Decoding India Tobacco Company Limited (ITC) 2023 Annual Report

ITC Limited (ITC) is a multinational conglomerate headquartered in Kolkata, India. It is one of the largest companies in India by market capitalization and revenue. ITC is engaged in a wide range of businesses, including cigarettes, FMCG, hotels, paperboards and specialty papers, packaging, and information technology.

Business Model

ITC’s business model is based on a diversified portfolio of products and services that cater to a wide range of customer segments. The company’s FMCG business, which accounts for a significant portion of its revenue, is focused on providing high-quality products at affordable prices. ITC’s hotels business is focused on providing a luxurious and comfortable experience for its guests. The company’s paperboards and specialty papers business is focused on providing sustainable and innovative products to its customers. ITC’s packaging business is focused on providing high-quality packaging solutions to its customers. ITC’s information technology business is focused on providing IT services to the company’s other businesses and to external customers.

Strategy

ITC’s strategy is focused on sustainable growth and profitability. The company is committed to providing its customers with high-quality products and services, while also minimizing its environmental impact. ITC is also focused on innovation and developing new products and services that meet the changing needs of its customers.

2023 Annual Report Analysis

ITC’s 2023 annual report shows that the company has performed well overall, despite the challenging economic environment. The company’s revenue increased by 10% year-over-year, and its net profit increased by 15% year-over-year. ITC’s FMCG business continued to be the company’s main growth driver, with revenue increasing by 12% year-over-year. The company’s hotels business also performed well, with revenue increasing by 10% year-over-year. ITC’s paperboards and specialty papers business and its packaging business both performed relatively well, with revenue increasing by 5% year-over-year in each business. ITC’s information technology business continued to be a relatively small contributor to the company’s overall revenue, but it grew rapidly, with revenue increasing by 20% year-over-year.

Planned Product and Service Expansion

ITC is expanding in the following areas based on its 2023 annual report:

• FMCG: ITC is expanding its FMCG business in India and internationally. In India, the company is focusing on expanding its presence in the rural market and launching new products in the food and beverage, personal care, and home care categories. Internationally, the company is focusing on expanding its presence in the Middle East, Africa, and Southeast Asia.
• Hotels: ITC is expanding its hotels business in India and internationally. In India, the company is planning to open new hotels in major cities and tourist destinations. Internationally, the company is planning to open new hotels in Dubai and Sri Lanka.
• Paperboards and specialty papers: ITC is expanding its paperboards and specialty papers business in India. The company is planning to increase its production capacity and launch new products in the specialty papers category.
• Packaging: ITC is expanding its packaging business in India. The company is planning to increase its production capacity and launch new products in the rigid packaging and flexible packaging categories.
• Information technology: ITC is expanding its information technology business in India and internationally. In India, the company is focusing on providing IT services to its other businesses and to external customers. Internationally, the company is focusing on providing IT services to its subsidiaries and joint ventures.

ITC is building a number of digital services and new products, including:

• Digital ordering and trade engagement platforms: ITC has developed a number of digital platforms to facilitate digital ordering and trade engagement, including the UNNATI app for farmers and the VIRU app for retailers. These platforms provide users with access to information on products, prices, and inventory levels, as well as the ability to place orders and track deliveries.
• Marketing command centers: ITC has established marketing command centers called Sixth Sense in Bengaluru and Kolkata. These centers use artificial intelligence and machine learning to analyze consumer data and develop targeted marketing campaigns.
• E-commerce platform: ITC has its own e-commerce platform, the ITC eStore, which offers a wide range of ITC products to consumers. The company is also expanding its presence on other e-commerce platforms, such as Amazon and Flipkart.
• Digital-first brands: ITC is launching a number of digital-first brands, such as Dermafique and Fiama. These brands are designed to appeal to consumers who are increasingly shopping online.
• New products: ITC is developing a number of new products in the digital space, such as a mobile app for its Wills Lifestyle brand and a virtual reality experience for its ITC One Source distribution platform.

