Q1 FY20 Results Update and Frequently Asked Questions
Q1. What is ITC's Vision and Mission?
Answer:
Vision:
Sustain ITC's position as one of India's most valuable and admired corporations through world-class performance, creating growing value for the Indian economy and the Company's stakeholders.
Mission:
To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value.
Q2. How does the Company effectively manage a highly diversified business portfolio? What is the Company's Corporate Governance structure?
Answer: ITC's 'Strategy of Organisation' is crafted in a manner that enables focus on each business while harnessing the diversity of the portfolio to create unique sources of competitive advantage. Please refer to the following link http://www.itcportal.com/about-itc/values/corporate-governance-structure.aspx for details of ITC's Governance Structure.
Q3. What is the Company's shareholder value creation track record?
Answer: ITC has been a consistent performer in terms of shareholder value creation. During the period 2008-09 to 2018-19, Total Shareholder Returns have clocked compound annual growth rate of 20.3% significantly outperforming the Sensex (14.8%).
Q4. Please provide a brief overview of Q1 FY20 results.
Answer: The Company posted a resilient performance during the quarter amidst sluggish demand conditions. Gross Revenue for the quarter stood at Rs. 11361.35 crores, representing a growth of 6%, driven mainly by Paperboards, Hotels and FMCG-Others (excluding the Lifestyle Retailing Business). Profit after Tax at Rs. 3173.94 grew by 12.6%. Total Comprehensive Income stood at Rs. 2960.93 crores (similar period last year Rs. 2897.10 crores). Earnings Per Share for the quarter stood at Rs. 2.59 (similar period last year Rs. 2.31).
On a comparable basis, FMCG Others segment revenue grew ~8% amidst sluggish demand condition.
Q5. (a). Why has 'Consumption of Raw Material etc. (net)' has gone up only 0.7% during Q1 FY20 as compared to Q1 FY19?
Answer: On a comparable basis, adjusting for Agri business (where margins are inherently low) and Lifestyle Retailing Business (restructuring of operations), Consumption of Raw Material etc. (net) is up 6.5%, in line with growth in revenue.
Q5. (b). Why has 'Other Expenditure' increased by about Rs. 287 Crores from Rs. 1820.12 Crores in Q1 FY19 to Rs. 2106.97 Crores in Q1 FY20?
Answer: Increase in Other Expenditure is mainly attributable to higher spends on Advertisement and Trade Developments activities, one-off expenditures and increase in operating expenditure on account of newer facilities.
Q5. (c). What is the growth in FMCG - Others - Segment EBITDA in Q1 FY20 as compared to Q1 FY19?
Answer: In respect of FMCG-Others segment, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), for Q1 FY20 is at ~Rs. 181 Crores representing a growth of 41% despite stepped up investments in brand building, gestation and start-up cost of new categories/new facilities.
Q5. (d). What is the impact on EBITDA and PBT due to adoption of IND AS 116?
Answer: The Company has adopted Ind AS 116 "Leases" effective 1st April 2019, as notified by the Ministry of Corporate Affairs (MCA) vide Companies (Indian Accounting Standard), Amendment Rules, 2019, using the modified retrospective method. The adoption of this Standard did not have any material impact on the profit for the quarter ended 30th June 2019.
Q6. Please provide a revenue split of the FMCG-Others Segment.
Answer: The Branded Packaged Foods Businesses represent the largest component of this segment, accounting for ~77% of Segment Revenue. The Personal Care Business and Education and Stationery Products Business account for ~8% and ~7% each of Segment Revenues respectively.
Q7. What are the new FMCG categories that the Company is likely to enter over the short to medium term?
Answer: With aspirations to become the No.1 FMCG player in India, the Company continuously evaluates opportunities to grow in the FMCG space.
The choice of category is guided by its growth prospects, profitability profile and the ability of the Company to effectively leverage its institutional strengths with a view to achieving leadership status within a reasonable time frame. Synergies with existing categories in terms of overlap of distribution reach, brand extension possibility, procurement efficiencies etc. are considered while choosing new categories.
The Company is in the process of scaling up its presence in Dairy & Beverages, Chocolates, Coffee and Frozen Snacks.
Q8. What is the margin profile of the Branded Packaged Foods Business?
