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ITC Ltd.

BSE: 500875 Sector: Consumer
NSE: ITC ISIN Code: INE154A01025
BSE 00:00 | 24 Sep 238.35 -4.05
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NSE 00:00 | 24 Sep 238.45 -4.05
(-1.67%)
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OPEN 244.20
PREVIOUS CLOSE 242.40
VOLUME 1219488
52-Week high 245.80
52-Week low 163.40
P/E 21.45
Mkt Cap.(Rs cr) 293,654
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 244.20
CLOSE 242.40
VOLUME 1219488
52-Week high 245.80
52-Week low 163.40
P/E 21.45
Mkt Cap.(Rs cr) 293,654
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

ITC Ltd. (ITC) - Director Report

Company director report

For the Financial Year Ended 31st March 2020

SOCIO-ECONOMIC ENVIRONMENT

The global economy witnessed a marked slowdown in 2019 with growth softening to 2.9% in2019 from 3.6% in 2018 and 3.9% in 2017. Growth in the US economy decelerated to 2.3%during the year as against 2.9% in 2018 while expansion in the Euro area slowed down to1.2% in 2019 from 1.9% in 2018. Emerging Markets were under pressure as well - with growthdecelerating to 3.7% in 2019 against 4.5% in 2018.

The COVID-19 pandemic has unleashed unprecedented disruption to human life and economicactivity the world over and has sent the already slowing global economy into a massiverecessionary shock. With world output estimated to contract by 5% to 7% in 2020 (as perlatest estimates of international agencies) the anticipated recession would be the deepestsince the Great Depression of the 1930s and the first one since 1870 to be triggeredsolely by a pandemic. In emerging economies the pandemic is likely to cause the firstoutput contraction in the past six decades. The pandemic will result in significantcontractions across the vast majority of advanced economies emerging markets anddeveloping economies; the ultimate outcomes however remain uncertain. While theimmediate priorities are to alleviate human costs protect vulnerable sections ofpopulation and mitigate the near-term economic losses a credible commitment tosustainable policies and structural reforms would be necessary to buttress long-termprospects once the crisis abates. Building capacity to deal with similar future eventsand appropriate safety nets to support the weaker sections of society will take centrestage in policy formulation going forward. Coordination and cooperation on a global scalewill be of paramount importance to revive the world economy.

A significant global recession looms on the horizon for all major world economies. Asper IMF estimates for 2020 advanced economies are projected to contract by a staggering6% to 7% with all major economies such as USA Euro Area UK and Japan set to contractsubstantially. China is expected to report a flat growth in 2020 while latest estimatesfor the Indian economy indicate a contraction in the range of 3.5% to 7% in 2020-21. Therapidly worsening economic outlook and deterioration of the risk sentiment have prompted aseries of government initiatives across the world. Further central banks across the worldhave responded synchronously effecting sharp cuts in policy interest rates boostingliquidity and undertaking large asset purchase programs to help stimulate economicactivity and alleviate tight financial conditions. Major economies across the world haveannounced stimulus packages in the range of 10% to 15% of their respective GDPs.

The Government of India responded proactively by announcing a lockdown towards the endof March 2020 to flatten the pandemic curve. While this was required to protect lives atthat stage the Government has thereafter taken steps to support livelihoods. TheGovernment has also responded swiftly in announcing an overall package of over Rs 20 lakhcrores largely in the form of liquidity boosting measures with about Rs 1.5 lakh croresrepresenting direct cash transfers and subsidies. Several initiatives to support theMicro Small and Medium Enterprises (MSME) sector and a slew of agri-reforms have alsobeen announced recently which augur well for the long-term prospects of the Indianeconomy. Further to the 'Make in India Rs programme announced earlier the Hon'ble PrimeMinister has made a clarion call to achieve self-reliance through the 'Atmanirbhar BharatRs programme which seeks to make India an even stronger more competitive and resilienteconomy.

In retrospect 2019-20 turned out to be one of the most challenging years for theIndian economy with GDP growth at an 11-year low (estimated at 4.2% Vs. 6.1% in 2018-19)despite a low base. On the supply side growth in the Agriculture sector improved (4.0% in2019-20 Vs. 2.4% in 2018-19) while Industry (0.9% Vs. 4.9%) and Services (5.5% Vs. 7.7%)sectors came under severe stress. Persistent weakness in capital formation manifest inthe decline in new project announcements transmitted to private consumption (PFCE) whichslowed down considerably to register a growth of 5.3% in 2019-20 Vs. 7.2% in 2018-19. Theslowdown in consumption expenditure was attributable largely to subdued consumersentiment agrarian distress and low rate of rural wage growth and tight liquidityconditions. PFCE growth in the fourth quarter of 2019-20 was reported at a mere 2.7% -the lowest in decades - reflecting inter alia the impact of nationwide lockdowns in lateMarch 2020.

While inflation remained benign during the first half of 2019-20 prompting consecutivepolicy rate cuts by the Reserve Bank of India (RBI) a surge in food prices in the secondhalf caused a spike in retail inflation resulting in CPI touching 4.8% in 2019-20 versus3.4% in 2018-19. Forecast of a normal monsoon along with soft global prices of oil metalsand other industrial raw materials are likely to keep input costs low. These factorscombined with favourable base effect are expected to pull down headline inflation belowthe 4% target in the latter half of 2020-21.

As per latest estimates Fiscal Deficit for 2019-20 widened to 4.6% overshooting theGovernment's revised target of 3.8% and original target of 3.3%. Slowdown in economicactivity exacerbated by the lockdown in March 2020 and lower tax collections contributedto the higher than planned deficit. In view of the prevailing recessionary situation acombination of low tax collections and stimulus measures by the Government could result insignificant increase in the Fiscal Deficit in 2020-21. Estimates currently range from 7% -10% of the GDP with an upward bias on account of additional measures that may be neededto support the economy.

Going forward there is heightened uncertainty around the timing and shape of therecovery trajectory as the Indian economy is expected to face multi-dimensional challengesin the form of health crises job losses labour force displacement lower productivitylack of export opportunities and volatility in capital flows. Studies indicate that thepandemic has put as much as 40% of Indian household expenditure at grave risk which wouldweigh on consumption expenditure in the short to medium-term. Even as the pace ofre-opening of the economy accelerates and alignment to the new normal becomes a keyimperative across sectors it is clear that the economic impact on certain industries islikely to be more severe. This will be a key monitorable and requisite support would needto be extended to nurture them back to health.

Even in the face of such tumultuous and challenging global upheavals India remains oneof the most dynamic major economies in the world. With structural drivers of growth firmlyin place the pace of economic growth is expected to pick up over time. The significantactions of the Government as well as the Reserve Bank of India in recent months includingmonetary stimulus and liquidity facilities to reduce systemic stress have supportedconfidence building measures and contributed to limiting the amplification of the shock.Further measures may be warranted going forward to improve demand drive consumption andrevive the Indian economy.

During the year India has moved up 14 places to the 63rd position globally in the'Ease of Doing Business Rs rankings on the back of reforms in areas such as starting abusiness dealing with construction permits trading across borders and resolvinginsolvency. The successful implementation of further structural initiatives identified bythe Government towards improving the ease of doing business and fostering greater levelsof value addition within the country would be crucial to boost the performance of theIndian economy and realise its full potential.

Enhancing agricultural productivity and value addition to international standardswhile simultaneously improving market linkages remain critical for the growth of theagricultural sector and significantly increasing farmers Rs income. It is pertinent tonote that 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.

The slew of reforms announced recently by the Government of India including amendmentof certain provisions of the Essential Commodities Act 1955 reforms in agriculturalmarketing and risk mitigation through predictable prices are commendable and will go along way in stimulating growth in the Agriculture sector in the country. These powerfulreforms will empower farmers strengthen agri-food processing linkages and enabledemand-driven value-added agriculture.

A big thrust on India's Food Processing sector can lead to significant job creationenhance rural incomes and help manage food inflation. Similarly the Agro-forestry sectoras a source of raw material for wood-based industry is woefully constrained by policiesthat not only prevent job creation in India but also promote avoidable imports. Byproviding crucial policy support the entire wood-based value chain can substantiallysupport rural livelihoods and create new opportunities for farmers and skilled artisansthat add value to wood. Supportive policies in the area of agro-forestry would go a longway in creating sustainable livelihoods while simultaneously augmenting the nation'senvironmental capital. In a welcome move the Government imposed restrictions on importsof raw battis to pave the way for large scale employment generation and creation of acompetitive indigenous raw batti industry through import substitution.

Your Company's interventions across its operating segments are aligned to the nationalpriorities of enhancing competitiveness of Indian agriculture and industry generatinglarge-scale employment opportunities and sustainable livelihoods driving importsubstitution by enhancing the competitiveness of domestic agri-value chains and industrycreating national brands to maximise value capture in India and promoting sustainablebusiness practices. Investments made by your Company continue to be guided by theGovernment of India's 'Make in India' 'Doubling Farmers Income Rs and the recentlyannounced 'Atmanirbhar Bharat Rs programmes.

In line with the Hon'ble Prime Minister's vision of significantly enhancing farmerincome your Company piloted an integrated 'Baareh Mahine Hariyali Rs programme in fourdistricts of Uttar Pradesh (Prayagraj Chandauli Ghazipur and Varanasi) to give a newdimension to the complex task of multiplying farmer incomes. Several initiatives have beenimplemented under the programme in an integrated manner including introduction of new highyielding varieties of wheat and short duration paddy to enable improved productivityquality and price realisation. To facilitate additional income for farmers croppingintensity has been increased with the introduction of a third summer crop which alsohelps in soil fertility management. Practices like zero tillage and sowing throughmechanised transplanters have not only improved productivity but have also enabled timelysowing.

Over 200000 farmers in UP have already been covered and the programme is planned tobe rolled out to over 10 lakh farmers progressively. Around 30000 farmers who adoptedall initiatives reported doubling of incomes while those who implemented the programmepartially have reported 30% to 75% growth in income.

Your Company supports farmers in the management of risks arising from erratic andextreme weather events through the promotion of climate smart agricultural practices. Inthis regard your Company has recently begun work in collaboration with CGIAR's ClimateChange and Food Security Programme to build climate smart villages.

Your Company is also working towards developing village level institutions andfostering microentrepreneurship by promoting custom hiring centres for farm mechanisationpost-harvest product management infrastructure and community managed seed banks forself-reliance in quality seed material. Your Company promotes environmentally sustainablefarm practices including zero till sowing micro-irrigation and watershed development.Demand side management is another critical component of your Company's Water StewardshipProgramme. Recognising that reducing water use especially in agriculture is essentialfor conserving this precious resource your Company works with farmers to achieve 'morecrop per drop Rs and improve farmer incomes. Around 2.09 lakh acres have been covered tilldate across 6 states. Through micro irrigation and crop-specific precision agronomicalpractices water consumption has been reduced by as much as 20% to 45%.

The collaboration with NITI Aayog aimed at boosting agricultural and allied activitiesin 27 backward districts of 8 states under the Aspirational Districts programme enhancedits scale of operation. Over 15 lakh farmers have so far been trained in package ofpractices appropriate for the dominant crop of the region.

These interventions have led to a significantly higher level of productivity of majorcrops compared to state averages reducing cultivation cost per acre by 20% compared toothers and increase in net incomes ranging between 33% and 100% for different crops.

Although India has 17% of the world population its share of natural resources isdisproportionately low with only 2.4% of global land mass 4% of freshwater resources and1% of forest resources. As 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 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.

This 'Triple Bottom Line Rs approach to creating larger 'stakeholder value' as opposedto merely focusing on uni-dimensional 'shareholder value Rs creation is the driving forcethat defines your Company's sustainability vision and its growth path into the future.

Your Company is a global exemplar in 'Triple Bottom Line Rs performance and is the onlyenterprise in the world of comparable dimensions to have achieved and sustained the threekey global indices of environmental sustainability of being 'water positive Rs (for 18years) 'carbon positive Rs (for 15 years) and 'solid waste recycling positive Rs (for 13years). The focus on creating unique business models that generate substantial livelihoodsacross the value chains has led to your Company's Businesses supporting over six millionsustainable livelihoods many of whom belong to the weaker sections of society.

Your Company has been ranked #1 globally amongst peers (comprising companies withmarket capitalisation between USD 38 Bln. and USD 51 Bln.) and overall #3 globally on ESGperformance in the Food Products industry by Sustainalytics - a renowned global ESGratings company. Your Company has also been rated 'AA Rs by MSCI-ESG - the highest amongglobal tobacco companies.

The following sections outline your Company's progress in pursuit of the 'Triple BottomLine'.

FINANCIAL PERFOMANCE

The macro-economic environment for the year under review was particularly challengingmarked by deceleration in economic activity accentuated by a sharp decline in consumptionespecially in rural areas. Severe crunch in market liquidity conditions and disruptionscaused by spatial variations in monsoons in several parts of the country added to thepressure. Just as the business environment was showing signs of an incipient recovery inthe beginning of the fourth quarter the onset of COVID-19 pandemic changed the situationdramatically. In the initial stages the contagion had a significant impact on the Hotelsand Education and Stationery Products businesses as it coincided with the peak season andthe onset of the school session respectively. Operations of all businesses were impactedtowards the close of the year as the pandemic gained momentum.

The Cigarettes Business consolidated its market standing during the year throughcontinued focus on delivering world-class products along with best-in-class execution.However persistent weakness in the demand environment coupled with growth in illicitcigarette trade weighed on performance. Steep increase in taxes w.e.f. 1st February 2020and disruptions in operations in March 2020 exacerbated the situation. In the FMCG-OthersSegment comparable revenue grew ahead of the industry amidst subdued demand conditionswhile profitability improved significantly. Segment EBITDA margins improved by appx. 160bps to 7.1% during the year despite heightened competitive intensity early closure ofeducational institutions that impacted the Education and Stationery Products Businesselevated input costs and gestation costs of new products/categories and manufacturingfacilities and impact due to disruptions following the outbreak of the pandemic. In theHotels Business while the first three quarters witnessed strong performance drivenlargely by excellent response to the Company's new iconic properties the outbreak ofCOVID-19 pandemic severely impacted performance in the fourth quarter. Sluggish growth inend-user industries such as FMCG Pharma and Liquor resulted in muted customer offtake inthe Paperboards Paper and Packaging segment; margin expansion was driven by higherin-house pulp production enhanced operating efficiencies and benign input costs. Whiletrading opportunities in oilseeds & pulses and scale-up of the value-added portfoliowere the key drivers of revenue growth in the Agri Business segment subdued demand forleaf tobacco in international markets accentuated by relatively steeper depreciation incurrencies of competing origins and adverse business mix weighed on Segment Results.

For the nine months ended 31st December 2019 Gross Revenue at Rs 35023.67 crores grewby 5.6% while PBT (before exceptional items) increased by 9.6%. Disruptions in businessoperations in the wake of the

COVID-19 pandemic resulted in decline in revenue and profits during the fourthquarter.

Overall for FY 2019-20 Gross Revenue at Rs 46323.72 crores increased by 2.4% whilePBT (before exceptional items) at Rs 19298.92 crores grew by 4.6% over FY 2018-19. Profitafter Tax grew at a faster pace of 21.4% to Rs 15136.05 crores aided by reduction incorporate income tax rates during the year (net of calibration in pricing).

Exceptional items during the year represent cost of leaf tobacco stocks (includingtaxes) destroyed at a third party owned warehouse due to fire for which insurance claimhas been filed and is under process.

Total Comprehensive Income for the year stood at Rs 13754.24 crores (previous year Rs12826.88 crores). Earnings Per Share for the year stood at Rs 12.33 (previous year Rs10.19).

Free Cash Flow Generation (net of taxes and capital expenditure) during the year stoodat Rs 11693 crores representing a robust growth of 30% over the previous year. YourCompany remains the clear leader in the FMCG industry in terms of annual Free Cash Flowgeneration.

The Directors are pleased to recommend an Ordinary Dividend of Rs 10.15 per share(previous year Ordinary Dividend of Rs 5.75 per share) for the year ended 31st March2020. Total cash outflow in this regard will be Rs 12476.61 crores.

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

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 232000crores of which over Rs 166000 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 74% 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 55%. 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 2019-20 your Company and its subsidiaries earned Rs 4597crores in foreign exchange. The direct foreign exchange earned by your Company amounted toRs 3506 crores mainly on account of exports of agri-commodities. Your Company'sexpenditure in foreign currency amounted to Rs 1885 crores comprising purchase of rawmaterials spares and other expenses of Rs 1503 crores and import of capital goods of Rs382 crores.

PROFITS DIVIDENDS AND RETAINED EARNINGS

2020 2019
a) Profit Before Tax@ 19166.81 18444.16
b) Tax Expense
- Current Tax 4441.97 5849.24
- Deferred Tax (411.21) 130.60
c) Profit for the year@ 15136.05 12464.32
d) Other Comprehensive Income (1381.81) 362.56
e) Total Comprehensive Income 13754.24 12826.88
a) At the beginning of the year 26978.13 21991.24
b) Add: Profit for the year 15136.05 12464.32
c) Add: Other Comprehensive Income (net of tax) (113.54) 5.59
d) Add: Transfer from share option on exercise and lapse 17.73 3.88
e) Less : Dividends
- Ordinary Dividend of Rs 5.75 (2019: Rs 5.15) per share. 7048.71 6285.21
- Income Tax on Dividend paid 1373.52 1201.69
f) At the end of the year 33596.14 26978.13

@Current year includes Exceptional items representing cost of leaf tobacco stocks(including taxes) destroyed at a third party owned warehouse due to fire for whichinsurance claim has been filed and is under process.

FMCG Cigarettes

A punitive and discriminatory taxation and regulatory regime along with a sharpincrease in illegal trade in recent years especially at the premium end continue to posesignificant challenges to the legal cigarette industry in the country. Performance duringthe year under review was additionally impacted by persistent weakness in overall demandenvironment especially in rural markets and wholesale channel and tight market liquidityconditions. Towards the end of the year the COVID-19 pandemic caused significantoperational disturbances even before the nation-wide lockdown. During the initial phase ofthe lockdown unprecedented disruption was witnessed across the value chain. However allfactories are currently operational and sales & distribution operations areprogressively normalising.

It is deeply satisfying to report that notwithstanding the extremely challengingoperating landscape and the headwinds faced during the year under review your Companysustained its leadership position in the cigarette industry including modern variantsthrough its unwavering focus on nurturing a portfolio of world-class products superiorconsumer insights a strategy of continuous innovation and superior product developmentcapabilities. Several new variants were introduced during the year to cater to thecontinuously evolving consumer preference and to ensure the future readiness of yourCompany's product portfolio. Key market interventions during the year include the launchof innovative and differentiated offerings at the premium end such as Gold Flake IndieMint & Gold Flake Luxury and the extension of Gold Flake Neo and Classic Rich &Smooth to other markets. The Business also deployed focused offers under the 'AmericanClub' 'Wave' 'Player's Gold Leaf' 'Pall Mall' 'Navy Cut' and 'Flake Rs trademarks instrategic markets towards bolstering and strengthening its market standing.

As stated earlier the Cigarettes category remains heavily impacted by punitive anddiscriminatory taxation. In the period between 2011-12 and 2017-18 taxes on cigarettesalmost trebled (on a comparable basis). In July 2017 the industry was further impacted bya sharp increase of 13% in tax incidence under the GST regime. Coupled with the increasein Excise Duty rates announced in the Union Budget 2017 this resulted in an incrementaltax incidence of over 20% on cigarettes post implementation of GST. Thereafter relativestability in taxation up to January 2020 provided some relief to the legal cigaretteindustry and lent buoyancy to tax collections. However legal industry volumes continuedto remain significantly below June 2014 levels. The short period of relative stability intaxes was halted in February 2020 with a sharp increase of 13% in tax incidence consequentto significant increases in the rates of National Calamity Contingent Duty announced inthe Union Budget.

Cigarette taxes have hit the threshold of diminishing returns. As amply demonstratedover the last decade whilst rates of Central Excise Duty were increased by a CAGR of15.7% between 2012-13 and 2016-17 tax revenue from cigarettes grew at merely 4.7% CAGRduring the same period. A moderate and stable tax environment for highly taxed productslike cigarettes on the other hand nurtures commensurate growth in tax revenue. Thiswould be evident from the fact that due to unchanged rates of tax on cigarettes up toJanuary 2020 after the steep hike in rates under GST in July 2017 the growth in taxrevenue from cigarettes has been in excess of 10%. In addition to growth in tax revenuestability and moderation in cigarette taxes also enables the legal cigarette industry tocombat illicit cigarette trade and claw back volumes that would have otherwise beenwrested by the illicit cigarette trade.

Discriminatory taxation on cigarettes has caused progressive migration from consumptionof duty-paid cigarettes to other lightly taxed/tax-evaded forms of tobacco productscomprising illegal cigarettes bidi chewing tobacco gutkha zarda snuff etc.Consequently while the share of legal cigarettes in total tobacco consumption in thecountry has declined considerably from 21% in 1981-82 to a mere 9% (against global averageof 90%) aggregate tobacco consumption in the country has increased over the same period.

As a result despite accounting for less than 1/10th of the tobacco consumed in thecountry duty-paid cigarettes contribute more than 4/5th of the revenue generated from thetobacco sector. It is estimated that on account of illegal cigarettes alone revenue lossto the Government is almost Rs 150001 crores per annum. In respect of the othertobacco products also the revenue losses are significant since about 68%2 ofthe total tobacco consumed in the country remains outside the tax net.

The punitive taxes on the legal cigarette industry have resulted in an alarming rate ofgrowth in the illicit cigarette trade in the country. Euromonitor International ranksIndia as the 4th largest illicit cigarette market globally - a dubious distinction arisingdue to the punitive taxation of cigarettes which has created an enormously attractive taxarbitrage and extremely lucrative opportunities for unscrupulous players. While legalcigarette industry volumes have declined by about 20% between 2010-11 and 2019-20 theillicit duty-evaded cigarette segment has grown by 36% during the same period accountingfor about one-fourth of the domestic industry and making India one of the fastest growingillicit cigarette markets in the world. Within this the wide expansion of the alreadylucrative tax arbitrage for the king-size cigarette segment consequent to the sharp taxincrease of 19% for this segment under GST has only served to open the floodgates ofsmuggled king-size cigarettes into the country. Since these smuggled international brandsof cigarettes do not have any embedded tax cost they are offered to consumers at pricesthat are at times less than half the price of duty-paid cigarettes. Moreover the tradechain is provided with incentives that are significantly higher than what duty-paidcigarettes can afford to offer.

The 13% increase in cigarette taxes with effect from 1st February 2020 asaforementioned will thus provide further fillip to this large and rapidly growingillicit cigarette trade in the country.

The regulatory framework for cigarettes in the country is one of the strictest in theworld. The Cigarettes and Other Tobacco Products (Prohibition of Advertisement andRegulation of Trade and Commerce Production Supply and Distribution) Act 2003 (COTPA)requires cigarette packages to bear the statutorily mandated pictorial and textualwarnings covering 85% of the surface area of the packet (one of the largest in the world).As reported in earlier years your Company and several other stakeholders had challengedthe validity of the pictorial warnings. The Karnataka High Court by its judgement inDecember 2017 held the 85% pictorial warnings with extremely gruesome imagery to befactually incorrect and unconstitutional. Upon a Special Leave Petition filed by theGovernment the Honourable Supreme Court has stayed the Order of the High Court. Pendingthe final hearing of this matter the regime of the extremely repugnant 85% pictorialwarnings continues. In fact new pictorial warnings with even more gruesome images havebeen introduced from 1st September 2018. In this respect your Company's writ petitionchallenging the introduction of these pictorial warnings with even more gruesome images isalso pending before the Karnataka High Court. Notwithstanding this similar gruesome andfactually incorrect pictorial warnings were put into effect from September 2019.

In addition to the substantial cost advantages in the value chain due to the taxarbitrage smuggledinternational brands of cigarettes do not bear any of the pictorial ortextual warnings mandated by Indian laws or bear much smaller pictorial warnings as perthe tobacco laws of the countries from where these cigarettes are sourced. As reported inprior years findings from research conducted by IMRB International an independent marketresearch organisation show that the lack of pictorial warnings on packets of smuggledinternational brands of cigarettes or their diminutive size creates a perception in theconsumer's mind that these illicit cigarettes are 'safer Rs than domestic duty-paidcigarettes that carry the 85% pictorial warnings.

The combination of low prices to consumers consequent to tax evasion and the wrongperception created by the absence of statutory pictorial warnings provides significantbuoyancy to illicit cigarette volumes.

