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ITC Ltd.

BSE: 500875 Sector: Consumer
NSE: ITC ISIN Code: INE154A01025
BSE 15:04 | 13 Aug 201.50 -2.65
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204.25

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204.25

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197.45

NSE 14:59 | 13 Aug 201.75 -2.45
(-1.20%)
OPEN

203.50

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204.20

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OPEN 204.25
PREVIOUS CLOSE 204.15
VOLUME 721650
52-Week high 266.20
52-Week low 134.95
P/E 17.21
Mkt Cap.(Rs cr) 247,940
Buy Price 201.50
Buy Qty 696.00
Sell Price 201.60
Sell Qty 2870.00
OPEN 204.25
CLOSE 204.15
VOLUME 721650
52-Week high 266.20
52-Week low 134.95
P/E 17.21
Mkt Cap.(Rs cr) 247,940
Buy Price 201.50
Buy Qty 696.00
Sell Price 201.60
Sell Qty 2870.00

ITC Ltd. (ITC) - Director Report

Company director report

&

Management Discussion and Analysis

For the Financial Year Ended 31st March 2019

SOCIO-ECONOMIC ENVIRONMENT

After two successive years of robust expansion global economic growth softened to 3.6%in 2018 representing a marked slowdown compared to the 3.9% growth anticipated at thebeginning of the year. While the US economy grew by 2.9% against 2.2% in 2017 sharpdeclines were witnessed in the Euro area (2.4% to 1.8%) and Japan (1.9% to 0.8%). Growthin Emerging Market economies also decelerated from 4.8% to 4.5% with both China (6.8% to6.6%) and India slowing down. Going forward global growth in 2019 is projected to declinefurther to 3.3% in the base case with risks to the downside emanating from politicaluncertainties rising trade tensions escalating protectionism and tighter financialconditions.

The US economy is projected to witness a sharp decline in growth to 2.3% in 2019 due tounwinding of the fiscal stimulus and lower government expenditure. Growth in EmergingMarkets & Developing Economies is also likely to decelerate marginally to 4.4% in2019. The Chinese economy is expected to slow down further to 6.3% in 2019 largely due toregulatory tightening to rein in debt.

2018-19 turned out to be another challenging year for the Indian economy. Despite arelatively soft base GDP growth declined to 7.0% (as per 2nd Advance Estimates) comparedto 7.2% in 2017-18 and 7.3% anticipated at the beginning of the year. On the supply sidethe Agriculture and Services sectors underperformed while Government Final ConsumptionExpenditure decelerated (off a relatively high base) on the demand side. Private CapitalExpenditure remained sluggish as evident from the decline in new project announcements.The much anticipated pick-up in Private Final Consumption Expenditure (PFCE) also remainedelusive - attributable largely to distress in the agrarian sector low rate of rural wagegrowth subdued urban consumer sentiment and tight liquidity conditions. PFCE growth infact decelerated in the second half of the year and particularly in the last 3-4 monthsas borne out by most major FMCG companies reporting slowdown in sales growth.

On the positive side inflation stayed well within RBI's comfort zone prompting a 50bps policy rate cut in recent months while the external account stabilised in the secondhalf of the year with the normalisation of crude oil prices from a peak of US$ 86 perbarrel and a pick-up in capital inflows especially from foreign portfolio investors.Capital markets stayed buoyant with the Sensex advancing by 17% during the year. Taxrevenues also witnessed robust growth during the year.

The key monitorables in the near term include volatility in crude oil prices concernsover fiscal deficit progress of the monsoon in 2019 and a slowdown in global growth.

While India remains one of the fastest growing major economies in the world the paceof economic growth in recent years has remained below the country's potential. Withstructural drivers of growth firmly in place – favourable demographics rapidurbanisation

With structural drivers of growth firmly in place – favourable demographics rapidurbanisation accelerated digitalisation and connectivity and improvement ininfrastructure - the pace of economic growth is expected to pick-up over time.

accelerated digitalisation and connectivity and improvement in infrastructure - thepace of economic growth is expected to pick-up over time. Implementation of key reformssuch as Goods and Services Tax direct benefit transfer schemes Insolvency and BankruptcyCode among others augur well for the growth prospects of the economy in the medium tolong-term.

The successful implementation of structural initiatives identified by the Governmenttowards improving the ease of doing business and fostering greater levels of valueaddition within the country would be crucial to boost the performance of the Indianeconomy and realise its full potential.

Enhancing agricultural productivity and value addition to international standards whilesimultaneously improving market linkages remain critical for the growth of theagricultural sector and significantly increasing farmers' income. It is pertinent to notethat substantial quantum of food is wasted along the chain in India depending on theinherent perishability of the crop and the season. Higher level of food processing in theeconomy can create a much larger pull for quality agri-commodities thereby reducing farmwastages and raising farm incomes. This calls for investment in product-specificclimate-controlled infrastructure as well as in branded products that benefit large agrivalue chains. Corporate participation is essential not only to invest in requisiteinfrastructure but also to provide assured market linkages to farmers. A big thrust onIndia's Food Processing sector can lead to significant job creation enhance rural incomesand help manage food inflation. Similarly the Agro-forestry sector as a source of rawmaterial for wood-based industry is woefully constrained by policies that not onlyprevent job creation in India but also promote avoidable imports. By providing crucialpolicy support the entire wood-based value chain can substantially support rurallivelihoods and create new opportunities for farmers and skilled artisans that add valueto wood. Supportive policies in the area of agro-forestry would go a long way in creatingsustainable livelihoods while simultaneously augmenting the nation's environmentalcapital.

In line with the Government's vision of significantly enhancing farmer incomerecognising the potential multiplier effect on the economy your Company has implemented apilot ‘Baareh Mahine Hariyali' programme in certain districts of Uttar Pradesh(Allahabad Chandauli Ghazipur and Varanasi) and Bihar (Munger). The programme focuses onspecific interventions such as crop intensification income diversification capabilitybuilding with appropriate market linkages leveraging your Company's e-Choupal network andChoupal Pradarshan Khets (demonstration farms). Your Company is also working towardsdeveloping village level institutions and fostering micro-entrepreneurship by promotingcustom hiring centres for farm mechanisation post-harvest product managementinfrastructure and community managed seed banks for self-reliance in quality seedmaterial. Your Company promotes environmentally sustainable farm practices including zerotill sowing micro-irrigation and watershed development. Your Company is also partneringwith the NITI Aayog to boost agricultural and allied activities in 27 districts under theAspirational Districts programme with a view to scaling up your Company's contribution tothe national goal of enhancing farmer incomes. Under this initiative over two lakhfarmers

In line with the Government's vision of significantly enhancing farmer incomerecognising the potential multiplier effect on the economy your Company has implemented apilot ‘Baareh Mahine Hariyali' programme to build capacity of farmers in certaindistricts of Uttar Pradesh and Bihar.

have been trained in package of practices appropriate for the dominant crop of theregion.

Given India's disproportionately low share of global natural resources relative to itslarge population and where millions continue to live in abject poverty the focus both atthe national and corporate level should be on fashioning strategies that fostersustainable equitable and inclusive growth. Differentiated and preferential incentivesin the form of fiscal or financial benefits to companies that adopt sustainable businesspractices would act as a force multiplier in achieving this critical national goal. It isyour Company's belief that businesses can bring about transformational change by pursuinginnovative business models that synergise the creation of sustainable livelihoods and thepreservation of natural capital with enhancing shareholder value. This ‘Triple BottomLine' approach to creating larger ‘stakeholder value' as opposed to merely focusingon uni-dimensional ‘shareholder value' creation is the driving force that definesyour Company's sustainability vision and its growth path into the future.

Your Company is a global exemplar in

‘Triple Bottom Line' performance and is the only enterprise in the world ofcomparable dimensions to have achieved and sustained the three key global indices ofenvironmental sustainability of being ‘water positive' (for 17 years) ‘carbonpositive' (for 14 years) and ‘solid waste recycling positive' (for 12 years). Thefocus on creating unique business models that generate substantial livelihoods across thevalue chains has led to your Company's Businesses supporting six million sustainablelivelihoods many of whom belong to the weakest in society. The following sections outlineyour Company's progress in pursuit of the ‘Triple Bottom Line'.

FINANCIAL PERFORMANCE

Your Company delivered another year of resilient performance despite a challengingoperating environment. The Cigarettes Business impacted by steep increase in taxes underthe GST regime sharpened focus on delivering world-class products through continuousinnovation along with best-in-class execution thereby consolidating its market standing.Amidst a subdued demand environment the non-cigarette FMCG segment grew ahead of industryrecording robust growth in revenue and significant improvement in profitability despiteheightened competitive intensity elevated input costs gestation costs of newproducts/categories and manufacturing facilities and ongoing restructuring of LifestyleRetailing Business. The Hotels Business delivered robust performance driven by improvementin RevPar and addition of two world-class properties to its portfolio. The PaperboardsPaper and Packaging segment had a stellar year recording strong growth in revenue andprofits on the back of capacity addition product mix enrichment strategic investments inpulp import substitution process innovation and a cost-competitive fibre chain. While theAgri Business posted healthy growth in revenue leaf cost escalation pertaining to theAndhra 2017 crop and business mix weighed on margins.

On a comparable basis Gross Sales Value (net of rebates/discounts)1 for the year stoodat Rs. 75309.36 crores representing a growth of 12.3% over 2017-18 driven mainly by AgriBusiness Branded Packaged

1 Gross Sales Value includes GST GST Compensation Cess Service Tax VATLuxury Tax etc. as applicable for the reported periods.

It is your Company's belief that businesses can bring about transformational change bypursuing innovative business models that synergise the creation of sustainable livelihoodsand the preservation of natural capital with enhancing shareholder value.

Foods Education & Stationery Products Business Hotels and Paperboards. ExcludingExceptional items Profit Before Tax and Profit After Tax grew by 12.2% and 13.8%respectively.

Profit After Tax at Rs. 12464.32 crores registered growth of 11.1% over the previousyear. Total Comprehensive Income for the year stood at Rs. 12826.88 crores (previous yearRs. 11605.59 crores). Earnings Per Share for the year stood at Rs. 10.19 (previous yearRs. 9.22). Cash generated from operations aggregated Rs. 17234.93 crores.

The Directors are pleased to recommend an Ordinary Dividend of Rs. 5.75 per share(previous year Ordinary Dividend of Rs. 5.15 per share) for the year ended 31st March2019. Total cash outflow in this regard will be Rs. 8497.59 crores including DividendDistribution Tax of Rs. 1448.88 crores.

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

( Rs. in Crores)

Over the last five years the Value-Added by your Company i.e. the value created bythe economic activities of your Company and its employees aggregated around Rs. 220000crores of which over Rs. 160000 crores accrued to the Exchequer.

Including the share of dividends paid and retained earnings attributable to governmentowned institutions your Company's contribution to the Central and State Governmentsrepresented about 80% of its Value-Added during the year.

Your Company remains amongst the Top 3 Indian corporates in the private sector in termsof Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businessesin the ITC portfolio are mandated to engage with overseas markets with a view to testingand demonstrating international competitiveness and seeking profitable opportunities forgrowth. Foreign exchange earnings of the ITC Group over the last ten years aggregatednearly US$ 7.2 billion of which agri exports constituted 56%. Earnings from agri exportswhich effectively link small farmers with international markets are an indicator of yourCompany's contribution to the rural economy.

During the financial year 2018-19 your Company and its subsidiaries earned Rs. 4673crores in foreign exchange. The direct foreign exchange earned by your Company amounted toRs. 3828 crores mainly on account of exports of agri-commodities. Your Company'sexpenditure in foreign currency aggregated Rs. 2373 crores comprising purchase of rawmaterials spares and other expenses of Rs. 1947 crores and import of capital goods at Rs.426 crores.

Including the share of dividends paid and retained earnings attributable to governmentowned institutions your Company's contribution to the Central and State Governmentsrepresented about 80% of its Value-Added during the year. ITC remains amongst the Top 3Indian corporates in the private sector in terms of Contribution to Exchequer.

PROFITS DIVIDENDS AND RETAINED EARNINGS

( Rs. in Crores)

PROFITS 2019 2018
a) Profit Before Tax@ 18444.16 16851.70
b) Tax Expense
– Current Tax 5849.24 5599.83
– Deferred Tax 130.60 28.62
c) Profit for the year@ 12464.32 11223.25
d) Other Comprehensive Income 362.56 382.34
e) Total Comprehensive Income 12826.88 11605.59
STATEMENT OF
RETAINED EARNINGS
a) At the beginning of the year 21991.24 17576.81
b) Add: Profit for the year 12464.32 11223.25
c) Add: Other Comprehensive Income 5.59 52.78
(net of tax)
d) Add: Transfer from share option on 3.88 18.65
exercise and lapse
e) Less: Dividend
– Ordinary Dividend of 6285.21 5770.01
Rs. 5.15 (2018: Rs. 4.75)
per share
– Income Tax on 1201.69 1110.24
Dividend paid
f) At the end of the year 26978.13 21991.24

@ Previous year includes Exceptional items representing provisions for earlieryears in respect of Tamil Nadu entry tax that were written back based on a favourableorder of the Honourable Supreme Court.

FMCG Cigarettes

A punitive and discriminatory taxation and regulatory regime together with sharpincrease in illegal trade in recent years continue to pose significant operatingchallenges to the legal cigarette industry in the country.

Contrary to indications from the Government that the transition to GST would be basedon principles of maintaining revenue neutrality tax incidence on cigarettes has risensharply under the GST regime and the discrimination vis--vis other tobacco productscontinues. The legal cigarette industry already reeling under the cumulative impact ofsteep increase in taxation over the previous five years in the pre-GST regime and intenseregulatory pressures was further impacted by a sharp increase of 13% in tax incidence oncigarettes (19% increase for the king-size filter segment) under the GST regime. Coupledwith the increase in Excise Duty rates announced in the Union Budget 2017 this resultedin an incremental tax incidence of over 20% on cigarettes post implementation of GST.

It is pertinent to note that the tax incidence on cigarettes has nearly trebled (on acomparable basis) between 2011-12 and 2017-18 and taxes on cigarettes are effectivelyabout 55 times higher than taxes on other tobacco products on a per kg basis.

Excessive taxation has made legal duty-paid cigarettes in India amongst the costliestin the world in terms of per capita affordability.

A punitive and discriminatory taxation and regulatory regime together with sharpincrease in illegal trade in recent years continue to pose significant operatingchallenges to the legal cigarette industry in the country.

The high rates of tax on cigarettes provide attractive tax arbitrage opportunities forillicit trade allowing sale of these cigarettes to consumers at prices much lower thanthose of duty-paid domestic cigarettes. This has encouraged mushrooming of unscrupulousoperators who indulge in clandestine manufacturing of cigarettes across the country andalso provided a huge impetus to large-scale smuggling of international brands into thecountry. Seizure of large quantum of smuggled cigarettes by enforcement agencies acrossthe country over the recent years confirm the growing menace of illegal cigarette trade inthe country. While the legitimate cigarette industry has declined steadily since 2010-11at a compound annual rate of over 4% p.a. illegal cigarette volumes in contrast havegrown at nearly 5% p.a. during the same period making India one of the fastest growingillegal cigarette markets in the world. It may be noted that according to EuromonitorInternational India is now the 4th largest illegal cigarette market in the world.

Due to the high rates of taxes on legal cigarettes and the consequent shift to illegalcigarettes and other forms of tobacco consumption duty-paid cigarettes constitute only10% of total tobacco consumption in India and per capita consumption of cigarettes inIndia is among the lowest in the world.

The disparity in taxation on tobacco products has caused a progressive migration fromconsumption of duty-paid cigarettes to other lightly taxed/ tax-evaded forms of tobaccoproducts comprising illegal cigarettes and bidi chewing tobacco gutkha zarda snuffetc. As a consequence while the share of legal cigarettes in total tobacco consumption inthe country has declined considerably over the years aggregate tobacco consumption hasincreased over the same period. As a result despite accounting for merely 10% of thetobacco consumed in the country duty-paid cigarettes contribute more than 86% of therevenue generated from the tobacco sector. It is estimated that on account of illegalcigarettes alone the revenue loss to the Government is more than Rs. 13000 crores perannum. In respect of the other tobacco products also the revenue losses are significantsince about 68% 2 of the tobacco consumed in the country remains outside the tax net.

The cost disadvantage faced by duty-paid cigarettes as compared to illegal cigarettesis exacerbated by the fact that duty-paid cigarettes comply fully with provisions ofapplicable Indian legislation like The Cigarettes and Other Tobacco Products (Prohibitionof Advertisement and Regulation of Trade and Commerce Production Supply andDistribution) Act 2003 (COTPA) and bear the statutorily mandated pictorial and textualwarnings covering 85% of the surface area of the packet (one of the largest in the world).On the other hand the smuggled illegal cigarettes do not bear any such pictorial ortextual warnings or bear much smaller pictorial warnings as per the tobacco laws of thecountries from where these cigarettes are sourced. As reported in prior years findingsfrom research conducted by IMRB International an independent market researchorganisation show

2 Report on the impact of current tax framework on the tobacco sector in India andsuggestions for its improvement - 2014 by ASSOCHAM and KPMG.

It is estimated that on account of illegal cigarettes alone the revenue loss to theGovernment is more than Rs. 13000 crores per annum. About 68% of the tobacco consumed inthe country remains outside the tax net.

that the lack of pictorial warnings on packets of smuggled cigarettes or theirdiminutive size creates a perception in the consumer's mind that smuggled cigarettes are‘safer' than domestic duty-paid cigarettes that carry the 85% pictorial warnings.Along with low prices to consumers (enabled through tax evasion) this has opened thefloodgates for contraband cigarettes.

It is pertinent to note that several other major tobacco producing countries includingthe USA have framed regulatory frameworks for tobacco taking into consideration theeconomic interests of their tobacco farmers in deciding whether or not to adopt large orexcessive pictorial warnings. The inadvertent and unforeseen consequence of the stringentIndian tobacco regulations is one of continuing losses to the Indian tobacco farmer withcorresponding gains to tobacco farmers in the countries that have opted for moderate andequitable tobacco regulations. These developments have had a devastating impact on theIndian tobacco farmer and the 46 million livelihoods dependent on the tobacco value chain.

As reported last year your Company and several other stakeholders had challenged thevalidity of the pictorial warnings. The Karnataka High Court by its judgement in December2017 held the 85% pictorial warnings with extremely gruesome imagery to be factuallyincorrect and unconstitutional. Upon a Special Leave Petition filed by the Government theHonourable Supreme Court has stayed the Order of the High Court. Pending the final hearingof this matter the regime of the extremely repugnant 85% pictorial warnings continues. Infact new pictorial warnings with even more gruesome images have been introduced from 1stSeptember 2018.

In India cigarettes are manufactured largely using flavourful Flue Cured VirginiaTobacco (FCV) which is grown in the states of Andhra Pradesh Telangana and Karnataka. FCVtobaccos are also traded internationally and India is an exporter of this commodity. Sincesmuggled international brands of cigarettes do not use Indian tobaccos in addition torevenue losses the growth of the illegal cigarette trade has also resulted in a drop indemand for Indian FCV tobaccos in the domestic market. This decline in domestic demandtogether with lack of export opportunities (favourable prices of competing origins andlower Indian crop) has adversely impacted earnings of the Indian tobacco farmer. It isestimated that in the four years since 2013-14 Indian tobacco farmers have suffered acumulative drop in earnings of over Rs. 4000 crores3. Ensuring stability in domesticdemand will aid in cushioning the impact of any volatility in the international markets.

India is the 2nd largest tobacco grower in the world. Tobacco occupies a prime place inthe Indian economy on account of its considerable contribution to the agriculturalindustrial and export sectors4. However the extremely stringent regulations along withthe discriminatory and steep taxation on cigarettes have had numerous negative albeitunintended repercussions. These include:

– continuing decline in legal cigarette volumes in favour of lightly taxed andtax-evaded tobacco products resulting in sub-optimisation of the revenue potential of thetobacco sector and significant loss to the Exchequer.

– further fillip to the growth of illegal cigarettes in the absence of statutorypictorial and textual warnings on smuggled international brands.

– widespread availability of illegal cigarettes and other tobacco products ofdubious quality and hygiene to consumers at extremely affordable prices.

3 Based on statistics published by the Tobacco Board Ministry of Commerce &Industry Gol.

4 Report on Tobacco Control in India Ministry of Health & Family WelfareGoI 2004 (Jointly supported by Centers for Disease Control and Prevention USA and theWorld Health Organisation).

The inadvertent and unforeseen consequence of the stringent Indian tobacco regulationsis one of continuing losses to the Indian tobacco farmer with corresponding gains totobacco farmers in the countries that have opted for moderate and equitable tobaccoregulations.

– a large component of tobacco consumption in the country aggregating around 68%remaining outside the tax net.

– persistent negative impact on the livelihood of tobacco farmers and othersdependent on tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicatethat on account of agro-climatic conditions there is no equally remunerative alternatecrop that can be grown in the FCV tobacco growing regions of the country.

As in the past your Company continues to represent with policy makers for equitablenon-discriminatory pragmatic evidence based regulations and taxation policies thatbalance the economic imperatives of the country and the tobacco control objectives havingregard to the unique tobacco consumption pattern in India. Due to the cumulative impact ofincrease in tax incidence on cigarettes over the last five years especially the sharpescalation post transition to the GST regime in 2017-18 legal cigarette industry volumesremain under severe pressure. While stability in taxes during the year provided somerelief to the legal cigarette industry it is pertinent to note that the legal cigaretteindustry volumes remain significantly below June'14 levels. Moderation in taxes iscritical for addressing the interests of all the stakeholders of this industry includingthe tobacco farmers the Exchequer and the consumers.

Your Company's unwavering focus on nurturing a portfolio of world-class productssuperior consumer insights and a strategy of continuous innovation and value creationhelped sustain its leadership position in the industry. Deep consumer insights and arobust innovation pipeline enabled the Business to introduce new variants catering to thecontinuously evolving consumer preferences. These include Classic Rich & SmoothClassic Verve Low Smell and Gold Flake NEO which have received positive response in themarket.

Similarly recently introduced brands/variants such as American Club Player's GoldLeaf and Wave strengthened their market standing during the year.

As in the past the research and development initiatives of your Company continue toadd to the country's bank of Intellectual Property Rights (IPR). In addition to grant ofseveral patents in previous years your Company has been granted two more patents duringthe year in respect of cigarettes.

On the supply-chain side the Business continued to modernise its manufacturingfacilities by inducting contemporary technologies to secure higher levels of productivityand product excellence. Cutting-edge technologies such as Industry 4.0 and Data Sciencewere deployed towards driving operational excellence. These interventions are poised tobring about a digital transformation in manufacturing processes and enhance the Business'competitive advantage. Continuing the journey of benchmarking the manufacturing processesagainst industry best practices the Saharanpur unit was recognised as ‘Future ReadyFactory - Platinum Rating: FMCG Sector Mega Large Business' under the aegis of IMEA(India Manufacturing Excellence Awards – a highly acclaimed and robust on-siteassessment program) by Frost & Sullivan. Various other manufacturing initiatives andprojects were adjudged winners in the Frost & Sullivan's ‘Project Evaluation andRecognition Program (PERP) 2018' under Quality Enterprise Leadership and Cost Leadershipin Manufacturing Sector. Upgradation and digitisation of on-line real time qualityassurance systems and induction of state-of-the-art technology for several product andpackaging variants were carried out during the year. These initiatives coupled within-house design and development expertise and innovation capabilities have furtherimproved the speed-to-market for new launches and augmented the innovation pipeline of the

Your Company's unwavering focus on nurturing a portfolio of world-class productssuperior consumer insights and a strategy of continuous innovation and value creationhelped sustain its leadership position in the industry.

