Here are some interesting takeaways from the ITC AGM

Key takeaways from the ITC AGM
Key takeaways from the ITC AGM

by 5paisa Research Team Last Updated: Dec 10, 2022 - 10:34 pm 22.2k Views
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On 20th July, the annual general meeting (AGM) of ITC Ltd was conducted. ITC, as a company, has been in a state of flux for some time. Cigarettes have been the mainstay and continued to drive more than 80% of its profits. However, the predominance of the cigarette business also means that it never got the valuations that other FMCG companies in the market got. The AGM sought to lay out a broad framework to put the company in a different trajectory. It assumes significance in the light of the current global headwinds.

Key takeaways from the ITC AGM 2022

The theme of the AGM was that some tectonic shifts were underway in the global ecosystem. For instance, there has been an exponential pace of digital adoption and futuristic innovation that has impacted almost every industry; FMCG included. The pandemic and the aftermath redefined the way people collaborated, worked and engaged. Some of the big themes in the ecosystem today are the adoption of green technologies, mobility and infrastructure; redefined supply chains and rapid digital advancements.

    a) The primary theme of the AGM was to explore the prospects and opportunities in the light of ITC's future-ready and purpose-driven Businesses and Brands. The idea is to seize the emerging opportunities and make a meaningful contribution to national priorities.

    b) ITC has focussed on innovative business models designed to build strategic national assets. The focus of ITC is now predicated on inclusive value chains, enabling import substitution, nurturing environmental capital and support massive livelihood creation.

    c) The ITC manufacturing facilities engage substantially with MSMEs to support local entrepreneurship. ITC has focussed on such specific areas like agri & food processing, packaging etc. ITC is also aligned to the goal of doubling farm incomes. 

    d) For any listed company, shareholder value creation lies at the core. The focus is on a strategy reset to nurture structural drivers for the next horizon of growth. Now, ITC would focus more on intangibles like agility, innovative capacity, digital transformation, structural cost optimisation and sustainability.

    e) In the FMCG business, ITC has nurtured a portfolio of 25 world-class Indian brands, emerging as the largest incubator of FMCG brands in India. The new FMCG business of ITC have garnered annual consumer spend of Rs24,000 crore. The FMCG products have chosen with a total addressable market potential of Rs500,000 crores by 2030.

    f) New brands cannot be at the cost of existing defining brands. ITC has outlined the “ITC Next” plan to fortify and scale up marquee brands like Aashirvaad, Sunfeast, Bingo etc. The brand leadership will also be used to address value added adjacencies. For instance, Aashirvaad is extended to Organic, Frozen Breads and Vermicelli. Sunfeast has been extended to Cakes while Savlon extended to Surface Disinfectant Sprays.

    g) No brand can be successful with a purely local market, so global aspirations are a must. ITC has now established distribution pacts abroad to catalyse the exports of ITC brands to over 60 countries. Obviously, one of the lessons we have learnt is that the export focus not only de-risks the domestic business, but also makes it less cyclical.

    h) The innovative Industry 4.0 plan is a template for smart manufacturing which enables a higher level of product freshness, world class quality, innovative market servicing and efficiency. ITC is also setting up automated logistics centres which combine with agile supply chains to enable superior customer needs fulfilment.

    i) Interestingly, at a time when most FMCG players were struggling with operating margins, ITC not only sustained EBITDA margins but also improved it by 650 basis points in last 5 years. Meanwhile, the cash cow of cigarettes has managed to claw back to normal demand and has been helped by a stable tax regime.

    j) ITC continues to focus on farmer empowerment via its agri business. ITC sources nearly 4 million tonnes of agri-commodities from 22 States & 20 agri-value chains and is today one of India’s leading exporter to over 95 countries. ITC is in sync with the broad macro plan to double agri-food exports over the medium term. ITC’s program on accelerating adoption of advanced technologies is taken up through ITCMAARS. That will also benefit the Indian farmer by creating new and scalable revenue streams.

    k) The paperboards and packaging business of ITC has been a classic manifestation of triple bottom line. This encompasses industry leadership, environmental stewardship and inclusive growth models supporting millions of livelihoods. The ITC Next vision also contemplates next generation sustainable and innovative packaging solutions. This business likely to benefit substantially from the unwillingness to encourage single use plastics in packaging. Numbers are the proof. Paperboards saw 36% growth in revenues and 55% in profits. 

    l) Hotels and Infotech complete the ITC story. With 113 properties, ITC is the fastest growing hotel chain in India. Travel business is just about turning around. Its asset-right approach has enabled ITC to enhance the ROI on its hotels business while keeping the capex cycle in check and leveraging the brand instead.

Big Focus of AGM: Building a Future Tech enterprise

ITC has committed to invest in consumer-centric innovation and a digitally-enriched smart ecosystem. ITC has over 900 patents filed which ranks it among the top private sector innovators in India. For instance in the agri business the focus is on being sustainable and future smart. This includes planet-friendly and micronutrient-rich millet-based products under the Aashirvaad Super Foods brand. 

ITC has been redefining consumer experience by providing customisation options with initiatives like 'Meri Chakki' atta and Unique personalised solutions are being offered. In the Hotels Business, for instance, ITC’s digital investments facilitate customer acquisition, enhanced guest experience and smart revenue management.

To sum up the theme of the AGM, ITC has recognized that digital is a megatrend of the decade. It will not just impact, but also disrupt conventional models. The focus of ITC has been to sharpen its competitive edge and explore opportunities that lie at the intersection of digital shift, sustainability and enterprise strengths.

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