Answer: The Branded Packaged Foods Businesses of the Company comprise 'Confections', 'Staples, Snacks and Meals' and 'Dairy & Beverages'. These Businesses have evolved over a period of time and are currently at different stages of their lifecycles. As such, the revenue dimensions, cost structures and profitability profiles of each of these businesses are distinct from the other. For example, EBIT margin is in the high single digit range for the Staples business (first full year of launch: 2002/03) while the same is in the mid-single digit range for the Snack Foods business (first full year of launch: 2007/08) representing upfront investments towards category development and brand building.
Overall, each category is striving towards achieving best-in-class margins within a reasonable period of time.
Q9. What is the margin profile of the Personal Care Products Business? When will it break-even?
Answer: The Personal Care Products Business presently comprise 'Personal Wash & Hygiene', 'Fragrances', 'Home Care', 'Skin Care', 'Health' and 'Talc' categories. The Company continues to make significant investments in this Business primarily in the area of brand building, R&D and product development towards competing effectively with incumbent players comprising firmly entrenched MNCs and domestic companies.
Presently, each category is operating at industry benchmarked gross margins. With enhanced scale and consumer connect, each category is expected to earn best-in-class EBIT margins progressively over the medium-term.
Q10. What are the Company's targets in the FMCG-Others space? What does the Company envision for this segment, over the medium and long-term?
Answer: ITC's endeavour is to become the No.1 FMCG player in India driven by the existing portfolio as well as entry into new categories. In this regard, the Company is aiming for revenue of Rs. 100,000 Crores from the new FMCG businesses by the year 2030.
Over the medium term, the Company seeks to grow revenues of each category within the FMCG-Others segment at a rate which is ahead of industry.
Q11. Would ITC contemplate acquisitions in order to achieve its vision in the Other FMCG segment?
Answer: ITC examines prospects for inorganic growth that arise from time to time not only in this business segment but also in the other businesses. The Company continues to evaluate opportunities to grow its businesses through Acquisitions and Joint Ventures and is guided by considerations such as strategic fit, valuation, financial viability, ease of integration etc.
The Company's 'Savlon' and 'Shower to Shower' brands, acquired earlier, have been leveraged to strengthen its position in the personal care space by expanding its existing product portfolio and gaining access to newer consumer segments and markets. The offerings have garnered significant consumer franchise and are well poised for rapid growth.
'Charmis' brand acquired by the Company in FY18 has been leveraged to re-launch moisturising skin creams with a fresh look & enhanced sensorial experience supported by a focussed campaign showcasing the brand's core value proposition - 'it is the goodness within that glows on the face'.
In FY19, Personal Care Products Business forayed into the floor cleaner segment under the 'Nimyle' brand. The range of herbal floor cleaners was extended to new markets even as it recorded robust growth in existing markets. Plans are on the anvil to scale up the brand's presence across target markets.
Q12. Please provide an update on the Company's progress in the FMCG-Others Segment during the quarter.
Answer: The FMCG-Others Segment delivered a resilient performance during the quarter amidst a marked slowdown in the FMCG industry across urban and rural markets. Segment Revenue grew by 8% appx. on a comparable basis (excluding the Lifestyle Retailing Business) led by Atta, Potato Chips, Premium Cream Biscuits and Noodles in the Branded Packaged Foods Business, Liquids (Handwash & Bodywash) in the Personal Care Products Businesses and Notebooks in the Education & Stationery Products Business. Segment EBITDA at Rs. 181 crores recorded a growth of 41% despite stepped up investments in brand building, gestation and start-up costs of new categories / new facilities.
The Branded Packaged Foods Businesses delivered a steady performance during the quarter, anchored on continued focus on innovative product launches and impactful communication campaigns in conventional and digital media.
- In the Staples, Snacks and Meals Business, 'Aashirvaad' atta recorded healthy growth and consolidated its leadership position across markets. The Business launched Aashirvaad Nature's Super Foods, a differentiated range of products comprising Gluten Free Flour, Ragi Flour and Multi-Millet Mix which are naturally gluten free, rich in dietary fibre and a source of protein. Available across select general and modern trade outlets as well as leading e-commerce platforms, the products cater to consumers' nutri-wellness requirements with taste that suits their preferences.
In the Snacks category, the Business launched 'Bingo! Starters', an innovative range of snacks offering tasty yet healthy everyday snacking options. Available in four exciting variants, Bingo! Starters is completely baked and is a rich source of protein & dietary fibre. In the Instant Noodles category, product portfolio stood augmented with the launch of 'YiPPee! Quik Mealz - Asian Surprise', a first-of-its-kind delicious bowl of noodles designed for on-the-go consumption. The product is currently available on Indigo airlines and has been well received by consumers.