Business. Further a long-term agreement was concluded successfully with the unionisedworkforce at the Saharanpur unit which will help the Business achieve furtherimprovements in productivity.

In line with your Company's commitment to the ‘Triple Bottom Line' the Businesshas ramped up usage of renewable energy to a record high of 55% of the total energyconsumed. This was achieved through sustained investments in wind bio-waste and solarenergy sources. Further all the manufacturing facilities of the Business are IGBC GreenBuilding certified at the highest ‘Platinum' rating. The Munger unit was honouredwith the ‘National Energy Leader' Award (the highest category of award) at the 19thNational Award for ‘Excellence in Energy Management' organised by Confederation ofIndian Industry (CII) and the ‘Winner Award for Excellence in Energy Conservation' byCII Eastern Region. The Munger unit was also the recipient of ‘EnvironmentExcellence Award' (runner-up prize) by Indian Chamber of Commerce (ICC). The Ranjangaonunit was recognised with the ‘Shreshtha Suraksha Puraskar' Award by National SafetyCouncil of India (NSCI) and ‘Safety Innovation Award' by The Institution of Engineers(India). As a testimony to the success of the investments made in effective capabilitybuilding by leveraging digital technology your Company was adjudged as a winner in the2018 Frost & Sullivan Project Evaluation and Recognition Program.

‘Electronic Nicotine Delivery Systems' (ENDS) broadly refer to both ElectronicVaping Devices (EVD) commonly called ‘e-cigarettes' as well as ‘electronic HeatNot Burn (eHNB)' products. As many as 27 countries including Singapore AustraliaThailand Taiwan UAE Brazil and Argentina have prohibited ENDS. In India 12 States haveprohibited or restricted this category. Regulatory issues are also being contested inIndian courts. Your Company's EON brand in the EVD segment is being marketed in selectstates. Your Company is closely following the regulatory developments while initiatingappropriate investments enhancing capability and gearing up to be in a state of readinessin this emerging segment.

The operating environment for the legal cigarette industry is likely to remainchallenging in view of the high levels of taxation and illegal trade and disproportionateregulatory pressures. Notwithstanding these challenges your Company remains confident offortifying its market standing in the legal cigarette industry leveraging its superiorstrategies execution excellence investments in cutting-edge technology and a futureready product portfolio.

FMCG - Others

After continued sluggishness over the last two years there was anticipation ofsignificant pick-up in the FMCG industry. However after a promising first half growth inthe second half of the year and particularly in the last 3-4 months was muted due to tightliquidity conditions and sluggish rural demand. Notwithstanding these short-termpressures the structural drivers of long-term growth such as rising disposable incomes& consumer awareness low levels of penetration of consumer goods favourabledemographics and increasing urbanisation amongst others remain firmly in place whichaugurs well for the FMCG industry.

Despite the challenging conditions prevailing during the year your Company'sFMCG-Others Segment Revenue at Rs. 12505.28 crores grew ahead of industry and recorded anincrease of 12% (on a comparable basis and excluding the impact of ongoing restructuringin Lifestyle Retailing Business). Most major categories enhanced their market standingduring the year. While ‘Bingo!' snacks ‘Aashirvaad' atta

The structural drivers of long-term growth such as rising disposable incomes &consumer awareness low levels of penetration of consumer goods favourable demographicsand increasing urbanisation amongst others remain firmly in place which augurs well forthe FMCG industry.

‘YiPPee!' noodles and ‘Dark Fantasy Choco Fills' super-premium cream biscuitswere the key drivers of growth in the Branded Packaged Foods Businesses ‘Engage'deodorants ‘Vivel'/‘Fiama' shower gels & bodywash and ‘Savlon'handwash reported robust growth in the Personal Care Products Business.

The Education and Stationery Products Business posted a strong performance during theyear led by ‘Classmate' notebooks which consolidated its leadership position in theindustry. As part of the ongoing restructuring of the Lifestyle Retailing Business yourCompany divested the ‘John Players' trademark/copyright and its variants in theapparel category along with related goodwill.

Segment EBITDA for the year registered a robust growth of 51% to Rs. 688.25 crores fromRs. 455.58 crores in 2017-18. Segment Results for the year (excl. net gain onrestructuring of Lifestyle Retailing Business) posted significant improvement to Rs.315.72 crores from Rs. 164.12 crores in 2017-18. This was driven by enhanced scaleproduct mix enrichment and strategic cost management initiatives after absorbing theimpact of sustained investment in brand building gestation costs of new categories andfacilities and costs associated with the ongoing structural interventions in theLifestyle Retailing Business.

Your Company continued to make investments during the year towards enhancing brandsalience and consumer connect while simultaneously implementing strategic cost managementmeasures across the value chain.

During the year your Company commissioned a world-class Integrated Consumer GoodsManufacturing and Logistics facility (ICML) at Pudukkottai (Tamil Nadu) while operationsof ICMLs at Kapurthala (Punjab)

Panchla (West Bengal) and Guwahati (Assam) were further ramped up. Significant progresswas also made in constructing several other state-of-the-art owned ICMLs across regionstowards supporting the scale up plans in the FMCG Businesses. Currently several projectsare underway and in various stages of development – from land acquisition/sitedevelopment to construction of buildings and other infrastructure. The Businesses deployed‘Industry 4.0' technologies including advanced analytics big data and industrialInternet of Things (IoT) in areas such as overall equipment efficiency energy managementquality and traceability. Your Company is leveraging emerging digital technologies such asmobility solutions analytics and social media to reduce cycle time and cost ofoperations and engage better with consumers & customers.

The FMCG Businesses comprising Branded Packaged Foods Personal Care ProductsEducation and Stationery Products Lifestyle Retailing Incense Sticks (Agarbattis) andSafety Matches have grown at an impressive pace over the past several years.

FMCG - Others Segment EBITDA for the year registered a robust growth of 51% to Rs.688.25 crores from Rs. 455.58 crores in 2017-18.

Today your Company's vibrant portfolio of brands represents an annual consumer spendof over Rs. 18000 crores in aggregate. Over 25 world-class Indian brands have been builtlargely organically by your Company over a relatively short period of time - a featunparalleled in the Indian FMCG industry. In terms of annual consumer spend‘Aashirvaad' is today over Rs. 4500 crores; ‘Sunfeast' over Rs. 3800 crores;‘Bingo!' nearly Rs. 2500 crores; ‘Classmate' over Rs. 1400 crores;‘YiPPee!' over Rs. 1100 crores and ‘Vivel' ‘Mangaldeep' &‘Candyman' are over Rs. 500 crores each. These world-class Indian brands support thecompetitiveness of domestic value chains of which they are a part ensuring creation andretention of value within the country.

Your Company's FMCG brands have achieved impressive market standing in a relativelyshort span of time. Today Aashirvaad is No. 1 in Branded Atta Bingo! is No. 1 in Bridgessegment of Snack Foods (No.2 overall) Sunfeast is No. 1 in the Cream Biscuits segmentClassmate is No. 1 in Notebooks YiPPee! is No. 2 in Noodles Engage is No. 2 inDeodorants (No. 1 in women's segment) and Mangaldeep is No. 2 in Agarbattis (No. 1 inDhoop segment).

‘Many Indias within one India' is both a challenge as well as an opportunity forconsumer goods companies. Your Company remains extremely agile and responsive to theemerging trends shaping the future of the industry. Some of the noteworthy consumer trendsinclude the emergence of health and wellness products as a key consumer need; increasingpreference for products rooted to ‘Indianness' and with regional/cultural connects;increasing need for customised products and experiences; growth in demand for‘on-the-go' consumption formats in low-unit packs and rising influence of socialmedia and digitalisation on consumer preferences and shopping behaviour. It has becomeimperative for companies to identify micro-segments and address the needs of eachmicro-segment in a unique way tailoring their offerings to meet diverse needs.

The FMCG market construct is likely to undergo rapid change driven by exponentialgrowth in Tier – II/III towns and rural India and the emergence of relatively newchannels Modern Trade and e-commerce. These new channels are disrupting the way theindustry operates and provide a platform with touchpoints to showcase and test out a widerange and portfolio of products. Adaptation assortment pricing shopper experience andexecution have been the key strategic drivers for businesses to gain competitive advantagein Modern Trade. Several initiatives were implemented during the year towards leveragingthe fast growing e-commerce channel with a view to enhancing the reach of your Company'sproducts and harnessing digital and social media platforms for deeper consumer engagement.Your Company continues to leverage its deep rural linkages and its understanding of therural economy to devise unique strategies to rapidly grow in these markets. Your Companycontinues to invest in cutting-edge digital technologies to tap into unexplored touchpoints for brand communication predictive analytics to enhance informed decision makingand customised mobility solutions for better distribution reach.

The Indian FMCG market is at an inflection point and winning in the market place willbe an outcome of capitalising on the trends as well as building efficiencies in businessoperations. Your Company seeks to significantly scale up the FMCG Businesses leveragingits institutional strengths viz. deep consumer insight proven brand building capabilityagri-commodity sourcing expertise cuisine knowledge strong rural linkages a deep andwide channel-tailored distribution network

Your Company's vibrant portfolio of brands in the FMCG - Others Segment represents anannual consumer spend of over Rs. 18000 crores in aggregate. and packaging know-how. Inaddition your Company continues to make significant investments in Research &Development strengthen supply chain capability focus on consumer insight discovery andharness digital technology to develop and launch disruptive and breakthrough products inthe market place. With these interventions your Company is well poised to strengthen itsmarket standing and seize growth opportunities in the FMCG industry.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Against the backdrop of a challenging operating environment as aforestated yourCompany sustained its position as one of the fastest growing branded packaged foodsbusinesses in the country leveraging a robust portfolio of brands a slew offirst-to-market offers a range of distinctive products customised to address regionaltastes and preferences along with an efficient supply chain and distribution network.

The Business implemented several initiatives encompassing cost management supply chainoptimisation smart procurement alternative fuel usage and productivity improvementthrough automation which helped in absorbing escalation in input costs start-up costs ofnew facilities and strategic investments in brand building for new categories viz. DairyJuices Chocolates and Coffee.

Your Company's Branded Packaged Foods Businesses continued to make significantinvestments towards brand building and supporting the launch of new variants. Cut-throughadvertising and brand engagement platforms touching millions of consumers through marketdevelopment efforts strengthened the market standing of its brands across categories. YourCompany's vibrant food brands such as ‘Aashirvaad' ‘Sunfeast' ‘Bingo!'

‘YiPPee!' and ‘B Natural' amongst others enable strong forward linkages fordomestic agri-value chains thereby enhancing their competitiveness and making ameaningful contribution to boost farmer earnings. Encouraged by consumer response yourCompany is scaling up presence in Juices Chocolates Coffee and Dairy in a calibratedfashion.

Relentless focus on delivering superior quality products to consumers remains a keysource of competitive advantage for the Branded Packaged Foods Businesses. The Businessescontinue to leverage your Company's agri-commodity sourcing expertise to procure highquality raw materials thereby ensuring the highest level of quality and safety of itsproducts. In addition each of your Company's branded packaged food products ismanufactured in HACCP/ ISO-certified manufacturing locations ensuring compliance with allapplicable laws and adherence to the highest quality norms.

The Business launched several innovative distinctive and first-to-market productsduring the year leveraging robust product development processes the capabilities of yourCompany's Life Sciences and Technology Centre and the cuisine expertise resident in yourCompany's Hotels Business.

Your Company's brands featured prominently amongst India's Most Trusted Brands 2018 inthe Brand Equity survey undertaken by The Economic Times with Sunfeast at No. 6Aashirvaad at No. 8 Sunfeast YiPPee! at No. 12 and Bingo! at No. 20 under the FoodProducts Category. Sunfeast and Aashirvaad also featured among Top 100 Most Trusted Brandsacross all categories.

Several manufacturing units of your Company's Branded Packaged Foods Businessescompeting with both the best within and outside the industry received various awards andaccolades during the year bearing testimony

Your Company sustained its position as one of the fastest growing branded packagedfoods businesses in the country leveraging a robust portfolio of brands a slew offirst-to-market offers a range of distinctive products customised to address regionaltastes and preferences along with an efficient supply chain and distribution network.

to your Company's focus on manufacturing excellence safety and quality.

Notable awards included ‘Platinum' rating for Haridwar biscuits plant at IndiaManufacturing Excellence Awards by Frost & Sullivan and ‘Outstanding Performancein Food Safety Excellence' Award by CII for biscuits plant in Bengaluru demonstrating yourCompany's commitment to excellence in manufacturing processes and food safety.

Your Company was recognised for ‘Overall Procurement Excellence (FMCG)' at the 5thInflection Summit and Awards organised by Alden Global in association with NASSCOM alongwith Council of Supply Chain Professionals USA & Singapore Institute of MaterialsManagement.

Your Company continues to make investments in Integrated Consumer Goods Manufacturingand Logistics facilities (ICMLs) towards augmenting the manufacturing and sourcingfootprint across categories with a view to improving market responsiveness leveragingfiscal incentives and reducing the cost of servicing proximal markets. New manufacturinglines were commissioned across categories such as Biscuits Beverages Noodles PotatoChips Finger Snacks at various locations viz. Kapurthala Trichy Panchla and Guwahati.These ICMLs are expected to set new benchmarks in quality productivity and costefficiency.

Your Company sustained its market standing as the 3rd largest food company in thecountry (publicly listed) and its brands have been successful in penetrating into one outof every two Indian households.

Your Company continues to enter into new categories and industry segments besidesstrengthening its existing portfolio of products with new launches. In addition itexperimented with innovative distribution channels to enhance reach and offer convenienceto consumers in line with emerging consumer trends.

– The Staples Business posted yet another year of robust performance growing wellahead of the industry. Aashirvaad atta fortified its market standing across geographiesand its leadership position in the industry. Variants in the value-added portfolio such asMultigrain Atta and Select Atta continued to record robust growth driven by highersalience in Modern Trade and e-commerce channels.

Your Company had to contend with increased competitive intensity post theimplementation of 5% GST on branded Atta. While it has been the Government's intention toprovide relief of nil rate of GST only to small and local manufacturers thereby benefitingconsumers with lower priced staple products many manufacturers have used this distinctionin rates as an attractive tax-evasion/ avoidance opportunity by classifying their productsas unbranded or with a declaration that ‘We hereby voluntarily forego all types ofactionable claim or enforceable right in respect of brand name printed on this pack' andcontinue to market the product with brand names and distinct trademarks. This inequitableGST differential between branded and unbranded players has resulted in market distortionwidening the price gap between national registered brands and local unregistered brands.

It may be recalled that there was a concerted attack on Aashirvaad atta on social mediain late 2017-18. Through 360 degree campaigns reassuring consumers and dispelling thebaseless rumours surrounding Aashirvaad atta your Company has been successful inregaining consumer's confidence and reviving growth especially in the second half of theyear. Focused marketing inputs consumer activations and region-specific interventions

The Business launched several innovative distinctive and first-to-market productsduring the year leveraging robust product development processes the capabilities of yourCompany's Life Sciences and Technology Centre and the cuisine expertise resident in yourCompany's Hotels Business.

supported by media investments have enabled Aashirvaad improve on brand healthparameters.

Your Company takes utmost care in manufacturing its products at HACCP/ISO-certifiedmanufacturing locations ensuring compliance with all applicable laws and adherence to thehighest quality norms. Powered by the trust reposed by over 2.5 crore households yourCompany is confident of sustaining Aashirvaad's position as India's No. 1 atta brand goingforward.

Supported by its new positioning – sun-dried and made from natural sea saltcrystals – backed up by on-ground activations visibility and media investmentsAashirvaad salt gained traction in key geographies and posted strong performance duringthe year.

In the branded Spices category the Aashirvaad range of spices registered robustrevenue growth. New blended spices variants were launched catering to regional tastes andpreferences such as ‘Chicken 65' & ‘Mutton Chukka Masala' in Tamil Nadu and‘Garam Masala' in Uttar Pradesh. With extension of the portfolio to the newgeographies of North India and Gujarat Aashirvaad range of spices is now available inmost states of India.

– In the Snacks and Meals Business the Bingo! range of snacks recorded robustgrowth during the year driven by new product launches portfolio renovation andextensions expansion of distribution footprint tailor-made trade marketing support andconsistent and impactful communication. Bingo! sustained market leadership in the bridgessegment and Tedhe Medhe emerged as India's most distributed brand in the category. TheBusiness strengthened its product range with the launch of several innovative variantssuch as Mad Angles Very Peri Peri

Mad Angles Fillos & Tedhe Medhe Wakhra Style. These products have garneredencouraging consumer traction and are being rolled out to other markets. Bingo! potatochips recorded impressive market share gains and consolidated its leadership position inthe South. Bingo! No Rulz launched in the previous year continued to gain consumerfranchise with its unique value proposition of multiple shapes in a single pack.

In the Instant Noodles category YiPPee! noodles sustained its growth momentum duringthe year despite increasing competitive intensity from national and several regionaldiscount players. The Business continued to focus on premiumising its product portfolioand enhancing brand affinity. During the year the Business launched limited editionvariants under the ‘My' range sub-brand. Available in four exciting variants therange has been crafted keeping in mind the taste preferences of young adults and hasreceived good response from consumers.

– The Confections Business continued to premiumise its portfolio and augment itsrange with the introduction of low-unit packs and channel-specific SKUs to its assortment.In the Biscuits category the Business consolidated its leadership position in theSuper-Premium Creams segment with continued focus on enhancing brand affinitystrengthening the supply chain and expanding distribution reach. Consistent and impactfulcommunication coupled with focused marketing inputs helped improve penetration and brandhealth metrics. Dark Fantasy Choco Fills witnessed further acceleration in growth momentumdriven by superior product attributes focused communication and consumer activation.During the year the Business augmented its portfolio in the rapidly growing Cakes segmentthrough the launch of layered cakes under the Sunfeast Bounce

‘Bingo!' sustained market leadership in the bridges segment and ‘Tedhe Medhe'emerged as India's most distributed brand in the category.

brand and expanded the offerings in the Marie & Cookies segment with the launch ofSunfeast Marie Light Vita & Sunfeast Mom's Magic Choco Chip cookies. Variousinnovative and first-to-market launches such as Bounce minis and Dark Fantasy Jellifillsalso led to premiumising the portfolio. Tailored and contextual content on digitalplatforms were deployed to enhance reach and drive brand imagery.

In the Confectionery category the Business continued to focus on premiumising itsproduct portfolio with its differentiated and unique offerings at ‘Rupee 1 and above'price points with greater thrust on Multi-unit pack portfolio. During the year theBusiness augmented its portfolio with the launch of Candyman Tadka Time a uniquefirst-to-market format of masala coated jelly beans and forayed into bridged chocolatesegment with the launch of Candyman Fantastik – an innovative offering of wafersticks with chocolate crme filling. These products have received encouraging consumerresponse.

– In the Dairy & Beverages Business the ‘B Natural' range of juicesleveraged its ‘Not from Concentrate' platform to deepen consumer connect by providinga more nutritive and natural tasting experience whilst simultaneously promoting fruit pulpprocured from Indian farmers thereby supporting the Indian farm and food processingsector. The entire range of B Natural Beverages is ‘made with 100% Indian Fruit &0% concentrate'. The Business also launched a premium range of juices comprising RatnagiriAlphonso Himalayan Mixed Fruit and Dakshin Guava in an appealing transparent bottleformat providing an exotic and rich fruit experience which has received an excellentinitial response from the target consumers. In the Dairy segment Business extendedAashirvaad pouch milk to Kolkata and Patna and scaled up presence in existing markets.The product received excellent response in a relatively short period of time.‘Aashirvaad Svasti' Ghee continues to gain consumer traction and excellent productfeedback. The Aashirvaad Svasti portfolio was augmented with the introduction of pouchcurd and paneer. The Business also forayed into the Dairy Beverages segment with thelaunch of four differentiated variants of milkshakes under the ‘Sunfeast Wonderz'brand. The product has received encouraging consumer response and is being rolled out totarget markets.

– In the Chocolates category the Business launched a range of premium chocolatebars crafted in two unique product formats – ‘Fabelle Soft Centres' (centrefilled chocolate bars) and ‘Fabelle Choco Deck' (layered chocolate bars) in selectmarkets which is gaining consumer traction. Presence in the luxury segment portfolio wasstrengthened by leveraging the world-class Fabelle boutiques new launches in the boxedchocolate segment and continued communication across key digital media. In the boxedchocolate range the Business launched India's first Ruby Chocolate Ruby Gianduja.

‘Sunbean' gourmet coffee which is available across all ITC Hotels continues toreceive excellent response from discerning consumers. The Business is also pilotingready-to-use beaten instant coffee paste in select markets.

A big thrust on India's Food Processing sector can lead to significant job creationenhance rural incomes and help manage food inflation. In view of the immense potential ofthis industry your Company is making significant investments in food processing andremains focused on establishing itself as the ‘most trusted provider of food productsin the Indian market' driven by superior product quality a differentiated productportfolio deep understanding of consumer needs and

Your Company is making significant investments in food processing and remains focusedon establishing itself as the ‘most trusted provider of food products in the Indianmarket' driven by superior product quality a differentiated product portfolio deepunderstanding of consumer needs and preferences R&D innovation and operationalexcellence across the value chain.

preferences R&D innovation and operational excellence across the value chain.Your Company will continue to make investments towards establishing a distributedmanufacturing footprint driving cost efficiencies in a structural manner and focus onsupply chain optimisation to support the rapid and profitable growth of the BrandedPackaged Foods Businesses in the years ahead.

Personal Care Products

Your Company's Personal Care Products Business delivered a healthy performance duringthe year and continued to enhance its market standing in the Hand Hygiene FragranceBodywash and Skin Care categories. This was driven by sustained focus on innovationportfolio premiumisation expansion of distribution reach and proactive cost management.

In the Fragrance category Engage recorded impressive gains consolidating itsleadership position in the women's segment and No. 2 position overall.

The Business continues to garner robust consumer traction in the fast-growing smallpack format of pocket perfumes despite intense competition. The Business also launched anew variant namely Mikkel Verde in the Fine Fragrance space under the Essenza Di Wills(EDW) brand.

In the Personal Wash category new bar soap variants such as Vivel Cool receivedpositive consumer response in the markets of launch. In the bodywash segment Fiamacontinued to garner increasing consumer franchise. During the year the Businessintroduced Vivel Bodywash in select markets at an attractive price point to offer bar soapusers an enhanced bathing experience. Savlon handwash recorded significant gains duringthe year across brand health metrics and emerged as one of the fastest growing brands inthe market.

The Business strengthened its presence in the Skincare space with the launch of‘Dermafique' range of premium skincare products which have been developed at theCompany's state-of-the-art Life Sciences and Technology Centre leveraging the latestbreakthroughs in bioscience nanotechnology and derma science. Designed and validated forthe Indian consumer the innovative premium range of products include anti-ageingspecialised hydrating creams body serum cleansing and toning products. In the popularSkincare space the Business restaged ‘Charmis' skin cream with a fresh look andenhanced sensorial experience supported by a focussed marketing campaign. The new productinnovations and launches in the Skincare space have received encouraging response fromtarget consumers.

Several new and exciting consumer friendly offerings were launched during the yearwhich include Savlon Hand Sanitizer in a child-friendly pen format and Savlon AntisepticLiquid in a ‘Braille' pack for the visually impaired.

