In the confectionery segment, the 'Candyman' range was further expanded with the launch of deposited candies in two exciting variants - Candyman Butterscotch & Candyman Orange. Market extension of Candyman Eclairs, Pineapple and Orange flavours - launched in the second quarter, was completed during the period. 'Minto', the Company's popular brand of compressed mint, continues to enjoy impressive market standing.

The Company's portfolio of offerings under the 'Aashirvaad Ready Meals' banner was further expanded with the addition of 'pav bhaji' and 'pindi chana' to the existing range. The range is fast gaining consumer acceptance as a 'value for money' convenience product. The 'Kitchens of India' premium ready-to-eat product range continues to enjoy the franchise of the discerning consumer.

The Company's foray into the mid-priced segment with the 'John Players' range of menswear was further scaled up during the quarter with distribution now extending to nearly 3250 outlets in 580 markets, making it the largest distributed apparel brand in the country in this category. Consumer response has been encouraging and the brand is being rolled out rapidly to establish national presence.

In addition to the 48 exclusive 'Wills Lifestyle Stores' across 39 cities, the 'Wills' range was extended to 65 multi-brand outlets (MBOs) and 16 large format retail stores (LFRs) during the quarter, to increase market penetration.

The Greeting Cards business continued to make impressive progress with current market share estimated at 20%. Card sales registered a strong growth of 18% in volume terms over the same period last year. Market coverage of the 'Expressions Paperkraft' range of stationery products and the 'Classmate' range of notebooks in the school stationery segment was further extended during the quarter. The business is gearing up to achieve national presence in the ensuing peak season to tap the full potential of the stationery segment.

The Safety Matches SBU, which markets Safety Matches sourced from the small-scale sector, continued to post impressive gains during the quarter with market share touching nearly 8%.

The Company's brands -'Mangaldeep' and 'iKno' - have become synonymous with value-addition in an industry where movement up the value chain has not been witnessed in a long time.

In the volume segment, 'AIM' has become the single largest brand in the country within a year of launch.

ITC continues to extend technical and management support to small-scale sector manufacturers to help them achieve superior product quality.

 Hotels

Segment revenues at Rs.71 crores grew by nearly 31% over the same period last year on the back of improved occupancies and room realisations following the recent upturn in the industry. Operating profits recorded a strong growth of 98% over the same period last year, notwithstanding depreciation and other gestation costs in respect of the recently opened hotel 'ITC Sonar Bangla' at Kolkata. 'ITC Sonar Bangla' has in a short span of time established itself as a premier property in the city and is well on course to achieve cash breakeven in the very first full year of operations.

Construction of the Company's second hotel in Mumbai, ITC Grand Central, is progressing satisfactorily.

 Paperboards, paper and packaging

During the quarter, the Company entered into an agreement to acquire BIPCO's paperboards undertaking located near Coimbatore for a consideration of Rs.233 crores payable over 5 years. With ITC's existing paperboards facilities operating at full capacity, this acquisition will create an additional 65000 MT per annum capacity to service the growing demand for high quality paperboards both in the domestic and overseas markets.

Sales of value-added products continued to grow leveraging the Company's recent investments in pulp manufacturing, poly-extrusion and supercalendering facilities. They now constitute nearly 50% of the total paperboard sales. The Company's Elemental Chlorine Free (ECF) pulp mill is the only one of its kind in the country, meeting world-class environmental standards. While ECF pulp-based board has internationally been the preferred packaging option, with increasing awareness of hygiene and safety among Indian consumers, industries like foods and pharmaceuticals in the country are increasingly switching to the Company's ECF pulp-based paperboard.

The Company also entered into a Memorandum of Understanding (MOU) with the Andhra Pradesh Government to collaborate on the state's 'Velugu' programme, to develop wastelands in Andhra Pradesh. The proposed partnership on 'Velugu' is yet another milestone in ITC's wasteland development programme. With the long-term objective of seeking sustainable solutions to the problems of endemic poverty and deforestation, ITC and the AP Government will synergise their strengths in forestry development in the Khammam District of Andhra Pradesh. This collaborative programme in which the Company will contribute its skills in project management and logistics support and provide quality planting stock, will be initiated with a pilot social forestry project covering 1,000 acres.

While Segment revenues grew by 8.5% over the same period last year, Segment results were depressed due to certain once-off events like inventory correction by end users primarily in the FMCG industry and plant shutdown for maintenance & repairs.

 Agri business

The Company continues to focus on building a robust IT-backed rural distribution infrastructure in support of its FMCG growth strategy. The e-choupal network was further ramped up during the quarter and is expected to touch nearly 4100 installations by March this year, reaching out to 2 million farmers in close to 18000 villages in the states of Madhya Pradesh, Uttar Pradesh, Maharashtra, Karnataka, Rajasthan and Andhra Pradesh. Pilot runs in respect of various rural marketing initiatives are underway and business models are being fine-tuned prior to scaling up.

Operating profits of the segment were adversely impacted primarily on account of slower marketing of the current Mysore leaf tobacco crop and delayed export shipments of soya. These timing differences impacting the current quarter's performance are expected to be set off in the last quarter of the current financial year.

The Board of Directors, at its meeting held in Kolkata on 30th January 2004, approved the financial results for the quarter ended 31st December 2003, which are enclosed.

