Localised lockdown impacting ITC's recovery pace, outlook uncertain: Puri

ITC would respond with agility to strengthen its market standing while sharply focusing on cost reduction measures, Puri reassured shareholders

ITC Chairman Sanjiv Puri said localised lockdowns were impacting recovery momentum for the firm, at the annual general meeting on Friday. 

Addressing shareholders, he added that near-term outlook remained uncertain despite progressive normalisation in segments except hotels, education, and stationery products. 

Constant evolution in consumer trends and industry dynamics, owing to the the pandemic and shape of economic recovery, has kept the outlook uncertain, Puri said.

Cigarette business, which accounts for 40 per cent of ITC’s revenues, faced challenges during the lockdowns. However, it showed signs of improvement since June. In July and August, however, distribution was impacted, Puri told shareholders.

ITC started hedging against tobacco more than a decade back. Puri said while responding to shareholder concerns about the stock price, the company realised that there could be headwinds as far as tobacco-related stocks were concerned and adopted multiple drivers of growth.

In the past three years, earnings per share have gone up by 40 per cent. So the performance is there but it is not recognised, he said. The ITC stock on Friday closed at Rs 186.70, down by 2.56 per cent. A year ago, it was at Rs 244.35 on the BSE.

Even though there were short-term challenges in the wake of the pandemic, Puri reassured shareholders that ITC would respond with agility to strengthen its market standing while sharply focusing on cost-reduction measures.

ITC's FMCG-Others segment (non-cigarettes FMCG) delivered a comparable revenue growth of 19 per cent, while segment Ebitda demonstrated strong growth of 42 per cent during the period, Puri said.

It was driven by revenue growth of 34 per cent in staples, convenience foods and health & hygiene products, which represent 75 per cent of the portfolio. 

Puri said even during the pandemic, the company’s innovation engine was at work 24x7 and it rapidly introduced over 40 high-quality, first-to-market products, and variants. 

Manufacture of Savlon sanitisers was also ramped up by 275 times to cater to the surge in demand.

ITC expects agri-reforms initiated by the government to open up opportunities and it is stepping up farmer engagement in wheat, potato, chilies, and fruits and vegetables through a crop value chain cluster model to connect small farmers to markets.

The company plans to support 3,000 FPOs, with more than a million farmers across 24 crop value chain clusters in 21 states, shaping competitive agri value chains and enhancing farmer incomes, Puri said. 

“These value chains will be anchored by ITC’s large investments in food processing, its vibrant brands as well as exports,” he added.The company’s agri-business segment revenue is Rs 10,200 crore. 

But perhaps, the biggest challenge that ITC is facing is from its hotels' business. According to Puri, in the first 11 months of the year, the hotels' business delivered strong performance, with the new iconic properties gaining excellent response, before the debacle crippled the sector.