Financial Results for the Quarter and Year ended 31st March, 2016

Financial year ended 31st March 2016 :

FMCG-Cigarettes Segment continues to be impacted by severe pressure on legal cigarette industry volumes even as illegal trade grows unabated.

FMCG-Others Segment registers revenue growth of 7.7% amidst sluggish demand conditions and price deflationary environment. Most categories record improvement in market standing. Segment Results improve further despite start-up cost of new categories (Juices, Dairy, Health & Hygiene segment in Personal Wash) and sustained investment in brand building.

Hotels Segment Revenue up 8.4% aided by healthy growth in occupancy and Food & Beverage revenue. Segment Results include the impact of gestation costs of ITC Grand Bharat and business disruption caused by heavy rains in Chennai during November/December 2015.

Agri Business Segment Revenue impacted by lack of trading opportunities in wheat, coffee & soya due to higher crop output and steeper currency depreciation in competing origins. Significant scale up in sourcing of wheat for ‘Aashirvaad’ atta. Profitability improvement driven by superior product mix and higher realisations.

Paperboards, Paper & Packaging Segment impacted by slowdown in the FMCG and Cigarette industry, zero duty imports under Free Trade Agreement with ASEAN countries and cheap imports from China.

Effective Tax Rate up 280 bps to 34.2% mainly due to increase in surcharge, change in income tax provisions relating to holding period for investments in debt oriented mutual funds to qualify as long-term capital asset, eligibility criteria for claiming investment allowance etc.

Quarter ended 31st March, 2016 :

Improvement in performance during the quarter driven by improved realisations, margin expansion, benign input costs and favourable base effect.

FMCG-Others Segment Revenue growth impacted due to persistently sluggish demand environment, price deflationary scenario and trade pipeline synchronisation in the Notebooks category. Growth in Segment Results driven by higher scale and gross margin expansion.
 

Financial  Performance

The  Company delivered another year of steady performance in the backdrop of an  extremely challenging year in the wake of unprecedented pressure on the legal  cigarette industry due to the cumulative impact of steep increase in taxation  and increasing regulatory pressures, sluggish demand and price deflationary  conditions in the FMCG space, and start-up costs relating to new  products/categories especially in the non-cigarette FMCG segment. The business  environment in the Hotels industry also remained challenging with the overhang  of excess room inventory exerting pressure on pricing apart from which the  Business had to absorb the gestation costs of new properties.  Agri exports from India were impacted during  the year due to higher crop output and steeper currency depreciation in  competing origins. The Paperboards, Paper and Packaging segment also had to  contend with a weak demand and pricing environment. 

Despite the  challenging business environment as aforestated, Gross Revenue at Rs. 51582.45  crores grew by 3.2% primarily driven by a 7.7% growth in the non-cigarette FMCG  segment and 6.2% growth in the Cigarettes segment. Excluding exports of  agri-commodities, Gross Revenue for the year grew by 6.4%. Profit Before Tax  registered a growth of 6.9% to Rs. 14958.39 crores while Net Profit at Rs.  9844.71 crores increased by 2.5%. Earnings Per Share for the year stood at Rs.  12.26 (previous year Rs. 12.05). Cash flows from Operations aggregated Rs.  14079.07 crores compared to Rs. 13534.65 crores in the previous year.

During the 4th quarter of the year, Net Revenue and Profit Before  Tax stood at Rs. 10062.38 crores and Rs. 3831.52 crores respectively. The muted  growth in revenue during the quarter reflects, inter alia, the continuing  impact of higher taxes and regulatory pressures on the legal cigarette  industry, weak demand conditions in the FMCG industry and synchronisation of  trade pipeline in the Notebooks category. Profit  Before Tax for the quarter grew by 14.4% aided by favourable base effect, benign  input costs and Gross Margin expansion in the FMCG-Others segment. 
 

Corporate  Action

2015/16  has been a year of significant milestones for the Company. The year marks the  completion of 20 years since the Company embarked upon its corporate strategy  of creating multiple drivers of growth and focusing on ‘Triple Bottom Line’  performance.  