The large and rapidly growing illicit cigarette trade also has a deleterious impact onthe millions of farmers and farm workers engaged in the tobacco value chain. In Indiacigarettes are manufactured largely using Flue Cured Virginia Tobacco (FCV) grown in thestates of Andhra Pradesh Telangana and Karnataka. FCV tobaccos are also tradedinternationally and India is an exporter of this commodity. Since smuggled internationalbrands of cigarettes do not use Indian tobaccos in addition to revenue losses the growthof the illegal cigarette trade has also resulted in a severe drop in demand for Indian FCVtobaccos in the domestic market. Along with decline in leaf exports (due to loweravailability of Indian crop favourable prices of competing origins and lower exportincentives) this has had an extremely adverse impact on earnings of the tobacco farmersand farm workers in India - the second largest tobacco producing country in the world.

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. The inadvertent and unforeseen consequencesof the stringent Indian tobacco regulations and discriminatory and punitive taxation oncigarettes continues to drive down the livelihood of Indian tobacco farmers withcorresponding gains to tobacco farmers in the countries that have opted for moderate andequitable tobacco regulations. These developments have had a devastating impact on 46million livelihoods including tobacco farmers farm workers tribals etc. who aredependent on the Tobacco Value Chain. It is estimated that since 2013-14 Indian tobaccofarmers have suffered a cumulative drop in earnings of appx. Rs 51753 crores.Stability in taxes on cigarettes will have the salutary effect of enabling the legalcigarette industry to combat illicit trade and claw back volumes thereby engenderingdomestic demand for Indian tobaccos. This will also help cushion the impact of volatilityin 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 regulationsalong with the discriminatory and steep taxation on cigarettes have had numerous negativealbeit unintended repercussions. These include:

- rapid growth in illicit cigarette volumes resulted in sub-optimisation of therevenue potential of the tobacco sector and significant loss to the Exchequer. It isestimated that on account of illegal cigarettes alone the revenue loss to the Governmentis almost Rs 15000 crores per annum.

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).

- widespread availability of illegal cigarettes and other tobacco products of dubiousquality and hygiene to consumers at extremely affordable prices. As a result despiteaccounting for less than 1/10th of the tobacco consumed in the country duty-paidcigarettes contribute more than 4/5ths of the revenue generated from the tobacco sector.

- 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 others dependenton tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicate that onaccount of agro-climatic conditions there is no equally remunerative alternate crop thatcan be grown in the FCV tobacco growing regions of the country.

Your Company continues to engage with policy makers for equitable non-discriminatorypragmatic evidence based regulations and taxation policies that balance the economicimperatives of the country and the tobacco control objectives having regard to the uniquetobacco consumption pattern in India. Moderation in taxes is critical for addressing theinterests of all the stakeholders of this industry including the tobacco farmers theExchequer and the consumers.

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 earlier years it is deeply satisfying to report that your Company hasbeen granted four more patents during the year in respect of cigarettes.

On the manufacturing and supply chain front the Business continued to build futureready capabilities. Manufacturing facilities continue to be modernised by inductingcontemporary technologies towards securing higher levels of productivity and productexcellence. Strategic capacity gearing for new developments in multiple areas were takenup during the year to provide competitive long-term business advantage. New benchmarkswere set in areas of quality sustainability supply chain responsiveness andproductivity. Cutting-edge technologies such as Industry 4.0 and Data Science wereleveraged to build a 'smart manufacturing Rs environment of interconnected systems. Focuscontinued on using IT enablement and advanced analytics for enhancing responsiveness andautomation of in-process quality control. These initiatives coupled with in-house designand development expertise and innovation capabilities have further improved thespeed-to-market for new launches and augmented the innovation pipeline of the Business.

Your Company continued to be recognised for its commitment towards HR practices andoperational excellence. The Business was conferred with the 2019 Association of TalentDevelopment (ATD) USA Excellence in Practice Award for the Gurukul initiative in theLearning and Development category for enhancing learning effectiveness by leveragingtechnology. The Business was also awarded the 'Significant Achievement in HR Excellence Rsin the CII National HR Excellence Awards and in addition a niche award for excellence inwellness practices the 'National Award for Exemplary HR Practices - Re-Imagineers AwardRs was conferred on the Business for 2019 by the National HRD Network the national apexbody of HR professionals in India. The Bengaluru unit was adjudged 'Winner Rs in Frost& Sullivan 2019 Project Evaluation and Recognition Program (PERP) in Automation &Robotics Category in the Manufacturing Sector.

In line with your Company's commitment to the 'Triple Bottom Line' the Business hasramped up usage of renewable energy to a record high of 58% of the total energy consumed.Sustainability initiatives of your Company continued to be recognised during the year. TheSaharanpur unit was awarded 'Excellent Energy Efficient Unit Rs and the Kidderpore &Munger units were awarded 'Energy Efficient Unit Rs in CII National Award for Excellencein Energy Management - 2019. The Munger unit also received the 'Winner Rs award forEnvironment Excellence in Large scale category by Indian Chamber of Commerce (ICC). TheRanjangaon unit was recognised with the 'Golden Trophy- Sarvashreshtha Suraksha PuraskarSafety Awards 2019 Rs by National Safety Council of India (NSCI).

The outbreak of COVID-19 pandemic has caused unprecedented disruption to operations.All cigarette manufacturing facilities of your Company as well as thecontract-manufacturers of cigarettes had to shut down operations during the last week ofMarch 2020. Coupled with widespread closure of markets and outlets across the countrythis led to considerable disruptions in servicing consumer demand. However immediatelyupon receipt of permissions your Company was able to resume operations quickly andswiftly ramp up production and availability of its brands across markets. The rapiditywith which this was achieved is a testimony to the extraordinary resilience and deepcommitment of your Company's workforce and business partners.

Notwithstanding the challenges as enumerated above your Company remains confident offortifying its market standing in the legal cigarette industry by leveraging its superiorstrategies execution excellence investments in cutting-edge technology and a futureready product portfolio. Being the market leader your Company is well placed to captureall opportunities and emerge stronger with the continuing support of consumers.

FMCG - Others

FMCG industry growth decelerated sharply during the year due to sluggish demandconditions tight market liquidity and delayed monsoons followed by excessive rainfall incertain parts of the country. Overall industry growth rates halved to ~7% in Q3 FY20compared to same period last year with the situation getting worse in Q4 FY20 due to theCOVID-19 pandemic induced lockdowns across the country. Rural markets which account foraround one-third of the industry and have been the key driver of growth in recent yearswitnessed a steep fall in growth rates. Rural growth stood at 0.8x of urban markets inFY20 compared to 1.4x in FY19.

Despite the challenging conditions prevailing during the year and the significantslowdown following the outbreak of the pandemic your Company's FMCG-Others businessesrecorded Segment Revenue of Rs 12844.23 crores representing an increase of 5% over theprevious year (on comparable basis excluding the Lifestyle Retailing Business). Mostmajor categories enhanced their market standing during the year. Prior to the outbreak ofthe pandemic the FMCG-Others segment was on track to register double-digit revenue growthfor the fourth quarter on a comparable basis. The Education and Stationery ProductsBusiness which reported strong growth till February 2020 was severely impacted due tothe outbreak of COVID-19 pandemic towards the end of the year which coincided with thecommencement of the new academic session. While 'Aashirvaad Rs atta spices and salt'Dark Fantasy Choco Fills'

'Dark Fantasy Bourbon' 'Bounce Layered Cakes' 'Bingo! Tedhe Medhe and Potato chips'Yippee! Noodles 'Aashirvaad Svasti Rs fresh dairy products and 'Candyman Fantastik Rswafer sticks were the key drivers of growth in the Branded Packaged Foods Businesses'Vivel'/'Fiama Rs shower gels & bodywash 'Savlon'/'Fiama Rs handwash 'Savlon Rssanitizers & antiseptic liquids and 'Nimyle Rs herbal floor cleaner witnessed goodtraction in Personal Care Products Business. However relatively subdued performance of'Engage Rs deodorants and 'Vivel Rs Soaps in line with industry trends weighed onoverall revenue growth. During the year the Lifestyle Retailing Business was scaled downsignificantly pursuant to the divestiture of 'John Players Rs trademark/copyright and itsvariants in the apparel category in March 2019.

Segment EBITDA for the year registered robust growth of 32.8% to Rs 914 crores withsignificant margin expansion of ~160 bps to 7.1%. This was driven by enhanced scaleproduct mix enrichment reduced distance-to-market and other strategic cost managementinitiatives after absorbing the impact of sustained investment in brand buildinggestation costs of new categories & facilities and the impact due to disruptionsfollowing the outbreak of the pandemic.

The Businesses continue to reinforce a consumercentric digital strategy enablingintimate engagement with your Company's brands. The Marketing Command Centre and ConsumerData Hub christened 'Sixth Sense' leverages cloud-technology cutting-edge social-mediaengagement tools and a digital marketing & analytics platform to gain insights onmarket trends and consumer behaviour. These insights are then synthesised to craftcontextual brand communication thereby deepening consumer connect.

The Businesses continue to deploy 'Industry 4.0 Rs technologies including advancedanalytics big data and industrial Internet of Things (loT) in areas spanning equipmentefficiency energy management product quality and traceability. Your Company isleveraging emerging digital technologies such as mobility solutions analytics and socialmedia to reduce cycle time & enhance operational efficiency and deepen engagementwith consumers.

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

Your Company's vibrant portfolio of over 25 world-class Indian brands largely builtthrough an organic growth strategy in a relatively short period of time represents anannual consumer spend of over Rs 19700 crores in aggregate. 'Aashirvaad Rs is today nearlyRs 6000 crores in terms of annual consumer spend; 'Sunfeast Rs over Rs 4000 crores;'Bingo! Rs nearly Rs 2700 crores; 'Classmate Rs nearly Rs 1400 crores; 'YiPPee! Rs nearlyRs 1300 crores; 'Mangaldeep Rs over Rs 800 crores and 'Vivel Rs Rs 500 crores. Thesehome-grown Indian brands support the competitiveness of domestic value chains especiallyin the agri space thereby ensuring creation and retention 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 in Snacks & Potato Chips) Sunfeast is No. 1 inthe Cream Biscuits segment Classmate is No. 1 in Notebooks YiPPee! is No. 2 in NoodlesEngage is No. 2 in Deodorants (No. 1 in women's segment) and Mangaldeep is No. 2 inAgarbattis (No. 1 in Dhoop segment).

The revival of growth momentum in the FMCG industry is largely dependent on restorationof normalcy and improvement in consumer sentiment in the aftermath of the still unfoldingimpact of the COVID-19 pandemic. While essential items health and hygiene relatedproducts are expected to sustain the recent buoyancy in demand discretionary categoriesand those with higher salience of out-of-home consumption are likely to experience a moregradual recovery. Notwithstanding the short-term pressures the structural drivers oflong-term growth such as rising disposable incomes and consumer awareness low levels ofpenetration of consumer goods favourable demographics increasing urbanisation andgrowing preference for trusted brands are firmly in place. Your Company remains agile andresponsive and continues to fashion strategies to service existing and emergent consumerneeds. Some of the noteworthy consumer trends include increasing preference for healthhygiene and wellness products; growing affinity towards trusted Indian brands and productsrooted to 'Indianness'; rising influence of social media and growing consumer preferencefor online shopping; increasing need for customised products & experiences andemergence of hyperlocal & direct-to-consumer delivery models.

Your Company is uniquely positioned to leverage its significant investments in productdevelopment R&D and innovation to effectively address these emerging need spaces. Theagility demonstrated during the lockdown phase including expeditious ramp-up of operationsand enhancement of capacity launch of new products such as Savlon disinfectant spray inrecord time deployment of ITC Store-on-Wheels and ITC e- Store collaboration with thirdparties for last mile delivery to cater to surge in consumer demand bears testimony toyour Company's resilience and capabilities.

Your Company seeks to significantly scale up the FMCG Businesses leveraging itsinstitutional strengths viz. deep consumer insight proven brand building capabilityagri-commodity sourcing expertise cuisine knowledge strong rural linkages a deep andwide channel-tailored distribution network and packaging know-how.

In addition your Company continues to make significant investments in R&Dstrengthen supply chain capability focus on consumer insight discovery and harnessdigital technology to develop and launch disruptive and breakthrough products in themarket place. With these interventions your Company is well poised to strengthen itsmarket standing and seize growth opportunities in the FMCG space in the new normal.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Against the backdrop of an extremely challenging operating environment as aforestatedyour Company 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.Whilst the Business was on track to register a double-digit revenue growth in the lastquarter of the financial year the momentum was severely disrupted by the onset ofCOVID-19 pandemic.

Your Company's Branded Packaged Foods Businesses continued to make significantinvestments towards brand building and supporting the scaling up of nascent categories.Cut-through advertising and brand engagement platforms touching millions of consumersthrough market development efforts strengthened the market standing of brands acrosscategories.

With consumer spends of nearly Rs 15000 crores anchored on robust brands that reach oneout of every two Indian households your Company sustained its market standing as the 3rdlargest food company in the country (publicly listed). During the year your Company'sbrands have been successful in entering an additional 10.5 million households (source:HHP Kantar World Panel MAT Dec'19).

Your Company's brands and consumer engagement initiatives continue to win wide acclaimand industry recognition. During the year Bingo! No Rulz won the Nielsen BreakthroughInnovations 2019 Award under the 'Crowd Pleaser Rs category while Aashirvaad won theSilver Effie award for integrated marketing. ESOMAR the apex global forum on consumerinsights recognised your Company for initiatives leveraging technology to understand realtime consumption behaviour.

The Businesses continue to leverage the unique competitive advantage of deep rurallinkages and agri-commodity sourcing expertise resident in your Company's Agri Business toprocure high quality raw materials thereby ensuring the highest levels of qualityconsistency and safety of its products. In addition each of your Company's brandedpackaged food products is manufactured in HACCP/ISO-certified manufacturing locationsensuring compliance with all applicable 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. While strengthening its core portfolio your Company continuesto explore opportunities to exploit adjacent spaces with a special focus on augmenting thehealth and nutrition portfolio within the chosen categories.

- The Staples Business posted yet another year of robust performance growing well aheadof the industry. Several innovative and value-added offerings catering to region-specificpreferences and consumer health needs continue to be added to the pipeline to propelgrowth. Aashirvaad atta fortified its market standing across geographies leveraging arobust product portfolio anchored on your Company's agri-sourcing expertise. The Businesscontinued to focus on growing the value-added portfolio consisting of Multigrain Selectand Sugar Release Control atta which posted robust growth driven by higher salience inModern Trade and e-Commerce channels. The range of value-added products was augmented withthe launch of Aashirvaad Nature's Super Foods a differentiated range of productscomprising Gluten Free Flour Ragi Flour and Multi-Millet Mix which are naturally glutenfree rich in dietary fibre and a source of protein. These products are available acrossselect general and modern trade outlets as well as leading e-Commerce platforms.

Focused and purposeful marketing inputs consumer activations and region-specificinterventions supported by media investments especially in the digital media enabledfurther improvement in Aashirvaad's brand health metrics. Powered by trust reposed by over3.6 crore households (source: HHP MAT Feb'20) your Company is confident of sustainingAashirvaad's position as India's No.1 atta brand going forward.

The Business however continues to contend with increased competitive intensity postthe implementation of 5% GST on branded atta. While it has been the Government's intentionto provide relief of nil rate of GST only to small and local manufacturers therebybenefiting consumers with lower priced staple products many unscrupulous players haveused this distinction in rates as an attractive tax-evasion/avoidance opportunity byclassifying their products as unbranded or with a declaration that all actionable claimsor rights associated with brand identity have been foregone while continuing to marketthe product with brand names and distinct trademarks. This inequitable GST differentialbetween branded and unbranded players has resulted in market distortion widening theprice gap between national registered brands and local unregistered brands and acts as adisincentive to invest in value creation for the agri sector.

Supported by its new positioning 'Created by Sun and Sea - pure just like natureintended it to be' Aashirvaad Salt gained traction in key focus geographies and posted ahealthy performance during the year.

In the Spices category during the year your Company expanded its geographicalfootprint to 17 states and recorded healthy volume growth. The industry offers significantopportunity for migration from unbranded to branded spices salience of which is low.

On 23rd May 2020 your Company entered into a Share Purchase Agreement ('SPA') toacquire

100% of the equity share capital of Messrs. Sunrise Foods Private Limited (SFPL) anIndian company primarily engaged in the business of spices under the trademark 'Sunrise'subject to fulfilment of various terms and conditions as specified in the SPA.

Sunrise is a clear market leader in eastern India in the fast-growing Spices categorywith a rich heritage and brand legacy of over 70 years. Over the years the brand hasbuilt a loyal consumer franchise anchored on a differentiated product portfolio tailoredto regional tastes and preferences both in the basic and blended spice segments.

Upon consummation of the transaction the proposed acquisition will augment yourCompany's product portfolio and will also align with your Company's aspiration tosignificantly scale up its Spices business and expand its footprint across the country.The deep consumer connect of SFPL in the focus markets together with synergies arisingout of the sourcing and supply chain capabilities of your Company's Agri Business and itspan-India distribution network will provide significant value creation opportunities foryour Company.

The proposed transaction is also in line with your Company's philosophy of enhancingthe competitiveness of Agri value chains in India whilst making a meaningful contributionto enhancing farmer incomes.

- Increasing consumer traction for 'Bingo! Rs Potato Chips and Tedhe Medhe continued todrive growth in the Snacks Business. Tedhe Medhe continues to be the most widelydistributed snack brand in the country. The Tedhe Medhe range was augmented with thelaunch of two innovative variants - 'Herby Spin Rs and 'Chatpata Swing'. 'Starters' abaked and protein rich snack launched during the year is being scaled up on the back ofencouraging response from discerning consumers. The 'Bingo! No Rulz Rs range was alsoaugmented with the launch of No Rulz Curlz a corn-based baked snack in two excitingflavours of Masala and Cheese. The Business continues to be the market leader in thebridges sub-segment and improved its market standing in potato chips.

- In the Instant Noodles category YiPPee! noodles sustained its overall marketstanding as a strong competitive No. 2 brand in the noodles space. YiPPee! led theindustry in terms of packaging innovation in family packs enabling impactful visibilityreducing breakages and driving growth in Modern Trade. With innovative media campaigns andcelebrity endorsements the Business created buzz around its brands and continued tostrengthen its presence across the country.

- In the Biscuits category Dark Fantasy Choco Fills sustained its high growthtrajectory driven by superior product attributes focused communication efficientdistribution and consumer activation. The recently launched Bounce Cake variants continueto receive excellent response from consumers and are now available in all target markets.The Business augmented its portfolio with 'Sunfeast Rs Veda Marie Light a healthyoffering infused with 5 natural ingredients strengthening the brand's 'chai ka perfectpartner Rs value proposition. Another innovative offering Bounce Loops was introducedduring the year in three exciting flavours - Vanilla Chocolate and Jam with a deliciousopen cream layer sprinkled with sparkles on the top. The Business consolidated itsleadership position in the super-premium segment with continued focus on enhancing brandaffinity and increasing penetration in emerging channels of Modern Trade & e-Commerceplatforms.

- In the Confectionery Business multi-unit packs and higher salience of 'Re. 1 andabove Rs products contributed to portfolio premiumisation. 'Candyman Rs Fantastik acrispy wafer roll filled with luscious choco creme continues to make rapid strides andgarner increasing consumer traction across markets.

The range was augmented with the introduction of 'Candyman Rs Fantastik Choco Mocha alimited edition variant for the gifting space.

- 'Fabelle Rs chocolates continue to receive excellent response from discerningconsumers setting new benchmarks in the luxury and FMCG chocolate segments. The range wasaugmented with the launch of Fabelle Choco Deck Milk & Ruby Chocolate in the FMCGrange. During the year the Business adopted a focused geography approach backed byinnovative brand campaigns on digital platforms increasing its presence in stores acrossBengaluru in Modern Trade & Independent Service Stores in select metro cities and byadding Fabelle kiosks in Welcomhotels at Amritsar Chennai & Bengaluru. The brandcreated a buzz for achieving the Guinness World Record for the most expensive chocolateFabelle Trinity - Truffles Extraordinaire which was covered widely by both print andvisual media globally.

- 'Sunbean Rs gourmet coffee which is available across all ITC Hotels and selecte-Commerce platforms continues to receive excellent response from discerning consumers.'Sunbean Beaten Caffe' a unique ready-to-use beaten coffee paste that produces a richcreamy frothy cup of coffee is being piloted in select markets in Delhi/NCR and has beenwell received by consumers. Encouraged by the positive response the Business hasintroduced the product in large jars and in single serve/multi use sachets.

- In the Dairy & Beverages Business the 'B Natural Rs range of juices anchored onthe proposition of '100% Indian Fruit 0% concentrate Rs with the added 'goodness offibre' continues to deepen consumer connect by providing a more nutritive and 'natural Rstasting experience. The premium range ofjuices with fruit inclusions in an appealingtransparent bottle format comprising unique region-specific fruits viz. RatnagiriAlphonso Himalayan Mixed Fruit and Dakshin Guava continued to receive excellent responsefrom consumers and is now available in all target markets.

The 'Aashirvaad Svasti Rs fresh dairy portfolio comprising pouch milk pouch curd andpaneer gained strong consumer traction on the back of high quality standards and superiortaste profile in Bihar and West Bengal where the portfolio is currently available.Aashirvaad Svasti Ghee continues to gain excellent product feedback and is witnessing goodtraction especially in Modern Trade and e-Commerce channels. Similarly the 'SunfeastWonderz Milk Rs range of milk shakes has received encouraging response and is beingextended to other markets.

Over the years your Company has invested in several state-of-the-art IntegratedConsumer Goods Manufacturing and Logistics facilities (ICMLs) towards augmenting itsmanufacturing and sourcing footprint across categories with a view to providing structuraladvantages such as ensuring product freshness improving market responsiveness reducingthe cost of servicing proximal markets and providing heightened focus on product hygienesafety and quality. The ICMLs also enable scalability besides setting new benchmarks inquality safety productivity and process excellence. During the year the Business rampedup capacity utilisation at the recently commissioned facilities at Trichy GuwahatiPanchla Haridwar & Pune.

Several manufacturing units of your Company's Branded Packaged Foods Businessescompeting with the best within and outside the industry received several awards andaccolades during the year bearing testimony to your Company's focus on manufacturingexcellence safety and quality. The Biscuits plants in Haridwar and Guwahati won the CIIaward for Outstanding performance in Food Safety Excellence (in the large manufacturingand rising star category respectively); Panchla and Haridwar (Snacks) factories won 'GoldRs awards at the National Awards for Manufacturing Competitiveness (NAMC) instituted bythe International Research Institute for Manufacturing (IRIM); the Haridwar plant won theBest Environment Award from CII and the National Safety Award from the Ministry of Labourand Employment New Delhi. The procurement and supply chain functions also won severalawards during the year. Your Company was awarded the prestigious 'Fastest Growing FMCGCompany for 2019 Rs award by Globoil India one of the world's largest trade events in theagri space.

The Business implemented several initiatives to improve profitability encompassingstrategic cost management supply chain optimisation smart procurement and productivityimprovement through automation leveraging new-age tools such as Industry 4.0 and SmartUtilities which helped in mitigating escalation in input costs and absorbing start-upcosts of new Integrated Consumer goods Manufacturing and Logistics (ICML) facilities andstrategic investments in brand building for new categories viz. Dairy Juices Chocolatesand Coffee.

Business operations were severely impacted with the outbreak of COVID-19 pandemic andthe consequent nationwide lockdown. However your Company was able to successfullyovercome these challenges and resume operations within a very short time frame.

Following the outbreak of the pandemic there is heightened awareness of qualityproducts anchored on vectors of health wellness and immunity. There is a rising trend of'at-home Rs as opposed to 'out-of-home Rs consumption. Apart from a thrift mindsetconsumers are also preferring larger pack formats as they seek to reduce frequency ofpurchase. Growing concerns on hygiene and safety are also reflecting in the consumers Rspreference for trusted brands. The categories which address these needs spaces viz.staples noodles biscuits dairy etc. witnessed robust demand while demand fordiscretionary categories was relatively soft. The Business significantly ramped upcapacity in certain categories to cater to surge in demand. The Branded Packaged FoodsBusinesses remain focused on addressing emerging consumer needs and are anchoringinnovations on the vectors of health wellness immunity and naturals to addressheightened concerns in these areas in the aftermath of the COVID-19 pandemic.

