Itc Unveils 3-Pronged Strategy For Tobacco
ITC Ltd has drawn up three strategic thrust areas in the cigarettes and tobacco business. These include focusing on crop development to enhance quality and farm productivity.
ITC has also planned investments of Rs 375 crore primarily for leaf-processing plants and modern storage facilities.
The other two thrust areas are modernisation of cigarette plants by inducting contemporary technology involving investments to the tune of Rs 900 crore over the next five years, and strengthening brands at the upper end of the market in anticipation of consumer aspirations.
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These plans were announced by ITC chairman Y C Deveshwar at the company's 87th annual general meeting held in Calcutta on Wednesday.
According to Deveshwar, the company has nurtured a pool of trained manpower for the purpose of enhancing quality and farm productivity. Brand strengthening is an important area as it takes several years to build sustainable brand equity. Deveshwar pointed out to the shareholders that the company was rationalising and restructuring the company's portfolio of businesses and investments.
"We will continue to review our businesses and measure our capabilities in various businesses. If we find we are not capable of being competitive, we will either look for partnerships or exit from the business," Deveshwar said, underscoring a view he had made public even at last year's annual general meeting.
He pointed out that the company was trying to keep up with the times, fortifying itself against global competitors.
"We would like to operate on an international size and scale, and we are waiting for the timetable to be set by the World Trade Organisation," he said.
The company moved out of financial services and edible oils based on the need to focus on areas where the company possessed a credible track record and where it had the relative capability of maintaining a leadership position. Exit from Classic Finance involved an outlay of Rs 800 crore close on the heels of the pre-deposit of Rs 350 crore relating to excise. This was accomplished through internal accruals.
Commenting on the contingency reserves of Rs 300 crore made last fiscal by the company, Deveshwar exhorted shareholders to take a conservative view of the company as the tobacco major had to address legal issues for which a contingency reserve was required.
As soon as the final legal outcome of the excise and Fera cases is known, provisions would be created and these would no longer weigh down the net worth of the company.
He said that he was not in favour of issuing bonus shares to shareholders as this would reduce the market value of the shares of the company.
When questioned on the loans and advances given to housing finance and stockbroking firms, at a time when it was staging an exit from financial services, Deveshwar said that these activities were part of a tripartite agreement made between ITC, ITC Classic, and the Industrial Credit & Investment Corporation of India (ICICI) during the merger of Classic with the ICICI.