ITC to follow asset-light strategy for expansion of hotel biz: Sanjiv Puri

Move will help it scale up room capacity faster; will take total strength to 12,000 rooms in 131 hotels, from 9,500 rooms in 107 hotels at present

Diversified business conglomerate ITC Limited said on Monday that it would pursue asset-light strategy in its hotel business to reach the next milestone of 30:70 ratio between owned and managed hotel properties, from the present 40:60 mix, as it seeks to scale up the room capacity faster.

Without giving a definite time frame in this regard, ITC managing director Sanjiv Puri said the asset-light path would help the company scale up the room capacity faster besides enhancing the productivity of capital being deployed in the hospitality segment by the group. "Our next milestone should be 30:70 between owned and the managed hotel properties," he told reporters after the launch of ITC's own Rs 7.5 billion luxury hotel, ITC Kohenur, in the heart of the city's IT hub earlier this morning while hinting at a shift in favour of managed hotel properties going forward.

The Hotels business forms one of the four core segments of the Indian cigarettes-to-food giant, and takes a major chunk of the Rs 250 billion capex plan announced for a period of five years by the company late last year. Between the four brands --- ITC Hotels, Welcome Hotels, Fortune and Welcome Heritage --- the company currently operates 107 properties with a combined capacity of 9,500 rooms while the ongoing projects would take the total strength to 12,000 rooms, adding 24 new hotels to its stable.

On the break-up of the overall capex plan, Sanjiv Puri said a significant amount of investment would be used to create assets in tourism and hospitality sector while underlining the importance of hotel business for the company's future growth. The company in a recent presentation held that going forward, as economic conditions and infrastructure improve, leisure tourism and business related travel is also projected to grow faster.

Already in pipeline are a similar super luxury hotels such as ITC Royal Bengal in Kolkatta and ITC Narmada in Uttar Pradesh, according to Puri. The new luxury hotel in Hyderabad was designed on the theme of the famous Kohinoor diamond of Golconda mines. 

"While Brits had taken it away, ITC has brought it back to the city," IT minister K T Rama Rao said, while inaugurating the 271-room property, which was designed around the theme of Kohinoor diamond and jewellery of Nizams.

Apart from the hotel business, the company also plans to invest Rs 100 billion to build 20 integrated consumer foods manufacturing and logistics facilities across the country. Two such units were already set up in West Bengal and Punjab, and two more units are expected to be ready in Hyderabad and Trichy in the next 12 months. 

"We had signed an MoU with the Ministry of Food Processing to invest Rs 100 billion in these facilities. As some investment was underway by the time we signed the MoU, the investment in food processing business would possibly go beyond Rs 100 billion," the ITC managing director said. The company is investing close to Rs 10 billion on the proposed integrated consumer goods manufacturing facility in Telangana.

Talking about the backward integration achieved in agribusiness through e-Chaupals, Puri said this pioneering initiative has proved a win-win for farmers as well as the company. The company currently works with four million farmers while this collaboration would be extended to 10 million farmers in future. He also said that ITC has proved that the doubling of farmers' incomes as Prime Minister Narendra Modi called for was possible through some of the pilot projects in Uttar Pradesh and other states.

As part of the ongoing R&D and investment plans the company would be adding several new products to its FMCG division, which the company aspires to grow into a  trillion rupee business in future. Puri said the company will be building global FMCG brands to create more value for its products. The company has made investments in its paper, paperboard division at its existing paper unit in Bhadrachalam and this is expected to reduce the dependence on import of pulp used in paper and paper board manufacturing.

Responding to a question on the company's cigarettes business, Sanjiv Puri said while it was facing major challenges in the form of taxation and resultant rise in consumption of smuggled cigarettes in the country, they would continue to do whatever it takes to sustain and reinforce their current standing in cigarette business.