Annual Report 2008-09

ITC – Imperial Tobacco Company of India Pvt. Ltd.

Enduring Value

1

2

3

4

ABOUT ITC

5

E-CHOUPAL

6

VALUE CHAIN – FARM TO FACTORY GATE

7

SOCIO ECONOMIC ENVIRONMENT

Fiscal 2008-09 commenced with the Indian Economy in cyclical slowdown after an extraordinary growth for five years.The timely and concentrated response from the government has been the savior!The cyclical downturn, in India was aggravated by huge inflationary pressures in the economyTo withstand economic downturn the corporate has to embrace the environmental and social capital.Company should be pro-actively engaged across “Triple Bottom Line” – economic, environmental and social.

8

PROFITS,DIVIDENDS AND RETENTION

2009 (Figures in Crores, INR)

Profit before tax 4825.74

Income Tax 1562.15

Profit after Tax 3263.59

Add: Profit Brought 724.45

forward from

previous year

Surplus available for

Appropriation 3988.04

2008 (Figures in Crores), INR

Profit before tax 4571.77

Income Tax 1451.67

Profit after Tax 3120.10

Add: Profit Brought 647.53

forward from

previous year

Surplus available for

Appropriation 3767.63

9

PROFITS,DIVIDENDS AND RETENTION

2009 (Figures in Crores), INR Transfer to general

reserve 1500.00 Proposed Dividend

for the financial yearat the rate of 3.70 1396.53per ordinary share of Re 1/- each (previous value was Rs 3.50 pershare)Income tax on proposeddividend 237.34

Earlier years provision no longer required (3.97)

Retained profit carried forward to the following 858.14year

3988.04

2008 (Figures in Crores), INR Transfer to general reserve 1500.00

Proposed Dividendfor the financial yearat the rate of 3.70 1319.01per ordinary share of Re 1/- each (previous value was Rs 3.50 pershare)

Income tax on proposeddividend 224.17

Earlier years provision no longer required -

Retained profit carried forward to the following 724.45year

3767.63

10

11

COMPANY OPERATIONS

FMCGHotelsPaperboards and PackagingAgri-Businesses ( Leaf Tobacco, Spices)Information technologyGroup Companies

13

FMCG PRODUCTS

CigarettesFoodWills LifestylePersonal care ( Fiama Di Wills, Vivel Di Wills, Superia)Education and StationarySafety matchesAgarbattis

14

PERFORMANCE BY INDUSTRY

FMCG: Segment revenues in FMCG (Others) grew by 20% over last year and clocked a CAGR of 74% in the last 7 years.

Foods: The range of offerings from the Branded Packaged Foods Business now comprise more than170 distinct products under 6 brands.

The Education & Stationery Products business registered an impressive sales growth of 60%

15

PERFORMANCE CONTD…….The Agarbatti business : Continues to contribute to the Company’s commitment to the ‘Triple Bottom Line’ by providing livelihood opportunities to more than 5000 persons through small scale entrepreneurs and NGOs.

Hotel : Company now has over 100 hotels across 80 locations in India, operating under 4 brands – ‘ITC Hotel’ at the top end, ‘WelcomHotel’ in the five star category, ‘Fortune’ in the mid market segment and WelcomHeritage’ in the heritage leisure segment.

16

PERFORMANCE CONTD…..Paper Boards : Company is the market leader in the Paperboards segment with an output close to that of the next three players combined.

Wills Lifestyle: Now available at 50 exclusive stores in 30 cities and in more than 150 ‘shop-in-shops’ in leading departmental stores. Eg: Wills Sports wear, Wills Classic Work Wear.

ITC InfoTech : The company delivered another year of good performance with total income growing by 33%.

17

LIST OF PRODUCTS AND BRANDS

Cigarettes (Wills, Gold Flake).Hotels (ITC Welcomegroup Hotels).Paper Boards and Specialty Papers (ITC Tribeni Tissues Division).Packaging and Printing Business (Cartoons, Shoulder box).Agricultural Industry (Agri-Business, e-choupal).Packaged Foods and Confectionary (Aashrivad, Sunfeast).Branded Apparel (Wills Life style, John Players).Toiletries (Fiama Di Villis, Vivel).Education and Stationery Products (Expressions, Classmate).Information Technology (ITC InfoTech).Safety Matches (Mangaldeep, HomeLite).Incense Sticks (Mangaldeep, Spriha).

18

19

IT IS CORPORATE POLICY CONVENTION

To prepare financial statement in accordance with applicable Accounting Standards in IndiaA summary of important accounting policies is set out below. The financial statements have also been prepared in accordance with relevant presentational requirements of the Companies Act, 1956.

20

BASIS OF ACCOUNTING

To prepare financial statements in accordance with the historical cost convention modified by revaluation of certain Fixed Assets as and when undertaken.

21

FIXED ASSETS

To state Fixed Assets at cost of acquisition inclusive expenses related to acquisition . In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalized. Expenses capitalized also include applicable borrowing costs.

