ICRA has assigned a CGR2 rating to the Corporate Governance practices of ITC Limited. This is on a rating scale of CGR1 to CGR6 where CGR1 denotes the highest rating. The CGR2 rating implies that in ICRA’s current opinion, the rated Company has adopted and follows such practices, conventions and codes as would provide its financial stakeholders a high level of assurance on the quality of corporate governance. ICRA’s opinion, however, is not a certificate of statutory compliance or a comment on the rated Company’s future financial performance, credit rating or stock price. This is the first Corporate Governance rating of its kind in the country.

ICRA’s Corporate Governance Rating (CGR) is meant to indicate the relative level to which an organisation accepts and follows the codes and guidelines of corporate governance practices. Corporate Governance practices prevalent in a company reflect the distribution of rights and responsibilities among different participants in the organisation such as the Board, management, shareholders and other financial stakeholders and the policies and systems laid down and followed for making business decisions. The emphasis of ICRA rating is on a corporate’s business practices and quality of disclosure standards that address the requirements of the regulators and is fair and transparent to its financial stakeholders.

The variables, which have been analysed for arriving at the rating, are the shareholding structure, governance structure and management processes, board structure and processes, stakeholder relationship, transparency/disclosures and financial discipline including transactions with subsidiaries and associates. Each of these variables have been evaluated with respect to a set of attributes and a composite score is computed using a proprietary model developed by ICRA.

The `High level of Corporate Governance’ rating reflects ITC’s transparent shareholding structure, well structured management decision making processes with adequate delegation of powers and sound Board structure and process. Further, in ICRA’s opinion, the composition of the Board as well as the Board Committees, frequency of meetings, quality of agenda papers and the Board’s involvement in the decision making process satisfy the requirements of good corporate governance. The rating also reflects conformity with the provisions of Clause 49 of the Listing Agreement, even though the rating is not to be interpreted as an indicator for statutory compliance. The rating also factors in the level of disclosure in the Annual Report and the Company’s decision to balance the extent of disclosures in the Annual Report with the need to protect shareholder interest in a competitive environment.

The Company’s corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The Company is currently focussed on four business groups : FMCG, Hotels, Paperboards, Paper & Packaging and Agri Business. Despite the gestation cost of some of its recent investments and the restructuring costs on account of exit from edible oils and financial services business, the Company has been consistently earning a high level of Return on Capital Employed and has a sound track record in terms of investor servicing as well as dividend payout.

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