Itc Plans Rs 800-Crore Investments
Tobacco major ITC Ltd has chalked out plans to invest about Rs 800 crore in the next five years. The money will be spent in expansion and diversification of its tobacco division.
The company plans to acquire additional plant and machinery as well as implement capacity expansion, said a company spokesperson. There is also a possibility of launching new brands.
ITC is mulling ways of introducing new styles and varieties as well as innovations for improving the quality of its existing brands. The tobacco division of the company has so far already invested about Rs 600 crore in the last few years resulting in major capacity expansions at its centres in Bangalore, Saharanpur and Calcutta.
The extension and diversification of the company's brands is being taken up as a part of its efforts to combat the possible onslaught of foreign brands into the domestic market, the source said.
"Foreign brands are already in the country. The difference is that so far these brands were smuggled into India. Now we are looking at a scenario where these brands can possibly be produced domestically," he added.
The proposed investments can be seen as steps taken by the company to gear itself for potential competition. However, according to the source, the premium segment does not account for more than five per cent of the total cigarette market in the country and therefore the company is not too concerned about the same. The segment is growing at a slower rate than the cigarette market as a whole.
The Calcutta-based tobacco major has over the last few months, introduced several extensions in the milder varieties of cigarettes. Classic Milds, Classic Ultra Milds and the recently launched Wills Natural Lights are examples of such extensions. A milder variety of Gold Flake also exists and plans are on to reposition the brand nationally.
"Worldwide, there is a trend for the milder variety of products. This is true of cigarettes as well. Hence, ITC's forays in this area," the source said. ITC's plans in their core competency, the tobacco business, are significant in the light of their major shareholder, BAT Industries, making its first formal entry into the Indian markets earlier this month. On May 5, the British tobacco major celebrated the 555 day in Mumbai.
Sources say this is an attempt by BAT Industries to test the waters before making a full-fledged entry into the country. It is already known that the company is in talks with ITC for the purpose though nothing has been finalised as yet.