22

DEPRECIATION

To calculate depreciation on Fixed Assets and Intangible Assets in a manner that amortises the cost of the assets after commissioning, over their estimated useful lives or, where specified, lives based on the rates specified in schedule XIV to the Companies Act, 1956.

23

REVALUATION OF ASSESTS

As and when Fixed Assets are revalued, to adjust the provision for depreciation on such revalued Fixed Assets, where applicable in order to make allowance for consequent additional diminution in value on considerations of age, condition and unexpired useful life of such Fixed Assets;

24

INVESTMENTS

To state Current Investments at lower of cost and fair value; and Long Term Investments, including in Joint ventures and associates, at cost. Where applicable, provision is a made where there is a permanent fall in valuation of Long Term Investment.

25

To state inventories including work-in-progress at lower of cost and net realisable value. The cost is calculated on weighted average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to its location and includes,

26

INVENTORIES

INVENTORIES where applicable, appropriate overheads based on normal level of activity. Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and, where necessary, provision is made for such inventories.

27

SALES

To state net sales after deducting taxes and duties from invoiced value of goods and services rendered.

28

INVESTMENT INCOME

To account for income from investments on an accrual basis, inclusive of related tax deducted at source.

29

PROPOSED DIVIDEND

To provide for dividend (including income tax thereon) in the books of account as proposed by the directors, pending approval at the Annual General Meeting.

30

EMPLOYEE BENEFITS

To make regular monthly contributions to varies provident funds which are in the nature of defined contribution scheme and such paid/payable amounts are charged against revenue. To administer such funds through duly constituted approved independent trusts with exception of Provident Fund and Family pension contributions in respect of Unionised staff which are statutorily deposited with the Government.To administer through duly constituted and approved independent trusts, various Gratuity and Pension Funds.

31

LEASE RENTALS

To charge rentals in respect of leased equipment to the profit and loss Accounts.

32

RESEARCH AND DEVELOPMENT

To write off all expenditure other than capital expenditure on Research and Development in the year it is incurred.

Capital expenditure on Research and Development is included under Fixed Assets.

33

TAXES ON INCOME

To provide Current tax as the amount of tax payable in respect of taxable income for the period.

To provide Deferred tax on timing difference between taxable income and accounting income subject to consideration of prudence.

34

FOREIGN CURRENCY TRANSLATION

To account for transactions in foreign currency at the exchange prevailing on the date of transactions. Gains/Losses arising out of fluctuations in the exchange rates are recognised in the Profit and Loss Account in the period in which they arise.

35

CLAIMS

To disclose claims against the Company not acknowledged as debts after a careful evaluation of the facts and legal aspects of the matter involved.

36

SEGMENT REPORTING

To identify segments based on the dominant source and nature of risks and returns and the internal organisation and management structure.

37

FINANCIAL AND MANAGEMENT INFORMATION SYSTEMS

To practise an Integrated Accounting System which unifies both Financial Books and Costing Records. The books of account and other records have been designed to facilitate compliance with the relevant provisions of the Companies Act on one hand, and meet the internal requirement of information and systems for Planning, Review and Internal Control on the other.

38

39

40

41

42

43

44

45

46

47

48

49

FAST MOVING CONSUMER GOODSFMCG-CIGARETTES

• IN INDIA,CONSUMPTION OF TOBACCO IN CIGARETTE FORM HAS STEADILY DECLINED FROM 23% OF TOTAL TOBACCO CONSUMPTION IN 1971-72 TO LESS THAN 15% CURRENTLY.

50

TOBACCO CONSUMPTION (IN MILLION KGS)

YEAR CIGARETTES OTHERS TOTAL

1981-82 86 320 406

2008-09(est) 74 421 495

DIFFERENCE -12 +101 +89

51

FMCG-OTHERS

• SEGMENT REVENUES IN FMCG(OTHERS) GREW BY 20% OVER LAST YEAR AND RECORDED A CAGR OF 74% IN THE LAST 7 YEARS.

53

BRANDED PACKAGED FOODS

• SALES GREW AT THE RATE OF 13% OVER THE PREVIOUS YEAR.

• THE RANGE OF OFFERINGS NOW COMPRISE MORE THAN 170 DISTINCT PRODUCTS UNDER 6 BRANDS.

• ‘AASHIRVAAD’ ATTA CONTINUED TO HAVE A MARKET SHARE OF 54%.

• ‘AASHIRVAAD’ SPICES GREW BY 40%.• IN THE BISCUITS BUSINESS,SALES

IMPROVED BY 14%.

54

LIFESTYLE RETAILING

• ‘WILLS LIFESTYLE’ CONTINUES TO BE A LEADER IN IN THE TOP END OF THE BRANDED APPAREL MARKET WITH SALES GROWING AT 19% OVER THE PREVIOUS YEAR.

• IN THE ‘YOUTH’ SEGMENT , THE ‘JOHN PLAYERS’ BRAND HAS ESTABLISHED A STRONG PRESENCE.