Unaudited Financial Results (Provisional)
For the Quarter and Nine Months ended 31st December, 2003

2994.55

2779.38

8732.89

8355.00

11194.47

1623.40

1467.60

4588.50

4345.92

5865.78

41.78

34.24

168.66

109.52

169.59

1665.18

1501.84

4757.16

4455.44

6035.37

1031.62

927.96

2766.66

2665.55

3712.00

(69.61)

(56.69)

(158.36)

(73.63)

3.00

667.69

625.22

1730.83

1733.06

2245.42

91.06

92.88

276.10

260.77

346.12

342.48

266.55

918.09

740.35

1117.46

7.17

6.90

16.61

23.88

29.84

59.78

61.22

179.09

173.18

237.34

566.61

505.76

1794.80

1592.83

2056.19

185.91

182.25

589.01

544.90

684.84

380.70

323.51

1205.79

1047.93

1371.35

247.59

247.51

247.59

247.51

247.51

5056.48

15.38

13.07

48.70

42.34

55.41

15.36

13.07

48.64

42.34

55.41

247586073

247511886

247586073

247511886

247511886

100

100

100

100

100

Segment-wise Revenue, Results and Capital Employed for the
Quarter and Nine Months Ended 31st December, 2003

(Rs. in Crores)

1. Segment Revenue

    a) FMCG - Cigarettes

2302.33

2155.48

6877.66

6568.02

8764.00

                  - Others

88.53

37.01

215.08

63.73

109.20

Total FMCG

2390.86

2192.49

7092.74

6631.75

8873.20

    b) Hotels

70.61

54.05

177.30

135.50

193.41

    c) Agri Business

378.11

397.47

1112.31

1293.46

1658.14

    d) Paperboards, Paper &
        Packaging

314.14

289.61

918.00

859.04

1162.86

Total

3153.72

2933.62

9300.35

8919.75

11887.61

Less : Inter-segment revenue

200.95

188.48

736.12

674.27

862.73

Gross sales / Income from operations

2952.77

2745.14

8564.23

8245.48

11024.88

2. Segment Results

    a) FMCG - Cigarettes

510.91

467.10

1569.46

1455.11

1923.53

                  - Others

(37.59)

(30.92)

(113.39)

(78.66)

(122.44)

                   Total FMCG

473.32

436.18

1456.07

1376.45

1801.09

    b) Hotels

11.21

5.65

13.60

5.37

10.09

    c) Agri Business

(1.18)

8.72

66.22

88.66

84.05

    d) Paperboards, Paper &
        Packaging

59.68

63.95

174.15

168.95

226.27

Total

543.03

514.50

1710.04

1639.43

2121.50

     Less : i) Interest (Net)

7.17

6.90

16.61

23.88

29.84

              ii) Other
                  un-allocable
                  expenditure
                  net of
                  un-allocable
                  income

(30.75)

1.84

(101.37)

22.72

35.47

Total Profit Before Tax

566.61

505.76

1794.80

1592.83

2056.19

3. Capital Employed

     a) FMCG - Cigarettes*

1146.67

1389.99

1621.58

                   - Others

177.43

73.81

80.41

1324.10

1463.80

1701.99

     b) Hotels

970.35

916.73

943.09

     c) Agri Business

646.01

538.75

410.88

     d) Paperboards, Paper &
         Packaging

1339.75

1250.87

1260.91

Total Segment Capital Employed

4280.21

4170.15

4316.87

* Before considering provision of Rs. 1263 Crores (31.12.2002 - Rs. 907 Crores) in respect of disputed State taxes, the levy / collection of which has been stayed.

(1) The Company's corporate strategy aims at creating multiple drivers of growth anchored on its core competencies.The Company is currently focused on four business groups : FMCG, Hotels, Paperboards, Paper & Packaging, and Agri Business. The Company's organisational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each one of them.

(2) The business groups comprise the following :

(3) Segment results of the new business activities namely 'FMCG : Others ' largely reflect start up and business development costs

(4) In its Hotels business, the Company has been engaged in implementing its strategic investment plans to complete the ITC Welcomgroup chain. Capital employed of Rs. 970 Crores (31.12.2002- Rs. 917 Crores) includes Rs. 836 Crores (31.12.2002 - Rs. 810 Crores) relating to the recently opened hotels at Mumbai and Kolkata as well as capital work in progress in respect of the second hotel under construction in Mumbai

The segment results for Hotels continue to reflect the depreciation charge and the gestation cost of the newly opened hotels, the impact of the global slump in international travel during the earlier part of this year, and the holding cost in respect of Hotel Searock which has been the subject matter of a prolonged legal dispute.

(5) The Company's Agri Business markets agri commodities in the export and domestic markets; supplies agri raw materials to the Branded Packaged Foods Business and sources leaf tobacco for the Cigarettes Business.

During the nine months ended 31st December, 2003, the Agri Business revenues / results witnessed a degrowth over the same period last year due to :
(a) transporters' strike in April 2003;
(b) significant reduction in the size of export opportunity in non basmati rice which was available last year (Rs. 76 Crores for nine months ended 31.12.2003 as against Rs. 456 Crores for nine months ended 31.12.2002); and
(c) significant appreciation of the Rupee against the US Dollar.

(6) As at 31st December 2003, the total capital employed of the Company of Rs. 6575 Crores (31.12.2002 - Rs. 5461 Crores) included Rs. 802 Crores (31.12.2002 - Rs. 874 Crores) being legacy assets acquired by the Company as part and parcel of the schemes facilitating exit from the Financial Services and Edible Oil Businesses in 1997.

(7) Figures for the previous year have been recast to conform to current presentation.