The Business continued to leverage creative brand campaigns and social media platformstowards deepening consumer engagement. Savlon Healthy Hands Chalk Sticks won the coveted‘Creative Effectiveness Grand Prix' at Cannes a first ever for India. Savlon‘Healthy Hands' Chalksticks initiatives was ranked amongst the top two most effectivecampaigns in the world by World Advertising Research Center U.K. (WARC) which recognisesexcellence in advertising and communication across the world. Savlon won a ‘Gold' atthe Asia Pacific Effie Awards for unique strategy and execution in Handwash categoryamongst school children. Winning the prestigious ‘Silver Lion' at the ‘CannesYoung Lions' competition for marketers bears testimony to the talent resident amongst ouryoung employees.

The Personal Care Products Business strengthened its presence in the Skincare spacewith the launch of ‘Dermafique' range of premium skincare products which have beendeveloped at the Company's state-of-the-art Life Sciences and Technology Centre leveragingthe latest breakthroughs in bioscience nanotechnology and derma science.

During the year the Business forayed into the Floor Cleaner market with the recentlyacquired ‘Nimyle' brand. Leveraging its 100% natural brand positioning Nimyle hasattained leadership position in West Bengal and is being extended to other parts of India.

Your Company continues to accord the highest priority to manufacturing excellence. TheGuwahati facility became the first in the Personal Care industry in India to receive theprestigious Five-S certification by JUSE (Union of Japanese Scientists and Engineers)bearing testimony to your Company's focus on manufacturing excellence safety and quality.

Your Company continues to strengthen its presence in the Personal Care space in view ofthe robust long-term prospects of the industry given the low levels of per capitaconsumption currently rising disposable incomes increasing urbanisation and growingconsumer preference for enhanced personal grooming. Your Company is well positioned toseize the emerging opportunities and continues to invest in creation of vibrant brandsinnovative consumer-centric products and a robust supply chain to emerge as a significantplayer in this space.

Education and Stationery Products

During the year the Stationery industry witnessed heightened competitive intensityalong with a sharp escalation in paper prices. Despite these challenging conditions theBusiness posted robust growth in revenue and sustained its leadership position in theindustry anchored on a portfolio of world-class brands and products and an efficientdistribution network.

The Business continued to leverage its dedicated product development cell and yourCompany's Life Sciences and Technology Centre to develop and launch innovative andsuperior products in the market. During the year the product portfolio was augmented withthe launch of several new products including paper and filing solutions range of vibrantcolour options and gift packs under the ‘Paperkraft' portfolio and several offeringsin the pens category. The Business also scaled up presence in the value segment of thenotebook industry through the ‘Saathi' brand with a view to consolidating itsleadership position.

The Business continued to deepen consumer engagement with the launch of‘MyClassmate' app – a ‘Perfect Buddy' to the students offering a range ofinnovative features and enabling them to traverse their learning journey. The app hasreceived encouraging response from consumers garnering close to 1.5 lakh downloads.‘Classmateshop.com' a first-to-market initiative that offers consumers the option topersonalise the images to be printed on notebook covers was enhanced through a mobileoptimised version. ‘Be Better Than Yourself' campaign helped Classmate consolidateits consumer mindshare and preference. The Business continued its association with‘Classmate Spellbee' and ‘Classmate activation programmes' in key towns. Theseengagement programmes collectively reach out to over a million children across 1600schools.

The concerted efforts of the Business to enhance brand affinity and consumer connecthas enabled Classmate to earn the ‘Superbrand' status in 2018.

In the area of supply chain initiatives on quality and cost management through networkoptimisation yielded superior product quality and enhanced operational efficiency. Thethrust on expanding distribution continued with specific focus on institutional channeland enhancing market penetration and outlet coverage. Sales and distribution systems were

The Education and Stationery Products Business continued to deepen consumer engagementwith the launch of ‘MyClassmate' app – a ‘Perfect Buddy' to the studentsoffering a range of innovative features and enabling them to traverse their learningjourney.

strengthened further through innovative processes and superior technologyinterventions.

Classmate and Paperkraft notebooks leverage your Company's world-class fibre line atBhadrachalam - India's first ozone treated elemental chlorine free facility - and embodythe environmental capital built by your Company in its paper business. During the yearthe Business scaled up the Paperkraft range of notebooks using Forest Stewardship Council(FSC) certified paper made at your Company's paper mill matching the best quality paperin the world. The project for setting up your Company's dedicated manufacturing facilityfor notebooks is nearing completion. Equipped with state-of-the-art machinery thefacility will enable large-scale automation of processes which is expected to bring inhigher operational efficiencies.

The Indian Education and Stationery Products industry is poised for exponential growthdriven by growing literacy increasing enrolment ratios Government's thrust on theeducation sector through various policy initiatives like Sarva Shiksha Abhiyan Right toEducation etc. and a favourable demographic profile of the country's population. YourCompany with its strong brands and robust product portfolio and collaborative linkageswith small & medium enterprises is well poised to strengthen its leadership positionin the Indian stationery market.

Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti category witnessed premiumisation with consumers seeking better productexperience and more culturally relevant fragrances. Apart from the introduction of newerformats and modern fragrances the industry witnessed heightened media and promotionspends from many regional and local players. Notwithstanding such competitive intensityMangaldeep's household penetration increased in urban & rural markets during the yearin both the Agarbatti and Dhoop formats. The brand sustained its position as the secondlargest brand in the Agarbatti category and a leader in the Dhoop segment.

Mangaldeep enhanced its market standing by focusing on driving brand salience throughsharply targeted media investments on-ground consumer activations and a differentiatedand superior product experience. Mix enrichment and cost optimisation initiativescontinued to be the other key focus areas for the Business.

The unique and innovative Mangaldeep app currently available in nine languages on boththe Android & iOS platforms caters to the everyday devotional needs of consumers. Thecontent on the app covers information and steps to perform various pujas populardevotional songs panchang (Hindu calendar and almanac) chant counter and temple locatoramongst others. The app has garnered over five lakh downloads and enjoys a healthy ratingof 4.6/5 which is the highest in the devotional space amongst apps of comparabledimensions. Dwell-time per user has more than doubled over the previous year. The app isbeing continually improvised to expand the scope of devotional journey of consumers.

The Agarbatti industry continues to import raw battis and bamboo sticks althoughbamboo and charcoal – the principal raw materials – are available in India inplenty. This is resulting in loss of livelihood creation opportunities for women andtribals in rural areas particularly in the North East. In this regard the Business isindigenising raw batti sourcing by enhancing domestic manufacturing capacity throughtechnology upgradation and standardisation of processes. Work has also been initiated onaugmenting bamboo plantations in the North East region and indigenisation of bamboo stickproduction which will encourage manufacture of raw battis from domestic bamboo andfacilitate creation of sustainable livelihood opportunities amongst small

‘Mangaldeep' sustained its position as the second largest brand in the Agarbatticategory and a leader in the Dhoop segment.

‘AIM' continues to be the largest selling Safety Matches brand in the industry.

and marginal farmers. The Business has also partnered with various State Governmentbodies to manufacture raw battis & branded finished goods in this regard.

In line with your Company's commitment to enhancing the competitiveness of Indian valuechains linked to its operations the Business has implemented several measures includingfacilitating the mechanisation of agarbatti manufacturing and backward integration intoraw batti manufacturing using indigenous inputs at small scale vendor locations.

While demand conditions in the Safety Matches industry remained sluggish the Businesssustained its market leadership position through portfolio premiumisation and byleveraging a robust portfolio of offerings across market segments. ‘AIM' continues tobe the largest selling brand in the industry. Inflationary pressures on account of a risein cost of input materials were mitigated through value engineering and strategic costmanagement initiatives to maintain profitability.

Lifestyle Retailing Business

The Business continued to execute the structural interventions initiated in theprevious year across the value chain including restructuring its retail footprint &rationalising the store network modifying the design language of its offeringsrestructuring the terms of trade with business partners and sharpening working capitalmanagement. During the year your Company divested the ‘John Players'trademark/copyright and its variants in the apparel category along with related goodwill.

Trade Marketing & Distribution

Your Company's Trade Marketing & Distribution (TM&D) vertical has over theyears developed critical insights into customer behaviour and channel-specific trends inthe FMCG industry. Given the diverse needs of your Company's FMCG businesses the TM&Dvertical has crafted a differentiated and comprehensive market / outlet specific strategyto address the opportunities in the FMCG industry.

Your Company's formidable distribution network which facilitates availability of itsproducts in over six million retail outlets across various trade channels was furtherstrengthened during the year with the addition of more markets and outlets to itsservicing base. Market standing of your Company's products improved in the urban areas asyour Company continued its customised servicing and engagement programmes for the topoutlets. Given the higher growth rates in rural markets your Company continues to rolloutbusiness models and market specific interventions to enhance its footprint in thesemarkets.

During the year your Company sustained its leadership position in the conveniencechannel while consolidating its market standing in premium grocery outlets. Your Company'strade loyalty programmes in the grocery channel continued to gain traction during theyear.

Your Company's sales continued to grow robustly in the Modern Trade channel driventhrough focused joint business planning increased use of customised packs and assortmenthigher level of category engagement and continued focus on in-store sell-out activities.

The FMCG e-commerce industry is coming into its own through multiple platforms and isgrowing at a rapid pace. Your Company continues to strengthen its position in thisemerging space through collaborative planning constant endeavour to drive customisationas required by the online shoppers and through higher discoverability of its offers acrossvarious platforms. Your Company will adapt innovate and collaborate with established andemerging e-commerce players to stay ahead in further evolution of this channel.

Your Company's formidable distribution network which facilitates availability of itsproducts in over six million retail outlets across various trade channels was furtherstrengthened during the year with the addition of more markets and outlets to itsservicing base.

The scale and diversity of your Company's distribution network continues to be acritical lever to enhance market presence gain valuable consumer/ trade insightsunderstand the changing trade/consumer behaviour and provide speed and scale of executionfor launches across geographies. During the year your Company executed more than 50 newproduct launches across geographies apart from extending distribution reach of severalexisting products in the portfolio.

Your Company's robust supply chain and logistics capabilities continue to play a vitalrole in enabling superior market servicing while continuously reducing cost of marketservicing. During the year several initiatives were undertaken to enhance supply chainresponsiveness and cost competitiveness. These include reducing distance to marketenhancing flexibility to cater to new launches and contingencies and reconfiguring marketservicing infrastructure. Robust capability of your Company's supply chain enabled it toquickly respond to and overcome the disruptions caused by the unprecedented floods inKerala during the year. Your Company has also created an end-to-end cold chain catering tothe requirements of new categories such as chocolates and frozen snacks. In additioninnovative distribution models were implemented to optimise inventory holding and reducetransit time by increasing direct market servicing. Your Company is also in the process ofsetting up several state-of-the-art warehouses co-located with the Integrated ConsumerGoods Manufacturing facilities. Construction of such modern warehouses which are expectedto provide long-term benefits by improving operating efficiency and enhancing productfreshness in the market is progressing as per schedule.

Technology enablement in the form of customised mobility solutions data analyticscomprising insightful visualisation tools and predictive analysis are being leveragedincreasingly to enable quick and accurate data capture informed decision making in realtime scientific design of trade inputs and drive sales. With one of the largestdistributed workforce in the FMCG industry your Company continues its focus on humanresource competency development productivity enhancement and sustained engagement.

Your Company continues to invest in augmenting the depth and width of its distributionnetwork while adopting a differentiated approach to address the unique needs of itsdiverse FMCG product portfolio market segments and trade channels. With its robustsystems and processes an agile and responsive supply chain synergies arising fromdistributing various kinds of products through common channels and relationships builtwith its channel partners the distribution highway is a source of sustainable competitiveadvantage for your Company and is well poised to support the rapid scale up of operationsin the ensuing years.

HOTELS

The operating environment in the hospitality sector reflected its growth trajectorywith foreign tourist arrivals growing by over 5% in the year 2018. Healthy growth rate indemand along with a lower rate of new supply aided in boosting room realisations. SegmentRevenue recorded robust growth driven by increase in average room rates improvement inoccupancy and higher Food & Beverage revenue from existing hotels and addition of newproperties to the portfolio. Improved operating leverage notwithstanding gestation costsof newer hotels in the portfolio boosted profitability.

Your Company's Hotels business remains amongst the fastest growing hospitality chainsin the country with over 105 properties under four distinct brands – ‘ITCHotels' in the Luxury segment ‘Welcomhotels' in the Upper-Upscale segment‘Fortune' in the Mid-market to

During the year your Company executed more than 50 new product launches acrossgeographies apart from extending distribution reach of several existing products in theportfolio.

Upscale segment and ‘WelcomHeritage' in the Leisure & Heritage segment. TheBusiness continues to focus on strengthening the equity of the ITC Hotels brand anchoredon unique and path breaking ‘Responsible Luxury' initiatives culinary excellence andpersonalisation of guest services through hotels that are the truest representation of theregion's culture and ethos.

‘Club ITC' your Company's pan-ITC consumer loyalty programme continues to gainfranchise amongst the premium clientele of ITC hotels and WLS. The programme continues toleverage its strategic partnership with Marriott Bonvoy the combined loyalty programme ofMarriott International. The dining loyalty programme ‘Club ITC Culinaire'registered robust growth in membership base.

During the year the Business continued to strengthen ‘Book Direct' proposition ondigital channels through targeted e-commerce activations for direct conversions leadingto increased reach and engagement with customers in both domestic and internationalmarkets. The Business leveraged social media communications to garner approximately 75million impressions & 8 lakh engagements thereby amplifying brand messaging andaugmenting guest relationships. Key campaigns for the year included those for the launchof ITC Kohenur and ITC Grand Goa Resort & Spa.

The world-class ambience of your Company's luxury hotels continues to be leveraged forthe gourmet luxury chocolates range under the Fabelle brand with exclusive boutiquesacross eight ITC Hotels. In addition to selling Fabelle's packaged luxury chocolates theFabelle chocolate boutiques offer a range of exquisitely crafted desserts and cocoabeverages created live by Fabelle Master Chocolatiers enabling experiences across rangequality and flavours thus establishing the brand position at the luxury end of the market.The ‘Fabelle Socit de Chocolat' an exclusive chocolate-making programme designedby the master chocolatiers of Fabelle at ITC luxury hotels for budding chocolatiers andchocolate lovers was further scaled up in the current year. The programme which enablesappreciation of the nuances of chocolate making is growing in popularity.

Sunbean gourmet coffee has established itself as the beverage of choice in yourCompany's luxury hotels. ‘Sunbean Ambassadors' – the specially trained in-housemaster baristas continue to bring alive the brand story supported by delightful creations.

Your Company's Hotels Business sustained its pre-eminent position in the hospitalityindustry receiving several coveted accolades and recognition during the year. TheTravel+Leisure magazine acknowledged ITC Hotels as the ‘Best Luxury Hotel Chain' ITCKohenur as the ‘Best New Luxury Hotel (Editor's Choice Award)' and ITC Grand BharatRetreat as the ‘Best Luxury Resort - Domestic' at the ‘India's Best Awards2018'. ITC Grand Bharat Retreat was ranked amongst the Top 50 resorts in Asia by CondeNast Traveller USA.

The Food & Beverage segment continues to be a major strength of your Company'sHotels Business with some of the most iconic brands in the country. Your Company'sculinary brands continue to retain their leadership position with ‘Bukhara'‘Dum Pukht' ‘Royal Vega' ‘Dakshin' ‘Avartana' ‘Kebabs &Kurries' ‘Ottimo' ‘EDO' ‘Pan Asian' and ‘West View' having receivedthe coveted Times Food Award. ‘Fabelle' received the Times Food Award as the‘Best Confectionery Destination in the Fine Dining category' in Mumbai New DelhiBengaluru and Chennai & the ‘Best Chocolatier' in Kolkata and Hyderabad.Epicurean Guild Awards awarded ‘Bukhara' as an ‘Iconic Restaurant'; Pan AsianITC Maratha –‘Best Multi-Asian restaurant'; and Royal Vega ITC Grand Chola– ‘Best New Indian Restaurant'. ‘Avartana' ITC Grand Chola was recognisedas the ‘Best South

Your Company's Hotels business remains amongst the fastest growing hospitality chainsin the country with over 105 properties under four distinct brands – ‘ITCHotels' in the Luxury segment ‘Welcomhotels' in the Upper-Upscale segment‘Fortune' in the Mid-market to Upscale segment and ‘WelcomHeritage' in theLeisure & Heritage segment.

Indian restaurant' at Travel+Leisure Delicious Food Awards besides being included inthe list of Top 50 restaurants of the year 2018 along with ‘Bukhara' and ‘EDO'by Conde Nast Traveller.

Your Company's Hotels Business continuously strives to reduce water and energyconsumption and enhance the usage of renewable energy to meet its overall energyrequirements. Such commitment to the Triple Bottom Line is manifest in the Business's‘Responsible Luxury' ethos making it a trailblazer in green hoteliering globally.Overall energy requirements in several ITC hotels are being fully met by renewable energysources.

In view of the long-term potential of the Indian hospitality sector your Companyremains committed to enhancing the scale of the Business by adopting an ‘asset-right'strategy that envisages building world-class tourism assets for the nation and growing thefootprint of managed properties by leveraging its hotel management expertise. Managedproperties now account for more than 50% of room inventory of ITC hotels group. During theyear the Business commissioned ITC Kohenur Hyderabad. Strategically situated in theheart of HITEC city in close proximity to the central business and commercial districtthe hotel offers the finest accommodation and dining experiences. In its first year ofoperations the hotel has been able to establish a pre-eminent position in the luxuryhospitality landscape of Hyderabad.

As reported earlier on 19th March 2018 the Honourable Supreme Court upheld the saleof the 250-room luxury beach resort located in South Goa operating under the name ParkHyatt Goa Resort & Spa by IFCI Limited to your Company and directed that the hotelproperty be handed over within six months. Your Company obtained possession of the hotelon 19th September 2018 and successfully commenced operations under the brand name‘ITC Grand Goa Resort & Spa' from

15th October 2018. With direct access to the pristine Arossim beach this beach-sidevillage-styled resort's architecture draws inspiration from the Indo-Portuguese vintageand a distinctive regional allure that is infused in its service cuisine rituals andmore - promising a truly immersive experience. Reconfigured with the acknowledged ITCHotels personalised service design and infused with an improved food and beverageportfolio the hotel has been well accepted by guests – both domestic andinternational.

The Business made steady progress during the year in the construction of luxury hotelsat Kolkata and Ahmedabad. Construction of ITC Royal Bengal in Kolkata is nearingcompletion and is expected to be commissioned in the first quarter of 2019-20.

ITC Royal Bengal and ITC Sonar together offer one of the largest meetings andconvention space in the East with a total of 693 rooms and suites and appx. 100000 sq.ft. of banqueting space and 15 dining destinations.

In the Upper-Upscale segment the ‘Welcomhotels' brand continues to build on the‘asset-right' strategy with distinctive brand proposition of addressing travellerneeds beyond traditional service design. The Business seeks to scale up the brand goingforward with the addition of owned hotels under construction at Amritsar Guntur andBhubaneswar along with a robust pipeline of managed properties.

The ‘Fortune' brand sustained its pre-eminent position in the Mid-market toUpscale segment with a sharpened brand positioning of ‘First class full servicehotels - an affordable alternative'. The Fortune brand presently comprises 47 hotelsacross 41 cities. The ‘WelcomHeritage' brand remains the country's most successfuland largest chain of heritage hotels with 34 operational hotels.

Your Company with continued thrust on ‘asset-right' strategy is well-positionedto sustain its leadership

Your Company remains committed to enhancing the scale of the Business by adopting an‘asset-right' strategy that envisages building world-class tourism assets for thenation and growing the footprint of managed properties by leveraging its hotel managementexpertise.

status in the Indian Hospitality industry given its portfolio of world-classproperties iconic cuisine brands and best-in-class levels of service excellence.

PAPERBOARDS PAPER AND PACKAGING

After a sluggish year in 2017-18 when the industry was affected due to GST transitionand ban on sale of liquor in outlets along highways the Domestic Paperboard Paper andPackaging Industry witnessed demand recovery across end-user segments. The restrictionsimposed by China on import of mixed waste had a major impact on the global fibre trade andkept international fibre prices at an elevated level which also reflected in therelatively higher paper and paperboard realisations during the year under review. This wasfurther aggravated by pulp supply disruptions in certain origins and rupee depreciation.Your Company's strategic investments in pulp import substitution proactive capacityaddition in value-added paperboard process innovations and a cost-competitive fibre chainsupported by effective go-to-market strategies helped deliver robust growth in revenue andsubstantial improvement in profitability.

Paperboards & Specialty Papers

Global demand for Paper & Paperboard in 2018 grew by 1% appx. to 417 milliontonnes with the paperboard segment registering a growth of 2.4% during the same period.Going forward global demand for Paper & Paperboard is projected to grow at a subduedpace of 1% to 1.5% CAGR driven mainly by Paperboard segment. The growth in the Paperboardsegment is expected to be driven by consumer goods pharmaceuticals and e-commerce. TheWriting & Printing and Newsprint segments on the other hand are expected to remainunder pressure largely due to increasing adoption of digital media and proliferation ofsmartphone usage.

Domestic demand for Paper & Paperboard was firm during the year across end-usesegments. Over the next five years domestic industry is projected to grow at 5.5% to 6.5%CAGR to reach 24 million tonnes by 2024 with Paperboard (54% of the market) and Writing& Printing paper (28% of the market) segments estimated to grow at around 7% CAGR and5% CAGR respectively. Within Paperboards demand for Value-Added Paperboards (VAP) inIndia is projected to grow at a healthy rate of around 10.5% CAGR driven by growth in theFMCG Pharma Publishing and Food & Beverages industries. In the Writing &Printing paper segment cut-size paper is projected to register the fastest growth at 9%CAGR driven by the education and office stationery segments.

During the year import of paper and paperboard from China ASEAN and South Koreadropped by 39% while overall imports dropped by 25%. This decline in imports is primarilyattributable to higher international fibre prices and imposition of anti-dumping duty oncut-size copier. Given the cyclical nature of the Industry imports are bound to increasewhen pulp and product prices soften. In fact correction in global fibre prices waswitnessed in the second half of the year.

The current import policy and extant regulations governing commercial and socialforestry in the country have put the Indian Paper and Paperboard industry at adisadvantage vis--vis imports. There is clearly a need to review the current import dutystructure and re-examine the existing Free Trade Agreements (FTAs) and the new ones underformulation towards providing a level playing field to the domestic industry andencouraging commercial farming of wood in India. Legislative changes along withappropriate environmental safeguards need to be implemented to enable private sectorparticipation in commercial forestry on drylands and wastelands.

Your Company's strategic investments in pulp import substitution proactive capacityaddition in value-added paperboard process innovations and a cost-competitive fibre chainsupported by effective go-to-market strategies helped deliver robust growth in revenue andsubstantial improvement in profitability.

Your Company remains a clear leader in the VAP segment and continues to consolidate itspreferred supplier position amongst leading end-use customers and brands. Your Company'scapacity augmentation in VAP segment at Bhadrachalam mill was commissioned during theyear. The machine equipped with latest technology is operating at near-full capacitydelivering superior quality board which has been well accepted in the market. During theyear your Company entered the art board market with the launch of ‘Safire GraphikDuo' which has received positive response. Furthermore traction was gained in packagingboards based on renewable and recyclable material. The Business sustained its leadershipposition in the sale of eco-labelled products volumes of which grew by appx. 33% duringthe year.

