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Cigarette back-up plan will reap benefits soon: Deveshwar

ITC's Q1 numbers were subdued due to stringent regulations in cigarettes business and sluggish demand in FMCG segment

BS Reporter  |  Kolkata 

ITC’s back-up plan to offset the losses on account of tight regulation on its cigarettes business would reap benefits soon, its chairman Y C Deveshwar said on Friday. Speaking at the company's annual general meeting here, he added the back-up plan had started many years ago. ALSO READ: ITC eyes Rs 1 lakh cr revenue from FMCG business by 2030 On Thursday, ITC had reported subdued June-quarter numbers in the wake of stringent regulations in the cigarettes business and an overall sluggish demand in the fast-moving consumer goods (FMCG) segment. Improved profitability helped make up for the volume decline in the cigarettes business, which accounted for 48 per cent of the firm’s revenues in the quarter. ALSO READ: Better margin rescues ITC's June quarter Responding to a shareholder's query that the company is spending more on its non-cigarette FMCG business compared to returns, Deveshwar said the expenditure was for gaining market share and for launch of products. He said: “The value of a company is recognised not only from its profits, but also from its vision for the future.” ALSO READ: ITC is now among cheapest FMCG stocks Deveshwar added that 59 per cent of net segment revenue is derived from businesses other than cigarettes. Segment revenue, other than cigarettes, has grown 17-fold since 1996 to Rs 23,500 crore in FY15. In the June quarter, revenue from other business -- including packaged foods, apparel, education and personal care products -- rose 12.2 per cent to Rs 2,171 crore from the same period last year. ITC said the food business, which accounted for a major portion of the non-cigarette FMCG business, had showed improvement. ITC has an ambitious plan to turn the FMCG business into a Rs 1-lakh-crore portfolio in the next 15 years. Deveshwar said the company would want to be present in all forms of FMCG business in the future. “As we succeed, we’ll enter everything that can be termed FMCG,” he said, while reiterating that all the brands that ITC grows will be entirely homegrown unlike other multinationals.

He was replying to a shareholder's query on whether ITC should enter the sanitary napkin business like P&G and Hindustan Unilever, which gave them good results. Maggi scare hurting sector The Food Safety and Standards Authority of India’s action over Nestlé’s Maggi noodles, which resulted in the product being pulled out from the market, has affected the noodles category. “Earlier, our product was growing at a rate (annual) of almost 40 per cent. But now, the whole packaged food category is affected, the market needs reassurance,” Deveshwar said. He added sales of YiPPee!, its noodle brand, weren’t halted. Questions NGO funding Deveshwar said foreign-funded non-government organisations (NGOs) were prodding the government to increase taxation on cigarettes. “I wonder if the NGOs demanding heavier taxation are agents of the who are afraid of ITC’s growth,” he said. Deveshwar said the company will request the government to probe the source of funding of the anti-smoking NGOs. He said heavy taxation was resulting in the government losing money as people were shifting to contrabrands, on which taxes are not levied. On regulatory environment, he said. “Do not kill the golden goose that lays egg.” Deveshwar expected the company's communication with the government would yield results and there would be a ‘more rational approach’ from the government in next year's Budget.

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First Published: Sat, August 01 2015. 00:50 IST