- In the Confections Business, Dark Fantasy Choco Fills witnessed further acceleration in growth momentum driven by superior product attributes, focused communication, efficient distribution and consumer activation. The recently launched Bounce Cake variants have recorded robust growth in launch markets and are being rolled out to other markets. Portfolio premiumisation continued in the Confectionery category with higher salience of 'Re. 1 and above' products in the sales mix. Availability of the recently launched 'Candyman Fantastik', a crispy wafer roll filled with luscious choco crème, was expanded further and the product continues to garner increasing consumer franchise.
- In the Dairy & Beverages Business, the 'B Natural' range of juices anchored on the '100% Indian Fruit, 0% concentrate' proposition continues to deepen consumer connect by providing a more nutritive and 'natural' tasting experience. The premium range of juices comprising Ratnagiri Alphonso, Himalayan Mixed Fruit and Dakshin Guava in an appealing transparent bottle format, continued to receive excellent response from consumers and is now available in all target markets. 'Aashirvaad Svasti' pouch milk continued to gain strong consumer traction in Bihar and West Bengal where the product is currently available on the back of its high quality standards and superior taste profile. Similarly, the 'Sunfeast Wonderz Milk' range of milk shakes has received encouraging response and is being extended to other markets.
- During the quarter, the 'Fabelle' range of chocolates was augmented with the launch of four exciting variants of centre filled luxury bars, viz., Fire, Wood, Tiramisu and Strawberry Cheesecake. Fabelle continues to receive excellent response from discerning consumers setting a new benchmark in the luxury chocolates segment.
In the Personal Care Products Business, Liquids (Handwash and Bodywash) and the 'Nimyle' range of herbal floor cleaners performed well and were extended to new markets. Product range in the Bodywash segment was augmented with the launch of 'Fiama' Scents in two exciting variants. Fiama Scents, a first-to-market product in India, is crafted with fragrance encapsulation technology which enables long lasting fragrance delivery through skin friendly micro fragrance capsules, which burst on touch or a slight rub. The quarter also witnessed the launch of Fiama Handwash in the premium segment in three refreshing variants and the augmentation of Engage range of perfumes with the launch of 'Engage' L'amante, a premium perfume for men and women.
The Branded Packaged Foods and Personal Care Products Businesses sustained their focus on deepening consumer engagement through refreshed and high decibel campaigns across key brands in the conventional and social media platforms.
The Education and Stationery Products Business strengthened its leadership position in the Notebooks category leveraging a pipeline of innovative products of superior quality and enhanced consumer connect. The dedicated manufacturing facility for notebooks being set up in Gollapudi, Andhra Pradesh, is nearing completion. Equipped with state-of-the-art machinery, the facility will enable manufacturing of a range of high quality and differentiated notebooks and drive higher operational efficiencies.
Please refer to the FMCG - Others section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Q13. What is the progress on upcoming integrated consumer goods manufacturing facilities (ICMLs) of the Company?
Answer: The Company continues to make investments in Integrated Consumer Manufacturing Facilities (ICMLs) towards augmenting the manufacturing and sourcing footprint across categories with a view to improving market responsiveness, leveraging fiscal incentives and reducing the cost of servicing proximal markets.
During the quarter, the manufacturing capability of ICML Trichy was augmented with the commissioning of state-of-the-art lines for Finger Snacks, Atta and Biscuits. Significant progress was also made in constructing several other state-of-the-art owned ICMLs across regions towards supporting the rapid scale-up plans in the FMCG Businesses. These ICMLs are expected to set new benchmarks leveraging scale over a period of time and improving cost efficiencies while ensuring best-in-class product quality.
Q14. Please provide an update on the Cigarettes business. What is the Company's view on cigarette volume trends over the medium to long term?
Answer: A punitive and discriminatory taxation and regulatory regime, together with sharp increase in illegal trade in recent years, continues to pose significant operating challenges to the legal cigarette industry in the country. Performance during the quarter was also impacted by weakness in the overall demand environment.
It may be recalled that tax incidence on cigarettes increased by over 20% in 2017-18, representing the combined impact of transition to GST and increase in Excise Duty announced in the Union Budget 2017. It is pertinent to note that the tax incidence on cigarettes has nearly trebled (on a comparable basis) between 2011-12 and 2017-18 and taxes on cigarettes are effectively about 55 times higher than taxes on other tobacco products on a per kg basis.