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 has made significant investments in food processing andremains focused on establishing itself as the premier supplier of food products. YourCompany will continue to drive cost efficiencies in a structured manner and focus onsupply chain optimisation to support the rapid and profitable growth in the years ahead.The Business with its robust portfolio of world-class brands and a steady pipeline ofinnovative offerings will continue to leverage its key competitive strengths ofinstitutional synergies with the Agri Business Hotels the Trade Marketing &Distribution vertical and Life Sciences and Technology Centre to scale up rapidly tobuild on its position as one of the fastest growing foods companies in India and the 'mosttrusted provider of food products in the Indian market'.

Personal Care Products

Your Company's Personal Care Products Business consolidated its market standing acrosscategories driven by sustained focus on innovation portfolio premiumisation and expansionof distribution reach both in traditional trade as well as e-Commerce. While 'Fiama Rshandwash 'Vivel Rs bodywash 'Savlon Rs handwash and antiseptic liquid and 'Nimyle Rsfloor cleaner witnessed robust growth performance in the bar soaps and fragrancingproducts categories was relatively subdued in line with the slowdown in consumer demand inthe industry witnessed during the year.

In the Personal Wash & Hygiene category the Business augmented the 'Fiama Rsbodywash range with the launch of 'Fiama Rs Scents in two exciting variants therebystrengthening the brand's 'mood upliftment Rs value proposition. Fiama Scents afirst-to-market product in India is crafted with fragrance encapsulation technology whichenables long lasting fragrance delivery through skin friendly micro fragrance capsuleswhich burst on touch or a slight rub. The Business also introduced a first-of-its-kindFiama 'mood uplifting Rs handwash in the premium segment with three refreshing variants.Crafted based on deep consumer insights these products have been developed leveraging thestate-of-the-art technological capabilities of your Company's Life Sciences and TechnologyCentre. Towards the end of the financial year heightened awareness for personal hygienein the wake of the COVID-19 pandemic led to a surge in demand for products in the 'Healthand Hygiene Rs portfolio such as hand sanitizers handwash antiseptic liquids and floorcleaners. Demonstrating a high degree of agility and responsiveness to the market dynamicsat play the Business rapidly expanded manufacturing capacity manifold and enhancedavailability of the 'Savlon Rs antiseptic liquid soap handwash hand sanitizer and'Fiama Rs handwash products in the market. The newly setup perfume manufacturing plant atManpura Himachal Pradesh was re-purposed in quick time to manufacture hand sanitizers andservice increased demand. The Business also launched two innovative products in recordtime - 'Savlon Surface Disinfectant Spray Rs and 'Savlon Hexa Rs hand sanitizing liquidfor quick and persistent action. The development and the subsequent launch of theseproducts across India in a short span of time is a testament to innovative and passionateteams working round the clock to fight against the virus and keep India safe.

In the Fragrances category 'Engage Rs consolidated its position as the second largestbrand in the category. Over the years the brand has been built on disruptive innovationsanchored on 'affordability Rs and 'convenience Rs thereby driving category expansion.During the year the Business introduced 'Engage L'amante' a world-class range ofmasstige perfumes and received encouraging response from the consumers. The Business alsolaunched a range of innovative 2-in-1 pocket perfume variants providing the consumer achoice of two fragrances in a single pack to cater to different engagement occasionsduring the day. 'Engage Rs sustained its clear market leadership position in the PocketPerfume segment despite intense competition.

The Business continued to expand its presence in the Floor Cleaner category leveragingthe recently acquired 'Nimyle Rs brand. Nimyle is a 100% natural action floor cleanerwhich derives its efficacy from neem extracts making it an ideal product for dailyhousehold use for providing a clean and hygienic environment. During the year Nimylewitnessed strong growth in the East and also expanded its geographical footprint to theSouth to become the 3rd largest brand nationally in a relatively short span of time. Thebrand's unique natural action proposition offers immense potential to build on the valuesof authenticity and trust which have assumed critical significance in the wake of COVID-19pandemic.

The Business continued to strengthen its presence in the premium skincare space throughits 'Dermafique Rs brand and in the popular space through 'Charmis'. Designed andvalidated for Indian consumers the Dermafique range is powered by cutting-edge skincaretechnology and extensive research. The formulations of the 'Dermafique Rs range have beendeveloped at the Company's state-of-the-art Life Sciences and Technology Centre. Duringthe year Dermafique's Hydration range was extended with launch of 2 new variantstailor-made for summer skincare needs. The brand is now available on all key e-Commerceplatforms and continues to receive encouraging consumer response.

The Business continued to leverage creative brand campaigns and social media platformstowards deepening consumer engagement. 'Savlon Rs won Gold at EMVIE for best integratedcampaign for turning mass media into Braille. 'Dermafique Rs won the coveted top slot atthe prestigious Cosmopolitan Beauty Awards for Best Body Lotion and BB Cream(Anti-Ageing).

The Business continues to accord the highest priority to manufacturing excellence. TheHaridwar and Manpura facility received the prestigious Five-S certification by JUSE (Unionof Japanese Scientists and Engineers) bearing testimony to your Company's focus onmanufacturing excellence safety and quality. With this all three manufacturingfacilities of the Business are Five-S certified.

Your Company continues to strengthen its presence in the Personal Care and Health &Hygiene spaces in view of the robust long term prospects of the industry given the lowlevels of per capita consumption currently rising disposable incomes and increasingurbanisation. Focused investments continue to be made in creation of vibrant brandsclutter-breaking communication innovative consumer-centric products and a robust supplychain. With heightened consciousness demand for products addressing the hygiene needs ofconsumers is on the rise. Your Company with the right mix of products and a portfolio oftrusted brands is well-positioned to seize the emerging opportunities and emerge as asignificant player in this space.

Education and Stationery Products

The Education and Stationery products industry was adversely impacted during the yeardue to sluggish demand and tight liquidity conditions. The situation was exacerbated bythe onset of the COVID-19 pandemic towards the close of the year which led to postponementof the academic session across the country. This also coincided with the peak season forsales.

Notwithstanding the challenging business environment the Business was on track todeliver a double-digit revenue growth prior to the outbreak of the pandemic. The Businesssustained its clear market leadership position in the industry leveraging a portfolio ofworld-class brands and products continued strategic interventions towards strengtheningsupply chain efficiencies and a deep and wide distribution network. While operationsremained impacted due to continued closure of educational institutions the Businessexpects to bounce back strongly once the academic session resumes.

The Business continued to develop and launch several innovative and superior qualityproducts in the market leveraging its product development cell recently commissioneddedicated manufacturing facility and your Company's Life Sciences and Technology Centre.During the year the 'Classmate Rs product portfolio was augmented with the launch ofinnovative variants while the premium 'Paperkraft Rs portfolio was enriched with thelaunch of super premium pens with world-class technology and leather-bound notebookorganiser. With a view to consolidating its leadership position the Business also scaledup presence in the college and value segments of the notebook industry through the'Classmate Pulse Rs and 'Saathi Rs brands respectively.

The Business continued to deepen consumer engagement through the unique 'MyClassmate Rsapp - a 'perfect buddy Rs to students offering a range of innovative features and enablingthem traverse their learning journey. 'Classmateshop.com' a first-to-market e-Commerceinitiative in the Stationery industry that offers consumers the option to personalise theimages to be printed on notebook covers continues to receive excellent response. Therobust brand salience of Classmate was further strengthened with the purposeful 'Be BetterThan Yourself Rs campaign that encourages students to strive for continuousself-improvement instead of being trapped in the constant pressure of performing betterthan others.

'Classmate Spellbee' a highly popular spelling competition open to students of Classes5 to 9 continues to grow its franchise and has now completed eleven successful seasons.This platform along with other activation programmes such as handwriting and sit-and-drawcompetitions conducted in key cities and towns reaches out to over a million childrenacross appx. 2000 schools and continues to strengthen brand engagement with theinstitutional channel.

Concerted efforts to enhance brand affinity and consumer connect along with focus onproduct quality and innovation have enabled Classmate to earn the 'Superbrand Rs status in2019. Leveraging its strong equity over the years the Classmate brand has establisheditself as the most trusted brand for all stationery needs of the consumer.

Strategic interventions such as extension of lean inventory model sharper focus onnetwork optimisation process improvements in operations planning and control continue tobe rolled out resulting in enhanced supply chain efficiencies. The thrust on expandingdistribution continued with specific focus on institutional channel enhancing marketpenetration and outlet coverage. Sales and distribution systems were strengthened furtherthrough innovative processes to assist the dealers in better working capital managementand superior technology interventions to enable faster stock replenishment and targetedsell outs.

The Classmate and Paperkraft range of notebooks leverage your Company's world-classfibre line at Bhadrachalam - India's first ozone treated elemental chlorine free facility- and embody the environmental capital built by your Company in its paper business. TheBusiness continued to scale up the Paperkraft range of notebooks using Forest StewardshipCouncil (FSC) certified paper made at your Company's paper mill matching the bestquality paper in the world.

During the year the Business commissioned a dedicated facility for manufacturingnotebooks. Equipped with state-of-the-art machinery the facility provides the Businesswith the capability to develop innovative and highly differentiated notebook formatsdrive cost reduction through process automation and higher operational efficiencies andexploit opportunities in the overseas markets.

The Indian Education and Stationery Products industry holds immense growth potentialdriven by growing literacy increasing enrolment ratios Government's thrust on theeducation sector and a favourable demographic profile of the country's population.

The scenario in the short-term remains challenging with uncertainty around theresumption timelines of the academic session across various states. Notwithstanding thisuncertainty your Company with its strong brands superior quality andenvironment-friendly paper robust product portfolio collaborative linkages with small& medium enterprises and superior distribution is well poised to strengthen itsleadership position in the industry.

Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti industry witnessed a marked deceleration in growth rates during the yearin line with the slowdown in consumption in the broader economy. The trend ofpremiumisation that had gathered pace in recent years saw some moderation during the yearwith affordability considerations amidst the economic slowdown resulting in higher demandfor 'value for money Rs packs.

Notwithstanding the challenging business environment the Mangaldeep brand sustainedits leadership position in the Dhoop category and consolidated its position as the secondlargest brand in the Agarbatti category with all-round improvement in brand measures.

Market standing was strengthened by focusing on driving brand salience through sharplytargeted marketing investments on-ground consumer activations and a differentiatedsuperior product experience.

The Business continued to deepen consumer engagement through digital media and theunique Mangaldeep app continues to play a key role in the devotional journey of consumers.The app has garnered nearly eight lakh downloads - the content has been enriched toinclude 'Mangaldeep Naivedyam' a set of guided videos on preparation of offerings forworship with recipes crafted by master chefs from your Company's Hotels Business. Furtherthe app also features a video series 'Mangal Darshan' created in association with therenowned archaeologist Dr. Chitra Madhavan highlighting the archaeological significanceof famous temples in India. The Mangaldeep app is now available in four more countries -Australia Singapore United Kingdom & South Africa connecting the Indian diasporawith their rich culture and heritage. The app won the 'Best Mobile App award Rs at theCampaign India Digital Crest Awards.

During the year the Business launched the Mangaldeep Temple 'Fragrance of God Rs rangeof products anchored on the core proposition of 'bringing home the divinity of thetemple'. A unique and differentiated offer in the category the 'Fragrance of God Rsagarbattis under each series constitute fragrances derived from the favourite offerings ofthe presiding deity. The Business also introduced an innovative 'Lo smoke Rs variant whichemits 80% lesser smoke than regular agarbattis. The Business continually invests insustaining product superiority and delivering best-in-class products. Towards this theBusiness further upgraded the sensory appeal of its products - both at the purchase andin-use stages. Consumer response to these interventions have been very encouraging.

Over the years the Business has implemented several measures to enhance thecompetitiveness of the Agarbatti value chain in India. These include facilitating themechanisation of agarbatti manufacturing and backward integration into sourcing raw battismanufactured using indigenous inputs at small scale vendor locations. The Business hasalso started sourcing Mangaldeep incense sticks manufactured from indigenous bamboo grownin the North-East region of the country. The Business has been working closely with theGovernment under the aegis of the National Bamboo Mission and other nodal agencies at thestate level. It is pertinent to note that during the year the Government of India imposedrestrictions on import of raw battis with a view to generating large-scale employmentopportunities in the country through import substitution. The proactive measuresimplemented by your Company as highlighted above will sub-serve national priorities andalso provide a source of competitive advantage to the Business.

The Agarbatti industry was confronted with significant challenges in the wake ofCOVID-19 pandemic especially in the initial lockdown phase mainly due to higher focus ofconsumers and trade channels on essential products. Proactive steps taken by the Businesssince then have enabled it to stage a smart recovery. The Business continues to focus onscaling up the availability of recently launched innovative products sustaining productsuperiority and enhancing supply chain efficiency to drive growth across all key segments.

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.

With effect from 1st April 2020 GST rates for all safety matches irrespective ofprocess of manufacture (mechanised/semi-mechanised units and 'handmade Rs safety matches)have been harmonised at 12% compared to 18% for mechanised/semi-mechanised and 5% forhandmade matches earlier. The harmonised rates offer a level playing field for allplayers.

Trade Marketing & Distribution

FMCG companies in the current environment face a multitude of challenges owing to thecomplex interplay of multiple channels diverse demographic profile and consumerpreferences across geographies. Each channel has its own set of needs and challenges andhence your Company's Trade Marketing & Distribution (TM&D) vertical takes achannel focused approach for efficient servicing enabling sustainable growth for variedFMCG businesses across diverse outlets. TM&D has over the years developed criticalinsights into customer behaviour and channel-specific trends in the FMCG industry. Theemergence of Modern Trade e-Com and the 'on-the-go Rs consumption channel as well as thegrowing importance of chemists and speciality outlets has warranted crafting of adifferentiated and comprehensive market/outlet specific strategy to address theopportunities 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. Initiatives to enhance and strengthen the distribution network in ruralmarkets coupled with a 'focus market Rs approach aided faster growth of your Company'sFMCG products compared to industry. Salience of your Company's products also improved inurban markets on the back of customised servicing and engagement programmes for the topoutlets. Complemented by digital tools and technology-aided routing solutions yourCompany continued its thrust on enhancing availability in markets proximal to its ICMLs.

The FMCG industry is witnessing rapid evolution of distribution channels withtraditional trade co-existing with emerging channels that are changing the way consumersshop. Your Company continues to reformulate its distribution model as consumersincreasingly move to an 'Omni Rs mode of shopping across formats expecting the productsto be available 'when Rs and 'where Rs they shop.

Your Company sustained its strong growth momentum in the Modern Trade channel. Theperformance was driven through focused joint business planning with channel partnersdrawing insights from Big Data analytics customised packs and assortment higher level ofcategory engagement improved operational excellence and continued focus on in-storesell-out activities.

The e-Commerce channel in the FMCG industry continues to grow at a healthy pace. YourCompany sustained its robust growth trajectory in this emerging space driven by customisedproduct portfolio catalogue & content management and impactful visibility of theproducts & offers across various platforms through superior sell-out solutions.

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 of execution for newlaunches. During the year your Company executed more than 60 new product launches acrossgeographies besides ramping up distribution reach of several existing products in theportfolio.

Your Company's robust supply chain and logistics capabilities continue to play a vitalrole in enabling superior market servicing while continuously reducing costs. During theyear several initiatives were undertaken to enhance supply chain responsiveness and costcompetitiveness. These include reducing distance to market enhancing flexibility tosupport new launches and contingencies leveraging technology to enhance efficiencies andreconfiguring market servicing infrastructure. Your Company has strengthened itsend-to-end cold chain network in line with the growing requirements of the frozen foodsand chocolate categories. In addition innovative distribution models were implemented tooptimise inventory holding improve distribution efficiency of trade channel partners andreduce transit time by increasing direct market servicing. During the year your Companymade considerable progress in setting up state-of-the-art warehouses co-located with theICMLs. The agility flexibility and efficiency of this extensive supply chain network havebeen the key determinants of success on performance parameters like fill rate freshnessinventory holding stock availability and cost.

Technology enablement in the form of customised mobility solutions machine learningalgorithms data analytics comprising insightful visualisation tools & predictiveanalysis are being leveraged increasingly enabling quick and accurate data captureinformed decision making in real time and scientific design of trade inputs to drivesales.

Your Company continues to work closely with its customers in deploying technologysolutions towards sharpening sales execution capabilities. These include salesforceautomation solutions on mobiles for the frontline field-force B2B digital solutions forretailers for online ordering & trade engagement at scale etc. Data visualisationapplications which provide actionable dashboards and timely role-based alerts on mobileapplications continue to drive excellence in execution. Artificial Intelligence (AI)& Machine Learning (ML) technologies backed by advanced analytics are being deployedfor analysing demand patterns providing store-level product recommendations andoptimising operational efficiency of the sales force.

Towards the end of the financial year your Company's operations were impacted by thenation-wide lockdown enforced by the Government due to COVID-19 pandemic. Your Company wasone of the fastest off the blocks to resume operations in essential goods by obtainingapprovals from local authorities in accordance with guidelines of the Central and StateGovernments. Your Company extended support to its trade partners by providing themnecessary guidance and training in conducting business operations under the new scenariowhile following the norms for social distancing personal protection safety and hygiene.This was supplemented with supply of essentials like hand sanitizers gloves and masks.Supporting the trade partners in the hour of need your Company facilitated the process ofobtaining insurance against COVID-19 for their associates and also rendered financialassistance in this regard thereby forging stronger ties with them. Under the 'SurakshaStore Rs initiative of the Department of Consumer Affairs Government of India yourCompany has also supported the implementation of safety measures in grocery stores in thecountry where consumers can purchase their needs in a safe and hygienic environment.

Your Company continues to explore new opportunities to engage with consumers andenhance visibility & reach. Within the first few days of the lockdown the'Direct-to-Consumer Rs delivery model was enabled through the activation of 'ITCStore-On-Wheels Rs and 'ITC e-store' to facilitate availability of your Company's FMCGproducts and provide consumers with rich brand experience with online purchase options.These initiatives received excellent response and reinforced the trust in your Company'sbrands. Partnerships with new-age delivery platforms have also been forged to enabledigital purchase and home-deliveries of your Company's products. Several other innovativemodels including tie-ups with QSR chains and food delivery companies were deployedexpeditiously to serve consumer demand for essentials.

While the pandemic poses formidable challenges in the short to medium-term as itseverely constrains the economy your Company is confident of benefiting from a highertrajectory of growth both on the bounce-back of the economy and the new opportunities inthe post-COVID world.

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 one of thelargest distributed workforce in the FMCG industry your Company continues its focus onhuman resource competency development productivity enhancement and sustained engagement.

With its robust systems and processes an agile and responsive supply chain and asynergistic relationship with its channel partners the distribution highway is a sourceof sustainable competitive advantage for your Company and is well poised to support therapid scale up of operations in the ensuing years.

HOTELS

2019-20 turned out to be a mixed bag for the domestic Hospitality industry. WhileGeneral Elections and sluggish economic activity weighed on the occupancy and room ratesduring the first half of the year the second half witnessed a pick-up in growth momentumdriven by increase in inbound & domestic tourism meetings & conventions andretail segments. Reduction in GST rates announced in September 2019 also contributed tothe recovery. However the revival in demand was short-lived with the onset of theCOVID-19 pandemic the impact of which was felt as early as February 2020 severelydisrupting operations.

Segment Revenue for the nine months ended 31st December 2019 recorded robust growth of19% appx. driven mainly by the newer properties in the portfolio. Segment EBITDA grewfaster at 34% appx. on the back of higher RevPar and operational leverage notwithstandinggestation costs of the new properties. The impact of COVID-19 pandemic weighed onperformance for the fourth quarter leading to full year Segment Revenue growth of appx.10% to Rs 1837 crores and Segment EBITDA growth of appx. 12% to Rs 420 crores.

Your Company's Hotels Business remains amongst the fastest growing hospitality chainsin the country with 109 properties and over 10250 rooms under four distinct brands - 'ITCHotels Rs in the Luxury segment 'Welcomhotel Rs in the Upper-Upscale segment 'Fortune Rsin the Mid-market to Upscale segment and 'WelcomHeritage Rs in the Leisure & Heritagesegment.

The Business continues to focus on strengthening the equity of the ITC Hotels brandanchored on unique and path breaking 'Responsible Luxury Rs initiatives culinaryexcellence and personalisation of guest services through hotels that are the truestrepresentation of the region's culture and ethos.

Recently commissioned hotels - ITC Kohenur Hyderabad and ITC Grand Goa Resort &Spa Goa - scaled up operations rapidly and strengthened customer franchise to establishthemselves as leading hotels in their respective markets.

During the year the Business commissioned ITC Royal Bengal Kolkata. Located adjacentto ITC Sonar and in close proximity to the new business districts of Kolkata this 'One ofa Kind Rs luxury hotel is an ode to the region's cultural heritage and lineage. Togetherthe two hotels offer one of the largest meetings and conventions spaces in eastern Indiacomprising 693 rooms & suites (including 82 serviced apartments) appx. 1 lakh squarefeet of banqueting space a range of dining destinations and Kaya Kalp - The Royal Spa.Within a short span of time the Kolkata complex has become one of the most sought afterF&B and banquets destination in the city. In its first year of operations the hotelhas been able to establish a pre-eminent position in the luxury hospitality &Meetings Incentives Conferences and Exhibitions (MICE) landscape of the region. Thehotel was acknowledged by the Travel+Leisure magazine as the 'Best New Hotel (Domestic) Rsat India's Best Awards 2019 and also received the LEED Platinum Certification by the U.S.Green Building Council.

The Business also made steady progress during the year in the construction of ITCNarmada a Luxury Collection hotel in Ahmedabad.

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. Bukhara at ITC Mauryaregained its coveted place in Asia's 50 Best Restaurants 2020. EDO at ITC Gardenia wasrated the No.1 restaurant at The Conde Nast Traveller & Himalayan Top RestaurantAwards 2019. Travel+Leisure Delicious Food Awards 2019 acknowledged Yi Jing at ITC Kohenurfor 'Best Ambience' Royal Vega at ITC Grand Chola for 'Best Veg Cuisine Rs and Dum Pukhtat ITC Maurya for 'Best Mughlai cuisine'. India's Top 50 restaurants at the Conde NastTraveller & Himalayan Awards 2019 featured Dum Pukht & Bukhara at ITC Maurya andAvartana at ITC Grand Chola.

The Food & Beverage offerings at ITC Royal Bengal is already much sought after -The Grand Market Pavilion acknowledged as the 'Noteworthy Newcomer All Day Dining Rs atthe Times Food and Night-life Awards 2020 and 12 other Food & Beverage outlets at theintegrated complex bear testimony to the wide range of popular culinary offerings.

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 8 ITC Hotels and kiosks at 3 Welcomhotels. The Fabelle chocolate boutiques offer arange of exquisitely crafted desserts and cocoa beverages created live by Fabelle MasterChocolatiers thereby establishing the brand at the luxury end of the market. During theyear 'Fabelle Rs received the Times Food Award as the 'Best Confectionery Destination inthe Premium Dining category Rs in Mumbai New Delhi Bengaluru and Chennai & the 'BestChocolatier Rs in Kolkata and Hyderabad.

Sunbean gourmet coffee has established itself as the beverage of choice in yourCompany's luxury hotels. 'Sunbean Ambassadors Rs - the specially trained in-house masterbaristas continue to bring alive the brand story with their delightful creations.

In the wellness space Kaya Kalp-The Royal Spa at ITC Hotels received multipleaccolades at the AsiaSpa Awards 2019 - 'Best Indigenous Luxury Spa Chain'; Kaya Kalp atITC Grand Bharat was adjudged the 'Best Destination Spa (India) Rs and Kaya Kalp at ITCMughal was acknowledged as the 'Best Hotel Spa (India)'.

'Club ITC' your Company's unique loyalty programme continues to gain franchise amongstthe premium clientele of ITC hotels and was acknowledged for 'Best Customer Service Rs and'Best Redemption Ability Rs in the Middle East and Asia/Oceania region at the globallyrenowned Freddie Awards 2020. The programme continues to strengthen its strategicpartnership with Marriott Bonvoy the combined loyalty programme of MarriottInternational. The dining loyalty programme 'Club ITC Culinaire' registered a healthygrowth in membership base.

In the Upper-Upscale segment the 'Welcomhotel Rs brand continues to strengthen itsequity with refreshed and distinctive positioning of 'Enriching Experiences'. During theyear the Welcomhotel portfolio was augmented with the addition of Welcomhotel Amritsar.Spread across eight acres of manicured greens the hotel is centred around a mansion whichtraces its origin to the early 1900s and has been lovingly restored with all moderncomforts while preserving the cultural architectural and culinary nuances. The brandcontinues to successfully build on the 'asset-right Rs strategy and during the year openeda Welcomhotel conveniently located close to the business districts at GST Road Chennai.The 'Welcomhotel Rs brand which currently comprises 16 operating hotels and over 2000keys is well poised to scale up rapidly with the addition of owned hotels underconstruction at Bhubaneswar & Guntur and a healthy pipeline of managed properties.