56

EDUCATION & STATIONERY

• SALES GREW AT THE RATE OF 60% OVER THE PREVIOUS YEAR.

• GROWTH MAINLY POWERED BY THE BRAND ‘CLASSMATE’.

• THE DEMAND SIDE SAW A SIGNIFICANT INCREASE IN CUSTOMER BASE RESULTING IN MARKET COVERAGE GOING UP FROM 2000 TO 2600 MARKETS.

58

OTHER BUSINESSES

• SAFETY MATCHES• INCENSE STICKS(AGARBATTIS)-

RECORDED A GROWTH OF 20% OVER THE PREVIOUS YEAR

• PERSONAL CARE PRODUCTS(BRANDS SUCH AS ‘FIAMA DE WILLS’,’VIVEL DE WILLS’,’VIVEL’ AND ‘SUPERIA’ BRANDS)

59

HOTELS• ITC NOW HAS OVER 100 HOTELS

ACROSS 80 LOCATIONS IN INDIA ,OPERATING UNDER 4 BRANDS:

• ‘ITC Hotel’ --- TOP END• ‘WelcomHotel ’--- FIVE STAR

CATEGORY.• ‘Fortune’--- MID MARKET SEGMENT• ‘WelcomHeritage’---HERITAGE

LEISURE SEGMENT.

61

PAPERBOARDS,PAPER & PACKAGING

• SEGMENT REVENUES GREW BY 19% OVER THE PREVIOUS YEAR.

• ITC IS THE MARKET LEADER IN THE PAPERBOARDS SEGMENT WITH A MARKET SHARE OF ABOUT 22% BY VOLUME AND 28% BY VALUE.

63

64

The company’s HRMS geared towards creating a culture which is

ResponsiveCustomer-centricMarket-focused

It blends ‘responsibility and accountability’ with ‘care and concern’ in a harmonious manner

65

ITC WORK CULTURE

HR APPROACH

Company’s holistic approach to HRM ensures active engagement to employees in providing innovative solutions for

Systems and processFocused on productivityCost and Quality

Over 5 lakh person hours were spent on formal learning and development supplemented with on-the-job learning, e-learning and coaching.

67

LETS PUT INDIA FIRST!!MILESTONES AND TARGETS

e – Choupal4 million farmers empowered,6,500 e - Choupals installed10 million farmers to be empowered20,000 e - Choupals to be installed

Social & Farm Forestry95,961 hectares greened,generating 43 million person - days of employment 100,000 hectares to be greened.47 million person - days of employment to be generated

Watershed DevelopmentMore than 46,200 hectaresbrought under soil and moisture conservation 56,000 hectaresto be brought under soil and moisture conservation

68

LETS PUT INDIA FIRST!!

Women's EmpowermentOver 18,221 women members1312 self - help groups 20,000 women members1,500 self - help groups

Livestock Development123 Cattle Development Centers2592 villages covered annually 150 Cattle Development Centers3,000 villages to be covered annually

Primary Education193,571 children coveredthrough 1885 Supplementary Learning Centers 200,000 children to be coveredthrough 2,000 Supplementary Learning Centers

69

ITC IN 2015

Green Revolution:Now four years old, the ITC’s red Green Building, almost a veteran in Gurgaon, the novae riche satellite city to Delhi, has been also a low-key trend-setter in green technology.

When completed in 2005, it was the largest building of its kind with a Platinum rating from the US Green Building Council (GBC) covering 1,70,000 square feet.

GBC is an NGO dedicated to sustainable building design and construction, and follows what is known as the LEED (Leadership in Energy and Environment Design) rating system, platinum being the highest of the three ratings that include gold and silver.

70

ITC IN 2015 IN PEN BUSINESSITC has conducted a soft launch of ballpoint and gel pens under the Classmate banner with the aim to emerge as one of the top three players in the Rs 3,000 crores writing products arena.ITC — which has also launched a geometry box lately we are also introducing markers and highlighters under the Paperkraft brand. Classmate is mainly aimed at students and thus we have launched the ballpoint and gel pens under this brand. Similarly, Paperkraft is targeted at executives and thus, we are using that for markers and highlighters.The segment has achieved a CAGR of 80% for five consecutive years since inception. The business has recorded a turnover of Rs 280 crores in 2008-09 compared to Rs 20 crores five years back. The segment is likely to cross the Rs 1,000 crores mark in three years.We are already the largest player in the fragmented note book segment with 12% market share. Our target is to achieve the top slot in pens.Our notebooks are made of green ECF (elementary chlorine free) paper which is also an advantage. 71

CONCLUSION

ITC has kept the ball rolling in a tough financial year of 2008-09.The profit margins have suffered only marginally.The future looks bright as ITC is planning to enter the PEN market and compete with giants.Lets hope ITC emerges fantastically and serve their tag “Lets put India first!”

72

REFERENCE

ITC ANNUAL REPORT 2008-09www.itcportal.comwww.wikipeida.com for basic understandingWhite papers from inte

73