The Business continues to be a leading quality player in the Writing & Printingpaper segment leveraging strong forward linkages with your Company's Education andStationery Products Business. In the Specialty Papers segment the new Dcor machinecommissioned last year is operating at optimum capacity and the diverse product range hasbeen well accepted by discerning customers. The Dcor Papers portfolio was furtherenhanced with the launch of new surfacing and print base grades.

Your Company continues to source its wood requirements from sustainable sources.Research on clonal development has resulted in introduction of high yielding and diseaseresistant clones that are adaptable to a wide variety of agro-climatic conditions whichaid in securing greater consistency in farmer earnings. In this context your Company'sLife Sciences and Technology Centre is engaged in developing a stream of higher yieldingsecond generation clones with enhanced pest and disease resistance attributes.

Your Company has the distinction of being the first in India to have obtained theForest Stewardship Council-Forest Management (FSC-FM) certification which confirmscompliance with the highest international benchmarks of plantation management across thedimensions of environmental responsibility social benefit and economic viability. Tilldate your Company has received FSC-FM certification for over 37000 hectares ofplantations involving over 32000 farmers. During the year over 97000 tonnes ofFSC-certified wood were procured from these certified plantations. All four manufacturingunits of the Business have obtained the FSC Chain of Custody certification and havecomplied with all requirements during the year thereby sustaining your Company's positionas the leading supplier of FSC-certified paper and paperboard in India.

All manufacturing units of the Business continue to recycle nearly 100% of the solidwaste generated during operations by converting the same into lime fly ash bricks greyboards egg trays etc. In addition the Business procured and recycled 117000 tonnes ofwaste paper during the year thereby sustaining your Company's overall positive solidwaste recycling footprint.

Your Company's manufacturing facilities at

Bhadrachalam Kovai Tribeni and Bollaram continue to receive industry recognition fortheir green credentials and safety standards in line with your Company's focus onsustainable business practices. The Bhadrachalam unit won the prestigious ‘NationalEnergy Leader' award under Pulp & Paper sector from Confederation of Indian Industry(CII). Kovai unit received the Energy Efficiency award from CII. Kovai unit and Bollaramunit were awarded with 5-star rating by CII Southern Region for EHS Excellence. Tribeniunit received the award for Excellence in Water Management 2018 from CII.

In line with the objective of enhancing share of renewable energy in its operationsthe Business has implemented

Your Company remains a clear leader in the Value-Added Paperboards segment andcontinues to consolidate its preferred supplier position amongst leading end-use customersand brands.

several initiatives including investments in a green boiler soda recovery boilershigh pressure & efficiency circulating fluidised bed boiler solar & wind energyand increased usage of bio-fuel. With these initiatives renewable sources presentlyaccount for 42% of total energy consumed at the Bhadrachalam Bollaram Tribeni and Kovaiunits. Your Company has commenced work at Bhadrachalam mill for replacement ofconventional Soda Recovery Boilers with the state-of-the-art High Pressure RecoveryBoiler. This investment is expected to lead to increased in-house pulp production therebyfurther reducing our dependence on imported pulp reduction in carbon footprint throughsavings in coal consumption and increase in overall share of renewable energy. The projectis expected to be commissioned by 2022.

The 46 MW windmill in Andhra Pradesh is wheeling power to various Business units ofyour Company located in Andhra Pradesh Telangana Karnataka Uttar Pradesh Uttarakhandand Bihar. Usage of wind energy has led to a reduction of carbon footprint by loweringconsumption of coal at Bhadrachalam mill by 35000 tonnes during the year. The regulatoryframework for levy of charges and banking of power on inter-state wheeling of renewableenergy is still evolving.

Consequently your Company continues to bear charges/levies at multiple points whichhave adversely impacted the returns on this large investment.

Your Company continues to engage with State and Central regulatory authorities towardsseeking relief from such additional levies/charges.

The Business continues to make structural interventions in the areas of strategic costmanagement and import substitution. These include augmentation of in-house pulpmanufacturing capacity efficiency improvements of existing equipment and developingalternative sources of supply for key inputs on an ongoing basis. Capacity utilisation ofBleached Chemical Thermo Mechanical Pulp mill (BCTMP) at Bhadrachalam unit was furtherscaled up during the year leading to reduced dependence on imported pulp and thereby costsavings. Innovations in the pulp mill have resulted in higher pulp production andimprovement in pulp quality and pulp yield. Initiatives such as bund plantation andplantation in core catchment area in Odisha (Malkangiri) will help in reducing leaddistance of wood sourcing for Bhadrachalam mill. In order to ensure that farmers get theright price for their wood produce Business has introduced system of direct purchasesfrom farmers and enabled online payment to them. More than one lakh tonnes has beenprocured during the year through this new initiative. Further farmer helpline has beencreated to address their concerns if any.

Your Company has been practising principles of Total Productive Maintenance (TPM) Leanand Six Sigma for over a decade now and has reaped substantial benefits through itsBusiness Excellence initiative. The Business embarked on an ‘Industry 4.0' journeylast year at Bhadrachalam mill. The initiative has yielded benefits and shown significantpotential in improving manufacturing and supply chain efficiencies. Your Company has nowinitiated large scale implementation of Industry 4.0 focusing on areas such as Internet ofThings (IoT) Artificial Intelligence and Advanced Analytics. These interventions willfurther help in sustaining and enhancing your Company's competitive advantage.

The integrated nature of the business model comprising access to high-quality fibrefrom the economic vicinity of the Bhadrachalam mill in-house pulp mill andstate-of-the-art manufacturing facilities along with clear market leadership invalue-added paperboards world-class product quality and a robust forward linkage with theEducation and Stationery Products Business

The Paperboards & Specialty Papers Business sustained its leadership position inthe sale of eco-labelled products volumes of which grew by appx. 33% during the year.

strategically positions your Company to further consolidate and enhance its leadershipstatus in the Indian Paperboard and Paper industry.

Packaging and Printing

Your Company's Packaging and Printing Business is a leading provider of superiorvalue-added packaging for the consumer packaged goods industry. The Business also providesstrategic support to your Company's FMCG Businesses by facilitating faster turnaround fornew launches design changes ensuring security of supplies and delivering benchmarkedinternational quality at competitive cost.

The Business caters to the packaging requirements of leading players across severalindustry segments viz. Food & Beverage Personal Care Home care Footwear ConsumerElectronics Pharma Liquor and Tobacco. With its comprehensive capability-set acrossmultiple platforms coupled with in-house cylinder making and blown film manufacturinglines the Business continues to provide innovative solutions to several key customers inIndia and overseas.

Amidst intense competition in the marketplace the Business continued to aggressivelypursue new business development across segments and to focus on new product development asa key driver for growth some of which include antifungal coated cartonsmicro-perforation for specific laminates braille feature for labels and cold seallaminates for chocolates. The Business in close coordination with the Cigarettes Businessensured smooth transition to the new Graphical Health warnings on cigarette packs.

As in previous years the Business won several awards for operational excellence andcreative packaging solutions. During the year the Business has been recognised as the‘Green Printing Company of the year

2018' and ‘Packaging convertor of the year 2018' by Print Week. The Businesscontinues to be acknowledged as a key associate by several large FMCG companies in thecountry for providing superior packaging solutions. The manufacturing facilities atTiruvottiyur Haridwar and Munger maintained the highest standards in Quality andEnvironment Health & Safety (EHS). All the three units are certified as per theIntegrated Management System consisting of ISO 9001:2015 ISO 14001:2015 OHSAS18001:2007 and have also received Social Accountability Certification (SA 8000:2008). Boththe Tiruvottiyur and Haridwar units received the highest ‘Grade A' BRC/IOPcertification (British Retail Consortium/ Institute of Packaging) for global standards inpackaging and packaging materials - a key enabler for supplies to the packaged foodsindustry. During the year Haridwar Unit received ‘Shreshtha Suraksha Puraskar' byNational Safety Council of India and ‘National Safety Award' by Ministry of Labourand Employment while Tiruvottiyur Unit received ‘CII-SR EHS Excellence Award 2018'.The Risk Management Framework of the Business was re-certified under ISO 31000:2009 duringthe year. The 14 MW wind energy farm in Tamil Nadu set up in 2008 continues to provideclean energy to the Tiruvottiyur facility contributing towards reducing your Company'scarbon footprint.

The Packaging and Printing Business has established itself as a one-stop shop offeringa wide range of superior and innovative packaging solutions. With world-class technologyacross a diverse range of packaging platforms best-in-class quality management systemsintensive investment in skill development and a distributed manufacturing footprint theBusiness is well positioned to grow its external business while continuing to service therequirements of your Company's FMCG Businesses.

With world-class technology across a diverse range of packaging platformsbest-in-class quality management systems intensive investment in skill development and adistributed manufacturing footprint the Packaging and Printing Business is wellpositioned to grow its external business while continuing to service the requirements ofITC's FMCG Businesses.

AGRI BUSINESS

Leaf Tobacco

Global production of Flue Cured Virginia (FCV) tobacco registered a further decline of5.3% in 2018 over the previous year primarily impacted by continued calibration inChina's crop output. After three successive years of decline Indian crop output in 2018increased by 6 million kgs. to 218 million kgs. However it still remains far below thelevels of 2014 representing a cumulative drop of over 30%.

Extremely high rates of taxes are levied on Cigarettes in India which apart fromimpacting domestic legal Cigarette industry has also resulted in significant pressure onleaf tobacco crop. This together with declining trend of global cigarette demand andrelative strength of the Indian Rupee compared to currencies of competing origins hasculminated in reduced demand for Indian tobacco with leaf tobacco exports declining to adecade low of approximately 180 million kgs. The Indian tobacco farmers are thus exposedto significant demand fluctuations both in Indian and export markets. Stable domestic basewould enable the Indian farmer to weather the volatility associated with internationalmarket.

Despite such challenging market conditions your Company consolidated its leadershipposition as the largest Indian exporter of unmanufactured tobacco with further improvementin market standing. This was achieved through new business development and enhanced valuedelivery to existing customers by leveraging the Business's expertise in crop developmentsuperior leaf procurement processes and world-class processing facilities. The Businessaggressively pursued and acquired new customers to widen the customer base by leveraginglong-term supply arrangements and collaborative crop development. The Business continuedto provide strategic sourcing support to your Company's Cigarettes Business meeting allrequirements at competitive prices.

Your Company's leadership in sustainability was reinforced with the Business remaining‘carbon positive' in the tobacco farm value chain as per ISO 14064-1 standard for‘Green House Gas (GHG) Management'.

Strategic cost management across the value chain continues to be a key focus area forthe Business. The Business implemented several initiatives during the year includingimprovement in processing yields and manufacturing efficiencies reduction in specificconsumption of power and logistics optimisation to drive down costs. Several Lean and SixSigma projects covering various facets of business operations - from processing wastereduction manpower rationalisation to data analytics - were successfully concludedresulting in improved process efficiencies and cost savings.

The Business continues to set benchmarks in leaf threshing operations through focusedinitiatives and innovative technological solutions. Investments continue to be made inyour Company's Green Leaf Threshing plants (GLT) at Anaparti Chirala and Mysuru towardsdelivering world-class quality and upgrading processing technology. In line with yourCompany's strategy of adopting a growth path with low-carbon footprint the energy needsof all three units at Chirala Anaparti and Mysuru are met from renewable sources.

The Business remains committed to the highest standards of EHS and quality andcontinues to win recognition in these areas. During the year the Chirala and AnapartiGLTs received the ‘Best Management Award' from Andhra Pradesh Labour Department andthe ‘Systematic actions towards sustainable Energy Performance' award from Society ofEnergy Engineers & Managers.

Despite such challenging market conditions your Company consolidated its leadershipposition as the largest Indian exporter of unmanufactured tobacco with further improvementin market standing.

A secular decline in crop output and exports as aforestated along with sustainedpressure on domestic legal cigarette volumes due to steep escalation in tax incidence andstringent regulations have led to severe stress on farmer earnings which have declined byover Rs. 4000 crores in the four years since 2013-14. In addition emerging trend of NewGeneration Products (NGPs) viz. ENDS EVDs etc. could pose a threat to global leaftobacco trade. Illicit cigarettes as well as smuggled NGPs in the country are a threat tothe Indian leaf tobacco trade as these products do not use Indian tobacco. Accordingly amore balanced regulatory and taxation regime that cognises for the unique tobaccoconsumption pattern prevalent in India and the economic realities of the country is theneed of the hour to support the Indian tobacco farmer and the 46 million livelihoodsdependent on tobacco. Restoring export incentives to earlier levels would also go a longway in enhancing the competitiveness of Indian tobacco exports and contribute toincreasing farmer earnings.

The Business will continue to provide strategic sourcing support to your Company'sCigarette Business even as it sustains its leadership position as a major exporter ofquality Indian tobacco thereby catalysing the multiplier impact of increased farmerincomes to benefit the rural economy. With its strong R&D capability modernprocessing facilities crop development and extension expertise and deep understanding ofcustomer and farmer needs your Company is well poised to sustain its position as aworld-class leaf tobacco organisation.

Other Agri Commodities

Domestic food grain production for 2018 crop year stood at 277 million tonnesrepresenting a muted growth over the previous year. Production of wheat declined by 1.4%to 97.1 million tonnes rice production increased by 1.2% to 111 million tonnes and coarsecereals production increased by 3.8% to 45.4 million tonnes. Oilseed production increasedby 5.3% to 31.5 million tonnes mainly due to higher soybean output which increased by 20%to 13.7 million tonnes. Based on current expectations of a normal monsoon in 2019 cropyear food grain production is estimated at around 281 million tonnes.

During 2018-19 world wheat output decreased by 30 million tonnes to about 733 milliontonnes mainly due to lower production in European Union Russia and Australia. Exportsfrom India were negligible due to uncompetitive prices compared to competing origins suchas Russia and Ukraine. India witnessed a lower production by 1.4 million tonnes whichcoupled with increase in government procurement by five million tonnes resulted in a lowersurplus available for domestic trade. Further increased import duty at 30% coupled withmarked rupee depreciation made imports unviable. However release of about eight milliontonnes of Wheat under Open Market Sales Scheme (OMSS) presented opportunities for theBusiness to trade in such Wheat auctioned by the Government.

Soymeal exports from India remained low as Indian meal continued to be uncompetitivedue to cheaper supplies from South America and USA. The Business leveraged itsgeographical presence and risk management capabilities to capture opportunities during theseason in domestic trade of Soya bean. The Business also continued to service orders fromcustomers in both domestic and export trade in selected varieties of Rice. The Coffeebusiness continued to export to select markets.

Your Company's deep rural linkages and expertise in agri-commodity sourcing coupledwith differentiation through value-added services of identity preservation traceabilityand certification is a critical source of competitive advantage for the Branded PackagedFoods

Your Company's deep rural linkages and expertise in agri-commodity sourcing coupledwith differentiation through value-added services of identity preservation traceabilityand certification is a critical source of competitive advantage for the Branded PackagedFoods Businesses.

Businesses. Given the volatile market conditions caused by climatic variations changesin Government policies and global demand-supply dynamics your Company has investedsignificantly in building competitively superior agri-commodity sourcing expertisecomprising multiple business models wide geographical spread and customisedinfrastructure. These capabilities and infrastructure have created structural advantagesthat facilitate competitive sourcing of agri raw materials for your Company's BrandedPackaged Foods Businesses. The Business continues to focus on developing capabilities andvectors of differentiation for potential foray into branded consumer and institutionalsegments while increasing the overall efficiency of procurement and logistics operationsby consistently pursuing cost optimisation initiatives and eliminating non value-addingactivities.

With regard to Aashirvaad atta the Business leveraged its wide geographical sourcingnetwork and multiple sourcing models to secure supplies of critical grades with benchmarkquality towards meeting the growing requirements of the brand. The Business deliveredsubstantial savings to your Company through efficient logistics management and other costoptimisation initiatives. In recognition of the various supply chain initiativesundertaken by the Business your Company has been awarded by the Confederation of IndianIndustry (CII) with the ‘Supply Chain and Logistics Excellence (SCALE)' Award forexcellence in supply chain transformation. The Institute for Supply Management (ISM-India)also conferred awards in the areas of Overall Excellence in Procurement Excellence in useof Technology and Excellence in Risk Mitigation.

The Business continues to collaborate with reputed research organisations such asIndian Agricultural Research Institute Indian Institute of Wheat & Barley ResearchPunjab Agricultural University and Agharkar

Research Institute towards building an efficient and cost competitive agri-value chain.As part of its wheat crop development programme the Business has facilitated theintroduction of location-specific new and improved seed varieties along with appropriatepackage of practices in nearly 150000 acres across Rajasthan Uttar Pradesh Bihar WestBengal Punjab Jharkhand Madhya Pradesh and Maharashtra. With a view to supporting thefuture requirements of your Company the Business continues to focus on deepeningcapabilities in proprietary crop intelligence scaling up the sourcing and deliverynetwork and developing blends based on customer requirements.

The Business leveraged its extensive sourcing network and associated infrastructure inkey growing areas coupled with deep-rooted farmer linkages to source high quality fruitpulp for your Company's ‘B Natural' juices brand. The Business tailored its sourcingand supply chain network to enable migration of the entire B Natural juices portfolio to‘made with 100% Indian Fruit & 0% Concentrate' proposition – a first in theindustry benefitting both consumers through higher retention of natural nutrients as wellas the Indian farmers. The Business is working closely with small and marginal farmersacross several states in building scale and sourcing options.

During the year the Business also strengthened its milk procurement network for‘Aashirvaad Svasti' Dairy Products with significant increase in daily milkcollection. During the year the Business expanded its milk sourcing network to Kolkatafor Fresh Dairy Products and to Punjab for meeting the requirement of Dairy Beveragesunder the Brand ‘Sunfeast Wonderz'. In this regard the Business provided farmerswith the required infrastructure (such as milking machines automatic milk testingequipment and chilling units) and package of practices to improve operational

The year also marked your Company's foray into branded packaged frozen snacks under the‘ITC Master Chef' brand in select cities for the retail segment leveraging theculinary expertise of ITC Hotels.

efficiency and to maintain quality with identity preservation and traceability.

Your Company's Spices Business continued to expand in Food Safe Markets viz. US EU andJapan leveraging its strong backward integration and customer focused strategies. Exportsof spices grew at a healthy pace driven by the addition of new customers and foray intonew markets. During the year the Business scaled up its Integrated Crop Management (ICM)programme thereby enhancing its ability to produce food safe spices in a sustainablemanner. The Business continues to partner with the various state governments forproduction of food safe spices. Your Company's Spices Business has maintained anunblemished track record on food safety parameters leveraging its superior processes andcustody of supply chain thereby consolidating its position as a preferred supplier forfood safe customers.

The Spices business was awarded ‘CII Food Safety Award 2018' for ‘SignificantAchievement on Food Safety' for its Integrated Sterilisation and Grinding plant in Guntur.As a recognition for the adherence to sustainable farm management practices the Businessalso received Rainforest Alliance certification during the year. The Business was awardeda ‘Certificate of Merit' by Spices Board India Ministry of Commerce & IndustryGovernment of India recognising meritorious performance in the export of Spices &Spice products.

In the Agri Business your Company remains focused on enhancing its presence in thehigh value-added segment. Branded frozen prawns and packaged frozen snacks are some of therecent additions in these high value-added segments. The branded prawns under the‘ITC Master Chef' range are ‘Super Safe' frozen prawns which adhere to the samestringent standards prevalent in USA Europe and Japan. These products go throughrigorous testing (240+ tests) and are ‘individually quick frozen' to ensurefreshness. Launched in six cities leveraging ITC's experience of catering to customers ininternational markets the range has been well appreciated for its taste and quality.

The year also marked your Company's foray into branded packaged frozen snacks under the‘ITC Master Chef' brand in select cities for the retail segment leveraging theculinary expertise of ITC Hotels. The Business continues to expand its footprint inbranded apples and potatoes by offering differentiated varieties of low Sugarantioxidant baby potatoes and french fry potatoes.

Nearly two decades ago your Company conceptualised and rolled out the e-Choupalnetwork as a unique delivery mechanism towards enhancing agricultural growth andproductivity and fostering sustainable rural development. Your Company continues to focuson providing a range of value-added services in rural areas towards enhancing thecompetitiveness of Indian agriculture and playing a critical enabling role in integratingfarmers input vendors and government agencies besides facilitating the necessary marketlinkages.

The unique ‘Choupal Haat' platform seeks to create awareness and improve access ofthe rural community to a wide range of areas - ranging from financial services andpharmaceuticals to commercial vehicles and white goods. Along with Choupal Saagars(integrated rural services hubs) this platform fosters round-the-year and large scaleengagement with the rural community thereby enhancing the vitality of your Company'se-Choupal network.

Your Company believes that it is imperative to take an integrated and holistic view ofthe agricultural value chain. This requires a joint participatory approach from all thestakeholders such as farmers input vendors traders processors and government agencies.In this regard the Government's initiative to develop a uniform

Your Company continues to focus on providing a range of value-added services in ruralareas towards enhancing the competitiveness of Indian agriculture and playing a criticalenabling role in integrating farmers input vendors and government agencies besidesfacilitating the necessary market linkages.

and suitable legal framework to undertake reforms in marketing of agricultural producethrough a Central Agricultural Produce Market Committee (APMC) Act as well as introductionof e-auctions to facilitate transparency of transactions and superior price discovery atthe Mandis are welcome steps towards stimulating agricultural growth in the country.

Your Company will continue to leverage the unique e-Choupal platform to serve as aunique delivery mechanism towards enhancing agricultural growth and productivity andfostering sustainable rural development. The Agri Business with its deep rural linkagesand agri-commodity sourcing expertise is well positioned to scale up in identified areasthat lend to higher value addition while meeting the increasing requirements for highquality agricultural produce thereby creating a unique source of sustainable competitiveadvantage for your Company's Branded Packaged Foods Businesses.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statementsprepared in accordance with Indian Accounting Standard 110. Shareholders desirous ofobtaining the report and accounts of your Company's subsidiaries may obtain the same uponrequest. Further the report and accounts of the subsidiary companies is also availableunder the ‘Shareholder Value' section of your Company's website www.itcportal.comin a downloadable format. During the year no new subsidiary has beenincorporated/acquired. On 10th July 2018 ITC Global Holdings Pte. Limited Singapore(‘Global') a subsidiary of your Company which had been under winding up wasdissolved vide the Order of the High Court of the Republic of Singapore. ConsequentlyGlobal ceased to be a subsidiary of your Company. The Policy for determining MaterialSubsidiaries adopted by your Board in conformity with Regulation 16 of the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 can be accessed on your Company's corporate website at https://www.itcportal.com/about-itc/policies/policy-on-material-subsidiaries.aspx.Presently your Company does not have any material subsidiary.

Surya Nepal Private Limited

The economy of Nepal grew by 5.9% during the year ended July 2018 as against 7.4%during previous year which had a low base due to lingering effects of the devastatingearthquake in 2015 and severe trade disruptions in 2016. Pick-up in economic activityfollowing a decade of tepid growth is being supported by ongoing reconstructionsuccessive favourable monsoons improved power supply and expansionary fiscal andmonetary policies. As per a recent IMF report the near term outlook of the economy isfavourable and growth is expected to reach 6.5% in the fiscal year ending July 2019.However the widening current account deficit resulting from exponential increase in tradedeficit and a drop in foreign exchange reserves continue to build up external sectorvulnerabilities in the economy.