The 'Fortune Rs brand maintained its prominent position in the Mid-market to Upscalesegment with the sharpened brand positioning of 'First class full service hotels - anaffordable alternative'. The Fortune brand presently comprises 43 hotels and nearly 3200rooms across 37 cities. The 'WelcomHeritage Rs brand retains its leadership as thecountry's most successful and largest chain of heritage hotels with 36 operational hotelsand over 900 rooms.

During the year the Business fortified its 'Book Direct Rs proposition across allowned and affiliated digital channels with a concerted focus on mobile first initiativesrecognising the shift in guest preference leading to enhanced reach and engagement in keymarkets.

The Business leveraged immersive content marketing and targeted social mediacommunication for amplifying brand messaging and augmenting guest engagement. Keycampaigns for the year included those for the launch of ITC Royal Bengal WelcomhotelAmritsar and several Responsible Luxury initiatives leading to over 187 millionimpressions and over 4 million engagements.

Your Company's Triple Bottom Line philosophy is manifest in the Hotels Business's'Responsible Luxury Rs ethos making it a pioneer in luxury hoteliering globally. TheBusiness continuously strives to reduce water & energy consumption and enhance theusage of renewable energy to meet its overall energy requirements. Currently energyrequirements in several ITC hotels are being fully met through renewable sources and plansare on the anvil to scale up the same.

As an integral part of its 'Responsible Luxury Rs initiatives ITC Hotels was amongstthe first luxury hotel chains in the world to mitigate single-use plastic usage inoperations. The Business also implemented radiation harmonisers across all Luxury Hotelsto mitigate the harmful effects of electromagnetic radiations apart from continuing tomaintain heightened focus on indoor air quality.

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 accredited ITC Hotels as the 'Best Luxury Hotel Chain' ITC GrandGoa as the 'Best Wedding Venue (Domestic) Rs and Club ITC as the 'Best Hotel LoyaltyProgramme Rs at the India's Best Awards 2019. The Conde Nast Traveller Readers Rs TravelAwards 2019 recognised ITC Grand Goa as the 'Favourite Destination Wedding Hotel inIndia'.

Around the early 2000s your Company had embarked upon an aggressive investment-ledgrowth strategy to rapidly expand its footprints in the luxury and Upper Upscale segmentsof the Indian hospitality industry. Since then your Company has added 13 iconicproperties comprising nearly 3400 rooms; construction of another 3 properties with around500 rooms is fast nearing completion. As reported earlier your Company's asset-rightstrategy envisages a large part of incremental room additions going forward to accruethrough management contracts. Towards engendering enhanced value creation your Companywill continue to aggressively pursue the 'asset-right Rs strategy focus on sweatingexisting assets create additional revenue streams and examine alternative structures.

The Travel & Hospitality sector is amongst the most severely impacted ones in thewake of the COVID-19 pandemic. With severe cutbacks in travel for leisure as well asbusiness and heightened sensitivity around hygiene and social distancing revenue streamsacross all segments of operations have been significantly impacted. The revival of thesector is dependent not only on the timing and degree of relaxation of lockdown measuresbut also on pick-up in business and leisure travel and consumers gaining assurance of thehygiene and safety standards at hotel properties. To reassure guests at your Company'siconic Hotels the 'WeAssure Rs programme has been launched to reinforce ITC Hotels Rscommitment towards health hygiene and safety.

The programme has been designed in collaboration with medical professionals anddisinfection experts to further enhance the existing hygiene and cleaning protocols. ITCHotels is also progressing towards an accreditation by National Accreditation Board forHospitals & Healthcare Providers (NABH) for its procedures and is working onassurance of higher levels of hotel operating standards by DNV GL Business Assurance bybuilding on the pillars of health hygiene safety and pathogen control.

Several interventions have also been implemented by the Business to mitigate the impactof the challenging business environment and help bounce back stronger. These includespecially customised packages for short getaways/staycations revamped packages withcurated offers for the MICE segment launch of specially crafted takeaway/delivery diningservice in major cities - 'Flavours Rs curated by ITC Hotels & Welcomhotels and'Gourmet Couch Rs -a collection of acknowledged signature menus extension of additionalbenefits to members of the Club ITC loyalty programme and enhanced guest connect throughsharing of contextual content in social media. 'Food for Thought Rs - a new seriesoutlining activities that are easy to do in the comfort of homes and are both constructive& beneficial was introduced on social media platforms. Adjacencies such as premiumlaundry services in select cities are also being actively explored.

While there are significant near-term challenges on account of the outbreak of theCOVID-19 pandemic the sector continues to hold immense potential in view of the robustlong-term economic and tourism prospects of the country. With its portfolio of world-classproperties iconic cuisine brands and best-in-class levels of service excellence anchoredon the ethos of 'Responsible Luxury Rs as well as the highest standards of hygiene at alltouchpoints your Company is well-positioned to sustain its pre-eminent position in theIndian Hospitality industry and to successfully overcome these challenges.

PAPERBOARDS PAPER AND PACKAGING

After witnessing a robust 2018-19 in terms of strong end-user demand and higherrealisations on the back of higher pulp prices the Paper and Paperboard industry remainedrelatively muted in 2019-20. General economic slowdown sharp fall in rural demand andtight liquidity conditions impacted end-user demand across segments. Pulp prices whichstarted correcting towards the end of 2018-19 declined sharply during the year due tocontraction in global demand and higher inventory levels. The fall in pulp prices not onlyresulted in lower price realisation but also led to a surge in imports of paper into thecountry. This along with subdued demand conditions which have been exacerbated by theCOVID-19 pandemic is likely to render the business environment challenging in theshort-term.

Against the backdrop of a challenging environment as aforestated your Companydelivered a competitively superior performance in the Paperboards Paper & Packagingsegment. Strategic investments in pulp import substitution proactive capacity addition inValue Added Paperboard (VAP) segment process improvements and a cost-competitive fibrechain supported by effective go-to-market strategies helped your Company deliver robustgrowth in revenue and substantial improvement in profitability in paperboards and paper.The packaging business however witnessed a marked slowdown in demand especially in theFMCG and Liquor industries which weighed on its performance.

Paperboards & Specialty Papers

Global demand for Paper & Paperboard in 2019 witnessed degrowth of 2% on the backof weak demand mainly in Asia and North America. Going forward demand recovery isexpected to be led by the packaging segment while demand for writing & printing andnewsprint segments is expected to decline. The growth in the packaging segment is expectedto be driven by essential consumer goods pharmaceuticals food service and e-Commerce.Writing & Printing and Newsprint segments on the other hand are expected to remainunder pressure largely due to increasing adoption of digitisation and proliferation ofsmartphone usage.

Domestic demand for Paper & Paperboard which remained subdued for the first ninemonths of the year started witnessing a marginal pick-up in growth trajectory in thefourth quarter. However nation-wide lockdown amidst the COVID-19 pandemic halted therecovery momentum and led to demand contraction in the ensuing months. Beyond theshort-term demand is expected to be primarily driven by essential consumer goods in theFMCG industry Pharma and Food delivery sectors. Recovery in other major sectors such asGarments Footwear Publishing Toys and certain discretionary segments of FMCG isexpected to be more gradual while longer term demand is expected to be driven by the movetowards higher levels of indigenous manufacturing. Emerging consumer trends in theseend-user industries are likely to provide significant opportunities to the Business goingforward.

While growth in the domestic paper and paperboard industry was subdued during the yearcheap imports of paper and paperboard continued to flood the domestic market. Imports fromChina ASEAN and South Korea rose sharply by 27% during the year. The current importpolicy and extant regulations governing commercial and social forestry in the country haveput the Indian Paper and Paperboard industry at a significant disadvantage vis-a-visimports. There is clearly a need to review the current import duty structure andre-examine the existing Free Trade Agreements (FTAs) as well as 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.

Despite a subdued operating environment and sluggish demand conditions the Businessachieved its highest ever volume of production and sales crossing 8 lakh tonnes drivenby strategic investments in augmenting VAP manufacturing capacity continuous focus onenhancing operational efficiency and innovations across the value chain. Your Companyremains the clear leader in the VAP segment and continues to consolidate its preferredsupplier position amongst leading end-use customers and brands. It is also a leadingplayer in the eco-labelled products segment and premium recycled fibre based boards space.

Recent capacity augmentation in the VAP segment at Bhadrachalam mill has been fullyabsorbed and the line is operating at full capacity delivering superior quality boardwhich has been well accepted in the market. In line with its pursuit of providingsustainable packaging your Company introduced recyclable barrier board 'Filo Rs series -a substitute for single-use plastics in the food service segment. The biodegradable 'OmegaSeries' launched as an alternative to plastic coated containers and cups is gainingsignificant customer franchise. The Business continues to augment capacity throughefficiency improvements of existing machines to support future growth in VAP segment.

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 Business enhanced its presence in the Pharma leaflets andpublishing segments.

The recently commissioned Decor Papers machine at the Tribeni unit caters to a diverserange of world-class products and continues to be well accepted by discerning customers.During the year the decor papers portfolio came under pressure from cheap importsespecially from China. Appropriate policy interventions to encourage higher level ofimport substitution will help realise the full potential of this sector.

The Business continues to make structural interventions to reduce operating costs anddependence on imported pulp. Significant increase in in-house pulp production was achievedduring the year through strategic interventions Industry 4.0 initiatives and improvedwood mix. Capacity utilisation of Bleached Chemical Thermo Mechanical Pulp mill (BCTMP) atthe Bhadrachalam unit was further scaled up during the year. Innovations in the pulp millhave resulted in higher pulp production and improvement in pulp quality and yield.Initiatives such as bund plantation and plantation in core catchment area in Odisha(Malkangiri) will help in further reducing delivered cost of wood at the Bhadrachalammill.

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's Life Sciences and Technology Centre is engaged indeveloping higher yielding second generation clones with enhanced pest and diseaseresistance attributes.

Last year a pioneering initiative was taken by the Business to introduce a system ofdirect purchases of wood from farmers with online payment enablement.

Currently approximately 15% of the total wood procurement is being sourced throughthis system which facilitates transparent price discovery and enhances transactionalefficiencies. Further a digital platform has been created for online sale of saplings tofarmers seamlessly integrated with payment engines making the process more efficient andtransparent. This mobile-enabled application provides real time visibility to the farmersfrom order to delivery makes available best practices for plantations and reducesprocurement lead time.

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 101000 acres of plantationsinvolving over 33500 farmers. During the year over 86000 tonnes of FSC-certified woodwere procured from these certified plantations. All four manufacturing units of theBusiness have obtained the FSC Chain of Custody certification and have complied with allthe requirements during the year thereby sustaining your Company's position as theleading 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 109000 tonnes ofwaste paper during the year thereby sustaining your Company's overall positive solidwaste recycling footprint.

The manufacturing facilities at Bhadrachalam Kovai Tribeni and Bollaram continue toreceive industry recognition for their green credentials and safety standards in line withyour Company's focus on sustainable business practices. The Kovai unit is the first sitein India and the first paper mill in the world to achieve platinum rating - the highestrating under the Alliance for Water Stewardship Standards. Bhadrachalam unit won thenational award for Excellence in Water Management from Confederation of Indian Industry(CII). Bhadrachalam and Kovai mills won awards for Excellence in Energy Management at'20th National Award for Excellence in Energy Management Rs in the Pulp & Paper sectorcategory. Tribeni unit received 5-Star Certificate in the Large Scale category at theEnergy Conservation Awards CII Eastern region.

The Business continues to strengthen its safety processes adopting globally recognisedbest practices. These interventions which inter alia incorporate Design Thinkingmethodologies ensure facilities are designed constructed operated and maintained in aninherently safe manner.

In line with the objective of enhancing the share of renewable energy in itsoperations the Business has implemented several initiatives including investments in agreen boiler soda recovery boilers high pressure & efficiency circulating fluidisedbed boiler solar & wind energy and increased usage of bio-fuel. With theseinitiatives renewable sources presently account for 43% of total energy consumed at theBhadrachalam Bollaram Tribeni and Kovai units. Your Company has embarked upon apioneering initiative at the Bhadrachalam mill that seeks to replace conventional sodarecovery boilers with a state-of-the-art and future-ready high pressure recovery boileralong with pulp capacity augmentation. This intervention will reduce the carbon footprintof operations through lower coal consumption and enable significant value capture in thesystem by enhancing in-house pulp production. The project is expected to be commissionedby 2022.

The 46 MW wind mill in Andhra Pradesh set up in 2014 is wheeling power to variousBusiness units of your Company located in Andhra Pradesh Telangana Karnataka UttarPradesh Uttarakhand Bihar and NCR. Usage of wind energy has led to a reduction ofGreenhouse Gas emission by appx. 1.05 lakh tonnes of CO2 equivalent during the yearprimarily at the Bhadrachalam Mill. The regulatory framework for levy of charges andbanking of power on inter-state wheeling of renewable energy is still evolving.Consequently your Company continues to bear charges/levies at multiple points which haveweighed on the returns on this investment. Your Company continues to engage with State andCentral regulatory authorities towards seeking relief from such additional levies/charges.

The Business 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. Implementation of several Industry 4.0 initiatives isunderway focusing on areas such as Internet of Things (IoT) Artificial Intelligence andAdvanced Analytics. Several projects using Industry 4.0 levers have been successfullycompleted during the year resulting in significant savings. The Business has launched anIndustry 4.0 Centre of Excellence (CoE) to build in-house capability in new technologies.

These interventions will further help in sustaining and enhancing your Company'scompetitive advantage.

The integrated nature of the business model comprising access to high-quality fibrein-house pulp capacity state-of-the-art manufacturing facilities and processes anchoredon TPM Lean and Six Sigma systems along with world-class product quality and robustforward linkage with the Education and Stationery Products Business equip your Company tofurther consolidate and enhance its leadership status in the Indian Paper and Paperboardindustry.

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 innovative packaging options design changes ensuring security of suppliesand delivering benchmarked international 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 packaging platforms coupled with in-house cylinder making and blown filmmanufacturing lines the Business continues to provide innovative solutions to several keycustomers in India and overseas. The Business continued to provide strategic support toyour Company's Cigarette and FMCG businesses.

The year under review was particularly challenging for the Business in view of theslowdown in demand across major end-user industries especially in the FMCG and Liquorsegments. Exports grew at a healthy pace partially offsetting the subdued performance inthe domestic segment owing to the aforementioned factors. Amidst intense competition inthe marketplace and sluggish economic conditions the Business continued to aggressivelypursue new business development across segments and focused on new product development todrive growth. Over the last two years the Business has acquired several new customersacross the cartons and flexibles packaging platforms thereby substantially diversifyingits customer base.

The Business continues to craft innovative packaging solutions based on deepunderstanding of end-user needs on the one hand and drawing on the institutionalsynergies including the capabilities of your Company's Life Sciences and TechnologyCentre on the other. These include development of a pipeline of pioneering products withfocus on sustainability such as barrier coating and bio-compostable offerings which arein various stages of validation and commercialisation. The Business continues to beacknowledged as a key associate by several reputed FMCG companies in the country forproviding superior packaging solutions. The focus is to continuously work with customersto provide cost-effective solutions across areas such as sustainable packaging superiorstructural design and enhanced security features thereby further strengthening itspositioning as a 'first choice packaging partner'.

The Business continues to win several awards for operational excellence and creativepackaging solutions. During the year the Business won the prestigious Dow InnovativePackaging award and was recognised as the 'Printing Company of the Year' by PrintWeekIndia. The manufacturing facilities at Tiruvottiyur Haridwar and Munger maintained thehighest standards in Quality and Environment Health & Safety (EHS).

All the three units are certified as per the Integrated Management System consistingof ISO 9001:2015 ISO 14001:2015 OHSAS 18001:2007 and have also received SocialAccountability Certification (SA 8000:2014). Both the Tiruvottiyur and Haridwar unitsreceived the highest 'Grade A Rs BRC/IOP certification (British RetailConsortium/Institute of Packaging) for global standards in packaging and packagingmaterials - a key enabler for supplies to the packaged foods industry. The Tiruvottiyurunit also ranked No.1 in the CII-Southern Region EHS Excellence Awards for FMCG packaging.

Despite the unprecedented challenges faced amidst the COVID-19 pandemic the Businesscontinued to support your Company's Branded Packaged Foods and Personal Care ProductsBusinesses as well as other FMCG companies engaged in the manufacture of essentialcommodities enabling continuity of their critical supply chain during the crisis.

The Packaging and Printing Business has established itself as a one-stop shop offeringa wide range of superior and innovative packaging solutions that will serve as thefoundation for sustainable growth.

With world-class technology across a diverse range of packaging platformsbest-in-class quality management systems focused investment in skill development and adistributed manufacturing footprint the Business is well positioned to grow its marqueecustomer base while continuing to service the requirements of your Company's FMCGBusinesses.

AGRI BUSINESS Leaf Tobacco

After declining for 6 years in a row global production of Flue Cured tobacco in 2019remained stable at around 3470 million kgs. Crop production in major producing countrieslike China Brazil Zimbabwe and India being largely similar to 2018 levels contributedto 80 percent of global flue cured supplies. In line with demand requirements Indian FlueCured tobacco supplies are stabilising at around 220-230 million kgs. However it stillremains far below the levels of 2014 representing a drop of over 30%. The disruptionscaused by the COVID-19 pandemic are likely to weigh on global cigarette industry volumesand consequently on leaf tobacco trade.

A punitive and discriminatory taxation and regulatory regime on cigarettes apart fromseverely impacting the domestic legal Cigarette industry has also resulted in significantpressure on the leaf tobacco crop grown in India. This together with declining trend ofglobal cigarette demand excess production in certain geographies relative strength ofthe Indian Rupee compared to currencies of competing origins lower export incentives andheightened illicit trade in cigarettes has culminated in reduced demand for Indiantobacco. Consequently leaf tobacco exports have declined by around 24% over the last sixyears - from 236 million kgs. in 2013-14 to 180 million kgs. in 2019-20. Analysis ofIndian exports between 2016-17 and 2019-20 reveals a sharp drop in offtake by globaltobacco majors due to decline in cigarette volumes and increased sourcing from cheaperorigins.

The COVID-19 pandemic could potentially aggravate the already challenging situationfacing the Indian leaf tobacco industry. A stable domestic base would be critical inenabling the Indian farmer to weather the volatility associated with internationalmarkets.

Despite such challenging market conditions your Company consolidated its leadershipposition as the largest Indian exporter of unmanufactured tobacco. This was achievedthrough new customer development and enhanced value delivery to existing customers byleveraging the Business's expertise in crop development superior product integrity andsourcing and world-class processing facilities. To offset the declining offtake by globalmajors the Business has acquired several new customers in recent years generatingsubstantial revenue during the year. Further the Business is exploring exportopportunities in the nicotine derivatives space in view of the increasing demand fornicotine salts liquid nicotine etc. in certain international markets.

The Business continued to provide strategic sourcing support to your Company'sCigarettes Business meeting all requirements at competitive prices. The Businessundertook crop-specific agronomic practices to cater to the emerging preferences ofcustomers. In addition synergistic R&D with focus on varietal development and climatesmart farming techniques are being actively implemented.

Strategic cost management across the value chain continues to be a key focus area forthe Business. Several initiatives were implemented during the year including digitallyenabled tobacco procurement decisions for better efficiency IoT interventions at theprocessing facilities yield improvement and logistics cost optimisation to drive downcosts in a structural manner.

The Business continues to set benchmarks in leaf threshing operations through focusedinitiatives and innovative technological solutions. Initiatives continue to be pursued inyour Company's Green Leaf Threshing (GLT) plants at Anaparti Chirala and Mysuru towardsdelivering world-class quality and upgrading processing technology. The energy needs ofall three units at Chirala Anaparti and Mysuru are substantially met from renewablesources in line with your Company's philosophy of adopting a low-carbon growth path.

The Business has successfully deployed integrated energy management initiativesspanning energy conservation promotion of alternative fuel usage and energy plantationstowards achieving wood fuel self-sufficiency in the curing of Flue Cured Virginia (FCV)tobacco. These initiatives will be scaled up further going forward.

The Business remains committed to the highest standards of EHS and quality andcontinues to win recognition in these areas. During the year the Business received anaward from the All India Organisation of Employers (AIOE) for its outstandingcontributions in the field of Industry Relations. Mysuru GLT was awarded 'Utthama SurakshaPuraskara Award 2019 Rs by National Safety Council Karnataka recognising its performancein Safety Management. Chirala GLT won an award under the category 'Systematic andSustainable Energy Performance Rs for the second consecutive year from Society of EnergyEngineers & Managers. The three GLTs also won various awards at events organised bythe Quality Circle Forum of India & CII for technological improvements and qualitycontrol.

A decline in leaf tobacco exports as aforestated along with sustained pressure ondomestic legal cigarette volumes due to steep escalation in tax incidence and stringentregulations have led to severe stress on farmer earnings which have declined by over Rs5000 crores in the last five years since 2013-14. Illicit cigarettes as well as smuggledElectronic Nicotine Delivery Systems (ENDS) in the country also impact leaf tobacco tradeas these products do not use Indian tobacco. Accordingly a more balanced regulatory andtaxation regime that cognises for the unique tobacco consumption pattern prevalent inIndia and the economic realities of the country is the need of the hour to support theIndian tobacco farmer and the 46 million livelihoods dependent on tobacco. Restoringexport incentives to earlier levels would also go a long way in enhancing thecompetitiveness of Indian tobacco exports and contribute to increasing 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

The Kharif and Rabi crops were adversely impacted during the year - initially bydelayed monsoon followed by heavy rains and widespread flooding across multiple states.This resulted in relatively inferior quality of crop higher premium for quality produceand considerable volatility in prices. India's competitiveness in global agri-commoditymarkets came under pressure owing to increase in procurement prices reduction/withdrawalof export incentives increase in supply from other origins and relatively higher currencydepreciation in competing origins.

Overall domestic food grain production for 2019 crop year stood at 285 million tonnesat par with previous year. Production of wheat grew by 2.3% to 102.2 million tonnes riceproduction increased by 3% to 116 million tonnes while coarse cereals production droppedby 9% to 43 million tonnes. Oilseed production increased by 2.5% to 32.3 million tonnesmainly due to higher soybean output which increased by 26% to 13.8 million tonnes. Goingforward food grain production for crop year 2020 is estimated to increase to 291 milliontonnes.

In 2019-20 world wheat output increased by 33 million tonnes to about 764 milliontonnes mainly due to higher production in European Union Russia and Ukraine. Exports fromIndia were negligible owing to uncompetitive prices compared to competing origins such asRussia and Ukraine. India witnessed a higher production by 2.3 million tonnes which led toincrease in the surplus available for domestic trade. The Business leveraged its stronggeographical presence to supply high quality wheat at competitive prices to flour millslargely located in South and East India besides servicing the internal requirements forAashirvaad atta.

Exports of rice from India at 7.5 million tonnes witnessed a significant declineagainst 12 million tonnes last year. Exports to destination markets dwindled due toprotective import tariffs and surplus production in other competing origins. The Businesscontinued to service orders from customers in both domestic and export trade in selectedvarieties.

Soymeal exports from India remained low as Indian meal continued to be uncompetitivedue to cheaper supplies from South America and USA.

The Business leveraged its geographical presence and risk management capabilities tocapture opportunities during the season in domestic trade of soya bean.

Deep rural linkages and agri-commodity sourcing expertise resident in your Company'sAgri Business coupled with the ability to offer differentiated value-added services ofidentity preservation traceability and certification continue to be critical sources ofcompetitive advantage for the Branded Packaged Foods Businesses. Over the years theBusiness has invested significantly in building competitively superior agri-commoditysourcing expertise comprising multiple business models wide geographical spread andcustomised infrastructure to mitigate the impact of uncertainties arising out of climaticvariations changes in Government policies and global demand-supply dynamics. Thesecapabilities and infrastructure have created structural advantages that facilitatecompetitive sourcing of agri raw materials for your Company's Branded Packaged FoodsBusinesses. The Business continues to focus on developing capabilities and vectors ofdifferentiation for potential foray into branded consumer and institutional segments whileincreasing the overall efficiency of procurement and logistics operations through targetedcost optimisation initiatives and by eliminating non value-adding activities.

