, “We have plenty of products in our portfolio that are relevant for the rural market. We are focused right now to expand our reach develop the market in the rural areas.” There is a lot of potential and headroom to grow in the rural market where ITC will continue to invest, he said.
About the impact of the tax on tobacco remaining unchanged in the Union Budget 2024-25, Puri said in periods when taxes were raised significantly, the government’s revenue growth had slowed while the amount of illicit products went up, as high as a third of the legal industry and when the tax remained stable, the legal industry was able to claw back.
Over the past four years, ITC’s overall revenues grew at a CAGR of 10.8 per cent to about Rs 79,000 crore.
ITC’s non-cigarette revenues grew at a CAGR of 11.6 per cent and now account for about 65 per cent of net revenue.
During the pandemic, hotels and cigarette businesses were severely impacted.
“Since then, these businesses have charted a smart recovery. The revenue and results of the cigarettes business over the last 2 years grew at a CAGR of nearly 13.5 per cent with volumes surpassing pre-pandemic level,” he said.
After a period of sustained headwinds, the hotels business emerged structurally stronger clocking a revenue of nearly Rs 3,000 crore and EBITDA crossing the Rs 1,000 crore mark in FY24, he added.
Moreover, the growing competitiveness of ITC’s world-class brands has enabled the company to take products and services to over 100 global markets.
“The value-added by your company’s economic activities in the last 4 years aggregated to around Rs 2,42,000 crore…,” he said.
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