The Government of Nepal continued to focus on policies and reforms towards promotingthe country as an attractive investment location by enacting the Foreign Investment andTechnology Transfer Act Public Private Partnership and Investment Act ConsumerProtection Act etc. While these reforms have the potential to boost investor confidenceit is essential that these policy measures are supported by regulations which enhance theease of doing business and encourage investment in the country.

During the year the company's Revenue from Operations at Nepalese Rupees (NRs.) 3576crores (previous year NRs. 3181 crores) and Profit After Tax at NRs. 945 crores (previousyear NRs. 857 crores) recorded a growth of 12% and 10% respectively. The company continuesto be one of the largest contributors to the exchequer accounting for about 3% of thetotal revenues of the Government of Nepal.

In spite of significant pressures due to the substantial increase in taxation thecompany reinforced its market standing by leveraging its strong portfolio of brandssuperior product quality and a robust distribution network. During the year the company'sdifferentiated and innovative offerings such as Surya 24 Carat Arctic Burst receivedpositive consumer response. The relentless focus on developing world-class productsanchored on innovation and benchmarked international quality standards is a key source ofsustainable competitive advantage for the company.

The persistent pursuit of operational excellence by the company resulted in themanufacturing systems setting benchmarks in sustainability responsiveness quality andproductivity. The company also continued to strengthen its quality processes and hygienestandards. During the year long-term agreements were concluded with the employees ofSimara and Seratar factory anchored on the company's philosophy of maintaining harmoniousemployee relations.

During the year the company sustained the growth momentum in the Agarbatti businessand continued to strengthen its market standing driven by a robust portfolio of offeringscatering to all consumer segments. In the Safety Matches business the company enhancedits market standing and leadership position in both wax and wooden matches segments.

With the objective of creating new drivers of growth the company completed the launchof confectionery products comprising Hard Boiled Candy clairs Jelly and Toffee acrossmajor geographies of the country during the year. The company's manufacturing facility isat an advanced stage of completion at Biratnagar in eastern Nepal which would enablescaling up the business through indigenous production of various confectionery products.

The company continues to support and invest in initiatives aimed at enhancing thesocial and economic capital of the nation including in areas relating to environmentalpreservation social empowerment and promoting and improving education in public schools.As part of the ongoing interventions in this area the company continues to:

provide assistance to farmers in agro-forestry agri-infrastructure andvermi-composting in villages situated in the economic vicinity of its operating locations;

impart training and development to farmers for improvements in productivity and otherincome generating activities;

support the animal husbandry sector by facilitating extension services covering animalbreeding health and nutrition in order to drive yield improvement and generate higherreturns for farmers;

promote improvement in quality of education in public schools in the economic vicinityof its operating locations.

The company declared a dividend of NRs. 453/- per equity share of NRs. 100/- each forthe year ended 16th July 2018 (32nd Ashadh 2075) amounting to NRs. 913.25 crores.

With structural reforms being initiated by the Nepalese Government the company is wellpositioned to leverage the investments made over the years to pursue sustainable growthopportunities over the long-term.

ITC Infotech India Limited and its subsidiaries

The IT services industry continues to witness rapid transformation driven by increasingadoption of digital technologies emergence of new models of customer value deliveryenhanced focus on experience journeys and client demands for efficiency especially intraditional service lines through automation. The industry is also focusing on creatingCentres of Excellence (CoEs) experience and design centers to collaborate with customersand develop proofs of concept and solutions in emerging digital technologies.

The Indian IT- BPM industry witnessed an improvement in performance with an estimatedgrowth of ~8.4% in constant currency dollar terms on the back of strong growth in digitaltechnologies.

Technology spending is witnessing a clear shift in favour of digital technologieswhich are estimated to account for 80% of incremental IT spends. With traditional lines ofbusinesses and business models coming under increasing pressure the fragmented ITServices market is gearing up to meet these challenges by strengthening alternativedelivery models and accelerating investments in digital capabilities.

In this context the company remains focused on providing domain-led digital servicesand solutions to customers in its targeted industry verticals. The company's revenuegrowth was fuelled by strong growth in its digital lines of businesses.

During the year the company's consolidated Total Income was Rs. 2019.91 crores(previous year Rs. 1652.10 crores) with Profit Before Tax of Rs. 155.40 crores (previousyear Rs. 81.69 crores). Net Profit stood at Rs. 103.90 crores (previous year Rs. 40.42crores). Revenue growth was driven by increasing traction with existing customers as wellas new client additions especially in digital technologies across the company's focusgeographic markets. For the year under review:

a. ITC Infotech India Limited recorded Revenue from Operations of Rs. 1212.68 crores(previous year Rs. 1002.93 crores) and Net Profit of Rs. 76.46 crores (previous year Rs.27.68 crores).

For the year under review the company paid a dividend of Rs. 8.25 per Equity Share ofRs. 10/- each aggregating Rs. 70.29 crores (previous year: Rs. 6/- per Equity Share of Rs.10/- each aggregating Rs. 51.12 crores).

b. ITC Infotech Limited UK (ITC Infotech UK) a wholly-owned subsidiary of thecompany recorded Revenue of GBP 49.11 million (previous year GBP

42.44 million) and Net Profit of GBP 1.57 million (previous year GBP 1.27 million).

c. ITC Infotech (USA) Inc. (ITC Infotech USA) a wholly-owned subsidiary of thecompany together with its wholly-owned subsidiary Indivate Inc. recorded Revenue of US$96.98 million (previous year US$ 88.11 million) and Net Profit of US$ 3.68 million(previous year US$ 1.97 million).

For the year under review the company paid a dividend of US$ 10 per share on 182000Common Shares (without par value) aggregating US$1.82 million (previous year: US$ 8 pershare aggregating US$ 1.46 million).

The company's superior service delivery capability continues to earn globalrecognition. During the year the company successfully qualified for CMMI level 5certification which will further augment the company's processes towards delivering highquality services with predictability. The company was also recognised in the‘Leadership Zone' for Enterprise Software in Zinnov Zones ER&D 2018 report andwas recognised amongst ‘High Performers' in the HfS Blueprint report on SoftwareProduct Engineering Services. During the year the company's automation capabilities werealso acknowledged in the Gartner report on Consulting and

System Integration Service Providers for Robotic Process Automation and in Avasant'sreport on Intelligent Automation RadarView 2018.

The outlook for the Indian IT Industry in the near term continues to remain uncertainwith NASSCOM not providing a forecast growth rate for 2019-2020. The company remainscommitted to its transformation journey with a sharper focus on providing differentiatedbusiness-friendly offerings to select industry verticals and technology areas. The companywill continue to focus on building domain-specific digital solutions across identifiedareas and driving efficiencies through automation in delivery investments in developingemployees in emergent technologies and other internal processes.

Technico Pty Limited and its subsidiaries

The company continues to focus on upgradation and commercialisation of itsTECHNITUBER Seed technology and customising its application across various geographies.Besides the company is engaged in the marketing of TECHNITUBER seed to global customersproduced at the facilities of its subsidiaries in China and Canada and Technico AgriSciences Limited India a wholly-owned subsidiary of your Company.

For the year under review:

a. Technico Pty Limited Australia registered a turnover of Australian Dollar (A$) 2.41million (previous year A$ 2.52 million) and a Net Profit of A$ 1.25 million (previous yearA$ 1.45 million).

b. Technico Asia Holdings Pty Limited Australia Technico Technologies Inc. Canadaand Technico Horticultural (Kunming) Co. Limited China – There were no significantevents to report with respect to the above companies.

Technico Agri Sciences Limited

The company's leadership in production of early generation seed potatoes and strengthin agronomy continues to support the Bingo! range of potato chips of your Company and inservicing the seed potato requirements of the farmer base of your Company's Agri Business.

The year under review continued to remain an extremely challenging one for the seedpotato industry.

Potato prices that had remained firm till November 2018 dropped sharply due to excessleft over stocks in cold stores as well as the upcoming fresh potato crop. This adverselyimpacted the seed markets across the country especially in West Bengal and Gujarat. Inspite of such adverse conditions the company leveraged the strength of its brandsuperior product quality better on-field performance and strong trade and customerrelationships to increase its Revenue from Operations to Rs. 160.26 crores (previous yearRs. 76.89 crores) with a Net Profit of Rs. 8.20 crores (previous year (-) Rs. 14.07crores). Total Comprehensive Income for the year stood at Rs. 8.23 crores (previous year(-) Rs. 14.02 crores).

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL) a wholly-owned subsidiary of your Companywas incorporated in Sri Lanka with the objective of developing and operating a mixed-usedevelopment project (‘Project') comprising a luxury hotel and a super-premiumresidential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded ‘Strategic

Development Project' status entitling the company to various fiscal benefits in SriLanka. Further the Project is also exempt from Sri Lankan foreign exchange regulations.

During the year the company made steady progress on construction of the project. Boththe hotel and residential towers are progressing as per scheduled timelines. TheExperience Centre showcasing the features of the super-premium residential apartmentswas commissioned during the year. The company also launched the sale of its luxuryapartments ‘Sapphire Residences' – positioned as the best residential address inColombo with launch events at Colombo and London. The recent socio-economic stress in SriLanka has adversely affected the economic and business environment of the country. Thecompany has put in place appropriate measures to ensure adequate safeguard of its assetsand people in Sri Lanka.

Your Company's investment in WLPL stood at US$ 208 million as at 31st March 2019.

Landbase India Limited

The company owns ‘ITC Grand Bharat' – a 104-key all-suite luxury retreat atGurugram which has been licensed to your Company. The Retreat an oasis of unhurriedluxury is co-located with the company's prestigious Classic Golf & Country Club a27-hole Jack Nicklaus Signature Golf Course.

ITC Grand Bharat has received several accolades establishing itself amongst the topluxury resort destination hotels in the world. During the year the property was listedamongst the ‘Top 50 Resorts in Asia' by Conde Nast Traveller USA and was accordedthe Editor's Choice Award by Travel+Leisure magazine for the ‘Best Luxury Resort– Domestic'.

The Classic Golf & Country Club continued to host various prestigious tournamentsand sustained its leadership position in the corporate tournament segment. The Club enjoysstrong brand equity with its members guests and the golfing fraternity and continues toreceive the patronage of professional and amateur golfers in the country. During the yearended 31st March 2019 the company recorded Total Income of Rs. 26.57 crores (previousyear Rs. 30.54 crores) and Net Profit of Rs. 3.11 crores (previous year Rs. 9.84 crores).

Total Comprehensive Income for the year stood at Rs. 3.13 crores (previous year Rs.9.89 crores including a once-off net gain of Rs. 6.88 crores on account of Award forcompulsory acquisition of land under the Land Acquisition Act).

Srinivasa Resorts Limited

The company's hotel ‘ITC Kakatiya' in Hyderabad continued to face sluggish demandconditions during the year. While room occupancy rates and average room rates remainedunder pressure Food and Beverages recorded robust growth.

The company recorded Total Income of Rs. 60.49 crores (previous year Rs. 58.37 crores)for the year ended 31st March 2019 with Net Loss of Rs. 2.12 crores (previous year NetProfit of Rs. 0.48 crore).

Total Comprehensive Income for the year stood at (-) Rs. 2.13 crores (previous year Rs.0.40 crore).

‘Dakshin' the South Indian fine dining restaurant at the hotel was adjudged the‘Best South Indian Fine Dining Restaurant' at the Times Food Guide Nightlife Award

2019 for the 9th consecutive year. ‘Dakshin' was also among the Top 3 in the listof Top 10 Restaurants in India and amongst the Top 10 in the list of top 25 restaurants inAsia at TripAdvisor's Travellers' Choice Awards 2018.

During the year the company's 101-key full service hotel under development on leasedland in Amritsar was sold to your Company along with assignment of the leased land on anarm's length basis.

Fortune Park Hotels Limited

The company which caters to the ‘Mid-market to Upscale' segment through a chainof Fortune hotels continues to forge new alliances and expand its footprint. Currentlythe company has an aggregate inventory of nearly 4000 rooms spread over 53 properties ofwhich 47 are operating hotels. Of the balance six properties one is slated to becommissioned in the ensuing year while five are in various stages of development.

The company has established ‘Fortune' as the premier ‘value' brand in theIndian hospitality sector. The brand remains a frontrunner in its operating segment and iswell positioned to sustain its leadership position in the industry.

During the year the company bagged the ‘Today's Traveller Award 2018' as well asthe ‘Hospitality India Travel Award 2018' in the ‘Best Premier Class BusinessHotel Chain' category. It was also awarded the ‘Versatile Excellence Travel Award(VETA) 2018' in the ‘Best Business Hotel Chain' category by Travelscapes.

During the year ended 31st March 2019 the company recorded Total Income of Rs. 29.98crores (previous year Rs. 27.59 crores) and Net Profit of Rs. 6.61 crores (previous yearRs. 1.93 crores). Total Comprehensive Income for the year stood at Rs. 6.63 crores(previous year Rs. 2.05 crores). The Board of Directors of the company has recommended adividend of Rs. 12.50 per Equity Share of Rs. 10/- each for the year ended 31st March2019 (previous year Rs. 12.50 per Equity Share).

Bay Islands Hotels Limited

Fortune Resort Bay Island the company's hotel in Port Blair with its strategiclocation excellent architectural design and superior service quality continues to offera unique gateway to the Andamans. A comprehensive renovation and expansion programmetowards enhancing the market standing of the hotel is currently underway with the firstphase (24 rooms) being commissioned during the year. The second phase of renovation (24rooms) is expected to be completed over the next year.

During the year ended 31st March 2019 the company recorded Total Income of Rs. 1.61crores (previous year Rs. 1.33 crores) and Net Profit of Rs. 1.10 crores (previous yearRs. 0.97 crore).

Total Comprehensive Income for the year stood at Rs. 1.10 crores (previous year Rs.0.97 crore).

The Board of Directors of the company has recommended a dividend of Rs. 70.00 perEquity Share of Rs. 100/- each for the year ended 31st March 2019 (previous year Rs.70.00 per Equity Share).

Wimco Limited

The company's business activities comprise fabrication and assembly of machinery fortube filling cartoning wrapping material handling including conveyor solutions andengineering services for the FMCG and Pharmaceutical industries.

The company's Revenue from Operations for the year stood at Rs. 9.68 crores (previousyear Rs. 8.77 crores) with a Net Profit of Rs. 0.04 crore (previous year (-) Rs. 3.03crores). Total Comprehensive Income for the year stood at Rs. 0.06 crore (previous year(-) Rs. 3.01 crores).

The company continues to focus on developing superior solutions towards addressingcustomer requirements.

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East Nutrients Private Limited (NENPL) acompany formed with the objective of setting up a food processing facility in MangaldoiAssam to cater to the fast-growing biscuits market in Assam and other north-easternStates. In August 2015 the company commissioned a state-of-the-art facility comprisingthree biscuit manufacturing lines in Mangaldoi Assam.

During the year the company implemented several initiatives which resulted inimprovement in operational efficiency and productivity. Such initiatives coupled withimprovement in sales mix and implementation of various cost management initiatives led tothe delivery of strong financial performance during the year. During the year the companyalso received a Capital Subsidy under the North East Industrial & Investment PromotionPolicy 2007 for setting up its unit in Assam apart from actualising fiscal incentivesunder the schemes of Central and the State government.

Revenue from Operations for the year stood at Rs. 161.69 crores (previous year Rs.150.30 crores). The company recorded a Net Profit of Rs. 9.05 crores (previous year Rs.3.15 crores) while Total Comprehensive Income for the year stood at Rs. 9.12 crores(previous year Rs. 3.30 crores).

Russell Credit Limited

During the year the company registered Total Income of Rs. 61.35 crores (previous yearRs. 82.88 crores) and Net Profit of Rs. 37.84 crores (previous year Rs. 64.03 crores).Total Comprehensive Income for the year stood at Rs. 65.42 crores (previous year Rs. 89.82crores). Total Income and Net Profit/Total Comprehensive Income for the previous yearincluded Rs. 33.78 crores and Rs. 18.48 crores respectively attributable to one-off saleof Non-Convertible Preference Shares of ICICI Bank Limited. Temporary surplus liquidity ofthe company is mainly deployed in bonds debt mutual funds bank certificate of depositsand bank fixed deposits. The company continues to explore opportunities to make strategicinvestments for the ITC Group.

Gold Flake Corporation Limited

During the year the company registered Total Income of Rs. 4.01 crores (previous yearRs. 3.44 crores) and Net Profit of Rs. 2.86 crores (previous year Rs. 2.37 crores). Thecompany holds 50% equity stake in ITC Essentra Limited – a joint venture withEssentra Group UK.

Greenacre Holdings Limited

During the year the company recorded Total Income of Rs. 5.33 crores (previous yearRs. 5.45 crores) and Net Profit of Rs. 1.78 crores (previous year Rs. 1.87 crores). Thecompany continues to provide maintenance services for commercial office buildings.

ITC Investments & Holdings Limited

The company a Core Investment Company within the meaning of the Core InvestmentCompanies

(Reserve Bank) Directions 2016 recorded Total Revenue of Rs. 0.06 crore during theyear (previous year Rs. 0.06 crore) and Net Profit of Rs. 0.02 crore (previous year Rs.0.03 crore).

MRR Trading & Investment Company Limited

The company a wholly-owned subsidiary of ITC Investments & Holdings Limited holdstenancy rights in a commercial building located in Mumbai and also provides estatemaintenance services. During the year the company recorded Total Income of Rs. 0.07 crore(previous year Rs. 0.07 crore).

Pavan Poplar Limited

The operations of the company continue to be adversely impacted pursuant to the Orderof the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing thewrit petition filed by the company against the Order of the District Magistrateauthorising the State authorities to take possession of the land leased to the company.The appeal filed by the company against the aforestated Order was admitted in April 2014and the matter is pending before the Honourable High Court.

Since the operations of the company continue to be adversely impacted pursuant to thesaid order the Management has completed separation of the non-managerial staff under theIndustrial Disputes Act 1947.

During the year the company recorded Total Revenue of Rs. 0.10 crore (previous yearRs. 0.16 crore) and Net Loss of Rs. 0.55 crore (previous year (-) Rs. 0.29 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely impacted pursuant to the Orderof the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing thewrit petition filed by the company against the Order of the District Magistrateauthorising the State authorities to take possession of the land leased to the company.The appeal filed by the company against the aforestated Order was admitted in April 2014and the matter is pending before the Honourable High Court.

During the year the company recorded Total

Revenue of Rs. 0.05 crore (previous year Rs. 0.07 crore) and Net Loss of Rs. 0.007crore (previous year (-) Rs. 0.004 crore).

NOTES ON JOINT VENTURES

ITC Essentra Limited

The relentless pressure on volumes of the legal cigarette industry on account of steeptaxation regime coupled with intense regulatory burden continues to exert pressure on thedemand for cigarette filters.

Despite such challenging business conditions the company was able to increase itsrevenue and profits on the back of improved sales mix and various cost managementinitiatives. The company retained its leadership position of being the preferred supplychain partner for several well-known national and international brands leveraging its corestrengths – strong customer relationships access to world-class innovation superiorexecution consistent delivery and best-in-class quality.

During the year ended 31st March 2019 on a comparable basis the company's revenuefrom sale of products (net of all taxes) stood at Rs. 356.05 crores (previous year Rs.245.05 crores). Net Profit during the year stood at Rs. 32.79 crores (previous year Rs.16.45 crores).

During the year the company scaled up its capability for manufacturing capsule filtersto cater to the growth in this segment. Investments continue to be made in technologyinduction and capability building towards sustaining the company's position as theinnovation and quality benchmark in the Indian cigarette filter industry.

In celebration of the company completing 25 years the Board of Directors hasrecommended a Special Dividend of Rs. 15 per Ordinary Share in addition to a dividend ofRs. 15 per Ordinary Share of Rs. 10/- each (previous year Rs. 12 per share) for the yearended 31st March 2019.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited a joint venture of your Company with JodhanaHeritage Resorts Private Limited currently operates 34 heritage properties across 13States in India. The company with its WelcomHeritage brand portfolio comprising‘Legend Hotels' ‘Heritage Hotels' and ‘Nature Resorts' provides uniquelydifferentiated offerings to guests in the cultural heritage and adventure tourismsegments respectively.

During the year ended 31st March 2019 the company recorded Total Income of Rs. 3.82crores (previous year Rs. 4.06 crores) and Net Loss of Rs. 0.14 crore (previous year (-)Rs. 0.33 crore). Total Comprehensive Income for the year stood at (-) Rs. 0.15 crore(previous year (-) Rs. 0.33 crore).

During the year the WelcomHeritage hotels brand was awarded ‘The Best HeritageHotel Chain' by Golden Star Awards ‘The Best Heritage Hotel Chain' by Today'sTraveller and ‘Most Preferred Heritage Hotel Chain' by ET Now.

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and theAmbience Group Hyderabad for developing a luxury hotel complex at Begumpet Hyderabad.Under the terms of the Joint Venture Agreement your Company acquired 26% equity stake inEHPL and will inter alia provide hotel operating services upon commissioning of thehotel.

As reported in the previous year the Ambience Group has expressed its desire to reviewthe timing of further investments in EHPL citing concerns about the viability of theproject in view of the challenging economic environment and the sluggish demand conditionscurrently prevailing in the relevant market.

Your Company continues to explore its options in this regard.

Your Company's investment in EHPL stood at Rs. 46.51 crores as at 31st March 2019.

Logix Developers Private Limited

Logix Developers Private Limited (LDPL) is a joint venture between your Company andLogix Estates Private Limited for developing a luxury hotel-cum-service apartment complexat the company's site located at Sector 105 in NOIDA. Under the terms of the Joint VentureAgreement your Company holds 27.9% equity stake in LDPL and will inter alia providehotel operating services upon commissioning of the hotel by LDPL.

As reported in the previous year your Company reiterated its position with the JVpartner that it was committed to developing a luxury hotel-cum-service apartment complexas envisaged under the JV

Agreement and that it was not interested in progressing with any alternative projectplans proposed by the JV partner. However the JV partner refused to progress the projectand instead expressed its intent to exit from the JV by selling its stake to your Company.

Subsequently the JV partner proposed that both parties should find a third party tosell the entire shareholding in LDPL. In view of these developments your Company hadfiled a petition before the erstwhile Company Law Board submitting that the affairs of theJV entity were being conducted in a manner that was prejudicial to the interest of yourCompany and the JV entity. The matter is currently before the National Company LawTribunal (NCLT). The JV partner had also filed a petition before the Honourable Delhi HighCourt for winding up the JV company which was transferred to the NCLT by the HonourableDelhi High Court. The matter was heard before the NCLT on several occasions during theyear and hearing for final arguments of the Company has concluded and the matter isscheduled for 27th May 2019 for the JV partner to conclude its submissions.

During the year ended 31st March 2019 the company recorded a Net Loss of Rs. 30.09crores (previous year Rs. 24.87 crores). The Net Worth of the company stood at (-) Rs.31.98 crores as at 31st March 2019 (previous year (-) Rs. 1.89 crores). Your Company'stotal investment in LDPL was Rs. 41.95 crores. In view of the aforestated developmentsyour Company had made a provision of Rs. 23.45 crores towards diminution in the carryingvalue of investment in LDPL in the previous year.

The financial statements of LDPL for the year ended 31st March 2019 are yet to beapproved by its Board of Directors. In the absence of audited financial statements ofLDPL the Consolidated Financial Statements of your Company for the year ended 31st March2019 have been prepared based on the financial statements prepared by the management ofLDPL.

