ASSIGNMENT ON CASE STUDY OF ITC IN

RURAL INDIA

Submitted to: Dr. Niladri Das

Date: 20th September, 2010

Subject: Entrepreneurship Management (MSC 43101)

Submitted by:Vibhor Garg (2009MB0014)Ravi Biwal (2009MB0027)Manish Kumar (2009MB0042)Binay Kumar (2009MB0005)Rohit Rajak (2009MB0019)Amit Anthony Soren (2009MB0035)Manish Kumar Jha (2009MB0011)

INTRODUCTION-ITCITC is one of India's foremost private sector companies with a market capitalization of over US $ 22 billion and a turnover of US $ 6 billion.* ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by BusinessWorld and among India's Most Valuable Companies by Business Today. ITC ranks among India's `10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. As one of India's most valuable and respected corporations, ITC is widely perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a commitment beyond the market". In his own words: "ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value. ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part." ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and acknowledged service skills in hoteliering. Over time, the strategic forays into new businesses are expected to garner a significant share of these emerging high-growth markets in India. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach. ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd, provides IT services and solutions to leading global customers. ITC Infotech has carved a niche for itself by addressing customer challenges through innovative IT solutions. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating. ITC employs over 26,000 people at more than 60 locations across India. The Company continuously endeavors to enhance its wealth generating capabilities in a globalizing environment to consistently reward more than 3, 77,000 shareholders, fulfill the aspirations of its stakeholders and meet societal expectations. This over-arching vision of

the company is expressively captured in its corporate positioning statement: "Enduring Value. For the Nation. For the Shareholder."(* as on 31st March 2010) Source: http://www.itcportal.com/about-itc/itc-profile/itc-profile.aspx

HISTORY-ITCITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. As the Company's ownership progressively Indianised, the name of the Company was changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'.The Company’s beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 3,10,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks. Though the first six decades of the Company's existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house. In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the hotels business for its potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment. Since then ITC's Hotels business has grown to occupy a position of leadership, with over 100 owned and managed properties spread across India. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in the world. It has also made an immense contribution to the development of Sarapaka, an economically backward area in

the state of Andhra Pradesh. It is directly involved in education, environmental protection and community development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead time and a wider product range. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, British American Tobacco and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry. The merged entity was named the Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002. Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh. In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the launch of Expressions range of greeting cards. A line of premium range of notebooks under brand “Paperkraft” was launched in 2002. To augment its offering and to reach a wider student population, the popular range of notebooks was launched under brand “Classmate” in 2003. “Classmate” over the years has grown to become India’s largest notebook brand and has also increased its portfolio to occupy a greater share of the school bag. Years 2007- 2009 saw the launch of Children Books, Slam Books, Geometry Boxes, Pens and Pencils under the “Classmate” brand. In 2008, ITC repositioned the business as the Education and Stationery Products Business and launched India's first environment friendly premium business paper under the “Paperkraft” Brand. “Paperkraft” offers a diverse portfolio in the premium executive stationery and office consumables segment. Paperkraft entered new categories in the office consumable segment with the launch of Textliners, Permanent Ink Markers and White Board Markers in 2009. ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the event forward to consumers.

In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area. Today ITC Infotech is one of India’s fastest growing global IT and IT-enabled services companies and has established itself as a key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers across key focus verticals - Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel, Hospitality and Transportation) and Media & Entertainment. ITC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments with the launch of the brands mint-o and Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing branded snacks category with Bingo! in 2007. In eight years, the Foods business has grown to a significant size with over 200 differentiated products under six distinctive brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing. In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matches brands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro. ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio Homme) and women (Inizio Femme). Continuing with its tradition of bringing world class products to Indian consumers the Company launched 'Fiama Di Wills', a premium range of Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel range of soaps in February and Vivel range of shampoos in June 2008.Source: http://www.itcportal.com/about-itc/itc-profile/history-and-evolution.aspx

BUSINESS MODELITC is a board-managed professional company, committed to creating enduring value for the shareholder and for the nation. It has a rich organizational culture rooted in its core values of respect for people and belief in empowerment. Its philosophy of all-round value creation is backed by strong corporate governance policies and systems. ITC’s corporate strategies are:

Create multiple drivers of growth by developing a portfolio of world class businesses that best matches organizational capability with opportunities in domestic and export markets.