Over  the last 20 years, the Company has delivered outstanding performance across key  financial metrics and is today, also widely recognised as a global exemplar of  sustainable business practices. During the period 1995/96 to 2015/16, Gross  Revenue has grown at a compound annual rate of 12.2% crossing the Rs. 50000  crore mark in 2015/16, while Profit After Tax has grown at a compound annual  rate of 19.9%. Total Shareholder Returns, measured in terms of increase in  market capitalisation and dividends, have grown at a compound rate of 23.3% per  annum during this period, placing the Company amongst the foremost in the  country in terms of efficiency of servicing financial capital. Your Company has  also achieved and sustained the unique distinction of being ‘water positive’  (for 14 years), ‘carbon positive’ (for 11 years) and ‘solid waste recycling  positive’ (for 9 years) – the three key global indices of environmental  sustainability.

Over  the last decade or so, the Company has created several world-class Indian brands  in the FMCG space. These brands, in aggregate, recorded a consumer spend of  more than Rs. 12000 cr. in 2015/16, with the ‘Aashirvaad’ brand crossing the  Rs. 3000 cr. mark during the year. In addition, the ‘Sunfeast’ brand is today  over Rs. 2500 cr. while Bingo! & Classmate are over Rs. 1000 cr. each, in  terms of annual consumer spend. The FMCG-Others Segment achieved breakeven at  the PBIT level in 2013/14 and has sustained/enhanced its profitability for 3  years in a row despite absorbing the gestation cost of new categories (Gums,  Juices, Dairy, Deodorants) and higher brand building spends both on existing as  well as new variants. 

The  capabilities built over the last 20 years provide the Company a strong  foundation for sustaining its position as one of India’s most admired and  valuable corporations creating growing value for the Indian economy and its  stakeholders.

To  celebrate these landmark achievements, the Board of Directors were pleased to  recommend to the shareholders for their approval,  

a)   A Special Dividend of Rs. 2.00 per share in  addition to the dividend of Rs. 6.50 per share (previous year: Rs.6.25 per  share) for the year ended 31st March, 2016. Total cash outflow in this regard  will be Rs. 8232.61 crores including Dividend Distribution Tax of Rs. 1392.49  crores.

b)   Issuance of 1 bonus share of Re.1/- each, for  every 2 existing ordinary shares of Re.1/- each held by the Members on the  record date. The  Board also recommended a transfer to General Reserve of Rs. 990.00 crores  (previous year: Rs. 970.00 crores).

FMCG
 

FMCG-Others
 

The FMCG industry faced another challenging year with  demand conditions remaining sluggish for the third year in a row. Headwinds in  rural demand due to the second successive year of sub-par monsoons and price  deflationary conditions prevailing in the industry resulted in a relatively  muted growth of 7.7% in Segment Revenue during the year. Additionally, the  Company had to contend with regulatory issues surrounding the Noodles industry  (largely related to products of the lead competitor) and synchronisation of  trade pipeline in the later part of the year ahead of the ensuing season in  Notebooks category. Most categories witnessed expansion in Gross Margin driven  by product mix enrichment and benign input costs. Segment Results for the year  improved to Rs. 71 crores from Rs. 34 crores in FY15 after absorbing gestation  costs of new categories viz., Juices, Gums & Dairy and significant  brand investments towards communicating the  superior value proposition offered by YiPPee! Noodles, besides a host of new  launches in existing categories.


Branded Packaged Foods Businesses
 

Demand  conditions in the Branded Packaged Foods industry remained sluggish during the  year with consumers curbing discretionary spending, headwinds in rural demand,  heightened competitive intensity against the backdrop of decline in commodity  prices and regulatory issues surrounding the Noodles industry. Despite such a  challenging operating environment, the Company sustained its position as one of  the fastest growing branded packaged foods businesses in the country leveraging  a robust portfolio of brands, differentiated range of products customised to  regional tastes and preferences along with enhanced product visibility and  availability in key markets.

In  the Staples, Snacks and Meals Business, the Company posted a robust performance  during the year, growing well ahead of the industry. In the Staples category,  ‘Aashirvaad’ atta consolidated its leadership position across markets aided by  robust performance of the value-added portfolio comprising the ‘Multigrains’,  ‘Select’ and ‘Superior MP’ variants. The Business recently launched a range of  blended spices in select markets under the ‘ITC Master Chef’ brand. The Company  also recorded impressive gains in market standing in the Savoury Snacks, Noodles  & Pasta categories. Consumer franchise of YiPPee! Noodles grew  significantly on the back of a focused and integrated 360 degree communication  campaign reassuring consumers on the quality and safety of YiPPee! Noodles,  even as the Noodles industry had to contend with regulatory issues pertaining  largely to the lead competitor’s products. The ‘Bingo!’ range of finger snacks  registered significant growth driven by the ‘Tedhe Medhe’ and ‘Mad Angles’  sub-brands. In the potato chips category, ‘Yumitos Original Style’ grew at a  robust pace on the strength of region-specific interventions.