NOTES ON ASSOCIATES

International Travel House Limited

The company offers a full range of travel services including air ticketing carrentals inbound and outbound tourism domestic holidays conferences events andexhibition management and foreign exchange services to travellers.

During the year ended 31st March 2019 the company recorded a Total Income of Rs.210.64 crores (previous year Rs. 207.69 crores) and Net Profit for the year of Rs. 2.68crores (previous year Rs. 6.95 crores). Total Comprehensive Income for the year stood atRs. 1.98 crores (previous year Rs. 6.02 crores).

The Board of Directors of the company has recommended a dividend of Rs. 2.50 per EquityShare of Rs. 10/- each for the year ended 31st March 2019 (previous year Rs. 4.25 perEquity Share).

Gujarat Hotels Limited

The company's hotel ‘Welcomhotel Vadodara' at Vadodara is operated by yourCompany under an Operating License Agreement.

During the year ended 31st March 2019 the company recorded Total Income of Rs. 5.66crores (previous year Rs. 5.02 crores) Net Profit and Total Comprehensive Income of Rs.4.08 crores (previous year Rs. 3.37 crores).

The Board of Directors of the company has recommended a dividend of Rs. 3.50 per EquityShare of Rs. 10/- each for the year ended 31st March 2019 (previous year Rs. 3.50 perEquity Share).

ATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. During the year the companyrecorded Total Revenue of Rs. 23.67 crores (previous year Rs. 23.13 crores) and Net Profitof Rs. 0.31 crore (previous year Rs. 0.66 crore).

The company continued to maintain high levels of operational responsiveness andbenchmark quality in its manufacturing operations. During the year the company wasconferred the ‘Suraksha Puraskar' by the National Safety Council of India PlatinumAward for Safety Systems Excellence by the Federation of Indian Chambers of Commerce &Industry and ‘4 Star Rating' for commitment to Environment Health & Safetypractices by the Confederation of Indian Industry (Southern Region).

Associates of Russell Credit Limited

Russell Investments Limited

During the year the company recorded Total Income of Rs. 6.01 crores (previous yearRs. 4.47 crores) and

Net Profit of Rs. 4.80 crores (previous year Rs. 3.60 crores). The company continues toexplore opportunities to make investments.

Divya Management Limited

During the year the company recorded Total Income of Rs. 0.57 crore (previous year Rs.0.49 crore) and Net Profit of Rs. 0.24 crore (previous year Rs. 0.21 crore). The companycontinues to explore opportunities to make investments.

Antrang Finance Limited

During the year the company recorded Total Income of Rs. 0.28 crore (previous year Rs.0.28 crore) and Net Profit of Rs. 0.05 crore (previous year Rs. 0.10 crore). The companycontinues to explore opportunities to make investments.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct of affairs of your Company andclearly delineates the roles responsibilities and authorities at each level of itsthree-tiered governance structure and key functionaries involved in governance. The ITCCode of Conduct commits management to financial and accounting policies systems andprocesses. The Corporate Governance Policy and the ITC Code of Conduct stand widelycommunicated across the enterprise at all times and together with the ‘Strategy ofOrganisation' Planning & Review Processes and the Risk Management Framework providethe foundation for Internal Financial Controls with reference to your Company's FinancialStatements.

Such Financial Statements are prepared on the basis of the Significant AccountingPolicies that are carefully selected by management and approved by the Audit Committee andthe Board. These Policies are supported by the Corporate Accounting and Systems Policiesthat apply to the entity as a whole to implement the tenets of Corporate Governance andthe Significant Accounting Policies uniformly across the Company. The Accounting Policiesare reviewed and updated from time to time. These in turn are supported by a set ofdivisional policies and Standard Operating Procedures (SOPs) that have been establishedfor individual businesses.

Your Company uses ERP Systems as a business enabler and also to maintain its Books ofAccount. The SOPs in tandem with transactional controls built into the ERP Systems ensureappropriate segregation of duties tiered approval mechanisms and maintenance ofsupporting records. The Information Management Policy reinforces the control environment.The systems SOPs and controls are reviewed by divisional management and audited byInternal Audit whose findings and recommendations are reviewed by the Audit Committee andtracked through to implementation.

Your Company has in place adequate internal financial controls with reference to theFinancial Statements. Such controls have been assessed during the year taking intoconsideration the essential components of internal controls stated in the Guidance Note onAudit of Internal Financial Controls over Financial Reporting issued by The Institute ofChartered Accountants of India. Based on the results of such assessment carried out bymanagement no reportable material weakness or significant deficiencies in the design oroperation of internal financial controls was observed. Nonetheless your Companyrecognises that any internal control framework no matter how well designed has inherentlimitations and accordingly regular audit and review processes ensure that such systemsare reinforced on an ongoing basis.

RISK MANAGEMENT

As a diversified enterprise your Company continues to focus on a system-based approachto business risk management. The management of risk is embedded in the corporatestrategies of developing a portfolio of world-class businesses that best matchorganisational capability with market opportunities focusing on building distributedleadership and succession planning processes nurturing specialism and enhancingorganisational capabilities through timely developmental inputs. Accordingly managementof risk has always been an integral part of your Company's ‘Strategy of Organisation'and straddles its planning execution and reporting processes and systems. Backed bystrong internal control systems the current Risk Management Framework consists of thefollowing key elements:

– The Corporate Governance Policy approved by the Board clearly lays down theroles and responsibilities of the various entities in relation to risk management coveringa range of responsibilities from the strategic to the operational. These roledefinitions inter alia provide the foundation for appropriate risk managementprocedures their effective implementation across your Company and independent monitoringand reporting by Internal Audit.

– The Risk Management Committee constituted by the Board monitors and reviewsthe strategic risk management plans of your Company as a whole and provides necessarydirections on the same.

– The Corporate Risk Management Cell through focused interactions withbusinesses facilitates the identification and prioritisation of strategic and operationalrisks development of appropriate mitigation strategies and conducts periodic reviews ofthe progress on the management of identified risks.

– A combination of centrally issued policies and divisionally-evolved proceduresbrings robustness to the process of ensuring that business risks are effectivelyaddressed.

– Appropriate structures are in place to proactively monitor and manage theinherent risks in businesses with unique / relatively high risk profiles.

– A strong and independent Internal Audit function at the Corporate level carriesout risk focused audits across all businesses enabling identification of areas where riskmanagement processes may need to be strengthened. The Audit Committee of the Board reviewsInternal Audit findings and provides strategic guidance on internal controls. The AuditCompliance Review Committee closely monitors the internal control environment within yourCompany including implementation of the action plans emerging out of internal auditfindings.

– At the Business level Divisional Auditors continuously verify compliance withlaid down policies and procedures and help plug control gaps by assisting operatingmanagement in the formulation of control procedures.

– A robust and comprehensive framework of strategic planning and performancemanagement ensures realisation of business objectives based on effective strategyimplementation. The annual planning exercise requires all businesses to clearly identifytheir top risks and set out a mitigation plan with agreed timelines and accountabilities.Businesses are required to confirm periodically that all relevant risks have beenidentified assessed evaluated and that appropriate mitigation systems have beenimplemented.

Your Company endeavours to continually sharpen its Risk Management systems andprocesses in line with a rapidly changing business environment. In this regard it ispertinent to note that some of the key businesses of your Company have adopted the ISO31000 Standard and the Risk Management systems and processes prevalent in these businesseshave been independently assessed to be compliant with the said global Standard on RiskManagement. This year two more businesses were assessed for compliance to ISO 31000Standard. This intervention provides further assurance on the robust nature of riskmanagement practices prevalent in your Company.

The centrally anchored initiative of conducting external independent reviews of keybusiness processes with high ‘value at risk' continued during the year. The RiskManagement Committee met thrice during the year and was updated on the status andeffectiveness of the risk management plans. The Audit Committee was also updated on theeffectiveness of your Company's risk management systems and policies.

A Cyber Security Committee was set up to provide specific focus on cyber securityrelated risks primary responsibility being to track emerging practices vendors andtechnologies and provide suitable recommendations for enhancing security of the IT systemsand infrastructure.

Your Company sources several commodities for use as inputs in its businesses and alsoengages in agri-commodity trading as part of its Agri Business.

In respect of commodities sourced for use as inputs in its businesses your Company haswell laid out policies to manage the risks arising out of the inherent price volatilityassociated with such commodities. This includes robust mechanisms for monitoring marketdynamics towards making informed sourcing decisions; well defined inventory holding normsbased on considerations such as seasonality and the strategic nature of the commodityconcerned; entering into long-term contracts with suppliers to secure supply of criticalitems at competitive cost and continuous diversification of supplier base. Multiplesourcing models wide geographical spread extensive supply chain network and associatedinfrastructure in key growing areas coupled with deep-rooted farmer linkages ensuressourcing high quality agri-commodities at competitive cost.

Your Company's strategy of backward integration in sourcing of agri-commodities such aswheat potato fruit pulp spices and leaf tobacco; in-house manufacturing of paperboardspaper and packaging (including pulp production and print cylinder making facilities); woodprocurement from the economic vicinity of the Bhadrachalam unit facilitates access tocritical inputs at benchmark quality and competitive cost besides ensuring security ofsupplies. Further each of your Company's businesses continuously focuses on product mixenrichment towards protecting margins and insulating operations from spikes in inputprice.

In respect of Agri-commodity trading your Company has a well laid out policy to managethe risks associated with sourcing of such commodities. This includes:

– segregation of duties and robust internal controls through a system of checksand balances embedded in the organisation and governance structure;

– clearly defined limits for trading position (long and short) and net cash lossfor specific commodities/commodity groups;

– mitigation of price liquidity and counter party risks in respect of commoditiessuch as soya mustard and chana through hedging on commodity exchanges (mainly NCDEX).Correlation between prices prevailing in the physical market and those on the commodityexchange is analysed regularly to ensure effectiveness of hedging;

– robust monitoring and review mechanisms of net open positions and ‘value atrisk'.

The combination of policies and processes as outlined above adequately addresses thevarious risks associated with sourcing of commodities for your Company's businesses.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant of the principleof governance that freedom of management should be exercised within a framework ofappropriate checks and balances.

Your Company remains committed to ensuring an effective internal control environmentthat inter alia provides assurance on orderly and efficient conduct of operationssecurity of assets prevention and detection of frauds/errors accuracy and completenessof accounting records timely preparation of reliable financial information and compliancewith the requirements with respect to related party transactions.

Your Company's independent and robust Internal Audit processes both at the Businessand Corporate levels provide assurance on the adequacy and effectiveness of internalcontrols compliance with operating systems internal policies and regulatoryrequirements.

Independent consultants have confirmed compliance of Internal Audit systems andprocesses with the Standards on Internal Audit (SIA) issued by the Institute of CharteredAccountants of India (ICAI). Although the Standards continue to be recommendatory innature such validation evidences the contemporariness of the Internal Audit function.

The Internal Audit function consisting of professionally qualified accountantsengineers and Information Technology (IT) Specialists is adequately skilled and resourcedto deliver audit assurances at highest levels.

In the context of the IT environment of your Company systems and policies relating toInformation Management are periodically reviewed and benchmarked for contemporariness.Compliance with the Information Management policies receive focused attention of theInternal Audit team. Information Technology systems undergo pre-implementation auditbefore being deployed for usage in businesses thereby delivering an independent assurancewith respect to the rigour of implementation. The usage of data analytics in audits wasaugmented across the organisation.

Qualified engineers in the Internal Audit function review the quality of designplanning and execution of all ongoing projects involving significant expenditure to ensurethat project management controls are adequate and yield ‘value for money'. InternalAudit continues to use state-of-the-art tools and software for conducting project audits.

Processes in the Internal Audit function have been continuously strengthened forenhanced effectiveness and productivity including the deployment of best-in-class toolsfor analytics in the Audit domain certification as complying with ISO 9001:2015 QualityStandards in its processes ongoing knowledge improvement programmes for staff etc. TheAudit methodology is also designed to validate effectiveness of critical IT controls thatare embedded in the business systems leading to greater alignment with the businessprocess environment.

The Audit Committee of your Board met eight times during the year. The Terms ofReference of the Audit Committee inter alia included reviewing the effectiveness of theinternal control environment evaluation of the Company's internal financial control andrisk management systems monitoring implementation of the action plans emerging out ofInternal Audit findings including those relating to strengthening of your Company's riskmanagement systems and discharging of statutory mandates.

HUMAN RESOURCE DEVELOPMENT

The talent management strategy of your Company focuses on sustaining ITC's position asone of India's most valuable corporations remaining customer-focusedcompetitively-superior performance-driven and future-ready. The initiatives and processesstrive to deliver the unique talent promise of Building Winning Businesses DevelopingBusiness Leaders and Creating Value for India. The talent development practices helpcreate foster and strengthen the capability of human capital to deliver critical outcomeson the vectors of strategic effectiveness operational efficiency and capitalproductivity.

Your Company's ‘Strategy of Organisation' is based on the approach of distributedleadership enabled through a three-tier governance structure. Such an approach allowsbusinesses through their management committees to focus develop and execute businessplans relevant to their product-market spaces while leveraging the institutional strengthsof your Company and the opportunities for synergy between businesses.

Your Company's strong employer equity has enabled the attraction and retention of highquality talent. The management trainee programme augmented with recruitment of highquality talent when required is an integral part of our leadership pipeline developmentprocess. We continue to draw the finest technical managerial and financial talent frompremier institutions in the country and are ranked amongst the leading companies in theseinstitutions. A recent survey conducted by Nielsen amongst MBA students featured ITCamongst the Top 8 most preferred employers. Your Company's intensive engagement withcampuses over decades to communicate ITC's talent proposition through case studycompetitions knowledge sharing programmes by senior managers and the annual internshipprogrammes have all contributed to create a compelling reason for the best candidates toaspire for a career with ITC.

Your Company's approach to talent development is founded on the belief that learninginitiatives must remain synergistic and aligned to business outcomes emphasiseexperiential learning provide an enabling and supportive environment and promote learningagility. Deep functional expertise is fostered through immersion in solving complexcustomer problems by the application of domain expertise early in managerial careers. Keytalent is provided critical experiences in high impact roles and mentored by seniormanagers. Managers are assessed on your Company's behavioral competency framework andprovided with learning and development support to address any areas identified forimprovement. As part of your Company's managerial development and capability buildingstrategy five platform areas have been identified - Strategic Value Chain LeadershipInnovation and Human Resources Development. Various programmes have been designed andcustomised to your Company's requirements under these platforms delivered by leadinginternational faculty. Learning is further supplemented with on demand online programmesmade accessible to employees through globally recognised content platforms. Your Company'sinvestments in creating an internal technical training infrastructure and academy wasrecently acknowledged by Frost & Sullivan when the institute ITC Gurukul won the‘Project Evaluation and Recognition Program 2018' for ‘Enhancing LearningEffectiveness by Leveraging Technology'.

Your Company has further strengthened its performance management system and its cultureof accountability through renewed emphasis on Management by

Objectives which includes clearly defined goals outcomes based assessment and evensharper alignment of performance and rewards.

Your Company continued with the practice of periodically assessing employee engagementthrough a Company-wide survey in 2018. During the year comprehensive action plans wereformulated and implemented which included the launch and strengthening of variousrecognition initiatives systems for career dialoguing employee wellbeing programmesperiodic communication by the leadership teams in each business as well as through thenovel digital platform ‘Studio One'.

Driven by an ambitious growth agenda your Company has already commissioned severalworld-class Integrated Consumer Goods Manufacturing and Logistics facilities across thecountry and the footprint is in the process of being expanded further. Your Companybelieves that alignment of all employees to a shared vision and purpose is vital forwinning in the marketplace. It also recognises the mutuality of interests with keystakeholders and is committed to building harmonious employee relations. Your Companyremains dedicated to an Employee Relations climate of partnership and mutuality whileensuring operations are cost competitive flexible and responsive. The Employee Relationsphilosophy of your Company anchored in the tenets of Scientific Management IndustrialDemocracy Human Relations and Employee Well-being has contributed to building a robustplatform which has aided the conclusion of long-term agreements at several of itsmanufacturing units and hotel properties ensured smooth commencement of operations atgreenfield locations and the execution of productivity improvement practices. Severalinitiatives have been taken to foster a culture of commitment amongst the demographicallydiverse workforce in these new facilities.

Your Company believes that the drive for progress is in never being satisfied with thestatus quo. We are confident that every one of your Company's 27000 plus employees willrelentlessly strive to meet the bold growth agenda deliver world-class performanceinnovate newer and better ways of doing things uphold human dignity foster team spiritand discharge their role as ‘trustees' of all stakeholders with true faith andallegiance.

Your Company is committed to perpetuate this vitality of ITC – its growth indimensions and also as a great institution – so that it continues to succeed in itsrelentless pursuit of creating enduring value.

Details of constitution of Internal Complaints Committee under the Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013 are provided in the‘Business Responsibility Report' forming part of Report and Accounts.

WHISTLEBLOWER POLICY

Your Company's Whistleblower Policy encourages Directors and employees to bring to theCompany's attention instances of unethical behaviour actual or suspected incidents offraud or leak of unpublished price sensitive information or any violation of the ITC Codeof Conduct that could adversely impact your Company's operations business performanceand / or reputation. The Policy provides that your Company investigates such incidentswhen reported in an impartial manner and takes appropriate action to ensure thatrequisite standards of professional and ethical conduct are always upheld. It is yourCompany's Policy to ensure that no employee is victimised or harassed for bringing suchincidents to the attention of the Company. The practice of the Whistleblower Policy isoverseen by the Audit Committee and no employee has been denied access to the Committee.The Whistleblower Policy is available on your Company's corporate website ‘www.itcportal.com'.

SUSTAINABILITY – CONTRIBUTION TO THE ‘TRIPLE BOTTOM LINE'

Inspired by the opportunity to sub-serve larger national priorities your Companyredefined its Vision to not only reposition the organisation for extreme competitivenessbut also make societal value creation and environmental replenishment the bedrock of itscorporate strategy. This super-ordinate vision spurred innovative strategies to addresssome of the most challenging societal issues including widespread poverty unemploymentand environmental degradation. Your Company's sustainability strategy aims at creatingsignificant value for the nation through superior ‘Triple Bottom Line' performancethat builds and enriches the country's economic social and environmental capital. Thesustainability strategy is premised on the belief that the transformational capacity ofbusiness can be very effectively leveraged to create significant societal value through aspirit of innovation and enterprise.

Your Company is today a global exemplar in sustainability. It is a matter of immensesatisfaction that your Company's models of sustainable development have led to thecreation of sustainable livelihoods for around six million people many of whom belong tothe marginalised sections of society. Your Company has also sustained its position ofbeing the only Company in the world of comparable dimensions to have achieved the globalenvironmental distinction of being carbon positive (for 14 consecutive years) waterpositive (for 17 years in a row) and solid waste recycling positive (for 12 years insuccession).

To contribute to the nation's efforts in combating climate change your Company'sstrategy of adopting a low-carbon growth path is manifest in its growing renewable energyportfolio establishment of green buildings large-scale afforestation programmeachievement of international benchmarks in energy and water consumption. During the yearabout 41% of your Company's total energy requirements were met from renewable energysources - a creditable performance given its expanding manufacturing base.

Your Company has adopted a comprehensive set of sustainability policies that are beingimplemented across the organisation in pursuit of its ‘Triple Bottom Line' agenda.These policies are aimed at strengthening the mechanisms of engagement with keystakeholders identification of material sustainability issues and progressivelymonitoring and mitigating the impacts along the value chain of each business.

Your Company's 15th Sustainability Report published during the year details theprogress made across all dimensions of the ‘Triple Bottom Line' for the year 2017-18.This report is in conformance with the Global Reporting Initiative (GRI) standards under‘In Accordance – Comprehensive' category and is third-party assured at thehighest criteria of ‘reasonable assurance' as per International Standard on AssuranceEngagements (ISAE) 3000. The 16th Sustainability Report covering the sustainabilityperformance of your Company for the year 2018-19 is being prepared in accordance with theGRI Standards and will be made available shortly.

In addition the Business Responsibility Report (BRR) as mandated by the Securitiesand Exchange Board of India (SEBI) for the year under review is annexed to this Reportand Accounts. The BRR maps the sustainability performance of your Company against thereporting framework suggested by SEBI.

Corporate Social Responsibility (CSR)

Your Company's overarching commitment to create significant and sustainable societalvalue is manifest in its CSR initiatives that embrace the most disadvantaged sections ofsociety especially in rural India through economic empowerment based on grassrootscapacity building. Towards this end your Company adopted a comprehensive CSR Policy in2014-15 outlining programmes projects and activities that your Company plans to undertaketo create a significant positive impact on identified stakeholders. All these programmesfall within the purview of Schedule VII read with Section 135 of the Companies Act 2013and the Companies (Corporate Social Responsibility Policy) Rules 2014.

The key elements of your Company's CSR interventions are to:

– Deepen engagement in identified core operational geographies to promote holisticdevelopment and design interventions in order to respond to the most significantdevelopment challenges of your Company's stakeholder groups.

– Strengthen capabilities of Non-Government Organisations (NGOs) / Community BasedOrganisations (CBOs) in all the project catchments for participatory planning ownershipand sustainability of interventions.

– Drive the development agenda in a manner that benefits the poor and marginalisedcommunities in your Company's factory and agri-catchments thereby significantly improvingHuman Development Indices (HDI).

– Ensure behavioural change through focus on demand generation for allinterventions thereby enabling participation contribution and asset creation for thecommunity.

– Continue to strive for scale by leveraging government partnerships and accessingthe most contemporary knowledge / technical know-how.

Your Company's stakeholders are confronted with multi-dimensional and inter-relatedconcerns at the core of which is the challenge of securing sustainable livelihoods.Accordingly interventions under your Company's Social Investments Programme (SIP) areappropriately designed to build their capacities and promote sustainable livelihoods.

The footprint of your Company's projects is spread over 27 States/Union Territoriescovering 235 districts.

Social Forestry

Your Company's pioneering afforestation initiative through the Social Forestryprogramme greened 33982 acres during the year. It is currently spread across 16 districtsin six States covering 3.29 lakh acres in 5087 villages impacting over 121557 poorhouseholds. Together with your Company's Farm Forestry programme this initiative hasgreened nearly 7.33 lakh acres till date and generated about 135 million person days ofemployment for rural households including poor tribal and marginal farmers. Integral tothe Social Forestry programme is the Agro-Forestry initiative which cumulatively extendsto over 1.12 lakh acres and ensures food fodder and wood security.

Besides enhancing farm level employment generating incomes and increasing green coverthis large-scale initiative also contributes meaningfully to the nation's endeavour tocreate additional carbon sinks for tackling climate change.

In addition to the above the Social and Farm Forestry initiative of your Companythrough a multiplier effect has led to improvement in pulpwood and fuelwood availabilityin Andhra Pradesh Telangana Karnataka Chhattisgarh and Odisha. In the state of Tripurathis initiative is also creating bamboo wood source that is suitable for agarbattimanufacturing.

Soil and Moisture Conservation

The Soil and Moisture Conservation programme aims to ensure water security for allstakeholders in the factory catchments and to drought-proof the agri-catchments tominimise risks to agricultural livelihoods arising from drought and moisture stress. Theprogramme promotes the development and management of local water resources inmoisture-stressed areas by facilitating community participation in planning andimplementing measures such as building reviving and maintaining water-harvestingstructures. The coverage of this programme currently extends to 43 districts of 15 States.During the year the area under watershed increased by 137105 acres taking thecumulative coverage area till 2018-19 to over 10.12 lakh acres. 2646 water-harvestingstructures were built during the year creating 3.39 million kilolitres of rainwaterharvesting potential taking the total number of water harvesting structures to 15086 andtotal net rainwater harvesting potential to 34.64 million kilolitres.

