ITC to invest Rs 20,000 crore over next 5 years, says Chairman Sanjiv Puri

Diversified company ITC Ltd will invest Rs 20,000 crore over the next five years, largely in its FMCG vertical division for capacity expansion, modernisation and innovation, Chairman Sanjiv Puri said.

From a broader perspective, green shoots are becoming visible in the rural markets, though it is still a “controllable” trend, with the prediction of a better monsoon this year, he said in a conference call on Friday.

“Our confidence in India is unwavering and that is reflected in your company’s capital expenditure of around Rs 20,000 crore over the medium term,” Puri had said earlier in the day while addressing shareholders at the annual general meeting.

On the details of the investment, he said, “As for Rs 20,000 crore, a larger portion would go to FMCG, which is about 35-40 per cent and another third or a little less would go to paperboard and packaging and the rest would go to other businesses like in agriculture, our traditional businesses are also doing certain corporate investments that are happening.” Puri further said, “The investments are largely for capacity expansion, and will also be for upgradation and modernisation and bringing in more variety and innovation… These are all the principles around which the investments will happen.” ITC is planning to set up a new greenfield unit for its paperboard and specialty paper as its existing paper mill at Bhadrachalam, according to Puri, is quite saturated.

The company is now looking for a new location, he added.

Asked about the demand situation, he said, “The larger trend is that there are green shoots in rural (India), but having said that, it is still a controllable trend. We hope that things will improve as the monsoons are coming.” The monsoons are expected to be better than last year, he added.

Despite the headwinds, ITC has invested across all business lines to increase structural competitiveness and build a company of the future, he added.

On the hotel sector, Puri said the demerger is on track and is expected to be completed in the coming months.

Puri added that he expects the hotel business split to be completed in the next five to six months and the company to go public by the end of this year.

ITC is also expanding its operations in rural markets by expanding its sales network in those areas, Puri said.

Asked if ITC will go for portfolio expansion for rural areas, he said: “We have a lot of products in our portfolio which are relevant to the rural market. We are now focused on expanding our reach and developing the market in rural areas.” There is a lot of potential and scope for growth in the rural market where ITC will continue to invest, he said.

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On the impact of keeping the tobacco tax unchanged in the Union Budget 2024-25, Puri said that in periods when taxes were hiked significantly, government revenues slowed down while the quantity of illicit products increased to as much as one-third of the legal industry. When the tax remained stable, the legal industry was able to pull out.

Over the past four years, ITC’s total revenues grew at a compound annual growth rate (CAGR) of 10.8 percent to around Rs 79,000 crore.

ITC’s non-cigarette revenues grew at a compound annual growth rate (CAGR) of 11.6 percent and now represent approximately 65 percent of net revenues.

During the pandemic, hotels and cigarette companies were hit hard.

“Since then, these companies have made a smart recovery. The cigarette business grew revenue and earnings at a CAGR of almost 13.5 percent over the past two years, with volumes exceeding pre-pandemic levels,” he said.

After a period of persistent headwinds, the hotel sector emerged structurally stronger, with revenues of nearly Rs 30 billion and EBITDA of over Rs 10 billion in FY24, he added.

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In addition, the growing competitiveness of ITC’s world-class brands has enabled the company to offer products and services in more than 100 markets worldwide.

“The added value of your company’s economic activities over the past 4 years totaled approximately Rs 2,420 trillion…,” he said.

On the impact of keeping the tobacco tax unchanged in the Union Budget 2024-25, Puri said that in periods when taxes were hiked significantly, government revenues slowed down while the quantity of illicit products increased to as much as one-third of the legal industry. When the tax remained stable, the legal industry was able to pull out.

Over the past four years, ITC’s total revenues grew at a compound annual growth rate (CAGR) of 10.8 percent to around Rs 79,000 crore.

ITC’s non-cigarette revenues grew at a compound annual growth rate (CAGR) of 11.6 percent and now represent approximately 65 percent of net revenues.

During the pandemic, hotels and cigarette companies were hit hard.

“Since then, these companies have made a smart recovery. The cigarette business grew revenue and earnings at a CAGR of almost 13.5 percent over the past two years, with volumes exceeding pre-pandemic levels,” he said.

After a period of persistent headwinds, the hotel sector emerged structurally stronger, with revenues of nearly Rs 30 billion and EBITDA of over Rs 10 billion in FY24, he added.

In addition, the growing competitiveness of ITC’s world-class brands has enabled the company to offer products and services in more than 100 markets worldwide.

“The added value of your company’s economic activities over the past 4 years totaled approximately Rs 2,420 trillion…,” he said.