Excessive taxation has made legal, duty-paid cigarettes in India amongst the costliest in the world in terms of per capita affordability.
The high rates of tax on cigarettes provide attractive tax arbitrage opportunities for illicit trade allowing sale of these cigarettes to consumers at prices much lower than those of duty-paid domestic cigarettes. This has encouraged mushrooming of unscrupulous operators who indulge in clandestine manufacturing of cigarettes across the country and also provided a huge impetus to large-scale smuggling of international brands into the country. Seizures of large quantum of smuggled cigarettes by enforcement agencies across the country over the recent years confirm the growing menace of illegal cigarettes trade in the country. While the legitimate cigarettes industry has declined steadily since 2010-11 at a compound annual rate of over 4% p.a., volume of illegal cigarettes in contrast has grown at nearly 5% p.a. during the same period, making India one of the fastest growing markets for illegal cigarettes in the world. It may be noted that, according to Euromonitor International, India is now the 4th largest market for illegal cigarettes in the world.
The disparity in taxation on tobacco products has caused a progressive migration from consumption of duty-paid cigarettes to other lightly taxed / tax-evaded forms of tobacco products, comprising illegal cigarettes and bidis, chewing tobacco, gutkha, zarda, snuff, etc. As a consequence, while the share of legal cigarettes in total tobacco consumption in the country has declined considerably over the years, aggregate tobacco consumption has increased during the same period. As a result, despite accounting for merely 10% of the tobacco consumed in the country, duty-paid cigarettes contribute more than 86% of the revenue generated from the tobacco sector. It is estimated that on account of illegal cigarettes alone, the revenue loss to the Government is more than Rs. 13000 crores per annum. In respect of the other tobacco products also, the revenue losses are significant since about 68% of the tobacco consumed in the country remains outside the tax net.
The cost disadvantage faced by duty-paid cigarettes as compared to illegal cigarettes is exacerbated by the fact that duty-paid cigarettes comply fully with provisions of applicable Indian legislation like The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) and bear the statutorily mandated pictorial and textual warnings covering 85% of the surface area of the packet (one of the largest in the world). On the other hand, the smuggled illegal cigarettes do not bear any such pictorial or textual warnings or bear much smaller pictorial warnings as per the tobacco laws of the countries from where these cigarettes are sourced. As reported in prior periods, findings from research conducted by IMRB International, an independent market research organisation, show that the lack of pictorial warnings on packets of smuggled cigarettes or their diminutive size creates a perception in the consumer's mind that smuggled cigarettes are 'safer' than domestic duty-paid cigarettes that carry the 85% pictorial warnings. Along with low prices to consumers (enabled through tax evasion), this has opened the floodgates for contraband cigarettes.
It is pertinent to note that several other major tobacco producing countries, including the USA, have framed regulatory frameworks for tobacco taking into consideration the economic interests of their tobacco farmers and decided not to adopt large or excessive pictorial warnings. The inadvertent and unforeseen consequence of the stringent Indian tobacco regulations is one of continuing losses to the Indian tobacco farmer with corresponding gains to tobacco farmers in the countries that have opted for moderate and equitable tobacco regulations. These developments have had a devastating impact on the Indian tobacco farmer and the 46 million dependent on the tobacco value chain for their livelihood.
In India, cigarettes are manufactured largely using Flue Cured Virginia Tobacco (FCV) which is grown in the states of Andhra Pradesh, Telangana and Karnataka. FCV tobaccos are also traded internationally and India is an exporter of this commodity. Since smuggled international brands of cigarettes do not use Indian tobaccos, in addition to revenue losses, the growth of the illegal cigarette trade has also resulted in a drop in demand for Indian FCV tobaccos in the domestic market. This decline in domestic demand, together with lack of export opportunities (favourable prices of competing origins and lower Indian crop) has adversely impacted earnings of the Indian tobacco farmer. It is estimated that in the four years since 2013-14, Indian tobacco farmers have suffered a cumulative drop in earnings of over Rs. 4000 crores. Ensuring stability in domestic demand will aid in cushioning the impact of any volatility in the international markets.