The Business continued to leverage its strong farm linkages and wide sourcing networkacross geographies to secure supplies of critical grades of wheat with benchmark qualitytowards meeting the growing requirements of Aashirvaad atta. During the year the Businessfurther scaled up its strategic sourcing and supply chain interventions. These includefocused crop development towards securing the right varieties for Aashirvaad atta with aview to providing consumers best-in-class product quality and experience use ofmulti-modal transportation comprising rail road & coastal routes and blend/costoptimisation through geographical and varietal arbitrage. The Business also ramped updirect buying at the recently commissioned ITC Kapurthala ICML plant. This initiativeoffers substantial benefits to farmers including transparency in grading weighment andpricing besides reducing transaction costs due to minimisation of handling andtransportation. Plans are on the anvil to scale this up even further going forward alongwith focused crop development initiatives in the area. In recognition of the variousinitiatives undertaken by the Business your Company has been recognised as 'IndustryLeaders in Grains and Cereals' for 'Efficient Wheat Supply Chain Management Rs and for'Implementation of Information Technology in Agri Value Chain Rs at the IndianAgri-Business Excellence Awards.

Ongoing collaborations with reputed research organisations such as Indian AgriculturalResearch Institute Indian Institute of Wheat & Barley Research

Punjab Agricultural University and Agharkar Research Institute continue to aid theBusiness in building an efficient and cost competitive agri-value chain.

During the year the Business further scaled up its wheat crop development programmeand introduced location-specific new and superior seed varieties along with appropriatepackage of practices in nearly 168000 acres across Rajasthan Uttar Pradesh Bihar WestBengal Punjab Jharkhand Madhya Pradesh and Maharashtra. Sharp focus on deepeningcapabilities in proprietary crop intelligence scaling up the sourcing & deliverynetwork and developing customised blends will support your Company's Branded Food PackagedBusinesses in the years to come.

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 Rs juices brand. New products such as strawberry pureeIQF mango dices etc. are being sourced to support the premium juices and milk shakes underyour Company's 'B Natural Rs and 'Sunfeast Wonderz Rs brands. In the processed fruitscategory the Business sustained its leadership position in certified mango pulp exports.The Business also leveraged its sourcing capabilities to commence supply of organic andcertified mango pulp with end-to-end traceability to the manufacturers of branded babyfood products in US and European markets. The scale and scope of the projects involvingsupply of certified products have been expanded by collaborating with more than 3000 smalland marginal farmers spanning over 4700 acres in four states in India.

During the year the Business also strengthened its milk procurement network for'Aashirvaad Svasti Rs dairy products with significant increase in daily milk collection.The Business expanded its network in West Bengal and Bihar to support the growingrequirement for fresh dairy products and in Punjab towards supporting the increasingrequirements of 'Sunfeast Wonderz Rs dairy beverages. In this regard the Businessprovided farmers with the requisite infrastructure (such as milking machines automaticmilk testing equipment and chilling units) and package of practices to improve operationalefficiency and maintain high quality along with identity preservation and traceability.

The Spices business continued to expand in 'Food Safe Markets Rs viz. US EU and Japanleveraging its strong backward integration and customer focused strategies. Exports ofspices grew at a healthy pace driven by the addition of new customers and foray into newmarkets. 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 various state governments for production offood safe spices and has maintained an unblemished track record on food safety parametersleveraging its superior processes and custody of supply chain thereby consolidating itsposition as a preferred supplier to food safe customers.

The Business also leveraged its strong backward integration linkages to foray into theorganic spices segment with the entire value-chain certified by Control UnionSwitzerland ensuring product authenticity and full compliance with stringent norms in theUS EU and Indian markets. The organic range comprises over 35 products in whole powderand sterilised form. The Business also ventured into its own organic crop developmentprogramme covering around 200 farmers in 4 states spread over 1300 hectares producing over600 tonnes during the year.

The Spices business was awarded 'CII Outstanding Performance in Food Safety Rs for itsstate-of-the-art Integrated Sterilisation and Grinding plant in Guntur.

The Business continues to pursue sustainable farm management practices and isaccredited with Rainforest Alliance and Global GAP.

The Coffee Business continued to augment its product portfolio with value-addedofferings including coffee certified by Rainforest Alliance Specialty and Monsoonedcoffee. Exports of premium grades to the Middle East markets increased significantlyduring the year. Strategic presence in key coffee producing geographies knowledge ofestate and region-specific characteristics and supply chain linkages is enabling theBusiness source the right coffee grades for your Company's gourmet coffee brand 'Sunbean'.Specialty coffee grades for 'Sunbean Rs were identified and sourced from Panama andNicaragua along with estate-specific supplies from Annamalai and Baba Budangiri in India.

The Agri Business remains focused on enhancing its presence in identified highvalue-added segments viz. spices for 'food-safe Rs markets processed fruits frozenmarine products frozen vegetables etc. This includes the 'ITC Master Chef Rs range of'Super Safe Rs frozen prawns which adhere to stringent standards prevalent in USA EU andJapan. These products go through rigorous testing (240+ tests) and are 'individually quickfrozen Rs to ensure freshness and highest standards of safety and hygiene. Launched ineight cities leveraging your Company's experience of catering to customers ininternational markets the range has been well appreciated for its taste and quality.

The Business remains focused on its strategy to build a robust and future-readyValue-Added Agri Products portfolio catering to both the B2B and B2C channels byleveraging its deep expertise in sourcing a vast range of agri-commodities and awidespread network spanning multiple regions in the country. Simultaneously the Businesscontinues to move up the value chain in existing categories such as aqua coffee spicesand staples. During the year the Business forayed into bulk staples comprising maidasooji pulses & besan and bulk spices catering to the food services channelleveraging institutional capabilities of sourcing product development and applicationsciences. Market specific and customised products tailored for end-users were launchedacross six major metro markets by developing an ecosystem of custom manufacturing unitsand a network of channel partners. Plans are on the anvil to rapidly scale up thebusiness.

During the year the 'ITC Master Chef Rs range of frozen snacks was augmented with thelaunch of a unique range of kebabs for the retail segment. The frozen snacks rangecurrently comprising 11 vegetarian and 6 non-vegetarian delicacies is available in over50 cities and is gaining good consumer traction. The accessibility of the range is beingscaled up in the retail and 'Direct-to-Home Rs delivery channels. In the Fresh Fruits& Vegetables segment the Business continues to expand its footprint in brandedpotatoes under the 'Farmland Rs brand.

More than 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. Leveraging this robustplatform your Company continues to focus on providing a range of value-added services inrural areas towards enhancing the competitiveness of Indian agriculture and playing acritical enabling role in integrating farmers input vendors and government agenciesbesides facilitating the necessary market linkages. Integrated rural service hubschristened 'Choupal Saagar' continue to serve farmers through their procurement andstorage infrastructure and front end retail stores. They facilitate efficient sourcing ofa wide range of agri commodities while making available assorted brands and merchandisefrom categories such as apparel footwear consumer durables electronics and fueltailored to farmers Rs needs. The Choupal Saagars also serve as an ideal platform for yourCompany's FMCG brands to deepen their engagement with rural markets. Choupal Haat isanother unique platform that provides an opportunity for companies/brands to closelyinteract with and understand the needs of the rural community. These platforms along withinterventions such as Choupal Pradarshan Khet Choupal Mahotsav etc. enhance the vitalityof your Company's e-Choupal network.

Leveraging emerging digital technologies and deep domain knowledge built over decadesof intense engagement with the rural community the Business has initiated Projecte-Choupal 4.0 - a digitally-enabled platform to augment rural engagement programmes withcustomised end-to-end services for the farmers. Key features include real time informationon weather and markets on-farm diagnostics continuous crop monitoring for buildingweather resilience agronomic advisory for improving productivity & quality and farminputs to make agriculture a viable enterprise besides forward linkages to remunerativeoutput markets.

The outbreak of COVID-19 pandemic has disrupted market dynamics across several agribusiness segments. While some segments were relatively subdued due to lockdown and willrecover with time wheat sourcing for Aashirvaad atta rice exports spices and retaildemand for packaged frozen snacks witnessed buoyancy in recent months.

The agricultural sector accounts for nearly 50% of India's livelihoods. Your Companystrongly believes that domestic agri value chains need to be more competitive and there isample headroom to enhance productivity. There is a need for a 'phygital Rs system thattransforms each element of the agricultural ecosystem through digitalisation therebyempowering farmers and enhancing market linkages. This will also set the foundation forIndia to garner a larger share of global trade in food processing and agriculture dulysupported through a joint participatory approach involving all stakeholders - farmersinput vendors traders processors and government agencies. The slew of reforms announcedrecently by the Government of India including amendments to certain provisions of theEssential Commodities Act reforms in agricultural marketing and risk mitigation throughpredictable prices are commendable and will go a long way in stimulating agriculturalgrowth in the country. These powerful reforms will empower farmers strengthen agri-foodprocessing linkages and enable demand-driven value-added agriculture.

Performance in the fourth quarter was impacted due to supply chain disruptions amidstthe COVID-19 pandemic. This led to lower exports and domestic sales towards the end of theyear. To ensure steady support to the Branded Packaged Foods Businesses as also to supportthe agri sector during this critical time the Business was able to secure necessarypermissions expeditiously to ramp up agri operations including direct buying from farmersleveraging its e-Choupal network to expand the buying locations at the village level toovercome labour and transport challenges from the market yards which were non-operationalduring March and April. The Business also leveraged its supply chain network and ensuredtransportation through multiple modes with due adherence to necessary safety protocolsand with necessary support both from the administration and supply chain partners.

Your Company's Agri Business with its deep rural linkages and agri-commodity sourcingexpertise is well positioned to scale up in identified areas that lend to higher valueaddition while continuing to provide strategic sourcing support to your Company's BrandedPackaged Foods Businesses.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements ofthe Company prepared in accordance with Indian Accounting Standard 110. Shareholdersdesirous of obtaining the report and accounts of your Company's subsidiaries may obtainthe same upon request. Further the report and accounts of the subsidiary companies isalso available under the 'Shareholder Value Rs section of your Company's website www.itcportal.comin a downloadable format. During the year no new subsidiary has beenincorporated/acquired. The Company's Policy for determination of a material subsidiary asadopted by your Board in conformity with Regulation 16 of the Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 can beaccessed on your Company's corporate website at https://www.itcportal.com/about-itc/policies/policy-on-material-subsidiaries.aspx. Presently your Company does nothave any material subsidiary.

Surya Nepal Private Limited

Gross Domestic Product (GDP) of Nepal grew by 7.0% for the year ended 16th July 2019as against 6.7% in the previous year. Improvement in GDP growth was aided by enhancedagricultural output on the back of good monsoons increase in tourist arrivals higherinward remittances fuelling consumption and higher industrial output due to increasedavailability of power. On the policy front the Government of Nepal introduced severalindustry-friendly regulations including the new Industrial Enterprises Act EnvironmentProtection Act and amendment to the existing Land Act.

These reforms are steps in the right direction and are expected to go a long way inenhancing the ease of doing business in Nepal.

After a prolonged period of sluggish growth Nepal's economy had been on a healthygrowth trajectory over the last three years clocking an average Real GDP growth of over7% per annum. Unfortunately this growth momentum suffered a severe setback with the onsetof the COVID-19 pandemic and consequent imposition of nation-wide lockdowns to combat itsspread. As per latest estimates released by the Government of Nepal growth for the fiscalyear ending 15th July 2020 is expected to decelerate sharply to 2.3% with furtherdownside bias. The Government of Nepal has taken a number of initiatives includingvarious fiscal and monetary measures to alleviate the stress in the economy. Howeverlower inward remittances on account of job losses suffered by Nepalese expatriatessignificant drop in tourism and substantial supply chain disruptions are expected to weighon economic growth in the near term. Going forward on-ground implementation of thereforms and industry-friendly policies promulgated to promote investments will be crucialto effect a progressive economic recovery.

The legal cigarette industry occupies an important place in Nepal's economy and is amajor contributor to the manufacturing sector of the country. However the discriminatorytaxation regime has posed significant challenges to the industry over the years.

The company continues to engage with policy makers for equitable non-discriminatorypragmatic evidence based regulations and taxation policies that balance the economicimperatives of the country and the tobacco control objectives considering the uniquetobacco consumption pattern in Nepal.

Despite the extremely challenging operating environment the company reinforced itsmarket standing by leveraging its strong portfolio of offerings superior product qualityand a deep and wide distribution network. Relentless focus on developing world-classproducts anchored on innovation and benchmarked international quality standards continuesto be a key source of sustainable competitive advantage for the company. During the yearthe product portfolio was further augmented with the launch of Singha King size Filter inselect markets. The manufacturing systems of the company continued to set benchmarks inresponsiveness quality and productivity. Quality processes and hygiene standards werefurther strengthened. The company continues to digitalise and automate business processesacross multiple areas of operations including human resource management order to cashcycle and market related data analytics.

During the year the company enhanced its market standing in the Agarbatti segmentthrough focused investments in brand building effective consumer activation initiativesand enhanced availability in target markets across the country. The portfolio currentlystraddles all segments offering consumers a wide choice of fragrances price points andpackaging formats.

In the Safety Matches business the company further enhanced its market standing andleadership position. The business continued to focus on delivering superior productquality enhancing distribution across markets by leveraging the strong trade marketingand distribution capabilities.

In the Confectionery segment the company's manufacturing facility at Biratnagar ineastern Nepal commenced commercial operations during the year. The facility will enablethe company to achieve scale and offer consumers a wide range of high qualityconfectionery products manufactured within the country.

The company continues to support and invest in initiatives aimed at enhancing thesocial and economic capital of the nation covering 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 agri-infrastructure and vermicomposting inareas proximate to operating locations

• provide training and development to farmers towards improvement in productivityand other income generating activities

• support the animal husbandry sector by providing extension services coveringanimal breeding health and nutrition in order to drive yield improvement and higherreturns for underprivileged farmers

• contribute towards improvement in quality of education in public schools in theeconomic vicinity of its operating locations

• provide assistance towards relief activities to the people impacted by naturalcalamities.

During the year the company's Revenue from Operations stood at Nepalese Rupees (NRs.)4018 crores (previous year NRs. 3576 crores) and Profit After Tax stood at NRs. 1110crores (previous year NRs. 945 crores) recording a growth of 12% and 17% respectively.

The company continues to be one of the largest contributors to the exchequeraccounting for about 3% of the total revenue of the Government of Nepal.

The Company declared a dividend of NRs. 489/- per equity share of NRs. 100/- each forthe year ended 16th July 2019 (31st Asadh 2076) amounting to NRs. 985.82 crores.

The company is well positioned to deliver superior performance over the long-term byleveraging the significant investments made by it over the years.

ITC Infotech India Limited and its subsidiaries

The IT services industry continues to witness the mainstream adoption of digitaltechnologies such as Data Analytics Artificial Intelligence and Cloud-based applicationplatforms and infrastructure. Accelerated adoption of these emerging technologies isdriven by the need for enterprises to deliver impactful business solutions along thedimensions of augmenting revenue streams increasing operational agility and enhancingcustomer experience. Intelligent technologies are enabling a paradigm shift in the wayconsumer needs are served. Clients are also accelerating the use of Automation to optimiseresources in technology areas that are involved in providing 'business as usual Rsservices such as Application Maintenance and Support.

According to NASSCOM estimates the Indian IT-BPM industry grew by 7.7% in dollar termsin 2019-20 driven by strong growth in digital technologies. Responding to the shift inspending towards digital technologies IT service providers continue to strengthen theircapabilities in these areas through a combination of direct investments and partnershipswith Independent Software Vendors (ISVs) and startups. Increasing on-site and near-shorepresence and investments in re-skilling employees in digital technologies have also beenkey areas of focus of IT Service providers in recent times.

The critical role of technology to deliver business impact is providing IT Servicesproviders an opportunity to engage in increasingly strategic conversations with clients.IT Services providers are differentiating themselves by providing business solutions thatlie at the intersection of industry domain and technology.

A deep understanding of the clients Rs industry domain along with cutting-edgecompetency in relevant digital technologies will be critical in gaining sustainablecompetitive advantage going forward.

In this context the company remains focused on providing domain-led digital servicesand solutions to customers in identified industry verticals. During the year the Businessgrew across all operative markets. Global In-house Centers (GIC) Services Data andAnalytics Application Development & Maintenance and Infrastructure services were someof the key drivers of growth during the year. The company also forged new alliances andstrengthened existing relationships with Independent Software Vendors (ISVs) and start-upsin areas such as Automation Data and Analytics and Loyalty.

During the year the company posted robust growth with consolidated Total Incomegrowing by 12% to Rs 2268.63 crores (previous year Rs 2019.91 crores) driven by increasingtraction with existing customers as well as new client additions especially in digitaltechnologies across the company's operating geographies.

Profit Before Tax stood at Rs 288.34 crores (previous year Rs 155.40 crores) and NetProfit doubled to Rs 209.47 crores (previous year Rs 103.90 crores).

For the year under review:

a. ITC Infotech India Limited recorded Revenue from Operations of Rs 1529.87 crores(previous year Rs 1212.68 crores) and Net Profit of Rs 194.69 crores (previous year Rs76.46 crores). For the year under review the company paid a dividend of Rs 11.75 perEquity Share of Rs 10/- each aggregating Rs 100.11 crores (previous year: Rs 8.25 perEquity Share of Rs 10/- each aggregating Rs 70.29 crores).

b. ITC Infotech Limited UK (ITC Infotech UK) a wholly-owned subsidiary of thecompany recorded Revenue of GBP 49.82 million (previous year GBP 49.11 million) and NetProfit of GBP 1.23 million (previous year GBP 1.57 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$105.12 million (previous year US$ 96.46 million) and Net Profit of US$ 3.28 million(previous year US$ 3.65 million).

For the year under review the company paid a dividend of US$ 11 per share on 182000Common Shares (without par value) aggregating US$ 2.0 million (previous year: US$ 10 pershare aggregating US$ 1.82 million).

The company's superior service delivery and technology capabilities continue to earnglobal recognition.

During the year the company was recognised in the 'Disruptors Rs category in Avasant'sIntelligent Automation RadarView 2019 report which ranked it amongst the Top 24 serviceproviders globally. The company was also awarded 'Best of The Global Outsourcing 100 Rsservice providers by International Association of Outsourcing Professionals (IAOP) and wasfeatured as a 'Leader Rs in their 'Global Outsourcing 100 Rs report.

The outbreak of the COVID-19 pandemic has resulted in heightened uncertainty globallyacross industry segments including information technology. The lockdown and otherrestrictions imposed by governments across the globe have had significant impact on theoperations of some of the company's clients in sectors such as Travel and Hospitality.

The company continues to take proactive steps to ensure the safety of its employeesprovide uninterrupted delivery of services to its clients and minimise the impact of theglobal pandemic on the company's performance in the near term.

The company remains committed to its transformation journey with a sharper focus onproviding differentiated business-friendly offerings to select industry verticals andtechnology areas. The company will continue to focus on building domain-specific digitalsolutions across identified areas and driving efficiencies through automation in deliveryinvestments in developing employees in emergent technologies and other internal processes.

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.

Due to a bumper crop during the year potato prices remained subdued till September2019. However prices started to rise sharply in the second half of the year on account oflower Kharif crop output as well as delay in arrival of the early Rabi crop due to heavyrains and an extended monsoon. The company leveraged the strength of its brand superiorproduct quality better on-field performance and strong trade and customer relationshipsto increase its market standing. During the year Revenue from Operations posted robustgrowth of 26% to Rs 202.26 crores (previous year Rs 160.26 crores) while Net Profit stoodat Rs 20.34 crores (previous year Rs 8.20 crores). Total Comprehensive Income for the yearstood at Rs 20.26 crores (previous year Rs 8.23 crores). During the year the companydeclared interim dividend Rs 4/- per Equity Share of Rs 10/- each aggregating Rs 15.19crores.

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 (TASL) a wholly-owned subsidiary of your Company.

For the year under review:

a. Technico Pty Limited Australia registered a turnover of Australian Dollar (A$) 2.49million (previous year A$ 2.41 million) and a Net Profit of A$ 1.56 million (previous yearA$ 1.25 million).

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

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-premium residentialapartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded 'Strategic Development Project Rs status entitling thecompany to various fiscal benefits in Sri Lanka. Further the Project is also exempt fromSri Lankan foreign exchange regulations.

After slowing down on account of the terror incidents in Sri Lanka in April 2019construction activity picked up pace and made steady progress during the year. Howeveroutbreak of the COVID-19 pandemic and consequent restrictions disrupted constructionactivity towards the end of the year. Sales of 'The Sapphire Residences Rs luxuryapartments which were gathering momentum were also impacted by the pandemic and themuted business environment in the country. Project activities have since resumed and arebeing progressively ramped up while ensuring highest standards of health and safetyprotocols.

Your Company's investment in WLPL stood at US$ 236 million as at 31st March 2020.

Landbase India Limited

The company owns 'ITC Grand Bharat Rs - a 104-key all-suite luxury Retreat at Gurugramwhich has been licensed to your Company. The Retreat an oasis of unhurried luxury isco-located with the company's prestigious Classic Golf & Country Club a 27-hole JackNicklaus 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 Rs by Conde Nast Traveller USA the Editor's ChoiceAward by Travel+Leisure magazine for being the 'Best Luxury Resort - Domestic Rs and the'Best Venue for Intimate Weddings and Celebrations Rs in the Wow Awards Asia byEventFaqs. The property's spa - Kaya Kalp - The Royal Spa was awarded 'Favorite Spa in anIndian Hotel Rs by Conde Nast Traveller India as well as the 'Best Destination Spa(India) Rs for 2019 by AsiaSpa India.

During the year the Classic Golf & Country Club sustained its leadership positionin the corporate tournament segment and hosted various prestigious tournaments including'Classic Golf & Country Club International Championship 2019 Rs and the 'PanasonicIndia Open Rs in association with the Asian Tour.

The Club enjoys strong brand equity with its members guests and the golfing fraternityand continues to receive patronage of professional and amateur golfers in the country.

In view of the ongoing COVID-19 pandemic the operations at the Club had been suspendedin March 2020. After due approvals the company has re-opened the Club in the month of May2020 with the implementation of highest levels of safety and hygiene standards socialdistancing norms and full compliance with all Environmental Health and Safety (EHS)protocols.

During the year ended 31st March 2020 the Company recorded Total Income of Rs 28.37crores (previous year Rs 26.57 crores) and Net Profit of Rs 2.85 crores (previous year Rs3.11 crores). Total Comprehensive Income for the year stood at Rs 2.82 Crores (previousyear Rs 3.13 crores).

Srinivasa Resorts Limited

The company's hotel 'ITC Kakatiya Rs in Hyderabad continued to face sluggish demandconditions during the year - with revenues from sale of rooms as well as from Food &Beverages remaining flattish.

The company received the Gold Award under 'Commercial Buildings Rs category forpromoting energy conservation practices by Telangana State Renewable Energy DevelopmentCorporation Ltd. 'Dakshin' the fine dining restaurant at the hotel was adjudged the'Best South Indian Fine Dining Restaurant Rs at the Times Food Guide Nightlife Awards 2020for the 10th consecutive year.

The company recorded Total Income of Rs 62.48 crores (previous year Rs 60.49 crores)for the year ended 31st March 2020 with Net Profit of Rs 3.24 crores (previous year NetLoss of Rs 2.12 crore). Total Comprehensive Income for the year stood at Rs 3.16 crores(previous year (-) Rs 2.13 crore).

Fortune Park Hotels Limited

The company which caters to the 'Mid-market to Upscale Rs segment through a chain ofFortune hotels continues to forge new alliances and expand its footprint. Currently thecompany has an aggregate inventory of nearly 4000 rooms spread over 52 properties ofwhich 43 are operating hotels. Of the balance nine properties two are slated to becommissioned in the ensuing year while seven are in various stages of development.

The company has established 'Fortune Rs as the premier 'value Rs brand in the Indianhospitality sector. The brand remains a frontrunner in its operating segment and is wellpositioned to sustain its leadership position in the industry.

During the year the company was awarded the 'Versatile Excellence Travel Award 2020for Best Business Hotel Chain of the Year Rs and the 'Today's Traveller Award for BestUpscale Hotel Chain 2019'.

The outbreak of COVID-19 has significantly impacted the travel & tourism industryacross all markets. Consequently most of the properties under the brand were notoperational until relaxations were announced in May 2020. The company has takenappropriate measures to ensure safety of all its employees.

After redesigning and implementing operating procedures with enhanced focus on safetyhealth and hygiene about half of the properties have since re-commenced operations.

During the year ended 31st March 2020 the company recorded Total Income of Rs 39.68crores (previous year Rs 42.23 crores) and Net Profit of Rs 2.69 crores (previous year Rs6.61 crores). Total Comprehensive Income for the year stood at Rs 2.76 crores (previousyear Rs 6.63 crores). During the year the company declared an interim dividend of Rs167.00 Per Equity Share of Rs 10/- each for the year ended at 31st March 2020 (previousyear Rs 12.50 per Equity Share) aggregating Rs 7.52 crores.

