Cigarettes-to-hotel company ITC ltd wants to create world-class brands for which it would strengthen its FMCG business.
“Diversification of ITC into the FMCG sector had helped the company in creating multiple drivers of growth. Today the FMCG business of the company is the fastest growing in the country. Now we want to create world class brands from India,” Chairman of the diversified conglomerate ITC ltd, YC Deveshwar told reporters in Kolkata.
He said diversification of the ITC portfolio had given some inherent strength to the company. “In the past there was lot of opposition when ITC was venturing out into non-tobacco areas. Building brands is not so easy. When our brands dominate here, then ITC will think of taking them outside the country”.
Deveshwar said if the FMCG brands continue to succeed and develop into world class brands, then ITC would engage in newer areas in this segment. In his AGM speech, Deveshwar had said that the revenue from the FMCG business was expected to reach Rs 1 lakh crore by 2030.
Asked whether ITC would gradually reduce its dependence on the tobacco business because OF high incidence of taxation at both Central and State levels, Deveshwar said: “If ITC is not in this business, then somebody else will be till there is demand for the product”.
“If nobody is there, then there will be imports and cigarettes will be illegally smuggled into the country. So we will be there so that the tobacco business is in responsible hands like ITC,” he said.
The cigarettes business generates cash flows which could be invested in other areas, he said. Deveshwar said the company was investing around Rs 25,000 crore across 65 projects in the country. “There are lot of delays taking place in getting the projects executed, the main being related to land.”
“In my belief, the company can aim for a revenue of Rs one lakh crore from the new FMCG businesses by the year 2030 and be the number one FMCG player in India,” Deveshwar added. Other areas where ITC was willing to venture out was tea, coffee, chocolate, fruit juices and dairy products.
ITC chairman said it was heartening to see that the company had diversified and built several brands to get a fair degree of consumer franchise. “I am happy that we did not take note of the dissenting voices which were opposing the company’s move to branch out in other areas besides tobacco,” Deveshwar told shareholders at the company’s AGM.
In 1996 there has been opposition from a section of the shareholders when the company wanted to diversify. “It is not easy to build brands. In ITC we have international brands and the company had been able to build a fair degree of consumer franchise,” he said. Regarding the hotels division, Deveshwar said the company was implementing eight projects involving 3,000 rooms.
Tobacco business was the highest revenue grosser for ITC followed by the agri-business. ITC had reported a 15.6 per cent rise in its net profit to Rs 2,186.39 crore for the first quarter ended June 30, 2014, on the back of robust sales in FMCG and agri-business categories. The company had registered a net profit of Rs 1,891.33 crore in the April-June quarter of 2013-14.
Net sales of the company during the quarter under review went up by 24.88 per cent to Rs 9,164.42 crore, compared to Rs 7,338.52 crore in the same period of the previous fiscal, ITC ltd said in a statement.