In  the Confections Business, the Company increased the scale of operations and  improved market standing. The ‘Sunfeast Mom’s Magic’ range of premium cookies,  launched during the previous year in two variants - ‘Rich Butter’ and ‘Cashew  & Almond’ – grew rapidly on the back of a superior value proposition and  sustained investments in brand building. Market standing of the ‘Sunfeast  Bounce’ range of cream biscuits improved further during the year thereby  sustaining its position as the largest selling cream brand in the country. The  Business augmented its product portfolio during the year with the launch of  several new variants including ‘Sunfeast Delishus’ ‘Gourmet cookies - Chocolate  Chip made with Ghana Cocoa’, ‘Sunfeast Farmlite Oats with Chocolate’ and  ‘Sunfeast Marie Light Rich Taste’ with a differentiated taste and flavour  profile. These variants have been well received by the markets. The  Business continued to leverage the ‘Candyman’ and ‘mint-o’ brands and focused  on premiumising its product portfolio by enhancing the share of variants priced  at 'Re. 1 & above' in the sales mix. During the year, ‘Candyman Choco  Double Eclairs’ emerged as the fastest growing brand in the éclair segment. The  Business also scaled up the ‘GumOn’ brand which was launched last year,  clocking robust growth in launch markets. The Gums portfolio was strengthened  during the year with the introduction of a strawberry variant.

In  the Dairy and Beverages Business, the ‘B Natural’ range of juices garnered  impressive consumer traction in a relatively short span of time since its  launch. During the year, the Business forayed into the fast-growing Dairy  category with the launch of ‘Aashirvaad Svasti’ – Pure Cow Ghee in select  markets.

 

Personal Care Products

The  Personal Care Products Business delivered a resilient performance during the  year which was marked by tepid volume growth and price deflation. Most players  in the industry passed on the benefit of a decline in input costs, especially  of palm oil, to consumers and implemented aggressive product promotion  initiatives in a bid to revive demand. The Company’s Personal Care Products  Business responded proactively to these challenges and continued to enrich its  product portfolio, expand distribution, manage costs by developing alternative  sources of supply and leveraging scale, and improve supply chain  responsiveness. During the year, the Business rolled out several differentiated  product offerings in the Deodorants, Soaps, Shower Gel and Skin Care categories  under the  ‘Engage’, ‘Fiama Di Wills’,  ‘Vivel’, and ‘Superia’ brands, and improved in-store brand salience of  offerings under the ‘Essenza Di Wills’ brand.

The  ‘Savlon’ and ‘Shower to Shower’ trademarks acquired during the previous year  were fully integrated with the existing operations of the Business during the  year. The Company also entered the fast-growing Hand Wash category with the  introduction of ‘Savlon Hand Wash’ in three variants which continue to gain  good consumer traction.

The  Engage portfolio was fortified during the year with the addition of ‘Engage  Perfume Sprays’ in two variants each for both men and women.

 

Education & Stationery Products
 

The  Education & Stationery Products Business consolidated its leadership  position in the Education and Stationery products industry in India. The later  part of the year saw synchronisation of the trade pipeline ahead of the 2016  season in view of the subdued demand conditions and tight liquidity position in  the market. This resulted in muted growth in revenue during the year.

The  Business enriched its product portfolio with the launch of several  differentiated offerings under the ‘Classmate’, ‘Classmate Pulse’, ‘Paperkraft’  and ‘Saathi’ brands. Several products in innovative formats were launched  during the year including Paperkraft notebooks with unique covers, Classmate  ‘Octane’ pens while the art stationery range of products was further expanded  with the introduction of oil pastels and plastic crayons.
 

Lifestyle Retailing
 

The branded  apparel industry witnessed significant pressure during the year in the wake of  consumers cutting back on discretionary spends and heavy discounting by  industry players including the online channel. Despite these challenging  conditions, the Company’s Lifestyle Retailing Business clocked healthy growth  in revenue led by the ‘John Players’ brand.