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 expected to be completed over thenext year.

The hotel was temporarily shut due to the outbreak of COVID-19 up to mid-May 2020. Thecompany has taken appropriate measures to ensure safety of all its stakeholders and hassince re-commenced hotel operations with strong focus on safety health and hygieneprotocols.

During the year ended 31st March 2020 the company recorded Total Income of Rs 1.69crores (previous year Rs 1.61 crores) and Net Profit of Rs 1.23 crores (previous year Rs1.10 crores). Total Comprehensive Income for the year stood at Rs 1.23 crores (previousyear Rs 1.10 crores).

The Board of Directors of the company has recommended a dividend of Rs 70.00 per EquityShare of Rs 100/- each for the year ended 31st March 2020 (previous year Rs 70.00 perEquity 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 order book for machines during the year remained muted due to sluggishdemand for capital investments arising out of subdued consumer sentiments excess capacityin FMCG and Pharmaceutical industries and stiff competition from national and regionalplayers. Performance for the fourth quarter of 2019-20 was also impacted due touncertainties arising out of the COVID-19 pandemic. The company's Revenue from Operationsfor the year stood at Rs 12.33 crores (previous year: Rs 9.68 crores) with a Net Profit ofRs 0.07 crore (previous year Rs 0.04 crore). Total Comprehensive Income for the year stoodat Rs 0.06 crore (previous year Rs 0.06 crore).

During the year the company issued 500000 9% Cumulative Preference Shares of Rs100/- each aggregating Rs 5 crores to your Company to meet its working capitalrequirements and other business needs.

On 21st March 2020 the equity shareholders of the company approved reduction of theequity share capital of the company from Rs 188460000/- comprising 188460000 EquityShares of Rs 1/- each to Rs 185081193/- comprising 185081193 Equity Shares of Rs 1/-each by way of cancelling and extinguishing in aggregate 3378807 Equity Shares of Rs1/- each held by shareholders other than your Company in lieu of payment not exceeding Rs1/- to such shareholders. The application for reduction of equity share capital has sincebeen filed with the National Company Law Tribunal Mumbai Bench for its confirmation.

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's performance was impacted by decline in demand in thesecond half of the year due to disturbances in the North East region. This was furtherexacerbated by the lockdown in March 2020. The company's Revenue from Operations for theyear stood at Rs 147.85 crores (previous year Rs 161.69 crores) while Net Profit stood atRs 4.79 crores (previous year Rs 9.05 crores) and Total Comprehensive Income for the yearstood at Rs 4.73 crores (previous year Rs 9.12 crores). The performance was also impactedby certain one-time expenditures relating to re-alignment of manufacturing lines tofacilitate manufacturing of new product variants.

The company declared a dividend of Rs 26.95 per Preference Share of Rs 100/- each andan interim dividend of Rs 0.14 per Equity Share of Rs 10 /- each for the year ended 31stMarch 2020.

Russell Credit Limited

During the year the company recorded Total Income of Rs 64.99 crores (previous year Rs61.35 crores) and Net Profit of Rs 41.75 crores (previous year Rs 37.84 crores). TotalComprehensive Income for the year stood at (-) Rs 68.86 crores (previous year Rs 65.42crores) reflecting inter alia the adverse movement in market value of certain long termstrategic investments. The company continues to monitor all its investments closely inview of the volatile market conditions. The company also continues to exploreopportunities to make investments in areas of strategic importance to the ITC Group.Temporary surplus liquidity is mainly deployed in bonds debt mutual funds bankcertificate of deposits and bank fixed deposits. During the year the company declaredinterim dividend Rs 0.85 per Equity Share of Rs 10/- each aggregating Rs 54.95 crores.

Gold Flake Corporation Limited

During the year the company recorded Total Income of Rs 8.48 crores (previous year Rs4.01 crores) and Net Profit of Rs 7.30 crores (previous year Rs 2.86 crores) due toincrease in dividend income. The company holds 50% equity stake in ITC Essentra Limited -a joint venture with Essentra Group UK.

Greenacre Holdings Limited

During the year the company recorded Total Income of Rs 5.70 crores (previous year Rs5.33 crores) and Net Profit of Rs 1.33 crores (previous year Rs 1.78 crores). The companycontinues to provide maintenance services for commercial office buildings. During theyear the company also entered into the business of providing engineering procurement andconstruction management services and project management consultancy services.

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 0.07 crore duringthe year (previous year Rs 0.06 crore) and Net Profit of Rs 0.02 crore (previous year Rs0.02 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.

During the year the company recorded Total Revenue of Rs 0.07 crore (previous year Rs0.10 crore) and Net Loss of Rs 0.14 crore (previous year loss of Rs 0.55 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 0.08 crore (previous year Rs0.05 crore) and Net Profit of Rs 0.0003 crore (previous year (-) Rs 0.007 crore).

NOTES ON JOINT VENTURES

ITC Essentra Limited

The relentless pressure on volumes of the legal cigarette industry on account of thepunitive taxation regime and intense regulatory burden with consequent growth in illicitcigarette trade continues to exert pressure on the demand for cigarette filters from thelegal industry.

Despite such challenging business conditions the company was able to increase itsrevenue and profits on the back of improved sales mix and strategic 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 world-class innovation superior executionconsistent delivery and best-in-class quality.

During the year ended 31st March 2020 on a comparable basis the company's revenuefrom operations stood at Rs 381.19 crores (previous year Rs 357.47 crores). Net Profitduring the year stood at Rs 42.09 crores (previous year Rs 32.79 crores).

The company continues to make investments in technology induction and capabilitybuilding towards sustaining its position as the innovation and quality benchmark in theIndian cigarette filter industry.

The Board of Directors has recommended a dividend of Rs 30.00 per Ordinary Share of Rs10/- each (previous year total dividend of Rs 30.00 per Ordinary Share of Rs 10/- each)for the year ended 31st March 2020.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited a joint venture of your Company with JodhanaHeritage Resorts Private Limited currently operates 36 heritage properties across 15states in India. The company with its WelcomHeritage brand portfolio comprising 'LegendHotels'

'Heritage Hotels Rs and 'Nature Resorts' provides uniquely differentiated offerings toguests in the cultural heritage and adventure tourism segments respectively.

The WelcomHeritage hotels brand was awarded 'The Best Heritage Hotel Chain Rs byToday's Traveller and 'Most Preferred Heritage Hotel Chain & Pioneers of Heritagehospitality Rs by VETA.

During the year ended 31st March 2020 the company recorded Total Income of Rs 3.69crores (previous year Rs 3.82 crores) and Net profit of Rs 0.39 crore (previous year (-)Rs 0.14 crore). Total Comprehensive Income for the year stood at Rs 0.35 crore (previousyear (-) Rs 0.15 crore).

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 2020.

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 anyalternative project plans proposed by the JV partner. However the JV partner refused toprogress the project and instead expressed its intent to exit from the JV by selling itsstake 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. On 21st January 2020 the matter was assigned to a new bench which is expected toinitiate hearings soon.

During the year ended 31st March 2020 the company recorded a Net Loss of Rs 36.77crores (previous year Rs 30.09 crores). The Net Worth of the company stood at (-) Rs 68.74crores as at 31st March 2020 (previous year (-) Rs 31.98 crores). Your Company's totalinvestment in LDPL was Rs 41.95 crores. In view of the aforestated developments yourCompany had earlier made a provision of Rs 23.45 crores towards diminution in the carryingvalue of investment in LDPL in the previous year. A further provision of Rs 10 crores hasbeen made during the year bringing the carrying value of the company's investment in LDPLas at 31st March 2020 to Rs 8.5 crores.

The financial statements of LDPL for the year ended 31st March 2020 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 March2020 have been prepared based on the financial statements prepared by the management ofLDPL.

NOTES ON ASSOCIATES

International Travel House Limited

The company is engaged in the business of providing travel related services tocorporate travellers in India and abroad. The services include car rentals businesstravel leisure meetings incentives conferencing exhibitions (MICE) foreign exchangeand hotel travel services.

During the financial year ended 31st March 2020 the company recorded a Total Incomeof Rs 210.52 crores (previous year Rs 210.64 crores) and Profit/(Loss) for the year of (-)Rs 7.41 crores (previous year Rs 2.68 crores). Total Comprehensive Income for the yearstood at (-) Rs 8.99 crores (previous year Rs 1.98 crores).

Gujarat Hotels Limited

The company's hotel 'Welcomhotel Vadodara' at Vadodara is operated by your Companyunder an Operating License Agreement.

During the year ended 31st March 2020 the company recorded Total Income of Rs 5.92crores (previous year Rs 5.66 crores) Net Profit and Total Comprehensive Income of Rs4.30 crores (previous year Rs 4.08 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 2020 (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 25.32 crores (previous year Rs 23.67 crores) and Net Profitof Rs 0.10 crore (previous year Rs 0.31 crore).

The company continued to maintain high levels of operational responsiveness benchmarkquality in its manufacturing operations and strict compliance and adherence to safetyprotocols. During the year the company was conferred the Platinum Award for SafetySystems Excellence by the Federation of Indian Chambers of Commerce & IndustryLongest Nil Loss Time Accident award by the Govt. of Tamil Nadu Prashansa Patra Award forSafety by the National Safety Council of India and Energy Efficient Unit award by theConfederation of Indian Industry.

Associates of Russell Credit Limited

Russell Investments Limited

During the year the company recorded Total Income of Rs 4.73 crores (previous year Rs6.01 crores) and Net Profit of Rs 2.50 crores (previous year Rs 4.80 crores). TotalComprehensive Income for the year stood at (-) Rs 43.01 crores (previous year (-) Rs 11.82crores) reflecting inter alia the adverse movement in market value of certain long termstrategic investments.

The company continues to explore opportunities for strategic investments.

Divya Management Limited

During the year the company recorded Total Income of Rs 0.53 crore (previous year Rs0.57 crore) and Net Profit of Rs 0.16 crore (previous year Rs 0.24 crore). TotalComprehensive Income for the year stood at Rs 0.16 crore (previous year Rs 0.24 crore).The company continues to explore opportunities for strategic investments.

Antrang Finance Limited

During the year the company recorded Total Income of Rs 0.31 crore (previous year Rs0.28 crore) and Net Profit of Rs 0.06 crore (previous year Rs 0.05 crore).

Total Comprehensive Income for the year stood at Rs 0.06 crore (previous year Rs 0.05crore). The company continues to explore opportunities for strategic 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 widely communicatedacross the enterprise at all times and together with the 'Strategy of Organisation'Planning & Review Processes and the Risk Management Framework provide the foundationfor Internal Financial Controls with reference to your Company's Financial Statements.

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 Enterprise Resource Planning (ERP) systems as a business enabler andalso to maintain its books of accounts. The SOPs in tandem with transactional controlsbuilt into the ERP systems ensure appropriate segregation of duties tiered approvalmechanisms and maintenance of supporting records. The Information Management Policyreinforces the control environment. The systems SOPs and controls are reviewed bydivisional management and audited by

Internal Audit whose findings and recommendations are reviewed by the Audit Committeeand tracked through to implementation.

Your Company has in place adequate internal financial controls with reference to theFinancial Statements. These have been designed to provide reasonable assurance with regardto recording and providing reliable financial information; complying with applicablestatutes; safeguarding assets from unauthorised use; ensuring that transactions arecarried out with proper authorisation and complying with Corporate Policies and Processes.Such controls have been assessed during the year after taking into consideration theessential components of internal controls stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting issued by The Institute of CharteredAccountants of India. Based on the results of such assessment carried out by managementno reportable material weakness or significant deficiencies in the design or operation ofinternal financial controls was observed. Nonetheless your Company recognises that anyinternal control framework no matter how well designed has inherent limitations andaccordingly regular audit and review processes ensure that such systems are reinforced onan 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 Rsand 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 the rolesand responsibilities of the various entities in relation to risk management covering arange of responsibilities from the strategic to the operational. These role definitionsinter alia provide the foundation for appropriate risk management procedures theireffective implementation across your Company and independent monitoring and reporting byInternal Audit.

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

- The Corporate Risk Management Cell through focused interactions with businessesfacilitates the identification and prioritisation of strategic and operational risksdevelopment of appropriate mitigation strategies and conducts periodic reviews of theprogress on the management of identified risks.

- A combination of centrally issued policies and divisionally-evolved procedures bringsrobustness to the process of ensuring that business risks are effectively addressed.

- Appropriate structures are in place to proactively monitor and manage the inherentrisks in businesses with unique / relatively high risk profiles.

- A strong and independent Internal Audit function at the Corporate level carries outrisk 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 with laiddown policies and procedures and help plug control gaps by assisting operating managementin the formulation of control procedures.

- A robust and comprehensive framework of strategic planning and performance managementensures realisation of business objectives based on effective strategy implementation. Theannual planning exercise requires all businesses to clearly identify their top risks andset out a mitigation plan with agreed timelines and accountabilities. Businesses arerequired to confirm periodically that all relevant risks have been identified assessedevaluated and that appropriate mitigation systems have been implemented.

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 accordingly the Risk Management systems and processes prevalent inthese businesses have been independently assessed to be compliant with the said globalStandard on Risk Management. This year ESPB was 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 Rs 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 chaired by the Chief Information Officer is in place toprovide specific focus on cyber security related risks with the primary responsibility oftracking emerging practices and technologies and provide suitable recommendations forenhancing security of the IT systems and infrastructure. The Chief Information Officer isinvited to all the Risk Management Committee meetings and is responsible for ensuring thatthe Cyber Security systems of your Company remain effective and contemporary.

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 sourcing and supply chain network andassociated infrastructure in key growing areas coupled with deep-rooted farmer linkagesensure sourcing of 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 checks andbalances embedded in the organisation and governance structure;

- clearly defined limits for trading position (long and short) and net cash loss forspecific commodities/commodity groups;

- mitigation of price liquidity and counter party risks in respect of commodities suchas 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 at risk'.

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

The COVID-19 pandemic has triggered new risks in business operations. While the gravityof the pandemic is still unfolding your Company pro-actively put in placeCrisis/Contingency Management Teams both at the Business as well as at the Corporatelevels. These cross-functional teams represented by senior management continually reviewstrategic operational financial matters as well as measures relating to employeewell-being health and safety.

Each of the Businesses guided by the Risk Management Framework has reviewed theirapproach to risk mitigation. Some of the key risk areas and mitigation plans are outlinedbelow:

Employee Well-being and Safety: Detailed advisories have been issued to employeeson how to safeguard themselves their colleagues and associates and their families bothat the workplace as well as at their homes. These guidelines also provide details onsocial distancing norms how they should seek help on any aspect concerning their healthfrom within the organisational support system.

Heightened safety protocols were implemented at all units that resumedoperations with end-to-end solutions from transportation of workmen screening regulardeep cleaning and sanitisation innovations to ensure safe distancing and strict adherenceto hygiene standards and use of personal protective equipment where required. YourCompany's Employees Trade Partners Transporters and their associates were providedextensive training - both online and at the place of work - in Social Distancing andPersonal Protection. Standard Operating Processes (SOPs) were developed to ensure safe andhygienic conditions both at the work place as well as in the market. This was supplementedwith training materials like posters pamphlets and guidelines. All employees andassociates were encouraged to download and use the Aarogya Setu app as advised by theGovernment. Prior to entry into any ITC location and facility the status in the AarogyaSetu App is mandatorily checked.

Senior management is frequently interacting with teams to bolster employee morale.E-learning programmes and platforms have been made available to ensure upskilling andknowledge enhancement.

Supply chain: As an immediate step multi-functional teams liaised with authoritiesacross all Unit locations to obtain necessary permissions to commence and thereafterensure uninterrupted operations with suitable safeguards. Business continuity plans havebeen activated by the various Business Teams to secure key material supplies includingusage of substitute materials identification of alternate/domestic vendorsidentification and activation of potential alternative manufacturing capacities tosupplement existing facilities.

Distribution: Measures have been taken to strengthen the system includingidentification of multiple/new transporters and service providers with necessarypermissions to operate evaluating alternative outbound logistics options and securingcapacity.

Realignment of distribution infrastructure was speedily executed to reach consumersmore efficiently as they remained confined at home by being a first mover in speedilyentering into collaborations with service delivery partners leveraging the synergy of theavailability of your Company's trusted brands with the reach of some of the partnersdirect to homes. Your Company's tie-ups for delivery of its products to consumers includediverse companies such as Dominos Swiggy Zomato Dunzo Amway etc.

Innovations including 'ITC Store-on-Wheels Rs to ensure direct reach to consumers inresidential agglomerations increased availability in e-Commerce platforms including the'ITC eStore' direct store deliveries to Modern Trade and substantially expanding presenceof its product portfolio in alternative outlets were some of the measures deployed toensure easier access to your Company's products.

Operations: Provision of basic infrastructure such as sanitisers personalprotection equipment scanners along with protocols for disinfection has been madeavailable at all operating locations. Appropriate training on safety and hygiene practiceshas been provided to own employees as well as to employees of associates. In respect ofHotels Business is benchmarking clinically clean standards by working towards gettingaccreditation by the National Accreditation Board for Hospitals & Healthcare providers(NABH) to enhance existing procedures and controls thereby conforming to hospital-levelhygiene standards.

Regulatory compliance: Considering the issuance of multiple directives fromcentral state and local authorities which have a bearing on operations there is a needto institute a close watch on compliance requirements. Your Company has put in placerequisite systems and processes to ensure that the compliance requirements are wellunderstood and comprehensively implemented.

IT Systems & cyber security: Advisories and Guidelines have been sent to allconcerned employees to facilitate secure and uninterrupted access to the Company's ITsystems and information. Proactive identification and monitoring of threat vectors is doneby the Company's Central IT Security Teams headed by the Chief Information SecurityOfficer (CISO).

Access to secure and contemporary platforms has been provided to facilitate workingthrough remote access. In order to ensure business continuity certain redundancy ofcritical IT resources has been built-in. Systems are also in place to ensure continuity inIT support both from within the organisation and external service providers.

With the implementation of Work From Home (WFH) safeguards against cyber-securityrisks have been strengthened. Employees have been provided with devices and secure remoteconnectivity to facilitate WFH. A 24x7 service desk has been setup to assist in WFH. CyberSecurity related WFH guidelines have been circulated to key stakeholders and antivirusupdates on all Company provided equipment is being ensured.

As enumerated above your Company is comprehensively geared to address potential risksarising out of the pandemic.

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 and Management Information

Systems timely preparation of reliable financial information adherence with relevantstatutes and compliance with 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 external validation evidences the contemporariness of the Internal Auditfunction.

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 hasbeen augmented 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'. Internal Auditcontinues 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 seven 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 strategy development and operational effectiveness.

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

Your Company's Human Resources approach is founded on the guiding principles of VisionValues and Vitality. It is your Company's belief that finding meaning and a larger purposeto human endeavour form the foundation of a high commitment workplace. Your Company'svision of creating value for its stakeholders through world class performance that servesa larger societal purpose is a powerful binding force for the employees of your Company.In achieving this Vision your Company's Values of Trusteeship Customer Focus Respectfor People Excellence Innovation and Nation Orientation serve as the bedrock of allthought and action.

All of this coalesces through the collective vitality of your Company as evidenced inexcellence in strategy formulation and execution. Human Resource systems and processesgoverning talent selection performance management capability building employeerelations recognition rewards and employee well-being all play a critical role inenhancing vitality. Your Company's employees frequently engage directly with the Chairmanand the members of the leadership team through various forums which serve as a vitalmeans of inspiring and communicating your Company's core purpose reinforcing values andsharing the demonstrated successes of vitality.

Your Company's strong employer equity has enabled the attraction and retention of highquality talent.

The management trainee programme augmented with recruitment of experienced talent fromthe market is an integral part of our leadership pipeline development process. Wecontinue to draw the finest management technical and commercial talent from premierinstitutions in the country and are ranked amongst the leading companies in theseinstitutions. Your Company's intensive engagement with campuses over decades tocommunicate ITC's talent proposition through case study competitions knowledge sharingprogrammes by senior managers and the annual internship programmes have all contributed tocreate a compelling proposition for the best candidates to aspire for a career with ITC.Your Company continues to enthuse talent with challenging work market drivenremuneration learning avenues and quality of life to further strengthen the employmentrelationship.

Your Company's approach to management development is founded on the belief thatlearning initiatives must remain synergistic and aligned to business outcomes.

Towards this end your Company has assiduously built a culture of continuous learninginnovation and collaboration across the organisation by providing cutting-edge learningand development support.

The emphasis is on providing experiential learning an enabling and supportiveenvironment and promoting learning agility. Deep functional expertise is fostered early inone's career through immersion in complex problem-solving assignments requiring theapplication of domain expertise. Managers are assessed on your Company's behaviouralcompetency framework and provided with learning and development support to address areasidentified for improvement. Key talent is provided critical experiences in high impactroles and mentored by senior managers. This promotes the development of a pool ofhigh-quality talent through mentorship coaching and learning opportunities.

Your Company has identified three capability platforms relevant to making businessesfuture-ready - Business Critical Strategic Competencies Leadership Development andOrganisation Identity & Pride. Employees are offered best in class learning anddevelopment support comprising a blend of classroom online and on-the-job training. Ineach of these areas globally benchmarked learning curriculums are designed supplementedwith business-critical application projects. This approach ensures that the application oflearning fructifies in a manner which benefits your Company's business results.

The state-of-the-art technical training facility in Ranjangaon Maharashtra - ITCGurukul the first integrated facility catering to your Company's skilling journey formanufacturing excellence in the FMCG Businesses won Excellence in Practice Award fromprestigious Association for Talent Development USA. The award recognised ITC Gurukul'sefforts in the area of leveraging technology to enhance training effectiveness.

Your Company continues to strengthen its performance management system and its cultureof accountability through the widespread adoption of the system of Management ByObjectives. Performance planning through clearly defined goals outcomes based assessmentand alignment of rewards to achievement of results have all contributed to a robustculture of ownership and accountability. 'Career Conversations Rs and succession planningprocesses have contributed to helping employees realise their potential craft theircareers while recognising their strengths and areas of development and ensure a soundworkforce planning system.

In 2020 your Company completed the third edition of its Employee Engagement Survey -iEngage capturing employee perceptions and views on various workplace dimensions with97% of employees responding to the survey. Survey results indicate that 95% of employeesare proud to work at ITC a score that is amongst the highest globally. The results ondimensions such as Employee Engagement Performance Enablement and ManagerialEffectiveness indicated substantial progress over the last survey undertaken in 2018bearing testimony to the various initiatives launched and strengthened by your Company.Your Company undertook various initiatives in the spheres of enabling processes employeewell-being work-life balance and growth & development during the year. Employeerecognition through introduction of recognition platforms across businesses communicationthrough Town Halls skip level meetings of young managers with senior leadersreinforcement of career dialogues and improving goal clarity through the performancemanagement system have all contributed to improving the levels of engagement across theCompany. The results of the 2020 survey have also set the agenda for action plans tocontinue to strengthen your Company's value proposition.

Your Company strengthened its communication platform for employees this year through'Studio One' which created an avenue for employees to hear from and engage directly withleaders. The Chairman's periodic address to employees and sharing of your Company'svision strategy and milestones were cascaded throughout the ITC community leveraging theStudio One platform. Through the IRIS application employees and stakeholders continue toshare content related to the Company across social media platforms building awarenessabout brands services and initiatives.

Driven by an ambitious growth agenda your Company has commissioned several world-classIntegrated Consumer Goods Manufacturing and Logistics facilities across the country andthe footprint is in the process of being expanded further. Your Company believes thatalignment of all employees to a shared vision and purpose is vital for winning in themarketplace.

It also recognises the mutuality of interests with key stakeholders and is committed tobuilding harmonious employee relations. Your Company remains dedicated to an EmployeeRelations climate of partnership and mutuality while ensuring operations are costcompetitive flexible and responsive. The Employee Relations philosophy of your Companyanchored in the tenets of Scientific Management Industrial Democracy Human Relations andEmployee Well-being has contributed to building a robust platform which has aided theconclusion of long-term agreements at several of its manufacturing units and hotelproperties. Smooth commencement of operations at greenfield locations and the execution ofproductivity improvement practices was ensured. Several initiatives have been taken tofoster a culture of commitment amongst the demographically diverse workforce in these newfacilities.

The COVID-19 pandemic and the consequent lockdown posed a formidable challenge to theCompany's operations and its stakeholders. Recognising early the potential impact of thepandemic your Company operationalised the Central and Business specific Contingency Teamswhich initiated several preventive actions under the supervision of the CorporateManagement Committee. With several of our units engaged in the supply of essentialproducts and therefore remaining operational ensuring a safe working environment in thenew context was the highest priority.