As in the past, the Company continues to make representations to policy makers for equitable, non-discriminatory, pragmatic, evidence based regulations and taxation policies that balance the economic imperatives of the country and the tobacco control objectives, cognising for the unique tobacco consumption pattern in India. While stability in taxes since the introduction of GST in July 2017 has provided some relief to the legal cigarette industry, it is pertinent to note that the legal cigarette industry volumes remain significantly below June 2014 levels. Moderation in taxes is critical for addressing the interests of all the stakeholders of this industry, including the tobacco farmers, the Exchequer and the consumers.
The Company's unwavering focus on nurturing a portfolio of world-class products, superior consumer insights and a strategy of continuous innovation and value creation helped deliver superior competitive performance. Deep consumer insights and a robust innovation pipeline enabled the Business to introduce new variants catering to the continuously evolving consumer preferences. These include Classic Rich & Smooth, Classic Verve Low Smell and Gold Flake NEO which have received positive response in the market. Similarly, recently introduced brands/variants such as American Club, Player's Gold Leaf and Wave continue to strengthen their market standing.
Please refer to the FMCG - Cigarettes section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Q15. What is the impact of the larger graphic health warnings (GHW) on packs on the cigarette industry?
Answer: The 85% GHW is excessively large, extremely gruesome and unreasonable. There is no evidence that cigarette smoking would cause the diseases depicted in the pictures or that large GHW will lead to reduction in consumption. The large GHW fuels the growth of smuggled international brands as such cigarette packs do not carry the excessively large (85% of the surface area of both sides of the cigarette package) pictorial warnings with extremely gruesome and unreasonable images that are prescribed under Indian laws. While the legal cigarette industry scrupulously complies with the statutory provisions, smuggled international brands of cigarettes either do not bear any pictorial or other health warnings or bear warnings of much smaller dimensions, that too different from what is mandated under Indian law. Findings from research conducted by IMRB International, an independent organisation, indicate that the lack of warnings or their diminutive size creates a perception in the consumer's mind that the smuggled cigarettes are 'safer' than domestic duty-paid cigarettes that carry the statutory warnings. The current GHW with even more gruesome images has been in place since Sep'18.
It is pertinent to note that the global average size of pictorial warnings is only about 30% coverage of the principal display area. In fact, the three countries that account for about 51% of the world's cigarette consumption, viz., USA, Japan and China have not adopted pictorial / graphical warnings and have prescribed only text-based warnings on cigarette packages. The statutorily prescribed pictorial warning occupying 85% of both sides of a cigarette pack ranks India in the 2nd position globally in terms of their stringency Unfortunately, these laws have fuelled, albeit unintentionally, the growth of illegal cigarettes in the country.
The excessively large GHWs prevent consumers from making an informed choice in a competitive market, since they are denied adequate information about the brand on the cigarette packages. The Company believes that such GHW also devalues the Intellectual Property Rights of brand owners and sub-optimises the large investments made over the years in creating and nurturing the brands.
Q16. What are the Company's plans in the 'Electronic Nicotine Delivery Systems (ENDS)' space?
Answer: 'Electronic Nicotine Delivery Systems (ENDS)' broadly refer to both Electronic Vaping Devices (EVD), commonly called 'e-cigarettes' as well as 'electronic Heat Not Burn (eHNB)' products. As many as 27 countries including Singapore, Australia, Thailand, Taiwan, UAE, Brazil and Argentina have prohibited ENDS. In India, about 15 States have prohibited or restricted this category. Regulatory issues are also being contested in Indian courts. The Company's EON brand in the EVD segment is being marketed in select states. The Company is closely following the regulatory developments, while initiating appropriate investments, enhancing capability and gearing up to be in a state of readiness in this emerging segment.
Q17. Please provide an update on the Company's Hotels business.
Answer: The Business recorded a steady performance with Segment Revenue growing by 15% during the quarter driven by the recently commissioned hotels - ITC Kohenur, Hyderabad and ITC Grand Goa, Resort & Spa, Goa. These new hotels in the ITC Hotels portfolio continue to receive excellent reviews from discerning guests, raising the bar of service excellence. However, the performance of existing hotels was relatively subdued due to slowdown in the conferences and banqueting segment. While Segment EBITDA posted strong growth of 18%, additional depreciation charge pertaining to the new properties weighed on Segment Results.
The Business unveiled its latest offering with the opening of first phase of ITC Royal Bengal, a Luxury Collection Hotel, comprising 254 rooms along with five signature restaurants, on 1st June, 2019. The property has received excellent initial response from discerning guests. The Business made steady progress during the quarter in the construction of an ITC Hotel in Ahmedabad and WelcomHotels in Amritsar, Guntur & Bhubaneswar.