In the  Premium segment, brand equity of 'Wills Lifestyle' was enhanced with heightened  focus on premium product platforms. The retail footprint of the Wills Lifestyle  brand spans over 100 exclusive stores in 50 cities and 350 ‘shop-in-shops’ in  leading national and regional chains, departmental stores and multi-brand  outlets and 6 exclusive boutiques across ITC Hotels.
‘John  Players’ has emerged as a leading brand in the ‘Youth fashion’ segment. The  brand has earned the distinction of being featured amongst the top five brands  in the apparel category in ‘Brand Equity - The Most Exciting Brands’ list  published by The Economic Times. John Players continues to expand its  strong pan-India presence with over 400 flagship stores, 600 ‘shop-in-shops’ in  leading national & regional retail chains and departmental stores, and 1600  multi-brand outlets.


Safety Matches and Incense sticks (Agarbatti)
 

The Company  recorded yet another year of impressive revenue growth in the Agarbatti  category, growing well ahead of the industry. Growing franchise for the 'Mangaldeep' brand, superior consumer experience and enhanced distribution  reach contributed to a robust performance during the year. The Company also  consolidated its leadership position in the ‘Dhoop’ segment. Investments were  made during the year to enhance quality, availability and improving supply  chain responsiveness.

The  Business sustained its market leadership in the Safety Matches category  leveraging a robust portfolio of offerings across market segments. However,  volumes remained impacted due to the proliferation of cheap and low quality  products.
 

Cigarettes
 

The  performance of the Cigarettes business remained subdued during the year due to  unprecedented pressure on the legal cigarette industry in India on account of  the cumulative impact of steep increase in taxation and intense regulatory  pressures. 

Over the last 4 years, the incidence of Excise Duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 118% and 142% respectively thereby exerting severe pressure on legal industry volumes even as illegal trade grows unabated. It is pertinent to note that steep increases in Excise Duty on cigarettes in recent years have resulted in widening the differential in Excise Duty rates (on a per kg. of tobacco basis) between cigarettes and other tobacco products from 29 times in 2005/06 to over 53 times currently. An analysis of the WHO Report on Tobacco Taxation, 2015 reveals that at 6.5% of per capita GDP, cigarette taxes in India are amongst the highest in the world. [As per WHO Report titled ‘The Global Tobacco Epidemic, 2015 – Raising Taxes on Tobacco’, cigarettes taxes (for 2000 cigarettes of the most sold brand covering both Central and State Taxes) in India represent 6.5% of per capita GDP]. In fact, cigarette taxes in India are 14 times higher than USA, 9 times higher than Japan, 7 times higher than China, 5 times higher than Australia and 3 times higher than Malaysia and Pakistan.

High  incidence of taxation and a discriminatory regulatory regime on cigarettes in  India have over the years led to a significant shift in tobacco consumption to  lightly taxed or tax-evaded tobacco products like bidi, khaini, chewing  tobacco, gutkha and illegal cigarettes which presently constitute over 89% of  total tobacco consumption in the country. Besides adversely impacting the  performance of the legal cigarette industry, this has led to sub-optimisation  of the revenue potential from the tobacco sector.

The  imposition of discriminatory and punitive VAT rates by some States provides an  attractive tax arbitrage opportunity for illegal cigarette trade by criminal  elements. The consequential decline in legal cigarette volumes in such States  has led to stagnation/decline in revenue collections, even as illegal  cigarettes gained significant traction. On the other hand, the pragmatic  decisions of several State Governments to rationalise VAT on cigarettes have  facilitated improvement in revenue buoyancy and containing the growth of  illegal trade.

According  to an independent study conducted by Euromonitor International – a renowned  global research organisation – India is now the 4th largest market for illegal cigarettes  in the world. In fact, illegal trade comprising smuggled foreign and  domestically manufactured tax-evaded cigarettes is estimated to constitute  one-fifth of the overall cigarette industry in India. A recent study by the  Federation of Indian Chambers of Commerce and Industry (FICCI) has estimated  that revenue loss due to illegal cigarettes is more than Rs. 9000 crores per  annum which represents a growth of nearly 50% over a two year period. During  the year under review, the Company was in continuous engagement with various  enforcement agencies whose proactive initiatives have resulted in significant  increase in seizure of smuggled cigarettes.