The highest standards of safety and precautionary measures were established in everyUnit extensive distribution of personal protective equipment undertaken and working fromhome adopted wherever the nature of work permitted such arrangements. Extensivecommunication and training on safety protocols - for the work place and for employee homesand communities adoption of technology enabled solutions to ensure compliance andprevention and periodic updation of such measures reflecting the changing scenario formedthe cornerstone of providing a safe and secure workplace. As an illustration your Companyintroduced a mobile phone based application for employees that serves as a single point ofinformation on all COVID-19 related Company advisories various employee led initiativesin the context of the pandemic and the technology enablement to contact trace whenrequired.

During these difficult times your Company reached out to the disadvantaged and weakersections of society and with the active participation of employees provided support andassistance across a large number of locations. Under such challenging circumstances yourCompany's employees and business associates continued to ensure that the manufacture andsupply of essential products remained largely undisturbed. The changed circumstanceswitnessed a surge in the utilisation of on-line training content which witnessedeleven-fold increase having been curated and extensively communicated to employees. Thiswas supplemented with the provision of counselling services and other employee wellnessprogrammes internal communication drives across a spectrum of platforms recognising therole of employees in reaching essential products to consumers and direct communication byleaders across the Company with employees addressing queries and engaging with them. Theresponse to the pandemic saw your Company's employees scale new heights in collaborationand nation orientation and go beyond the call of duty in supporting those in distress andreinforcing your Company's trust with consumers.

Your Company believes that the drive for progress is in never being satisfied with thestatus quo. We are confident that each and every one of your Company's over 28000employees will relentlessly strive to meet the bold growth agenda deliver world-classperformance innovate newer and better ways of doing things uphold human dignity fosterteam spirit and discharge their role as 'trustees Rs of all stakeholders with true faithand allegiance.

Your Company is committed to perpetuate this vitality of ITC - its growth as a valuegenerating engine and also as an exemplary institution - so that it continues to succeedin its relentless 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 illegal or unethical conduct actual or suspectedincidents of fraud actions that affect the financial integrity of the Company or actualor suspected instances of leak of unpublished price sensitive information that couldadversely impact your Company's operations business performance and/or reputation.

The Policy provides that your Company investigates such incidents when reported in animpartial manner and takes appropriate action to ensure that the requisite standards ofprofessional and ethical conduct are always upheld. It is your Company's Policy to ensurethat no complainant is victimised or harassed for bringing such incidents to the attentionof the Company. The practice of the Whistleblower Policy is overseen by the AuditCommittee and no employee was denied access to the Committee during the year. TheWhistleblower Policy of the Company originally approved in the year 2014 wascomprehensively reviewed recently. The revised Policy which was approved by the AuditCommittee and endorsed by the Board 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. The sustainability strategy is premised on the belief thatthe transformational capacity of business can be very effectively leveraged to createsignificant societal value through a spirit 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 over 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 15 consecutive years) waterpositive (for 18 years in a row) and solid waste recycling positive (for 13 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 programme andachievement of international benchmarks in energy and water consumption. During the yearover 41% of your Company's total energy requirements were met from renewable energysources - a creditable performance given its expanding hotels and manufacturing footprint.

Your Company has adopted a comprehensive set of sustainability policies that are beingimplemented across the organisation in pursuit of its Triple Bottom Line agenda. Thesepolicies are aimed at strengthening the mechanisms of engagement with key stakeholdersidentifying material sustainability issues and progressively monitoring and mitigating theimpact along the value chain of each Business.

Your Company's 16th Sustainability Report published during the year detailed theprogress made across all dimensions of the 'Triple Bottom Line Rs for the year 2018-19.This report is in conformance with the Global Reporting Initiative (GRI) standards under'In Accordance - Comprehensive Rs category and is third-party assured at the highestcriteria of 'reasonable assurance Rs as per International Standard on AssuranceEngagements (ISAE) 3000. The 17th Sustainability Report covering the sustainabilityperformance of your Company for the year 2019-20 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)

In addition to the regular Social Investments Programme (SIP) of your Company in theseextraordinary times of COVID-19 the immediate and most pressing need was to provideassistance and relief to the poor and vulnerable in the short run and ensure theireconomic rehabilitation in the long run. Your Company has always risen to the challenge ofmitigating the worst impacts of major natural disasters that threaten the well-being andlivelihoods of its stakeholders. Your Company along with ITC Education and HealthcareTrust and ITC Rural Development Trust has set up a COVID Contingency Fund of Rs 215 croresto help the victims of the COVID-19 pandemic and in controlling its spread. A large partof the fund has been utilised towards providing relief to the poor and vulnerable sectionsof society who are facing severe disruptions to their livelihoods. The actions include (a)providing food and personal hygiene products to District Authorities and other governmentbodies whose eco-system reaches out to the weakest sections of society; (b) supply of dryration kits or cooked food to migrant labour camps and for doctors in governmenthospitals; (c) supply of PPEs to district hospitals and to the frontline staff of thehealth department; and (d) contribution to the PM CARES Fund.

In addition to the Company's CSR funds being partly redeployed towards COVID-19 reliefand assistance:

- The ITC Education and Healthcare Trust has provided financial assistance to ChiefMinister's Relief Funds of states which have witnessed the worst outbreak of the pandemicand are engaged in minimising its spread.

- The ITC Rural Development Trust has provided funds with the aim of (a) distributinghampers containing essential food products and personal hygiene products amongstbeneficiaries in identified geographies across India; (b) providing assistance toappropriate entities engaged in combating and controlling the spread of the COVID-19pandemic; and (c) contributions to identified Civil Society Organisations engaged inproviding relief to the poor and vulnerable groups suffering economic privations broughtupon by the COVID-19 pandemic.

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 it plans to undertake to createa significant positive impact on identified stakeholders. All these programmes fall withinthe purview of Schedule VII read with Section 135 of the Companies Act 2013 and theCompanies (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 all interventionsthereby enabling participation contribution and asset creation for the community.

- continue to strive for scale by leveraging government partnerships and accessing themost 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 SIP are appropriately designed to buildtheir capacities and promote sustainable livelihoods.

The footprint of your Company's projects is spread over 27 states/union territoriescovering 254 districts.

Social Forestry

Your Company's pioneering afforestation initiative through the Social Forestryprogramme the largest of its kind in the private sector greened 35193 acres during theyear. It is currently spread across 18 districts in 8 states covering 3.64 lakh acres in5292 villages. Together with your Company's Farm Forestry programme this initiative hasgreened over 8.02 lakh acres till date and has generated about 147 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 1.16 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 states ofTripura Assam and Maharashtra this initiative is also creating bamboo wood source that issuitable for agarbatti manufacturing.

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 development and management of local water resources inmoisture-stressed areas by facilitating community participation in planning andimplementing such measures as well as building reviving and maintaining water-harvestingstructures. The coverage of this programme currently extends to 37 districts in 15 states.During the year the area under watershed management increased by 1.22 lakh acres takingthe cumulative coverage area till 2019-20 to over 11.33 lakh acres. 2946 water-harvestingstructures were built during the year creating 3.68 million kilolitres of rainwaterharvesting potential taking the total number of water harvesting structures to 18985 andthe net water storage to 38.16 million kilolitres.

Biodiversity

The focus of the programme is on reviving the ecosystem services provided toagriculture by nature such as natural regulation of pests pollination nutrient cyclingsoil health retention and genetic diversity which have witnessed considerable erosionover the past few decades. During the year your Company's biodiversity conservationinitiative covered 9280 acres taking the cumulative area under biodiversity conservationto 30919 acres in 13 districts and 7 states. 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 promotion of climate-smart agriculture premised on dissemination ofrelevant package of practices adoption of appropriate mechanisation and provision ofinstitutional services. Currently 6.54 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 4786 Farmer Field Schools and 2079 ChoupalPradarshan Khets benefiting 2.72 lakh farmers.

353 Agri Business Centres delivered extension services arranged agri-credit linkagesand established collective input procurement and agricultural equipment on hire. Inpursuit of your Company's long-term sustainability objective of increasing soil organiccarbon a total of 5572 compost units were constructed during the year taking the totalnumber till date to over 45966 units.

The 'Village Adoption Programme Rs pioneered by your Company's Agri Business presentlycovers 223 model villages in the states of Andhra Pradesh Karnataka Telangana andRajasthan. This initiative is aligned to the Prime Minister's Sansad Adarsh Gram Yojana(SAGY) an initiative to promote holistic rural development. Your Company had entered intoa partnership with NITI Aayog in April 2018 to improve agriculture and other alliedservices in 27 aspirational districts of 8 states (Assam Bihar Jharkhand RajasthanMadhya Pradesh Maharashtra Odisha and Uttar Pradesh). The plan is to train governmentofficers who in turn would cascade the methodology to farmers. During the year 864agricultural department staff were trained as Master Trainers and 5147 village levelstaff as Village Resource Persons who have trained 9.73 lakh farmers. Additionally 2.43lakh farmers were trained by your Company directly during the year. The total number offarmers trained in 3 seasons including

Rabi 2018-19 is 15.58 lakh and 15 crops were covered in training. The results of theprogramme show that productivity has increased significantly by 53% cost of cultivationhas dropped by up to 15% and net farmer incomes have increased in the range of 33% to100%.

The 'Baareh Mahine Hariyali Rs programme in certain districts of Uttar Pradesh(Chandauli Ghazipur Prayagraj Varanasi) is a pioneering initiative to facilitatefarmers to enhance their incomes. This programme is founded on a 360-degree multiprongedapproach with interventions such as increased cropping intensity with a third crop duringsummer enhancement of productivity through context-specific agronomic practicesdemonstrated through Choupal Pradarshan Khets (on-farm demonstrations) and provision ofmarket linkages with transparency in assessment of quality prices and weighment. In someregions taking a holistic approach to income diversification as an adjacency livestockdevelopment women empowerment and agro forestry are also included. Over 2 lakh farmershave already benefited from the interventions under the 'Baareh Mahine Hariyali Rsprogramme - over 30000 farmers who have adopted the package of practices reported doublingof income and those who have implemented the programme partially reported increase intheir incomes by 30% to 75%.

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 5 states and19 districts. During the year 1.38 lakh artificial inseminations were carried out whichled to the birth of 0.56 lakh high yielding progeny. Cumulatively the figures forartificial inseminations and calving stand at 25.05 lakh and 8.69 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 year70032 cattle of 40989 dairy farmers across 484 villages in 8 districts of Bihar and 2districts of West Bengal were supported through training programmes on clean milkproduction mastitis control and animal husbandry services like deworming ectoparasitecontrol etc.

Women Empowerment

This initiative provided a range of gainful employment opportunities to over 74000poor women cumulatively supported with capacity building and financial assistance by wayof loans and grants. Included in the total are 29184 ultra-poor women in the 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 15 districts during the year taking the total districts covered till dateto 26. 1062 Super Trainers were trained directly and they in turn trained 2592 MasterTrainers who cascaded the training to 19267 Self Help Groups (SHGs) covering 194433women across 1703 villages. 98441 women of those trained have been linked to Governmentsocial security schemes.

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 26 districts of 13 states the programme covered0.84 lakh children during the year thus taking the total coverage to over 7.75 lakhchildren. 273 government primary schools were provided infrastructure support comprisingboundary walls additional classrooms sanitation units and furniture taking the totalnumber of government primary schools covered till date to 1842. To ensure sustainableoperations and maintenance of infrastructure provided 680 School Management Committeeswere strengthened and 644 Child Cabinets and Water and Sanitation (WATSAN) Committeescumulatively were formed in various schools with the active involvement of students andteachers.

Skilling & Vocational Training

This programme provides training in market linked skills to the youth to enable them tocompete in the job market. 14014 youth were enrolled under different courses during theyear of which 44% were female and 34% belonged to the SC/ST communities. Cumulatively81510 youth have been enrolled under this programme. The programme is operational in 34districts of 17 states.

In addition 13 trainees have graduated in 2019-20 and 27 trainees are currentlyenrolled in the ITC Basic Kitchen Skills Foundation Programme of ITC HospitalityManagement Institute which is a comprehensive undergraduate programme on kitchenservices. Since the inception of ITC Culinary Skills Training Centre in Chhindwara in2014 143 trainee chefs have successfully completed the six-month programme whereincooking skills are 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 reduce incidence of water-borne diseases 1597 Individual HouseholdToilets (IHHTs) were constructed in 28 districts of 15 states in collaboration with therespective State Governments/ District sanitation departments. With this a total of37513 IHHTs have been constructed so far in your Company's catchment areas. In addition19 community toilets were constructed/renovated in Bihar and West Bengal during the yeartaking the total to 81. Along with sanitation infrastructure development special focuswas given to awareness campaigns to create demand and drive behavioural change.

To make potable water available to local communities in three districts of AndhraPradesh Reverse Osmosis (RO) water purification plants were set up in certain villages.15 new RO plants were established in 2019-20 taking the total to 142 which provide safedrinking water to over 1.75 lakh rural people.

Your Company continued to enhance awareness on various health related issues through anetwork of 430 women Village Health Champions (VHCs) who covered nearly 3.04 lakh womenadolescent girls and school children during the year. The programme is operational inseven districts of Uttar Pradesh and three districts of Madhya Pradesh. Apart from makingdoor-to-door visits focusing on aspects like sanitation menstrual and personal hygienefamily planning diarrhoea prevention and nutrition VHCs conduct group meetings with thewomen and adolescent girls school activities and door to door activation in thevillages.

Through your Company's 'Swasth India Mission' a combination of audio-visual aidsgames and practical training was leveraged to encourage healthy hygiene habits. Nearly14.86 lakh children from around 5124 schools in 49 cities in 11 states were coveredduring the year. Additionally access to handwashing was enabled through the unique 'IDGuard Rs initiative to all the students covered in these 5124 schools.

Your Company's Swasth India Mission programme has been a front runner in drivingbehavioural change towards good hand hygiene habits since its inception in 2016. Theprogramme has delivered demonstrated success in terms of seeding hygiene habits in primaryschool children.

In 2019-20 the programme covered 5154 schools in 11 states reaching out to 14.96 lakhchildren and has cumulatively covered over 15000 schools in 82 towns and nearly 56 lakhchildren. The programme was supported by awareness building communication such as 'germ-fuRs and 'hidden monsters Rs to engage children and parents through social media. With theoutbreak of COVID-19 the need to accelerate awareness on hand hygiene became even morecritical. To address this the programme utilised known public figures to spread themessage on staying safe from COVID-19. These campaigns were put out in TV print anddigital media. During the year schools and students were also enabled with access tohygiene products as a continuing feature of the programme.

Over 72000 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 & adolescent health and nutrition and child protection.

Solid Waste Management

Your Company's waste recycling programme 'WOW - Well-Being Out of Waste' enables thecreation of a clean & green environment and promotes sustainable livelihoods for wastecollectors. The programme continued to be executed in Coimbatore Chennai BengaluruMysuru Chikmagalur Delhi Muzaffarpur (Bihar) and several districts of Telangana &Andhra Pradesh besides being expanded to Kochi and Tiruppur during the year. The quantumof dry waste collected during the year was 74300 tonnes from 786 wards. The programme hascovered 125 lakh citizens 52 lakh school children and 2000 corporates since itsinception. It has created sustainable livelihoods for 16205 waste collectors byfacilitating an effective collection system in collaboration with municipal corporations.The intervention has also created over 189 social entrepreneurs who are involved inmaximising value capture from dry waste collected. In Pune your Company is spearheading acircular economy based first-of-its-kind Multi-Layer Plastic (MLP) collection andrecycling programme. As a part of this initiative your Company has created viablerecycling options for post-consumer multi-layered plastic packaging using the expertiseresident within the ITC Life Sciences and Technology Centre for converting multi-layeredplastics into useful items of consumption. In 2019-20 this 360-degree model forsustainable management of MLP packaging waste channelised around 500 MT of Multi-LayerPlastic (MLP)/Low Value Plastic (LVP) waste for recycling.

The 'Mangaldeep Green Temple Rs initiative powered by your Company's SocialInvestments programme 'Mission Sunehra Kal' aims to manage waste close to the templethereby minimising associated costs and waste to landfill. This initiative involvesdeployment of technologies and community involvement to foster a self-sustainablescalable and replicable model for management of offerings in temples. The initiative hasreached out to 76 temples in 3 districts of Tamil Nadu till date.

In addition to WOW a separate programme on solid waste management which deals withboth wet and dry waste is operational in 16 districts of 11 states covering 313228households and collected 22757 MT of waste during the year. This programme focuses onminimising waste to landfill by managing waste at source. Home composting was practiced by20635 households. In 2019-20 14776 MT of wet waste was composted 4537 MT of dry wasterecycled and only 15% of the total waste was sent to landfills.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA/Academy) 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 based on the age-old principle of 'Guru-Shishya Parampara'. Theeminent Gurus of the academy impart intensive training and quality education inHindustani classical music to the scholars. The present Gurus of the Academy are PadmaBhushan Pt. Ajoy Chakrabarty Padma Shri Pt. Ulhas Kashalkar Pt. Partha Chatterjee Pt.Uday Bhawalkar Vidushi Subhra Guha and Shri Omkar Dadarkar.

The Academy's focus continues to be on nurturing exceptionally gifted students selectedfrom across the country through a system of multi-level audition.

Full scholarship is provided to them to reside and pursue music education in theAcademy's campus and in other designated locations under the tutelage of the country'smost distinguished musicians. Creation of the next generation of masters of Hindustaniclassical music for the propagation of a precious legacy continues to be the Academy'sobjective.

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 WASH Institute and Water for Peopleamongst others. These partnerships which bring together the best-in-class managementpractices of your Company and the development experience and mobilisation skills of NGOswill continue to provide innovative grassroots solutions to some of India's mostchallenging 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 believes that a safe and healthy work environment is a prerequisite forensuring employee well-being and adopting best practices in occupational health &safety bears a direct impact on its overall performance. With an aim to percolate safetydeeper into ITC's operational practices and achieve the 'Zero Accident Rs goal yourCompany has developed a comprehensive EHS strategy founded on two pillars: 'Safety byDesign Rs and 'Safety by Culture'.

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 maximisingwater-use efficiencies and rainwater harvesting maximising reuse and recycling of wasteand utilising post-consumer waste as raw material.

Energy Conservation and Renewable Energy

As a responsible corporate citizen your Company has made a commitment to reducedependence on energy from fossil fuels. Accordingly all factories incorporate appropriategreen features and premium luxury hotels & office complexes continue to be certifiedat the highest level by either the US Green Building Council Indian Green BuildingCouncil or the Bureau of Energy Efficiency (BEE). Despite the addition of severalIntegrated Consumer goods Manufacturing and Logistics (ICMLs) facilities expansion in themanufacturing capacity of Value Added Paperboards and Hotels during the year over 41% ofyour Company's total energy requirements were met from renewable sources such as biomasswind and solar.

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. Your Company continues itsefforts to achieve a 50% renewable energy share in its total energy consumption through amix of energy conservation and renewable energy investments despite significantenhancement 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 & 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 & storage ofrainwater (in soil and storage ponds) and recharging aquifers. Additionally efficacystudies are also being carried out across sites in order to verify effectiveness of theinterventions. As on March 312020 your Company's integrated watershed developmentprojects covered over 1.13 million acres and have created a net water storage of 38.16million kilolitres which is over 3 times the net water consumed by ITC's operations in2019-20.

In 2019-20 Paperboards & Speciality Papers unit at Kovai earned a uniquedistinction of being only the second facility in the world and first in India to beawarded the Alliance for Water Stewardship (AWS) Platinum-level certification - thehighest recognition for water stewardship in the world.

Greenhouse Gases and Carbon Sequestration

The greenhouse gas (GHG) inventory of your Company for the year 2019-20 compiled as perthe ISO 14064 Standard has been assured as in the earlier years at the highest'Reasonable Level Rs by an independent third party. The GHG inventory covers emissionsfrom ITC's operations and GHG removals from ITC's large-scale forestry programmes.

Reaffirming your Company's commitment to the ethos of 'Responsible Luxury' all premiumluxury hotels of your Company are Leadership in Energy & Environmental Design (LEED)Platinum certified making it a trailblazer in green hoteliering globally. Your Company isa pioneer in the green buildings movement. In 2004 the ITC Green Centre at Gurugram wasawarded the Platinum Green Building rating by USGBC- LEED (US Green Building Council -Leadership in Energy and Environmental Design) making it the largest Platinum ratedbuilding in the world at that point in time.

ITC Grand Chola the 600-key super-premium luxury hotel in Chennai is amongst theworld's largest LEED Platinum certified green hotels besides holding a 5-Star ratingfrom the Green Rating for Integrated Habitat Assessment (GRIHA) Council. The data centreat Bengaluru ITC Sankhya is the first data centre in the world to receive the LEEDPlatinum certification 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 and the ITC GreenCentre at Bengaluru (both are LEED Platinum certified) continue to demonstrate yourCompany's commitment to green buildings. Virginia House and ITC Centre Kolkata - theheadquarters of your Company are also now USGBC certified at the highest 'LEED PlatinumRs rating. To date 30 buildings of your Company have achieved Platinum certification byUSGBC/IGBC. In order to continually reduce your Company's energy footprint green featuresare integrated in all new constructions and also incorporated in existing hotelsmanufacturing units warehouses 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.

Towards a Circular Economy

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 for87% 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 over 85000tonnes of externally sourced post-consumer waste paper thereby creating yet anotherpositive environmental footprint.

Your Company aims to go beyond the requirements of Plastic Waste Management Rules 2016to ensure 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 affectingthe integrity of the product. This is being done in a structured manner by optimisingdesign identifying alternative packaging material with lower environmental impact andsuitable end-of-life solutions for packaging waste. Your Company is also working towardsestablishing scalable replicable and sustainable models of municipal solid wastemanagement based on circular economy principles. The approach is centred around treatingwaste as a resource and ensuring that zero waste goes to landfill which can be achievedonly when waste is segregated at source. The initiatives focus on educating citizens onsegregating waste at source into dry and wet waste streams and ensuring that value isderived from these resources and in the process create sustainable livelihood for wastecollectors and rag-pickers.

These models operate on a public-private partnership basis with active involvement ofUrban Local Bodies Civil Society and the informal sector of waste collectors.

Under its flagship 'Wellbeing Out of Waste Rs (WOW) programme running across variouscities in Karnataka Bihar Delhi Tamil Nadu Andhra Pradesh Telangana and Kerala over20000 MT of post-consumer plastic waste including around 10650 MT of LVP comprising ofmulti-layered plastic and thin films is being collected annually. The LVP wastecollection programme at Pune in collaboration with SWaCH a cooperative of waste pickerscontinued to scale up covering 13 wards across the city with over 1000 waste collectorsparticipating in the programme. During the year the programme successfully channelisedaround 500 MT of post-consumer LVP waste to an authorised recycler.

Safety

'Safety by Design Rs and 'Safety by Culture Rs are the two pillars of your Company'ssafety strategy.

Your Company follows 'Safety by Design Rs by continuously striving to improve on safetyperformance by incorporating best-in-class engineering standards in the design and projectexecution for all investments in the built environment. This helps reduce potentialhazards as well as optimise operational costs. In addition Environment Health &Safety audits are being carried out to verify compliance with standards.

'Safety by Culture Rs looks at driving behavioural changes so that safety is ingrainedin the culture of the organisation across operating units. Your Company has also pioneeredthe usage of Design Thinking principles for seamless integration of safety in businessoperations. This initiative has resulted in significant positive behavioural changes.

Several national awards and certifications received by various units reaffirm yourCompany's commitment to provide safe and healthy workplace for all.

Promoting Thought Leadership in Sustainability

The 'CII-ITC Centre of Excellence for Sustainable Development' established by yourCompany 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 for the year include the following:

• The Climate Leadership Conference was organised on 1st August 2019 in New Delhito showcase India's leadership on climate action and brought together thought leadersscholars and corporate professionals to position ideas and implement actions. Theconference hosted four sessions on topics including building disaster resilientinfrastructure; start-up eco-system on innovation; supply chain greenhouse gas emissionchallenges; and new government's agenda on climate change.

• 14th Sustainability Summit - Science Systems and Sustainability held on28th-29th August 2019 in New Delhi was attended by 200 participants and 80 speakers. Keydignitaries included Mr Piyush Goyal Hon'ble Minster of Railways Commerce and IndustryGovernment of India Mr. Amitabh Kant CEO

NITI Aayog and Mr Sanjiv Puri Chairman and Managing Director ITC Limited.