The Company, with continued thrust on 'asset-right' strategy, is well-positioned to sustain its leadership status in the Indian Hospitality industry, given its portfolio of world-class properties, iconic cuisine brands and best-in-class levels of service excellence.
Please refer to the Hotels section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Q18. Please provide an update on the Company's Agri Business.
Answer: In line with its focus on strengthening the value-added products portfolio, the Business launched attribute-based maida in the food service channel suited for bakery and pizza products. The recent foray into the Frozen Snacks segment under the 'ITC Master Chef' brand, buoyed by encouraging consumer response, continues to be scaled up. However, lack of trading opportunities in Oilseeds and Pulses, subdued demand for leaf tobacco in international markets, relatively steeper depreciation in currencies of competing origins in recent years and adverse business mix weighed on Segment Results.
The deep rural linkages and agri-commodity sourcing expertise resident in the Agri Business, including value-addition through identity preservation, traceability and certification are a critical source of competitive advantage for the Company. During the quarter, the Business established a robust milk sourcing network in West Bengal to cater to the increasing requirements on the back of the growing franchise of the Aashirvaad Svasti range of dairy products. The Business continues to step up initiatives in the area of value-added agriculture to create new vectors of growth by leveraging its agri-commodity sourcing and processing expertise and the strong distribution network of the Company.
Please refer to the Agri Business section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Q19. Please provide an update on the Company's Paperboards, Paper and Packaging Segment.
Answer: The Paperboards Business continued to record robust growth driven by strong volume growth in the Value Added Paperboard segment and product mix enrichment. However, growth in the Packaging & Printing Business was impacted due to sluggish demand conditions in the FMCG industry and exports. Segment Results registered a healthy growth driven by product mix enrichment, higher realisation, strategic investments in imported pulp substitution and benefits of a cost-competitive fibre chain.
Capacity utilisation of the recently commissioned facilities, viz., Value Added Paperboard machine, Bleached Chemical Thermo Mechanical Pulp mill and Décor machine, was further ramped up during the quarter. The Business continues to make structural interventions in the areas of strategic cost management and import substitution towards enhancing its market standing and competitive advantage.
Please refer to the Paperboards, Paper & Packaging section in the Report of the Directors & Management Discussion and Analysis for the financial year ended 31st March 2019 and Media Releases on quarterly results for further details.
Q20. Please provide details of the Company's Capital expenditure by Business.
Answer: The Company's Capex during the last financial year is tabulated below:
Q21. Please provide an overview of the capex plan of the Company.
Answer: The Company's capex plans are directed primarily towards capacity gearing, productivity enhancement, ensuring the highest standards in quality and environment, health & safety, and R&D.
One of the key elements of the capex plan going forward is to invest in setting up state-of-the-art owned integrated consumer goods manufacturing and logistics facilities across regions in line with long-term demand forecasts. Currently, over 15 projects are underway and in various stages of development - from land acquisition/site development to construction of buildings and other infrastructure.
The Hotels Business made steady progress during the quarter in the construction of an ITC Hotel in Ahmedabad and WelcomHotels in Amritsar, Guntur & Bhubaneswar.
The major items of capital expenditure in the Paperboards, Paper and Packaging segment going forward comprise paperboards capacity augmentation/machine rebuild at the Bhadrachalam unit and capacity augmentation in Cartons and Flexibles packaging at the Tiruvottiyur and Haridwar unit.
Overall, the Company estimates capex of around 17000 Crores over the next 5 years (excluding investments for inorganic growth and acquisition of trademarks, other intellectual property, etc.). However, this would depend on several factors such as pick-up in economic activity and improvement in demand conditions, timely acquisition of land at desirable locations, obtaining approvals from the concerned authorities in a timely manner etc.
Q22. Why has the Segment Capital Employed increased by from Rs. 23,673 Crores as at 30th June 2018 to 26,140 Crores as at 30th June 2019?
Answer: The increase in Segment Capital Employed is primarily on account of capacity augmentation in FMCG Business and ongoing investments in Hotels coupled with higher inventory in Agri Business.
Q23. What are the dividend payout trends in recent years? What is the Dividend policy of the Company?
Answer: Dividend paid out by the Company for the last 5 years is given below:
Please refer to the following link for the Dividend Distribution policy of the Company.
http://www.itcportal.com/about-itc/policies/dividend-distribution-policy.pdf
Q24. Please explain the Company's 'Triple Bottom Line' philosophy.