Biodiversity

The focus of the programme is on reviving ecosystem services provided to agriculture bynature such as natural regulation of pests pollination nutrient cycling soil healthretention and genetic diversity which have witnessed considerable erosion over the pastfew decades. During the year your Company's biodiversity conservation initiative covered5937 acres in seven states and 18 districts taking the cumulative area underbiodiversity conservation to 22031 acres. While the conservation work is being carriedout in select plots of village commons this intervention significantly benefitsagricultural activity in the vicinity of these plots through soil moisture retentioncarbon sequestration and by acting as hosts to insects and birds.

Sustainable Agriculture

The Sustainable Agriculture programme attempts to de-risk farmers from erratic weatherevents through the promotion of climate-smart agriculture premised on dissemination ofrelevant package of practices adoption of appropriate mechanisation and provision ofinstitutional services. Currently 3.95 lakh acres are covered under the programme whichhas a significant multiplier effect in terms of adoption by the farming community. Duringthe year knowledge was disseminated through 4747 Farmer Field Schools and ChoupalPradarshan Khets benefiting around 1.34 lakh farmers. 351 Agri Business Centres deliveredextension services arranged agri-credit linkages and established collective inputprocurement and agricultural equipment on hire. In pursuit of your Company's long-termsustainability objective of increasing soil organic carbon a total of 3169 compost unitswere constructed during the year taking the total number till date to over 40699 units.

The ‘Village Adoption Programme' pioneered by your Company's Agri Businesspresently covers 250 model villages in the states of Andhra Pradesh Karnataka Telanganaand Rajasthan. This initiative is aligned to the Prime Minister's Sansad Adarsh GramYojana (SAGY) an initiative to promote holistic rural development. Your Company hadentered into a partnership with NITI Aayog in April 2018 to improve agriculture and otherallied services in 27 aspirational districts of eight states (Assam Bihar JharkhandRajasthan Madhya Pradesh Maharashtra Odisha and Uttar Pradesh). The plan was to traingovernment officers who in turn would cascade the methodology to farmers. During theyear your Company succeeded in creating 402 block level agri-officers as Master Trainers(MT) who in turn trained 2259 village level personnel as Village Resource Persons (VRPs)to train farmers directly. These VRPs have so far covered 2.05 lakh farmers in package ofpractices appropriate for the dominant crop of the region.

Livestock Development

The programme provides an opportunity for farmers to improve their livestock basedlivelihoods by improving productivity of the progeny through breed improvement anddissemination of improved animal husbandry practices. The programme provided extensionservices including breeding fodder propagation and training of farmers in six States and21 districts. During the year 1.46 lakh artificial inseminations (AIs) were carried outwhich led to the birth of 0.62 lakh high yielding progeny. Cumulatively the figures forAIs and calving stand at 23.67 lakh and 8.13 lakh respectively.

Your Company is also working with dairy farmers in Bihar and Punjab to improve farmproductivity through several extension services and to facilitate higher milk production.Qualified teams comprising veterinarians and para-veterinarians have been deployed tofacilitate animal breeding animal nutrition and animal health services towards improvingfarm productivity and promoting commercial dairy farming among farmers. During the year1.29 lakh cattle of 55074 dairy farmers across 426 villages in six districts of Biharwere supported through training programmes on clean milk production mastitis control andanimal husbandry services like deworming ectoparasite control etc.

Women Empowerment

This initiative provided a range of gainful employment opportunities to over 64000poor women cumulatively supported with capacity building and financial assistance by wayof loans and grants. Included in the total are 22700 ultra-poor women in your Company'score catchments who have access to sustainable sources of income through non-farmlivelihood opportunities. The financial literacy and inclusion project in partnershipwith Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation wasrolled out in 765 villages across 11 districts during the year.

Education

The Primary Education Programme aims to provide children from weaker sections ofsociety in your Company's factory catchments access to education with focus on learningoutcomes and retention. Operational in 24 districts of 14 states the programme covered1.15 lakh children during the year thus taking the total coverage to around 6.91 lakhchildren. In addition nearly 27000 children were covered through support in teaching andlearning material. 199 government primary schools were provided infrastructure supportcomprising boundary walls additional classrooms sanitation units and furniture takingthe total number of government primary schools covered till date to 1802. To ensuresustainable operations and maintenance of infrastructure provided 682 School ManagementCommittees were strengthened and 566 Child Cabinets and Water and Sanitation (WATSAN)Committees cumulatively were formed in various schools with the active involvement ofstudents and teachers.

Skilling & Vocational Training

The Skilling & Vocational Training programme provides training in market linkedskills to youth to enable them to compete in the job market. 12172 youth were enrolledunder different courses during the year of which 44% were female and 36% belonged to theSC/ST communities. The programme is operational in 32 districts of 17 States. In addition785 youth were trained with requisite skills and provided increased opportunities forentrepreneurial development.

The Company continues to work with the Welcomgroup Graduate School of HotelAdministration (WGSHA) together with Dr TMA Pai Foundation to cater to the ever-growingneed for professionally trained human resources in the hospitality industry. In additionsince the inception of ITC Culinary Skills Training Centre Chhindwara in 2014 103trainee chefs have successfully completed the six-month programme wherein cooking skillsare imparted to youth from economically marginalised communities.

Health & Sanitation

Your Company continues to adopt a multi-pronged approach towards improving publichealth and hygiene. To promote a hygienic environment through prevention of opendefecation and to reduce incidence of water-borne diseases 4443 Individual HouseholdToilets (IHHT) were constructed in 26 districts of 15 States in collaboration with therespective State Governments/District sanitation departments. With this a total of 35916IHHTs have been constructed so far in your Company's catchment areas. In addition 32community toilets were constructed/renovated in Bihar West Bengal and New Delhi duringthe year taking the cumulative to 62. Along with sanitation infrastructure developmentspecial focus was given to awareness campaigns to create demand and drive behaviouralchange.

To make potable water available to local communities in three districts of AndhraPradesh Reverse Osmosis (RO) water purification plants were set up in villages with poorquality water. 26 new RO plants were established in 2018-19 taking the total to 127 whichprovide safe drinking water to over 150000 rural people.

The Company continued to enhance awareness on various health related issues through anetwork of 415 women Village Health Champions (VHCs) who covered nearly 3.22 lakh womenadolescent girls and school children during the year. The programme is operational inseven districts of Uttar Pradesh and four districts of Madhya Pradesh. The VHCs conductedover 7000 village meetings and participated in over 4000 group events apart from makingdoor-to-door visits focusing on aspects like sanitation menstrual and personal hygienefamily planning diarrhoea prevention and nutrition.

Through your Company's ‘Swasth India Mission' a combination of audio-visual aidsgames and practical training was leveraged to encourage healthy hygiene habits. Nearly19.2 lakh children from around 5247 schools in 60 cities in 12 states were covered duringthe year. Additionally access to handwashing was enabled through the unique ‘IDGuard' initiative to all the students covered in these 5247 schools.

Over 77000 beneficiaries were covered under Mother and Child Health initiative aimedat improving the health-nutrition status of women adolescents and children in thecatchments of a few of your Company's factories with high maternal and infant mortalityindices. This was achieved by strengthening institutional capacity promoting greaterconvergence with existing government schemes and increasing access to basic services onmaternal child and adolescent health nutrition and child protection.

Solid Waste Management

Your Company's waste recycling programme ‘WOW – Well-Being Out of Waste'enables the creation of a clean and green environment and promotes sustainable livelihoodsfor waste collectors. The programme continued to be executed in Coimbatore ChennaiBengaluru Delhi Muzaffarpur (Bihar) several districts of Telangana and Andhra Pradeshand now expanded to Mysuru and Chikmagalur districts during the year. The quantum of drywaste collected during the year was 51696 tonnes from 651 wards. The programme hascovered 89 lakh citizens 48 lakh school children and 2000 corporates since itsinception. It creates sustainable livelihoods for 14745 waste collectors by facilitatingan effective collection system in collaboration with municipal corporations.

The intervention has also created over 178 social entrepreneurs who are involved inmaximising value capture from dry waste collected.

In addition to WOW Programme another programme on solid waste management which dealswith both dry and wet waste has spread to 15 districts of 10 States covering 2.12 lakhhouseholds and collected 12608 tonnes of waste during the year. This programme focuses onminimising waste to landfill by managing waste at source. Home composting was practiced by10892 households. Under this programme in 2018-19 8462 tonnes of wet waste wascomposted

2383 tonnes of dry waste recycled and only 14% of the total waste was sent tolandfills.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA) which was established in 1977 is anembodiment of your Company's sustained commitment to a priceless national heritage. TheCompany's pledge towards ensuring enduring excellence in Classical Music educationcontinues to drive ITC SRA in furthering its objective of preserving and propagatingHindustani classical music in the age-old principle of the ‘Guru-Shishya Parampara'.The eminent Gurus of the Academy most of whom reside in the Academy's campus impartintensive training and quality education in Hindustani Classical Music to the Scholars.The present Gurus of the Academy are Padma Shri Pt. Ajoy Chakrabarty Padma Shri Pt. UlhasKashalkar Pt. Partha Chatterjee Pt. Uday Bhawalkar Vidushi Subhra Guha and Shri OmkarDadarkar. The Academy's focus continues to be on nurturing exceptionally gifted studentsselected from across India through a system of multi-level audition. Full scholarship isprovided to them to reside and pursue music education in the Academy's campus and in otherdesignated locations under the tutelage of the country's most distinguished musicians. Thecreation of the next generation of masters of Hindustani classical music for thepropagation of a precious legacy continues to be the Academy's objective.

Forging Partnerships with NGOs

The meaningful contribution made by your Company's Social Investments Programme toaddress some of the country's key development challenges has been possible in significantmeasure due to your Company's partnerships with globally renowned NGOs such as BAIF DSCFES DHAN Foundation MYRADA Pratham SEWA Bharat Outreach WASH Institute and Water forPeople amongst others. These partnerships which bring together the best-in-classmanagement practices of your Company and the development experience and mobilisationskills of NGOs will continue to provide innovative grassroots solutions to some ofIndia's most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities as required underSections 134 and 135 of the Companies Act 2013 read with Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 and Rule 9 of the Companies(Accounts) Rules 2014 is provided in the Annexure forming part of this Report.

Environment Health & Safety

Your Company's Environment Health & Safety (EHS) strategies are directed towardsachieving the greenest and safest operations across all your Company's units by optimisingnatural resource usage and providing a safe and healthy workplace. Systemic effortscontinue to be made towards natural resource conservation by continuously improvingresource-use efficiencies and enhancing the positive environmental footprint following alife-cycle based approach.

Your Company's focus on inculcating a green and safe culture is supported through theadoption of EHS standards that incorporate best international standards codes &practices and verified through regular audits.

Your Company is addressing the critical area of climate change mitigation throughseveral innovative and pioneering initiatives. These include continuous improvement inenergy efficiency enhancing the renewable energy portfolio integrating green attributesinto the built environment better efficiency in material utilisation maximising wateruse efficiencies and rain water harvesting maximising reuse and recycling of waste andutilising post-consumer waste as raw material.

Energy Conservation and Renewable Energy

Your Company is well positioned to benefit from energy conservation and renewableenergy promotion schemes such as Perform Achieve and Trade (PAT) and Renewable EnergyCertificates (RECs) promoted by the Government of India. As a responsible corporatecitizen your Company has made a commitment to reduce dependence on energy from fossilfuels. Accordingly all factories incorporate appropriate green features and premiumluxury hotels and office complexes continue to be certified at the highest level by eitherthe US Green Building Council Indian Green Building Council or the Bureau of EnergyEfficiency (BEE).

Despite capacity augmentation during the year in FMCG Hotels and PaperboardsBusinesses about 41% of your Company's total energy requirements were met from renewablesources such as biomass wind and solar.

Your Company continues its efforts to achieve a 50% renewable energy share in its totalenergy consumption based on a mix of energy conservation and renewable energy investmentsdespite significant enhancement in its scale of operations going forward.

Water Security

With water scarcity increasingly becoming an area of serious concern your Companycontinues to focus on an integrated water management approach that includes waterconservation and harvesting initiatives at its units – while at the same time workingtowards meeting the water security needs of all stakeholders at the local watershed level.Interventions have been rolled out to improve water-use efficiencies by adopting latesttechnologies and increasing reuse and recycling practices within the fence while alsoworking with farmers and other community members towards improving their water-useefficiencies. The supply side interventions include enhancing capture and storage ofrainwater (in soil and storage ponds) and recharging aquifers. These initiatives haveresulted in the creation of rainwater harvesting potential that is over three times thenet water consumption of your Company's operations.

Greenhouse Gases and Carbon Sequestration

The greenhouse gas (GHG) inventory of your Company for the year 2018-19 compiled as perthe ISO 14064 Standard has been assured as in the earlier years at the highest‘Reasonable Level' by an independent third party.

Reaffirming your Company's commitment to the ethos of ‘Responsible Luxury'premium luxury hotels of your Company are Leadership in Energy & Environmental Design(LEED) Platinum certified making it a trailblazer in green hoteliering globally. YourCompany is a pioneer in the green buildings movement. In 2004 the ITC Green Centre atGurugram was certified as the largest platinum rated building in the world by the US GreenBuilding Council (USGBC-LEED).

ITC Grand Chola the 600-key super-premium luxury hotel complex in Chennai is amongstthe world's largest

LEED Platinum certified green hotels besides holding a 5-Star rating from the GreenRating for Integrated Habitat Assessment (GRIHA) Council. The data centre at BengaluruITC Sankhya is the first data centre in the world to receive the LEED Platinumcertification by USGBC.

Several of your Company's factories and office complexes have also received the GreenBuilding certification from Indian Green Building Council (IGBC) the LEED certificationfrom USGBC and star ratings from the Bureau of Energy Efficiency (BEE). Largeinfrastructure investments such as the ITC Green Centre at Manesar (LEED Platinumcertified) and the ITC Green Centre at Bengaluru (pre-certified for LEED Platinum)continue to demonstrate your Company's commitment to green buildings. To date 24buildings of your Company have achieved Platinum certification by USGBC/IGBC. In order tocontinually reduce your Company's energy footprint green features are integrated in allnew constructions and also incorporated in existing hotels manufacturing unitswarehouses and office complexes.

Over twice the amount of Carbon Dioxide emissions from your Company's operations arebeing sequestered through its Social and Farm Forestry initiatives. Besides mitigating theimpact of increasing levels of GHG emissions in the atmosphere these initiatives helpgreening of degraded wasteland prevent soil erosion enhance organic matter content insoil and enhance ground water recharge.

Waste Recycling

Your Company continues to make significant progress in reducing specific wastegeneration through constant monitoring and improvement of efficiencies in materialutilisation and also in achieving almost total recycling of waste generated in operations.In this way your Company has prevented waste reaching landfills and the associatedproblems of soil and groundwater contamination and GHG emissions all of which canadversely impact public health. In the current year your Company has achieved over 99%waste recycling with the Paperboards and Specialty Papers Business which accounts for89% of the total waste generated in your Company recycling 99.9% of the total wastegenerated by its operations. During the year this

Business also recycled around 89000 tonnes of externally sourced post-consumer wastepaper thereby creating yet another positive environmental footprint.

Circular Economy Approach to Plastic Packaging

ITC aims to go beyond the requirements of Plastic Waste Management Rules 2016 toensure that over the next decade 100% of packaging is reusable recyclable orcompostable. Your Company is working towards optimising packaging in a way that it reducesthe environmental impact arising out of post-consumer packaging waste without affectingintegrity of the product. This is being done in a structured manner by optimising designidentifying alternative packaging material with lower environmental impact and suitableend-of-life solutions for packaging waste. ITC is also working towards establishingscalable replicable and sustainable models of municipal solid waste management based oncircular economy principles. ITC's approach is centred around treating waste as a resourceand ensuring that zero waste goes to landfill which can be achieved only when waste issegregated at source. These initiatives focus on educating citizens on segregating wasteat source into dry and wet waste streams and ensuring that value is derived from theseresources and in the process create sustainable livelihood for waste collectors andrag-pickers. These models operate on a public-private partnership basis with activeinvolvement of Urban Local Bodies Civil Society and the informal sector of wastecollectors.

Under its flagship ‘Well-Being Out of Waste' (WOW) programme running acrossvarious cities in Karnataka Bihar Delhi Tamil Nadu Andhra Pradesh and Telanganaaround 16000 tonnes of post-consumer plastic waste including around 7400 tonnes of LowValue Plastics (LVP) comprising of multi-layered plastic and thin films is beingcollected annually. In 2018-19 your Company also launched an LVP waste collectionprogramme in Pune in collaboration with SWaCH a cooperative of waste pickers with decadelong experience in implementing source segregation and door-to-door collection in Pune.The collection programme was operationalised in January 2019 and has successfully startedchannelising post-consumer LVP waste to an authorised recycler and is targeting acollection of around 200 tonnes of LVP waste per month.

Safety

Your Company's commitment to provide a safe and healthy workplace to all has beenreaffirmed by several national and international awards and certifications received byvarious units. Your Company's approach has been to institutionalise safety as a value-ledconcept with focus on inculcating a sense of ownership at all levels in order to drivebehavioural change. In line with this approach several of your Company's operating unitsare progressively implementing behaviour-based safety initiatives and customised riskassessment supported by planned job observation programmes to strengthen their safetyculture.

Your Company continuously strives to improve on safety performance by incorporatingbest-in-class engineering standards in the design and project execution phase itself forall investments in the built environment besides optimising costs. Environment Health& Safety audits before commissioning and during the operation of units continue to becarried out to verify compliance with standards.

Promoting Thought Leadership in Sustainability

The ‘CII–ITC Centre of Excellence for Sustainable Development' establishedby your Company in 2006 in collaboration with the Confederation of Indian Industry (CII)continues to focus on its endeavour to promote sustainable business practices amongstIndian enterprises. The major highlights during the year include the following:

The 13th edition of the Centre's flagship event the ‘Sustainability Summit:Everyone's Future' was held on 6th & 7th September 2018 in New Delhi with focus onthe ‘Circular Economy Mission' (CEM) under the European Union Resource EfficiencyInitiative. Key dignitaries included Dr Harsh Vardhan Minister for Environment Forest& Climate Change Science & Technology and Earth Sciences Mr Suresh PrabhuMinister of Commerce & Industry and Civil Aviation Mr Hardeep Singh Puri Ministerfor State (I/C) Housing and Urban Affairs Mr Karmenu Vella Commissioner for EnvironmentMaritime Affairs and Fisheries European Commission and Mr Sanjiv Puri ITC Limited. 80delegates from 16 different countries with their representatives from industry businessassociations and academia as well as research institutions were present at the EU-CEM.

The circular economy guidebook for CEOs titled ‘Circular Economy: A New Source ofCompetitiveness' which discusses alternatives to current business models by adopting theconcept of circular economy was launched at the Sustainability Summit.

A high-level B2G Partnership Conclave on

Sustainable Development Goals (SDGs) was jointly organised by the Centre NITI Aayogand the UNDP. The conclave focused on three core areas— water energy and greenindustry—which have been identified as fast tracks for the 2030 Agenda. Keydignitaries included Mr. Raj Kumar Singh Hon'ble Minister of State (I/C) Power and New& Renewable Energy and Mr. Amitabh Kant CEO NITI Aayog. A three-year partnership MoUwas signed between CII and NITI Aayog at the Conclave. This partnership aims to showcasethe efforts of Indian businesses to the Government and the UNDP increase awarenessamongst businesses share best practices and build a tracking mechanism for furtherimproving industry engagement to achieve SDGs by 2030. The Centre also launched a reportduring the event titled ‘Indian Solutions for the World to Achieve SDGs'.

The Centre's India Business & Biodiversity Initiative (IBBI) participated in theBusiness & Biodiversity Forum of the 14th Meeting of the Conference of the Parties(COP 14) to the UN Convention on Biological Diversity (CBD) held in Sharm El Sheikh Egyptfrom 17th to 29th November 2018 with the theme of ‘Investing in biodiversity forpeople and planet'. The Centre took an Indian industry delegation to participate in theforum to present Indian companies' initiatives and best-practice case studies onmainstreaming biodiversity into the sectors of energy mining infrastructuremanufacturing and processing and health.

The Centre organised a session on voluntary climate adaptation framework for industryat the 24th Conference of Parties under United Nations Framework Convention on ClimateChange (COP24) held at Katowice Poland in December 2018.

The 13th CII-ITC Sustainability Awards 2018 took place in December 2018. Since 2006878 businesses have applied for the Awards of which 275 have been recognised so far. In2018 out of 77 applicants 39 companies were declared winners in various categories.

The Centre promoted capacity building in sustainability through a range of training andconsulting assignments. In 2018 almost 2000 participants were covered through 75programmes conducted both in India and abroad. Topics included Value Innovation CSRRules and Impact Measurement Sustainability Reporting Integrated Reporting ClusterPlatform for Transformative Solutions Human Rights and Biodiversity.

R&D QUALITY AND PRODUCT DEVELOPMENT

Your Company continues to invest in a comprehensive Research & Developmentprogramme leveraging its world-class infrastructure benchmarked processesstate-of-the-art technology and a business-focused R&D strategy.

ITC's Life Sciences & Technology Centre (LSTC) Bengaluru continues to focus onits mandate to develop unique sources of competitive advantage and build future readiness.LSTC seeks to achieve this by harnessing contemporary advances in several relevant areasof science and technology and blending the same with classical concepts of productdevelopment often leveraging cross-business synergies. Competencies are constantlyevolving at LSTC as it strives for scientific rigour at par with the best our globalcompetitors have to offer. LSTC is resourced with 350 highly qualified scientistsworld-class measurement systems and state-of-the-art facilities to conduct experimentalresearch rapid prototyping and process development. Several Centres of Excellence havebeen established over the past few years in these areas in LSTC. In addition a number ofareas centred around these capabilities have secured global quality certifications.

The Agrisciences R&D team continues to engage in evaluating and introducing severalgermplasm lines of identified crops including Casuarina and Eucalyptus to increase thegenetic and trait diversities in these species. This intervention would facilitate thedevelopment of new varieties with higher yields better quality and other traits relevantfor your Company's businesses. These new lines are being introduced commercially and willenable farmers increase their revenues and earnings significantly on account ofproductivity gains and improved disease resistance. Besides pulpwood species theAgrisciences team continues to focus on delivering world-class solutions usingcontemporary technologies in crops such as wheat soya potato and rice. This includesevaluating and building research collaborations with globally recognised centres ofexcellence with a view to accelerating the journey towards demonstrating multiple‘proofs of concept'. These collaborations covering identified crops and species aredesigned in a manner that enables your Company in gaining fundamental insights intoseveral technical aspects of plant breeding and genetics and the influence ofagro-climatic conditions on the growth of these species. Such interventions willaccelerate LSTC's efforts in creating future generations of crops that are more adaptableto varied agro-climatic conditions thereby providing farmers relatively safer and moreprofitable alternatives whilst helping secure your Company's supply chain andcontributing to the vitality and competitiveness of your Company's Branded Packaged FoodsBusinesses. Further these outcomes have a strong potential to contribute towardsaugmenting the nation's ecological capital and biodiversity as well.