• A report titled 'The Un-Plastic Strategy Rs that summarises the challengesrelating to management of plastic waste and provides businesses a strategy to combat theissue was released. In addition the 'Un-Plastic Collective (UPC)' a voluntarymulti-stakeholder initiative was launched by UN-Environment Programme India the Centreand WWF-India with the objective to eliminate plastic pollution and move towards acircular economy.

• CII Sustainability Awards: 75 applications were received across industrysectors of which 29 qualified for recognition.

• Plastic Waste Management: Consultative sessions were organised along with theMinistry of Environment Forest and Climate Change (MoEFCC) and relevant stakeholders todraft a National Framework on Extended Producer Responsibility (EPR) for plastic wastemanagement. Recommendations shared with MoEFCC included e-Governance of Registrationunder Plastic Waste Management Rules 2016 EPR Return Filing System EPR Credit pricingmechanism and online registration of producer responsibility organisation (PROs) at thestate level.

• India Business and Biodiversity Initiative (IBBI):

o The Centre participated in a two-day workshop on Access and Benefit Sharing (ABS)organised on 20th and 21st May 2019 as a part of the Union Ethical Bio Trade (UEBT)Conference 'Beauty of Sourcing with Respect' in Paris France. The workshop focused onthe ABS regulations under the Nagoya Protocol Convention on Biological Diversity (CBD).

o The Centre participated in the UNCCD COP 14 side event on 'Sustainable LandManagement Practices by Indian Business Rs on 4th September 2019 at India Expo MartGreater Noida.

On 7th September 2019 in collaboration with the World Business Council forSustainable Development (WBCSD) the Centre organised a Business Day at the Expo Mart oncombating land degradation and desertification.

• India CEO Forum on Air Pollution: The Centre organised a forum on Air Pollutionon 23rd July 2019 in New Delhi where eighteen CEOs across industries came together toform a core group for 3 years (2019-2022) under the 'National Initiative: Cleaner Air-Better Life' with a mission to accelerate clean air action in India. The objectives ofthis forum are to formulate sectoral roadmaps to reduce emissions get voluntarycommitments from companies and enable peer-learning for reducing air pollution.

• The Clean Industry Report was released in partnership with NITI Aayog On 16thNovember 2019 which presents recommendations of the Task Force on Clean Industry forreducing air pollution from major industrial sources in the airshed of Delhi/NCR.

The major recommendations include i) new policy mandates and incentives forprioritising clean fuels in electricity generation; ii) system-wide changes forleapfrogging to higher co-firing ranges for locally available farm biomass in existingthermal power plants; and iii) more stringent environmental norms for diesel generatorsas per global benchmarks.

• UNFCC Conference of Parties (COP 25): The Centre organised a session on'Practices from Indian Railways and Auto Sector Towards Climate Mitigation Rs as part ofthe UNFCC COP 25 at the India Pavilion IFEMA Madrid on 13th December 2019. Theobjective of the session was to understand how to bring low carbon transition to thesector.

• Circular Economy and Resource Efficiency: On 17th February 2020 the Centrecertified Delhi International Airport Limited (DIAL) for successful implementation of'Single Use Plastic Free Airport Rs measures within IGI Airport's operation voluntarily.

The Centre promoted capacity building in sustainability through a range of training andconsulting assignments on topics including Waste Management Rules and Compliance CSRRules and Impact Measurement Sustainability Reporting Integrated Reporting

GRI Reporting Internal Auditors training on Safety Health & Environment HumanRights and Biodiversity.

Your Company's pursuit of the triple bottom-line approach has allowed it to developunique sustainable and industry-leading solutions to some of the most pressingsustainable development challenges being faced by our country. Combining deep-rootedinsights perspectives and on-ground managerial expertise with meaningful collaborationsand partnerships your Company has created sustainable scalable and replicable businessmodels in response to these challenges. Some of these include the revolutionary ITCe-Choupal ecosystem which has empowered over 4 million farmers the Social and FarmForestry Initiative which has created over 147 million person-days of employment theIntegrated Watershed Development that brings soil and moisture conservation to over 1million acres and the circular economy based waste management models which enabledrecycling of around 80000 MT of dry waste in 2019-20.

R&D QUALITY AND PRODUCT DEVELOPMENT

Your Company's strong portfolio of world-class brands and products continues to besupported by cutting-edge R&D by the globally benchmarked state-of-the-art ITC LifeSciences and Technology Centre (LSTC) in Bengaluru. LSTC's mandate is to drive science-ledproduct innovation with a world-class team of over 350 highly qualified scientists. Theirfocus is on designing differentiated products to address unique needs and deliver superiorbenefits to Indian consumers.

Your Company's LSTC is working on game-changing R&D - driving science-led productinnovation. LSTC harnesses contemporary advances in relevant core areas of science andtechnology whilst seamlessly integrating classical concepts of product development andcross-business synergies. This challenging task of driving science-led product innovationis being crafted by building relevant contemporary set of core competency areas in scienceand product development.

LSTC has evolved over the years and is presently resourced with highly qualifiedscientists with over 900 patents filed world-class scientific infrastructure andstate-of-the-art facilities to conduct experimental research rapid prototyping andprocess development. Centres of Excellence in Biosciences Agrisciences and Materials havebeen established over the past few years. In addition rigorous systems processes andindustry best practices have enabled securing global quality certifications - a keyenabler in delivering products that follow the highest standards in quality safety andefficacy to the Indian consumers.

Your Company has been a forerunner in introducing first-to-the-market innovativeproducts for Indian consumers. In the context of the COVID-19 pandemic LSTC researchersand product development teams have developed and delivered a range of innovative andsuperior products to meet consumer needs in Foods and Personal Care businesses. The futureready scientific platforms in hygiene health and immunity ensured speedy intervention andresponse to the COVID-19 pandemic with a number of hygiene health and immunity productsto serve the nation's needs. Your Company's unique competencies in Materials and Packaginghave focused on delivering innovative recyclable and bio-compostable packaging solutionsin line with the environmental sustainability agenda. LSTC has created long term researchplatforms to evolve multi-generation product concepts.

LSTC has been working on a strategy of building new synergistic value chains in hygieneand nutrition targeted for the Indian consumer. Innovative science-based programmes havebeen initiated to reduce salt sugar and fat from the recipes of packaged food productswithout compromising on sensory attributes. Multiple value propositions have beenidentified in areas of functional foods and personal hygiene where progress is being madetowards developing products to propel future growth. Similar advances in materialschemistry paper sciences and agronomy have been established to develop compellingpropositions to deliver value-added environmentally friendly solutions to our customersand consumers.

In the Agrisciences domain LSTC is engaged in an ambitious R&D programme toaddress future demand of food security improving yields & quality and developing newvarieties. LSTC in collaboration with the Agri Business Division endeavours to ensurecontemporary science outcomes are fully integrated across the value chain from farm tofactory. Scientific platforms in silviculture continue to deliver new clones in tandemwith Paperboards and Specialty Papers Division (PSPD) to enhance wood productivity andpulp quality for sustainable agroforestry and farmer profitability.

In line with your Company's relentless focus on operational excellence and qualityeach Business is mandated to continuously innovate on materials training processes andsystems to enhance their quality competitiveness. During the year your Company's HotelsBusiness leveraged its 'Lean Rs and 'Six Sigma Rs programmes to improve business processefficiencies. This will further enhance capability to create superior customer valuethrough a service excellence framework. The Paperboards Paper & Packaging Businessescontinued to pursue 'Total Productive Maintenance Rs (TPM) programmes with focus oncustomer delivered quality.

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 22000 standards.Additionally the quality of all FMCG products of your Company is regularly monitoredthrough 'Product Quality Ratings Systems Rs (PQRS) which measure competitive superiorityof 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. The Hon'ble Calcutta High Court by its orders allowed thesewrit petitions and the proceedings in respect of these memoranda were quashed. TheEnforcement Directorate filed appeals against these orders before the Division Bench ofthe Calcutta High Court which are pending.

Meanwhile some of the prosecutions launched by the Enforcement Directorate have beenquashed by the Honourable 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.

In a bid to revive the Indian economy which witnessed a sharp slowdown during theyear the Government introduced several measures to support the banking housing and MSMEsectors and announced a sharp reduction in corporate Income Tax rates in September 2019.The Reserve Bank of India (RBI) also adopted an accommodative monetary stance cutting therepo rate by a cumulative 185 basis points since April 2019 besides deploying severalliquidity management tools which pushed the banking system liquidity into surplus from adeficit position at the beginning of the year. This led to a sharp decline in marketinterest rates during the year. The decline was more pronounced in short maturitysecurities as compared to those with longer maturities due to market apprehension ofhigher borrowing by the Government to offset shortfall in revenue collections. Borrowingcost for private sector entities also remained elevated due to market concerns overliquidity profile of NBFCs and highly leveraged corporate groups arising out of defaultby some large corporates in servicing their market borrowings and RBI placing a largeprivate bank under moratorium.

Subsequently the onset of COVID-19 pandemic triggered a risk-off sentiment infinancial markets and Foreign Institutional Investors (FII) pulled out of emerging marketassets including Indian debt/equity markets. The resultant volatility pushed marketinterest rates higher. Towards the end of March 2020 the RBI in tandem with concertedaction by other global Central Banks announced a 75 basis points cut in repo rate alongwith several other measures to enhance liquidity and ease stress in the financial sector.This improved market sentiment and reduced volatility in interest rate movements.

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. Further in an environment of heightened stress in corporate bondmarkets your Company's risk management processes ensured that investment of surplusliquidity was made after careful evaluation of underlying risk while remaining focused oncapturing market opportunities. The ongoing practice of continuous review and monitoringof credit worthiness including engagement with market participants ensured that theinvestment portfolio was not exposed to undue credit risks.

The key themes that influenced currency markets during the year were US-China tradenegotiations and Brexit. To insulate their economies from the slowdown in global economydue to the trade war central banks across the world adopted expansionary monetarypolicies and resorted to rate cuts and asset purchase programs.

On the domestic front whilst strong FII inflows on the back of a decisive mandate inthe General Elections led to Rupee appreciation initially global risk aversion arisingout of US-China trade developments induced volatility and caused sharp depreciation of theRupee.

Slowdown in domestic growth and manufacturing activity exacerbated the situation. Rupeepared some of the losses by end December 2019 due to positive sentiments arising out ofreduction in corporate Income Tax rate and expectation of positive Balance of Payments forthe year as a result of capital inflows and lower crude oil prices. However the spread ofCOVID-19 led to extreme risk aversion across the globe leading to heavy sell-off in theIndian capital markets and a sharp depreciation of the Rupee by nearly 7% during Q4 FY20.

Given the high volatility in the currency markets your Company adopted a proactiverisk management strategy and actively managed the foreign currency exposures by use ofappropriate hedging strategies and instruments.

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 2020 there were no deposits due for repayment except in respect of two depositholders with aggregate outstanding of Rs 20000/- which have been withheld on thedirectives received from the 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. Sanjiv Puri was appointed by the Board of Directors of your Company ('the Board')as the Chairman with effect from 13th May 2019 consequent to the demise of Mr. YogeshChander Deveshwar. With effect from the said date Mr. Puri is the Chairman & ManagingDirector of the Company.

Mr. Hemant Bhargava was appointed with your approval as a Non-Executive Director ofthe Company for a period of three years with effect from 12th July 2019 representing theLife Insurance Corporation of India. Further Mr. Sumant Bhargavan was also appointedwith your approval as a Wholetime Director of the Company for a period of three yearswith effect from the aforesaid date.

Messrs. Ajit Kumar Seth and Anand Nayak who have the required integrity expertise andexperience were appointed by the Members as Directors and also as Independent Directorsof the Company for a period of five years with effect from 13th July 2019.

The Board on the recommendation of the Nomination & Compensation Committee ('theCommittee') at the meeting held on 31st January 2020 appointed Mr. Atul Jerath as anAdditional Non-Executive Director of your Company with effect from the said daterepresenting the General Insurers Rs (Public Sector) Association of India ('GIPSA').Further the Board at the meeting held on 26th June 2020 on the recommendation of theCommittee appointed Mr. David Robert Simpson [representing Tobacco Manufacturers (India)Limited a subsidiary of British American Tobacco p.l.c.] as an Additional Non-ExecutiveDirector of your Company with effect from 28th July 2020 upon completion of his presentterm on 27th July 2020.

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. Jerath and Simpsonwill vacate office at the ensuing Annual General Meeting ('AGM') of your Company.

On the recommendation of the Committee the Board on 26th June 2020 recommended forthe approval of the Members appointment of Messrs. Jerath and Simpson as Non-ExecutiveDirectors of your Company liable to retire by rotation for a period of three years fromthe date of the ensuing AGM and for a period of five years with effect from 28th July2020 respectively.

Ms. Nirupama Rao will complete her present term as an Independent Director of yourCompany on 7th April 2021. The Board on 26th June 2020 on the recommendation of theCommittee recommended for the approval of the Members the re-appointment of

Ms. Rao as a Director and also as an Independent Director of your Company for a periodof five years with effect from 8th April 2021 in terms of Section 149 of the Act andRegulation 17 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ('Listing Regulations').

Messrs. Nakul Anand and Rajiv Tandon will complete their present terms as WholetimeDirectors of your Company on 2nd January 2021 and 21st July 2021 respectively. TheBoard on 26th June 2020 on the recommendation of the Committee recommended for theapproval of the Members the re-appointment of Mr. Anand from 3rd January 2021 and Mr.Tandon from 22nd July 2021 as Directors liable to retire by rotation and also asWholetime Directors of your Company for a period of two years and one year respectively.

Requisite Notices under Section 160 of the Act have been received in respect of Mr.Jerath Mr. Simpson Ms. Rao Mr. Anand and Mr. Tandon who have filed their consents toact as Directors of the Company if appointed.

Appropriate resolutions seeking your approval to the above are appearing in the Noticeconvening the 109th AGM of your Company.

Mr. Sahibzada Syed Habib-ur-Rehman ceased to be a Director of your Company uponcompletion of his term on 15th September 2019. Further Mr. John Pulinthanamrepresenting the GIPSA stepped down from the Board with effect from 23rd December 2019.Your Directors place on record their appreciation for the services rendered by Messrs.Rehman and Pulinthanam.

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. Nakul Anand and Rajiv Tandon will retireby rotation at the ensuing AGM and being eligible offer themselves for re-election. TheBoard has recommended their re-election.

Number of Board Meetings

Six meetings of the Board were held during the year ended 31st March 2020.

Attributes Qualifications & Independence of Directors and their Appointment

The Corporate Governance Policy of your Company inter alia requires thatNon-Executive Directors be drawn from amongst eminent professionals with experience inbusiness/finance/law/public administration and enterprises. The Nomination &Compensation Committee have stipulated the criteria for determining qualificationspositive attributes and independence of Directors including Independent Directors. TheBoard Diversity Policy of your Company requires the Board to have balance of skillsexperience and diversity of perspectives appropriate to the Company. The skills expertiseand competencies of the Directors as identified by the Board along with those availablein the present mix of the Directors of the Company are provided in the 'Report onCorporate Governance Rs forming part of the Report 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 inter alia confirmed that (a) theymeet the criteria of independence prescribed under Section 149 of the Act and Regulation16 of the Listing Regulations and

(b) they are not aware of any circumstance or situation which could impair or impacttheir ability to discharge duties with an objective independent judgement and without anyexternal influence. In the opinion of the Board the Independent Directors fulfil theconditions prescribed under the Act and the Listing Regulations and are independent ofthe management of the Company.

Details of the Company's Policy on remuneration of Directors Key Managerial Personneland other employees are provided in the 'Report on Corporate Governance Rs forming part ofthe Report and Accounts.

Board Evaluation

The Nomination & Compensation Committee as reported in earlier years formulatedthe Policy on Board evaluation evaluation of Board Committees Rs functioning andindividual Director evaluation and also specified that such evaluation will be done bythe Board pursuant to the Act & the Rules thereunder and the Listing Regulations.

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 and responsibilities of the Board asprovided in the Act and the Listing Regulations read with the Company's GovernancePolicy. The parameters for Board performance evaluation have been derived from the Board'score role of trusteeship to protect and enhance shareholder value as well as to fulfilexpectations of other stakeholders through strategic supervision of the Company.Evaluation of functioning of Board Committees is based on discussions amongst Committeemembers and shared by the respective Committee Chairmen with the Board. IndividualDirectors are evaluated in the context of the role played by each Director as a member ofthe Board at its meetings in assisting the Board in realising its role of strategicsupervision of the functioning of the Company in pursuit of its purpose and 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 respectiveCommittee Chairmen after discussions with their Committee members.

The Independent Directors Committee of the Board also reviewed the performance of theChairman other non-Independent Directors and the Board pursuant to Schedule IV to theAct and Regulation 25 of the Listing Regulations.

KEY MANAGERIAL PERSONNEL

During the year Mr. Sumant Bhargavan was appointed with your approval as a WholetimeDirector of the Company as stated above. There were no other changes in the KeyManagerial Personnel of your Company.

AUDIT COMMITTEE & AUDITORS

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

Statutory Auditors

Messrs. S R B C & CO LLP Chartered Accountants ('SRBC') were appointed with yourapproval as the Auditors of the Company for a period of five years till the conclusion ofthe 113th AGM. The Board on the recommendation of the Audit Committee recommended forthe approval of the Members the remuneration of SRBC for the financial year 2020-21.Appropriate resolution seeking your approval to the remuneration of SRBC is appearing inthe Notice convening the 109th AGM of the Company.

Cost Auditors

Your Board as recommended by the Audit Committee appointed the following CostAuditors for the financial year 2020-21:

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

(ii) Messrs. S. Mahadevan & Co. Cost Accountants for audit of Cost Recordsmaintained in respect of all applicable products of the Company other than 'Wood Pulp''Paper and Paperboard Rs and 'Nicotine Gum Rs 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 109th AGM of theCompany.

The Company maintains necessary cost records as specified by the Central Governmentunder Section 148(1) of the Act read with the Companies (Cost Records and Audit) Rules2014.

Secretarial Auditors

Your Board appointed Messrs. Vinod Kothari & Company Practising CompanySecretaries as the Secretarial Auditors of the Company for the financial year ended 31stMarch 2020. The Report of the Secretarial Auditors pursuant to Section 204 of the Act isprovided in the Annexure forming part of this Report.

CHANGES IN SHARE CAPITAL

During the year 33599640 Ordinary Shares of Rs 1/- each fully paid-up were issuedand allotted upon exercise of 3359964 Options under the Company's Employee Stock OptionSchemes. Consequently the Issued and Subscribed Share Capital of your Company as on 31stMarch 2020 stands increased to Rs 12292231241/- divided into 12292231241 OrdinaryShares of Rs 1/- each. The Ordinary Shares issued during the year rank pari passu with theexisting Ordinary Shares 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 can alsobe accessed on the Company's corporate website 'www.itcportal.com Rs under the section'Shareholder Value'. During the year there has not been any material change in theCompany's Employee Stock Option Schemes.

Your Company's Auditors Messrs. S R B C & CO LLP have certified that the EmployeeStock 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 the coveted ISO9001:2015 certification is registered with the Securities and Exchange Board of India asCategory II Share Transfer Agent for providing in-house share registration and relatedservices.

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.

Further the 'Investor Relations Rs section on the Company's corporate website'www.itcportal.com Rs serves as a user friendly online referencer for the shareholders andinvestors in respect of share related matters.

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 Listing Regulations.

All such contracts or arrangements which were approved by the Audit Committee were inthe ordinary course of business and on arm's length basis. No material contracts orarrangements with related parties were entered into during the year under review.Accordingly the disclosure of Related Party Transactions as required in terms of Section134 of the Act read with Rule 8 of the Companies (Accounts) Rules 2014 in Form AOC -2 isnot applicable for this year.

DIRECTORS Rs 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 were 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 and its Subsidiaries ('the Group')Associates and Joint Venture entities in terms of the requirements of the Companies Act2013 (Act) and in accordance with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards specified under Section 133 of the Act.

The respective Boards 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 of each company and for preventing and detecting frauds and other irregularities;the selection and application of appropriate accounting policies; making judgments andestimates that are reasonable and prudent; and the design implementation and maintenanceof adequate internal financial controls that were operating effectively for ensuringaccuracy and completeness of the accounting records relevant to the preparation andpresentation of the consolidated financial statements that give a true and fair view andare free from material misstatement whether due to fraud or error which have been usedfor the purpose of preparation of the consolidated financial statements by the Directorsof your Company as aforestated.

OTHER INFORMATION

Compliance with the conditions of Corporate Governance

The certificate from your Company's Auditors

Messrs. S R B C & CO LLP confirming compliance with the conditions of CorporateGovernance as stipulated under the Listing Regulations is annexed.

Integrated Report

The Company has voluntarily prepared its Integrated Report for the financial year2019-20. As a green initiative the Report has been hosted on the Company's corporatewebsite at https://www.itcportal.com/about-itc/shareholder-value/itc-integrated-report-2020.pdf

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 and 9 to the FinancialStatements.

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 underSection 118(10) of the Act.

Employees

The total number of employees as on 31st March 2020 stood at 28115.

There were 114 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 2020. 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'.During the year the Policy was amended to inter alia provide that effective financialyear 2019-20 in the medium term the dividend pay-out ratio of the Company is expected tobe around 80% to 85% of its profits after tax.

Key Financial Ratios

Key Financial Ratios for the financial year ended 31st March 2020 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 Rs and other similar expressions as they relate to the Company and/or itsBusinesses are intended to identify such forward-looking statements. The Companyundertakes no obligation to publicly update or revise any forward-looking statementswhether as a result of new information future events or otherwise. Actual resultsperformances or achievements could differ materially from those expressed or implied insuch forward-looking statements. Readers are cautioned not to place undue reliance onthese forward-looking statements that speak only as of their dates. This Report should beread in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Inspired by the superordinate purpose to serve larger national priorities your Companyredefined its Vision about two decades ago to transform itself into a vibrant engine ofgrowth that would make a substantial contribution to the Indian economy whilst rewardingshareholders by creating growing value for the Indian society.

Over the last two decades your Company has created multiple drivers of growth bydeveloping a portfolio of world-class businesses across several 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 20years your Company's Value Addition aggregated Rs 4.9 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 13.2% and 15.9% respectively. Total Shareholder Returns measured in terms ofincrease in market capitalisation and dividends have grown at a compound rate of 16% perannum during this period placing your Company amongst the foremost in the country interms of efficiency of servicing financial capital.

In the last two decades non-cigarette businesses have grown over 25-fold and presentlyconstitute over 60% of net segment revenue. In aggregate the non-cigarette businessesaccount for over 85% of your Company's operating capital employed about 90% of theemployee base and over 90% of annual investments.

Your Company today is the leading FMCG marketer in India a pre-eminent hotel chainand a 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 Rs and 'Atmanirbhar Bharat Rs missionsyour Company is building national assets in the manufacturing and tourism sector. Over theyears several world-class Integrated Consumer Manufacturing & Logistics facilitieshave been built and others are in various stages of implementation/planning across thelength and breadth of the country facilitating regional and national economic developmentbesides delivering sustainable competitive advantage to your Company's FMCG businesses.Recognising that tomorrow's world will belong to those who create own and nurtureintellectual capital your Company continues to invest in augmenting the capability of itsglobally benchmarked Life Sciences and Technology Centre to ensure that its Businesses arefuture-ready and contribute to building intellectual property assets for the nation.Robust analytical models using AI/ML and emerging digital technologies are being harnessedto obtain real-time predictive and prescriptive actionable insights and drive sustainablecompetitive advantage.

Your Company's diverse talent pool of professional entrepreneurs 'proneurs' have theunique opportunity to create categories products and brands right from scratch. Thistalent pool is being nurtured not only to create winning products and services for todaybut also to seize larger opportunities as they emerge from the expanding horizons of yourCompany's businesses. This model of distributed leadership together with institutionalstrengths and cross-business synergies have together built over 25 world-class Indianbrands in a relatively short span of time - a feat unparalleled in the Indian FMCGindustry.

Your Company's commitment to sustainable and inclusive growth provides inspiration topursue the triple bottom line philosophy of 'Sab Saath Badhein'. This finds expression inthe innovative business models pursued by your Company to enable competitive growth whilstsimultaneously generating sustainable livelihoods and enriching the environment - theparadigm of 'Responsible Competitiveness'.

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 'NationFirst: Sab Saath Badhein Rs credo anchored on the core values of TrusteeshipTransparency Empowerment Accountability and Ethical Citizenship which are thecornerstones of ITC's Corporate 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
Kolkata S. PURI

Chairman & Managing Director

26th June 2020 R. TANDON

Director & Chief Financial Officer

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