The Company  continues to engage on an ongoing basis with policy makers at both the Centre  and the States for moderation in tax rates on cigarettes to maximise the  revenue potential from the tobacco sector and contain the growth of illegal  trade. Such a policy would also bolster the tobacco control and health  objectives of the Government which have hitherto been seriously compromised  since non-cigarette tobacco products from the unorganised sector and illegal  cigarettes are manufactured using inferior tobaccos and other ingredients of  questionable quality and hygiene without any regulatory oversight.

Over and above  a punitive and discriminatory taxation regime, the legal Cigarette industry  continues to be subjected to increasingly stringent regulations. A Government  notification, originally proposed to be effective from 1st April 2015,  increased the size of graphic health warnings (GHW) from 40% of the surface  area on one side of the cigarette package to 85% of the surface area of both  sides of the package, and substituted the previous pictures with even more  gruesome and repulsive ones. The implementation of the new GHW was subsequently  kept in abeyance by the Central Government pending the recommendations of the  Parliamentary Committee on Subordinate Legislation (PCOSL) which was tasked  with the responsibility of examining the issue of introduction of larger GHW in  India. The decision to defer the notification till completion of PCOSL’s review  was reiterated by the Government in the Parliament. Nevertheless, whilst the  PCOSL was engaged in the matter, on 24th September 2015, the Central Government  notified that the new GHW would come in to effect from 1st April 2016. On 15th  March 2016, the PCOSL in its Final Report recommended that the size of the GHW  should be kept at 50% on both sides of the cigarette package as opposed to 85%  proposed by the Government.

The implementation  of any change in health warnings on cigarette packages is an elaborate process  for manufacturers, entailing months of preparation involving substantial cost  and effort. Since the matter of new GHW was under the Parliamentary Committee's  consideration, and the Government had itself held out that it would await the  Committee's report, the industry was led to believe that the Government would  re-notify new health warnings after considering the Committee's  recommendations. Further, the question of the legality of the new warnings was  and continues to be pending before the Court. In this situation, the Company,  as any prudent person would, did not commit to wasting substantial resources in  creating the large number of cylinders and other tools necessary for a  changeover of the warnings. As a result, the Company was not in readiness to  print the new GHW and was compelled to cease manufacture of cigarettes with  effect from 1st April 2016 pending clarity on the matter. Subsequently, in  order to attain clarity on the matter, the Company challenged the rules  mandating larger GHW before the Honourable High Court of Karnataka. The Court  was pleased to direct, vide Interim Order dated 12th April 2016, that the  Government should not take any coercive steps against the Company for a period  of 8 weeks during which the Company would continue to follow the Cigarettes and  Tobacco Products (Packaging and Labelling) Rules, 2008 (“2008 Rules”), which  prescribed 40% warning on the front panel of the cigarette packs. Accordingly,  the Company resumed production of cigarettes at its factories from 15th April  2016.

On 4th May  2016, the Honourable Supreme Court directed the Honourable High Court of  Karnataka to hear and dispose of within 6 weeks, the legal challenge to GHW pending  in several High Courts. The Honourable Supreme Court, however, also ordered  that any stay order granted by any High Court would not be given effect to till  the cases are finally disposed of. As a consequence of the above development,  in compliance with the interim requirements pending hearing in the Honourable  Karnataka High Court, the Company progressively commenced manufacture of  cigarettes with 85% warning.

The Tobacco  industry in India supports the livelihood of over 45 million people including  vulnerable sections of the society like farmers, farm labour, rural poor,  women, tribals etc. and contributes around Rs. 30,000 crores to the national  exchequer apart from generating valuable foreign exchange earnings of around  Rs. 6000 crores.

The  proposed GHW is excessively large, extremely gruesome and unreasonable. There  is no evidence to suggest that cigarette smoking would cause the diseases  depicted in the pictures or that large GHW will lead to reduction in  consumption. In fact this inadequacy of evidence prompted the courts in USA to  hold that the US FDA’s proposal for introduction of similar GHW in that country  as unconstitutional. Further, over 100 countries representing 60% of the  signatories to the Framework Convention on Tobacco Control have not adopted  GHW. It is pertinent to note that other major tobacco producing countries have  taken a considered view on the matter and have not adopted over-sized and  excessive graphic health warnings, thus striking a balance between the  interests of the consumer and of their farmers.   It may also be noted that the global average size for GHW is only about  30% coverage of the principal display area. Moreover, the top three cigarette  consuming countries - USA, China and Japan - which together account for 51% of  global cigarette consumption have only text based warnings  and have not adopted pictorial / graphic  health warnings.