Recognising the unique construct of your Company in terms of its strong presence inAgri Branded Packaged Foods and Personal Care Products Businesses a convergence ofR&D capabilities is being leveraged to deliver future products aimed at nutritionhealth and well-being. In keeping with the above during the year your Company launched avariety of potatoes which are low in sugar content and rich in antioxidants. LSTC'sBiosciences team has designed and developed several long-term research platforms forevolving multi-generation product concepts and associated claims that are fully backed byscientific evidence for the Branded Packaged Foods and Personal Care Products Businesses.Consumer insight driven propositions have been identified in the area of functional foodswhich are being progressed to products of the future with strong scientifically validatedclaims via clinical trials. Several of these initiatives have completed clinicalassessment of safety and efficacy of products in line with global standards andspecifically for the Indian population. These interventions will go a long way in enablingyour Company to become a world-class producer of nutritionally superior food products inthe near-term. Similar advances have been made in the skin care hair care andhealth/hygiene arena. New best-in-class initiatives such as data analytics consumerexperience labs and Industry 4.0 are being seeded across LSTC with a view to furtherstrengthen your Company's long-term competitiveness. Intellectual properties arising fromthese efforts have also been secured as appropriate and as of 31st March 2019 yourCompany has filed 836 patents. The product development teams at LSTC were instrumental indeveloping over 50 unique products that were launched during the year by our FMCGBusinesses.

LSTC has a clear vision and road map for long-term R&D backed by a well-craftedIntellectual Property strategy. With scale speed science and sustainabilityconsiderations LSTC is poised to deliver long-term competitive advantage for yourCompany.

In line with your Company's relentless focus on operational excellence and qualityeach Business is mandated to continuously innovate on processes and systems to enhancetheir competitive position. During the year your Company's Hotels Business leveraged its‘Lean' and ‘Six Sigma' programmes to improve business process efficiencies. Thiswill further enhance capability to create superior customer value through a serviceexcellence framework. The Paperboards Paper & Packaging Businesses continued topursue ‘Total Productive Maintenance' (TPM) programmes in all units resulting insubstantial cost savings and productivity improvements.

All manufacturing units of your Company have ISO quality certification. Allmanufacturing units of the Branded Packaged Foods Businesses (including contractmanufacturing units) and hotels operate in compliance with stringent food safety andquality standards. Almost all Company owned units/hotels and contract manufacturing unitsof the Branded Packaged Foods Businesses are certified by an accredited third party inaccordance with ‘Hazard Analysis Critical Control Points' (HACCP)/ISO 22000standards. Additionally the quality of all FMCG products of your Company is regularlymonitored through ‘Product Quality Rating System' (PQRS) which measures competitivesuperiority of your Company's product offerings.

PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

In the proceedings initiated by the Enforcement Directorate in 1997 in respect of someof the show cause memoranda issued by the Directorate after hearing arguments on behalfof your Company the appropriate authority has passed orders in favour of your Companyand dropped those memoranda.

In respect of some of the remaining memoranda your Company filed writ petitionschallenging their validity before the Honourable Calcutta High Court which have beenallowed and the proceedings in respect of these memoranda have been quashed. Meanwhilesome of the prosecutions launched by the Enforcement Directorate have been quashed by theHonourable Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year your Company's treasury operations continued to focus on deployment ofsurplus liquidity and management of foreign exchange exposures within a well-defined riskmanagement framework.

The first half of the financial year witnessed a sharp spike in global price of crudeoil leading to concerns on retail inflation and the Government's ability to adhere to thefiscal deficit target. Further exit by Foreign Institutional Investors from the capitalmarkets led to currency depreciation which accentuated the negative sentiment. Inresponse RBI increased policy interest rates. In addition credit growth outpacingdeposit growth increase in currency holding by the public and default in debt repaymentby a large non-banking finance company contributed to volatility and increase in marketinterest rates. In the second half of the financial year market concerns started to abateas price of crude oil corrected significantly and domestic retail inflation remainedanchored within the targeted range.

Consequently market interest rates normalised supported by RBI reducing policyinterest rates and infusing unprecedented amount of liquidity into the Banking systemthrough open-market purchase of Government Securities.

All investment decisions relating to deployment of surplus liquidity continued to beguided by the tenets of Safety Liquidity and Return. Treasury operations focused onproactive rebalancing of portfolio duration and mix in line with the evolving interestrate environment.

Your Company's risk management processes ensured that investment of surplus liquiditywas made after proper evaluation of underlying risk while remaining focused on capturingmarket opportunities.

US$ strength was a dominant theme in global currency markets during the yearattributed to a strong US economy (pick-up in economic growth decline in unemploymentrate) and monetary policy normalisation by the US Federal Reserve through interest ratehikes. By mid-October the Indian Rupee (INR) depreciated by over 14% against the US$(from 65 to 74.48). Other factors which contributed to Rupee weakness include wideningCurrent Account Deficit and global risk aversion due to economic/political crisis in someof the Emerging Markets. Thereafter as global risk sentiment towards Emerging Marketsimproved Rupee regained some of the losses to close the year at Rs. 69.16. In thisscenario your Company adopted a proactive forex exposure management strategy whichincluded the use of foreign exchange forward contracts and plain vanilla options toprotect business margins and reduce risks/costs.

As in earlier years commensurate with the size of the temporary surplus liquidityunder management treasury operations continue to be supported by appropriate controlmechanisms including independent check of 100% of transactions by your Company's InternalAudit department.

DEPOSITS

Your Company's erstwhile Public Deposit Scheme closed in the year 2000. As at 31stMarch 2019 there were no deposits due for repayment except in respect of two depositholders totalling to Rs. 20000/- which have been withheld on the directives received fromthe government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interestdue thereon in terms of the conditions of your Company's erstwhile Schemes.

Your Company has not accepted any deposit from the public / members under Section 73 ofthe Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014during the year.

DIRECTORS

Changes in Directors

Mr. Yogesh Chander Deveshwar Chairman of the Company since 1st January 1996 passedaway on 11th May 2019. Your Directors express their sincere condolences on the demise ofMr. Deveshwar and place on record their deep appreciation for his legendary stewardship ofthe Company for more than two decades.

Spearheading a journey of stellar growth

Mr. Deveshwar's leadership transformed ITC into a valuable and admired multi-businessconglomerate with a robust portfolio of front-ranking businesses in FMCG HotelsPaperboards Paper & Packaging and Agri Business. His vision to make societal valuecreation a bedrock of corporate strategy also led ITC to become a global exemplar insustainability and the only company in the world of comparable dimensions to be carbonpositive water positive and solid waste recycling positive for over a decade creatingover six million livelihoods many of whom represent the most disadvantaged in society.

Mr. Deveshwar's outstanding contribution and foresight helped in creation ofworld-class Indian brands which capture and retain larger value in the country andnational assets in the form of intellectual property state-of-the-art manufacturingfacilities and iconic hospitality properties. Mr. Deveshwar's inspiring vision willcontinue to guide your Company in the journey ahead.

The Board of Directors of your Company (‘the Board') on the recommendation of theNomination & Compensation Committee (‘the Committee') appointed Mr. Sanjiv PuriManaging Director also as the Chairman of the Company with effect from 13th May 2019.

Mr. Suryakant Balkrishna Mainak [representing the Life Insurance Corporation of India(‘LIC')] resigned from the Board with effect from 24th July 2018. Your Directorsplace on record their appreciation for the services rendered by Mr. Mainak.

Mr. John Pulinthanam was appointed with your approval as a Non-Executive Director ofthe Company with effect from 27th July 2018 representing the General Insurers' (PublicSector) Association of India.

On the recommendation of the Committee the Board at the meeting held on 27th July2018 appointed

Mr. Hemant Bhargava as an Additional Non-Executive Director of your Company with effectfrom 28th July 2018 representing LIC.

Mr. Sumant Bhargavan on the recommendation of the Committee was appointed by theBoard at the meeting held on 15th November 2018 as an Additional Director of yourCompany and subject to the approval of the Members also as a Wholetime Director witheffect from 16th November 2018.

By virtue of the provisions of Article 96 of the Articles of Association of yourCompany and Section 161 of the Companies Act 2013 (‘the Act') Messrs. Bhargava andSumant will vacate office at the ensuing Annual General Meeting (‘AGM') of yourCompany.

The Board at the meeting held on 13th May 2019 on the recommendation of theCommittee recommended for the approval of the Members (a) appointment of Mr. Bhargava asa Non-Executive Director of your Company liable to retire by rotation for a period ofthree years from the date of the ensuing AGM and (b) appointment of Mr. Sumant as aDirector liable to retire by rotation and also as a Wholetime Director of your Companyfor a period of three years from the date of the ensuing AGM.

Further the Board at the meeting held on 13th May 2019 on the recommendation of theCommittee recommended for the approval of the Members the re-appointment of Mr. ArunDuggal Mr. Sunil Behari Mathur and Ms. Meera Shankar as Independent Directors of yourCompany in terms of Section 149 of the Act and Regulation 17 of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 (‘Listing Regulations 2015') with effect from 15th September 2019.

Requisite Notices under Section 160 of the Act have been received in respect of Messrs.Bhargava Sumant Duggal and Mathur and Ms. Shankar who have filed their consents to actas Directors of the Company if appointed.

Appropriate resolutions seeking your approval to the above are appearing in the Noticeconvening the 108th AGM of your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Act read with Article 91 of theArticles of Association of the Company Messrs. David Robert Simpson and John Pulinthanamwill retire by rotation at the ensuing AGM and being eligible offer themselves forre-election. The Board has recommended their re-election.

Number of Board Meetings

Eight meetings of the Board were held during the year ended 31st March 2019.

Attributes Qualifications & Independence of Directors and their Appointment

The Nomination & Compensation Committee as reported in earlier years adopted thecriteria for determining qualifications positive attributes and independence ofDirectors including Independent Directors pursuant to the Act and the Rules thereunder.The Corporate Governance Policy inter alia requires that Non-Executive Directors bedrawn from amongst eminent professionals with experience in business/finance/law/publicadministration and enterprises. The Board Diversity Policy of your Company requires theBoard to have balance of skills experience and diversity of perspectives appropriate tothe Company. The skills expertise and competencies of the Directors as identified by theBoard are provided in the ‘Report on Corporate Governance' forming part of theReport and Accounts.

The Articles of Association of your Company provide that the strength of the Boardshall not be fewer than five nor more than eighteen. Directors are appointed/ re-appointedwith the approval of the Members for a period of three to five years or a shorterduration in accordance with retirement guidelines and as may be determined by the Boardfrom time to time. All Directors other than Independent Directors are liable to retireby rotation unless otherwise approved by the Members. One-third of the Directors who areliable to retire by rotation retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that (a) they meet thecriteria of Independence as prescribed under Section 149 of the Act and Regulation 16 ofthe Listing Regulations 2015 and (b) they are not aware of any circumstance or situationwhich could impair or impact their ability to discharge duties with an objectiveindependent judgement and without any external influence. Further in the opinion of theBoard the Independent Directors fulfil the conditions prescribed under the ListingRegulations 2015 and are independent of the management of the Company.

Details of the Company's Policy on remuneration of Directors Key Managerial Personneland other employees is provided in the ‘Report on Corporate Governance' forming partof the Report and Accounts.

Board Evaluation

The Nomination & Compensation Committee as reported in earlier years formulatedthe Policy on Board evaluation evaluation of Board Committees' functioning and individualDirector evaluation and also specified that such evaluation will be done by the Boardpursuant to the Act and the Rules thereunder and the Listing Regulations 2015.

In keeping with ITC's belief that it is the collective effectiveness of the Board thatimpacts Company's performance the primary evaluation platform is that of collectiveperformance of the Board as a whole. Board performance is assessed against the role andresponsibilities of the Board as provided in the Act and the Listing Regulations 2015 readwith the Company's Governance Policy. The parameters for Board performance evaluation havebeen derived from the Board's core role of trusteeship to protect and enhance shareholdervalue as well as to fulfil expectations of other stakeholders through strategicsupervision of the Company. Evaluation of functioning of Board Committees is based ondiscussions amongst Committee members and shared by the respective Committee Chairman withthe Board. Individual Directors are evaluated in the context of the role played by eachDirector as a member of the Board at its meetings in assisting the Board in realising itsrole of strategic supervision of the functioning of the Company in pursuit of its purposeand goals.

While the Board evaluated its performance against the parameters laid down by theNomination & Compensation Committee the evaluation of individual Directors wascarried out against the laid down parameters anonymously in order to ensure objectivity.Reports on functioning of Committees were placed before the Board by the CommitteeChairmen. The Independent Directors Committee of the Board also reviewed the performanceof the non-Independent Directors and the Board pursuant to Schedule IV to the Act andRegulation 25 of the Listing Regulations 2015.

KEY MANAGERIAL PERSONNEL

During the year Mr. Sumant Bhargavan was appointed as an Additional Wholetime Directorof the Company as stated above. There were no other changes in the Key ManagerialPersonnel of your Company.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section ‘Board ofDirectors and Committees' in the Report and Accounts.

Statutory Auditors

The Company's Auditors Messrs. Deloitte Haskins & Sells Chartered Accountantswho were appointed with your approval at the 103rd AGM for a period of five years willcomplete their present term on conclusion of the ensuing 108th AGM of the Company.

The Board on the recommendation of the Audit Committee recommended for the approvalof the Members the appointment of Messrs. S R B C & CO LLP Chartered Accountants(‘SRBC') as the Auditors of the Company for a period of five years from theconclusion of the ensuing 108th AGM till the conclusion of the 113th AGM. On therecommendation of the Audit Committee the Board also recommended for the approval of theMembers the remuneration of SRBC for the financial year 2019-20. Appropriate resolutionseeking your approval to the appointment and remuneration of SRBC as the StatutoryAuditors is appearing in the Notice convening the 108th AGM of the Company.

Cost Auditors

Your Board as recommended by the Audit Committee appointed for the financial year2019-20:

(i) Mr. P. Raju Iyer Cost Accountant for audit of Cost Records maintained by theCompany in respect of ‘Wood Pulp' ‘Paper and Paperboard' and ‘NicotineGum' products.

(ii) Messrs. S. Mahadevan & Co. Cost Accountants for audit of Cost Recordsmaintained in respect of all applicable products of the Company other than ‘WoodPulp' ‘Paper and Paperboard' and ‘Nicotine Gum' products.

Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules2014 appropriate resolutions seeking your ratification to the remuneration of theaforesaid Cost Auditors are appearing in the Notice convening the 108th AGM of theCompany.

The Company maintains necessary cost records as specified by Central Government undersub-section 1 of Section 148 of the Act read with the Companies (Cost Records and Audit)Rules 2014.

Secretarial Auditors

Your Board appointed Messrs. Vinod Kothari & Company Practising CompanySecretaries to conduct secretarial audit of the Company for the financial year ended 31stMarch 2019. The Report of Messrs. Vinod Kothari & Company is provided in the Annexureforming part of this Report pursuant to Section 204 of the Act.

CHANGES IN SHARE CAPITAL

During the year 54336690 Ordinary Shares of Rs. 1/- each fully paid-up wereissued and allotted upon exercise of 5433669 Options under the Company's Employee StockOption Schemes.

Consequently the Issued and Subscribed Share Capital of your Company as on 31stMarch 2019 stands increased to Rs. 12258631601/- divided into 12258631601 OrdinaryShares of Rs. 1/- each.

The Ordinary Shares issued during the year rank pari passu with the existing OrdinaryShares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options as required under Regulation 14 of theSecurities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014(‘the Regulations') are available in the Notes to the Financial Statements and canalso be accessed on the Company's corporate website ‘www.itcportal.com' underthe section ‘Shareholder Value'. During the year there has not been any materialchange in the Company's Employee Stock Option Schemes.

Your Company's Auditors Messrs. Deloitte Haskins & Sells have certified that theEmployee Stock Option Schemes of the Company have been implemented in accordance with theRegulations and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of your Company (‘ISC') accredited with ISO 9001:2015certification is registered with the Securities and Exchange Board of India as CategoryII Share Transfer Agent for providing in-house share registration and related services.ISC continues to focus on upgrading its infrastructure systems and processes forproviding contemporary and efficient services to the shareholders and investors of yourCompany in compliance with the applicable statutory requirements.

During the year Messrs. Det Norske Veritas accredited agency for ISO certificationaccorded the highest possible ‘Level 5' rating to ISC's systems and processes for thetenth consecutive year exemplifying the excellence achieved by ISC in providing qualityinvestor services.

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by the Company with its related partiesduring the financial year were in accordance with the provisions of the Companies Act2013 and the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015. All such contracts or arrangements have been approved bythe Audit Committee as applicable. No material contracts or arrangements with relatedparties were entered into during the year under review. Further the prescribed details ofrelated party transaction in Form No. AOC-2 in terms of Section 134 of the Act read withRule 8 of the Companies (Accounts) Rules 2014 is given in the Annexure to this Report.

Your Company's Policy on Related Party Transactions as adopted by your Board can beaccessed on the corporate website at https://www.itcportal.com/about-itc/policies/policy-on-rpt.aspx.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act 2013 your Directors confirmhaving:

a) followed in the preparation of the Annual Accounts the applicable accountingstandards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgementsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of your Company at the end of the financial year and of the profit ofyour Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting recordsin accordance with the provisions of the Companies Act 2013 for safeguarding the assetsof your Company and for preventing and detecting fraud and other irregularities;

d) prepared the Annual Accounts on a going concern basis;

e) laid down internal financial controls to be followed by your Company and that suchinternal financial controls are adequate and were operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company's Board of Directors is responsible for the preparation of theconsolidated financial statements of your Company & its Subsidiaries (‘theGroup') Associates and Joint Venture entities in terms of the requirements of theCompanies Act 2013 and in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards specified under Section 133 of the Act.

The respective Board of Directors of the companies included in the Group and of itsassociates and joint venture entities are responsible for maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets and for preventing and detecting frauds and other irregularities; the selection andapplication of appropriate accounting policies; making judgements and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error which have been used for the purpose ofpreparation of the consolidated financial statements by the Directors of your Company asaforestated.

OTHER INFORMATION

Compliance with conditions of Corporate Governance Report

The certificate from your Company's Auditors

Messrs. Deloitte Haskins & Sells confirming compliance with the conditions ofCorporate Governance as stipulated under the Listing Regulations 2015 is annexed.

Integrated Report

The Company has voluntarily prepared its Integrated Report for the financial year2018-19. As a green initiative the Report has been hosted on the Company's corporatewebsite at https://www.itcportal.com/about-itc/shareholder-value/index.aspx#sectionb2.

Going Concern status

There is no significant or material order passed during the year by any regulatorcourt or tribunal impacting the going concern status of the Company or its futureoperations.

Extract of Annual Return

The information required under Section 134 of the Act read with Rule 12 of theCompanies (Management and Administration) Rules 2014 is provided in the Annexure formingpart of this Report.

Particulars of loans guarantees or investments

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are provided in Notes 4 5 6 9 and 27 (v) (a) (ii) to theFinancial Statements.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act 2013 relating toConservation of Energy and Technology Absorption are also provided in the Annexure to thisReport.

Compliance with Secretarial Standards

The Company is in compliance with the applicable Secretarial Standards issued by theInstitute of Company

Secretaries of India and approved by the Central Government under Section 118(10) ofthe Act.

Employees

The total number of employees as on 31st March 2019 stood at 27279.

There were 91 employees who were employed throughout the year and were in receipt ofremuneration aggregating Rs. 102 lakhs or more or were employed for part of the year andwere in receipt of remuneration aggregating Rs. 8.5 lakhs per month or more during thefinancial year ended 31st March 2019. The information required under Section 197(12) ofthe Companies Act 2013 and the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is provided in the Annexure forming part of this Report.

Dividend Distribution Policy

The Company's Dividend Distribution Policy is provided in the Annexure forming part ofthis Report and is also available on the Company's corporate website ‘www.itcportal.com'.There has been no change in the Policy during the year.

Key Financial Ratios

Key Financial Ratios for the financial year ended 31st March 2019 are provided in theAnnexure forming part of this report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties.When used in this Report the words ‘anticipate' ‘believe' ‘estimate'‘expect' ‘intend' ‘will' and other similar expressions as they relate tothe Company and/or its Businesses are intended to identify such forward-lookingstatements.

The Company undertakes no obligation to publicly update or revise any forward-lookingstatements whether as a result of new information future events or otherwise. Actualresults performances or achievements could differ materially from those expressed orimplied in such forward-looking statements. Readers are cautioned not to place unduereliance on these forward-looking statements that speak only as of their dates. ThisReport should be read in conjunction with the financial statements included herein and thenotes thereto.

CONCLUSION

Inspired by the opportunity to serve a larger national purpose your Company redefinedits Vision about two decades ago to transform itself into a vibrant engine of growth thatwould make a substantial contribution to the Indian economy whilst rewarding shareholdersby creating growing value for the Indian society.

Over the last 23 years your Company has created multiple drivers of growth bydeveloping a portfolio of world-class businesses across all sectors of the nationaleconomy spanning agriculture manufacturing and services. Your Company ranks amongst theTop 3 in the private sector in terms of Contribution to the Exchequer. Over the last 23years your Company's Value Addition aggregated Rs. 4.6 lakh crores of which nearly 75%accrued to the Exchequer at the Central and State levels. During this period yourCompany's net revenue and post-tax profit have recorded an impressive compound annualgrowth of 13.3% and 18.3% respectively. Total Shareholder Returns measured in terms ofincrease in market capitalisation and dividends have grown at a compound rate of 22.3%per annum during this period placing your Company amongst the foremost in the country interms of efficiency of servicing financial capital.

Your Company's non-cigarette businesses have grown over 21-fold since 1996 andpresently constitute appx. 60% of net segment revenue. In aggregate the non-cigarettebusinesses account for over 80% of your Company's operating capital employed about 90% ofthe employee base and over 80% of annual investments.

Your Company today is the leading FMCG marketer in India a pre-eminent hotel chain anda globally acclaimed icon in green hoteliering the clear market leader in the IndianPaperboard and Packaging industry a pioneering trailblazer in farmer and ruralempowerment through its Agri Business and a global exemplar in sustainable businesspractices.

Aligned with the Government's Make in India Vision your Company is building nationalassets in the manufacturing and tourism sector. As stated earlier in this Report severalworld-class Integrated Consumer Manufacturing & Logistics facilities are being builtto deliver sustainable competitive advantage to your Company's FMCG businesses. Severalprojects with an aggregate outlay of Rs. 25000 crores are in various stages ofimplementation / planning across the length and breadth of the country facilitatingregional and national economic development. Recognising that tomorrow's world will belongto those who create own and nurture intellectual capital your Company continues toinvest in augmenting the capability of its globally benchmarked Life Sciences andTechnology Centre to ensure that its Businesses are future-ready and contribute tobuilding intellectual property assets for the nation.

Your Company's Board and employees are inspired by the Vision of sustaining ITC'sposition as one of India's most admired and valuable companies creating enduring valuefor all stakeholders including the shareholders and the Indian society. The vision ofenlarging your Company's contribution to the Indian economy is driven by its ‘Let'sPut India First' credo anchored on the core values of Trusteeship TransparencyEmpowerment Accountability and Ethical Citizenship which are the cornerstones of ITC'sCorporate Governance philosophy.

Inspired by this Vision driven by Values and powered by internal Vitality yourDirectors and employees look forward to the future with confidence and stand committed tocreating an even brighter future for all stakeholders.

On behalf of the Board
13th May 2019
Gurugram S. PURI Chairman & Managing Director
India R. TANDON Director & Chief Financial Officer