Answer: Inspired by the opportunity to sub-serve larger national priorities, the Company redefined its Vision to not only reposition the organisation for extreme competitiveness but also make societal value creation the bedrock of its corporate strategy. This super-ordinate Vision spurred innovative strategies to address some of the most challenging societal issues including widespread poverty, unemployment and environmental degradation. The Company's sustainability strategy aims at creating significant value for the nation through superior 'Triple Bottom Line' performance that builds and enriches the country's economic, environmental and social capital. The sustainability strategy is premised on the belief that the transformational capacity of business can be very effectively leveraged to create significant societal value through a spirit of innovation and enterprise.
The Company is today a global exemplar in sustainability. It is a matter of immense satisfaction that its models of sustainable development have led to the creation of sustainable livelihoods for around six million people, many of whom belong to the marginalised sections of society. The Company has also sustained its position of being the only Company in the world of comparable dimensions to have achieved the global environmental distinction of being water positive (for 17 years in a row), carbon positive (for 14 consecutive years) and solid waste recycling positive (for 12 years in succession).
To contribute to the nation's efforts in combating climate change, the Company's strategy of adopting a low-carbon growth path is manifest in its growing renewable energy portfolio, establishment of green buildings, large-scale afforestation programme and achievement of international benchmarks in energy and water consumption. In FY 18-19, about 41% of the Company's total energy requirements were met from renewable energy sources - a creditable performance given its expanding manufacturing base. The Company is well positioned to benefit from energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. As a responsible corporate citizen, the Company has made a commitment to reduce dependence on energy from fossil fuels. Accordingly, all factories incorporate appropriate green features and premium luxury hotels and office complexes continue to be certified at the highest level by either the US Green Building Council, Indian Green Building Council or the Bureau of Energy Efficiency (BEE).
The Company has adopted a comprehensive set of sustainability policies that are being implemented across the organisation in pursuit of its 'Triple Bottom Line' agenda. These policies are aimed at strengthening the mechanisms of engagement with key stakeholders, identification of material sustainability issues and progressively monitoring and mitigating the impacts along the value chain of each Business.
The Company's 15th Sustainability Report, published during the year detailed the progress made across all dimensions of the 'Triple Bottom Line' for the year 2017-18. This report is in conformance with the latest Global Reporting Initiative (GRI) Guidelines - G4 under "In Accordance - Comprehensive" category and is third-party assured at the highest criteria of "reasonable assurance" as per International Standard on Assurance Engagements (ISAE) 3000. The 16th Sustainability Report, covering the sustainability performance of the Company for the year 2018-19, is being prepared in accordance with the GRI Standards and will be made available shortly.
Please refer to the following link http://www.itcportal.com/sustainability/sustainability-report-2018/sustainability-report-2018.pdf for Sustainability Report 2018.
In addition, the Business Responsibility Report (BRR), annexed to the Report and Accounts 2019, maps the sustainability performance of the Company against the reporting framework suggested by Securities and Exchange Board of India.
The Company has prepared its Integrated Report for the financial year 2018-19. As a green initiative, the Report has been hosted on the Company's corporate website at https://www.itcportal.com/about-itc/shareholder-value/index.aspx
Q25. Please provide an update of the Company's Corporate Social Responsibility Programme.
Answer: The Company's Social Investments Programme aims to address the challenges arising out of poverty, environmental degradation and climate change through a range of activities with the overarching objective of creating sustainable sources of livelihood for stakeholders.
The footprint of the Company's CSR programme can be viewed at a glance in the following chart:
| Intervention Areas | Unit of Measurement | Cumulative till date |
| Social and Farm Forestry Soil and Moisture Conservation Programme | Lakh Acres Lakh Acres | 7.34 10.68 |
| Sustainable Agricultural Practices Compost Units | Number | 41,048 |
| Sustainable Livelihoods Initiative Cattle Development Centres Animal Husbandry Services | Number Artificial Inseminations (in lakhs) | 141 23.88 |
| Economic Empowerment of Women Ultra Poor Women covered Self Help Group Members Livelihoods created | Number Number Number | 23,710 43,195 65,053 |
| Primary Education Children covered | Number (in lakhs) | 7.02 |
| Health and Sanitation Low Cost Sanitary Units Households covered under Solid Waste Management | Number Number | 36,492 215,581 |
| Vocational Training Students Enrolled | Number | 70,755 |