The new GHW  will encourage the flow of illegal trade of brands owned by international  companies into the country since such brands are manufactured in many  jurisdictions which do not mandate the printing of graphic health warnings on  cigarette packages as applicable in India. The legal cigarette industry in  India will be hard pressed to counter the menace of illegal cigarettes as they  will be perceived by the consumer to be safer in the absence of the statutorily  mandated health warnings. Coupled with the fact that illegal cigarettes are  available at a fraction of the price of legal cigarettes, the new GHW will  provide further fillip to the growth of illegal cigarettes in the country.

It is  pertinent to note that the Department of Commerce, in its submissions to PCOSL,  has stated that “large warnings will lead to an increase in overall tobacco  consumption and illegal cigarettes; when large quantities of non-cigarette  tobacco products from unorganised sector are sold loose and / or without any  health warnings, it gives an impression of these products being relatively  safer than cigarettes.”

As always,  the Company complies fully with all regulations and laws in letter and spirit  and continues to engage with policy-makers for reasonable, pragmatic and  evidence based regulation and taxation policies that balance the health,  employment and economic imperatives of the country.

The  Company’s strong product portfolio along with superior consumer insights and a  strategy of continuous innovation and value addition has helped deliver  superior competitive performance. Some of the key new products launched during  the year include ‘Classic Fine Taste – Low Smell’, ‘Noir’ – the first 97mm  super slim cigarette in the country and new Kretek and capsule filter offers.  Significant investments were made during the year on cutting-edge  anti-counterfeit technology solutions that will enable the Company to protect its  trademarks, state-of-the-art on-line quality oversight systems and know-how for  developing innovative packaging formats in the future.

The  operating environment for the legal cigarette industry is likely to remain  extremely challenging in the year ahead in view of the high levels of taxation  which was exacerbated by a further increase of 10% in Excise Duty as announced  in the Union Budget 2016, rising illegal trade and increasing regulatory  pressures including the new GHWs. Despite these challenges, the Company remains  confident of sustaining its leadership position in the legal cigarette industry  by leveraging its superior strategies, comprehensive product portfolio and  world-class execution capabilities.
 

HOTELS

The  operating environment in the hospitality sector remained challenging during the  year. While occupancy improved during the year, average room rates remained  under pressure due to subdued growth in foreign tourist arrivals coupled with a  steady supply of new room inventory particularly in key markets like New Delhi,  Mumbai and Bengaluru. The Company’s hotels in Chennai also had to contend with  business disruption due to heavy rainfall and floods in the city during  November/December 2015.

Despite  a challenging operating environment, Segment Revenue recorded a growth of 8.4%  driven by improvement in room occupancy and robust growth in the Food &  Beverage segment.  Segment Results,  however, reflect the impact of floods in Chennai, gestation costs of the recently  commissioned ITC Grand Bharat, Gurgaon and higher depreciation charge due to  revision in useful life of fixed assets in accordance with Schedule II of the  Companies Act 2013.

The   Company’s Hotels Business continues to be rated amongst the fastest growing  hospitality chains with over 100 properties across the country under 4 distinct  brands -‘ITC Hotels’ in the Luxury segment, ‘WelcomHotel’ in the  ‘upper-upscale’ segment, ‘Fortune Hotels’ in the ‘upscale & mid-market’  space and ‘WelcomHeritage’ in the ‘leisure & heritage’ segment.

The  Company was declared the successful bidder for a 250-room luxury beach resort  located in South Goa operating under the name Park Hyatt Goa Resort and Spa,  following an auction held by IFCI Limited in February 2015 in terms of the  Securitisation and Reconstruction of Financial Assets and Enforcement of  Security Interest Act, 2002. Subsequent to the Company making full payment of  the bid amount, IFCI issued the requisite Sale Certificates in favour of the  Company on 25th February, 2015. However, based on an appeal by the erstwhile  owners, the sale has been struck down by the Honourable Bombay High Court. The  Company and IFCI have filed a Special Leave Petition before the Honourable  Supreme Court and the matter is sub judice.
Steady  progress is being made on construction of new hotels at Kolkata, Hyderabad and  Ahmedabad. The Company’s third property under the ‘My Fortune’ brand at  Coimbatore is nearing completion. All requisite clearances for the Company’s  first overseas project at Colombo have been received from the Sri Lankan  authorities by WelcomHotels Lanka (Private) Limited, a wholly-owned subsidiary  of the Company.  While excavation work is  in its final stage at the Colombo project site, allied works including piling  are progressing as per schedule.
 