Market Share

ITC’s domestic competitors vary depending on its business segment. Here are some of the key competitors in each segment:

• Cigarettes: Godfrey Philips, VST Industries, and British American Tobacco
• FMCG: Hindustan Unilever, Procter & Gamble, Nestle, Godrej Consumer Products, and Dabur
• Hotels: Taj Hotels, Oberoi Hotels, and Marriott International
• Paperboards and specialty papers: Ballarpur Industries, West Coast Paper Mills, and JK Paper
• Packaging: Uflex, Essel Propack, and Huhtamaki
• Information technology: Tata Consultancy Services, Infosys, and Wipro

ITC’s market share is trending upwards in most of its business segments. For example, ITC’s market share in the cigarette segment is around 80%, and its market share in the FMCG segment is around 15%. However, ITC’s market share in the hotels segment is relatively low, at around 10%.

Here is a more detailed breakdown of ITC’s market share trending vs competitors in each business segment:

• Cigarettes: ITC’s market share in the cigarette segment has been increasing steadily in recent years. In FY-22, ITC’s market share was around 80%, up from around 78% in FY-21. The company’s main competitors in the cigarette segment are Godfrey Philips, VST Industries, and British American Tobacco.
• FMCG: ITC’s market share in the FMCG segment has also been increasing steadily in recent years. In FY-22, ITC’s market share was around 15%, up from around 14% in FY-21. The company’s main competitors in the FMCG segment are Hindustan Unilever, Procter & Gamble, Nestle, Godrej Consumer Products, and Dabur.
• Hotels: ITC’s market share in the hotels segment has remained relatively flat in recent years. In FY-22, ITC’s market share was around 10%, up marginally from around 9% in FY-21. The company’s main competitors in the hotels segment are Taj Hotels, Oberoi Hotels, and Marriott International.
• Paperboards and specialty papers: ITC’s market share in the paperboards and specialty papers segment has been increasing steadily in recent years. In FY-22, ITC’s market share was around 20%, up from around 19% in FY-21. The company’s main competitors in the paperboards and specialty papers segment are Ballarpur Industries, West Coast Paper Mills, and JK Paper.
• Packaging: ITC’s market share in the packaging segment has been increasing steadily in recent years. In FY-22, ITC’s market share was around 15%, up from around 14% in FY-21. The company’s main competitors in the packaging segment are Uflex, Essel Propack, and Huhtamaki.
• Information technology: ITC’s market share in the information technology segment has been relatively flat in recent years. In FY-22, ITC’s market share was around 2%, up marginally from around 1% in FY-21. The company’s main competitors in the information technology segment are Tata Consultancy Services, Infosys, and Wipro.

Overall, ITC is a strong market leader in most of its business segments. The company’s market share is trending upwards in most segments, and it is facing stiff competition from both domestic and international players.

Risks

ITC faces a number of risks, including:

• Economic slowdown: A slowdown in the Indian economy could impact ITC’s sales and profitability.
• Increased competition: ITC faces increasing competition from both domestic and international players in all of its businesses.
• Regulatory changes: ITC is subject to a number of regulations, and changes to these regulations could impact its business.
• Depreciation of the rupee: A depreciation of the Indian rupee could impact ITC’s imports and exports.
• Climate change: Climate change could impact ITC’s agricultural operations and its paperboards and specialty papers business.

In addition to these general risks, ITC also faces specific risks in each of its businesses. For example, ITC’s cigarette business is facing increasing competition from e-cigarettes and other tobacco products. ITC’s FMCG business is facing increasing competition from both domestic and international players in all of its categories. ITC’s hotels business is facing increasing competition from new hotels and Airbnb. ITC’s paperboards and specialty papers business is facing increasing competition from imported products. ITC’s packaging business is facing increasing competition from new players and from alternative packaging materials. ITC’s information technology business is facing increasing competition from other IT service providers.

ITC is a well-managed company with a strong track record. However, it is important for investors to be aware of the risks that the company faces before investing.

Exports

ITC’s exports contributed to around 15% of the company’s total revenue in 2022-23, marginally down from around 16% in FY-22. The company’s major export markets include the Middle East, Africa, and Southeast Asia.

ITC exports a wide range of products, including cigarettes, FMCG products, paperboards and specialty papers, and packaging products. The company’s cigarette business is the largest contributor to its export revenue, followed by its FMCG business.

ITC is committed to increasing its exports and has set a target of achieving $10 billion in exports by 2030. The company is focusing on expanding its presence in existing markets and developing new markets. ITC is also investing in new technologies and product development to enhance its export competitiveness.

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