PAPERBOARDS, PAPER & PACKAGING
 

During the  year, the Paperboards, Paper and Packaging segment was impacted by the muted  demand environment prevailing in the FMCG and Cigarette industry. Additionally,  zero duty on imports under the Free Trade Agreement (FTA) with ASEAN countries,  coupled with cheaper imports from China continued to adversely impact the  domestic Paper and Paperboard industry. Consequently, Segment Revenue grew by  0.9% and Segment Profits declined by 1.5% respectively against the backdrop of  a challenging business context as aforestated.

In the Paperboards and Specialty Papers  Business, despite a challenging operating environment and heightened  competitive intensity, the Company continued to drive volume growth and improve  realisations during the year. This was achieved by focusing on identified  end-use segments, investments in quality systems and processes, and enhancing  customer service levels.

The  Business consolidated its market leadership position in the Value Added  Paperboard (VAP) segment through effective key account management, focus on  product & process innovation, enhanced service delivery levels leveraging  strategically located ‘quick service centres’ and improved manufacturing  efficiencies.
Sales  of flexibles and cartons packaging recorded healthy growth during the year,  driven by increased offtake by existing customers and robust new business  development. The factories at Tiruvottiyur, Haridwar and Munger continued to  maintain the highest standards in Quality and Environment, Health & Safety  (EHS). With investments in  world-class technology, best-in-class quality management systems, multiple  locations and a wide packaging solutions portfolio, the Packaging and Printing  Business has established itself as a one-stop shop offering superior packaging  solutions.

 

AGRI BUSINESS

As per  latest estimates, Leaf tobacco exports from India dropped to a four-year low of  207 million kgs. during the year. Decline in cigarette consumption &  build-up of uncommitted stocks both globally and in India, coupled with steeper  currency depreciation in competing origins weighed on leaf tobacco exports.  Despite the challenging business environment, the Company sustained its  pre-eminent position as the leading exporter of unmanufactured tobacco from  India through focused strategies aimed at strengthening trade with existing  customers and robust new business development.

During  the year, the quality of wheat crop in India was adversely impacted primarily  due to unseasonal rains. The Business leveraged its wide geographical sourcing  network and customised infrastructure to secure supplies of critical grades  with benchmark quality while scaling up operations significantly towards  meeting the growing requirements for Aashirvaad atta. The Business also  delivered substantial savings to the system through efficient logistics  management and other cost-optimisation initiatives. However, lack of export  trading opportunities in wheat, soya and coffee due to higher crop output and  steeper currency depreciation in competing origins impacted revenue growth  during the year.
The  Business continues to provide strategic sourcing support to the Company’s  Cigarette business and leverage its deep rural linkages to source  identity-preserved specific grades of superior quality wheat and high quality  chip stock potatoes for the Branded Packaged Foods Businesses.  The Business is collaborating with research  organisations such as Indian Agricultural Research Institute, Directorate of  Wheat Research, Punjab Agricultural University and Agarkhar Research Institute  towards scaling up wheat sourcing from areas that are in close proximity of  atta manufacturing plants. As part of its wheat crop development program, the  Business has introduced location-specific new and improved seed varieties along  with appropriate package of practices across many states and continues to focus  on augmenting capabilities in proprietary crop intelligence, scaling up the  sourcing & delivery network and developing blends based on consumer  requirements. The Business also leveraged its extensive sourcing network and  associated infrastructure in key growing areas coupled with well-entrenched  farmer linkages to source high quality chip stock potato for the Company’s  Bingo! Yumitos brand and fruit pulp for the Company’s ‘B Natural’ brand.

Contribution to Sustainable Development
 

The  Company’s Corporate Social Responsibility (CSR) 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 programmes has spread to 166 districts across  the country and can be viewed at a glance in the following chart:

The Board of Directors, at its meeting in Kolkata on  20th May 2016, approved the financial results for the year ended 31st  March 2016, which are enclosed.