Continue to focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards & Packaging, Agri Business and Information Technology.

Benchmark the health of each business comprehensively across the criteria of Market Standing, Profitability and Internal Vitality.

Ensure that each of its businesses is world class and internationally competitive. Enhance the competitive power of the portfolio through synergies derived by

blending the diverse skills and capabilities residing in ITC are various businesses. Create distributed leadership within the organization by nurturing talented and

focused top management teams for each of the businesses. Continuously strengthen and refine Corporate Governance processes and systems

to catalyse the entrepreneurial energies of management by striking the golden balance between executive freedom and the need for effective control and accountability.

Source: http://www.itcportal.com/about-itc/itc-profile/the-itc-way.aspx

Vision: Sustain ITC’s position as one of India’s most valuable 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 globalizing environment, delivering superior and sustainable stakeholder value.

Businesses:FMCGCigarettes & CigarsFoodsLifestyle RetailingPersonal CareEducation and StationerySafety MatchesAgarbattisHotelsPaperboards and PackagingPaperboards and Specialty PapersPackagingAgri BusinessAgri Commodities & Rural Servicese-ChoupalLeaf Tobacco, Spices & Agri InputsInformation Technology

ITC- AGRI COMMODITIES & RURAL SERVICES

ITC Limited is undisputedly, one of India's most professionally managed companies. It has a history of over 90 years, dealing with the Indian agricultural system. ITC's Agri Business Division (ITC-ABD) is engaged in the trading of a wide range of Agri Commodities and Aqua Foods. It holds a principal position in a number of international markets and is backed by

sound technical expertise, a strong proprietary knowledge of the Indian farming system and Competency to cater to customer specific requirements.

ITC-ABD today has the enviable reputation of being the most reliable Indian supply chain partner for select global buyers of India's finest Agri and Aqua offerings.

ITC's pre-eminent position as one of India's leading corporates in the agricultural sector is based on strong and enduring farmer partnerships that has revolutionized and transformed the rural agricultural sector. A unique rural digital infrastructure network, coupled with deep understanding of agricultural practices and intensive research, has built a competitive and efficient supply chain that creates and delivers immense value across the agricultural value chain. One of the largest exporters of agri products from the country, ITC sources the finest of Indian Feed Ingredients, Food Grains, Edible Nuts, Marine Products, Processed Fruits, Coffee & Spices. ITC's Agri Business Division is the country's second largest exporter of agri-products with exports of over Rs. 1000 Crores (Rs. 10 billion). Its domestic sales of agri-products are in excess of Rs. 1500 Crores (Rs. 15 billion). It currently focuses on exports and domestic trading of: Feed Ingredients - SoyamealFood Grains - Rice (Basmati & Non Basmati), Wheat, PulsesEdible Nuts - Sesame Seeds, HPS Groundnuts, Castor oilMarine Products - Shrimps and PrawnsProcessed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit Products, Fresh Fruits

Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery and other Seed Spices

Farmer empowerment through e-Choupals

ITC's unique strength in this business is the extensive backward linkages it has established with the farmers. This networking with the farming community has enabled ITC to build a highly cost effective procurement system. ITC has made significant investments in web-enabling the Indian farmer. Christened 'e-Choupal', ITC's empowerment plan for the farmer centres around providing Internet kiosks in villages. Farmers use this technology infrastructure to access on-line information from ITC's farmer-friendly website www.echoupal.com. Data accessed by the farmers relate to the weather, crop conditions, best practices in farming, ruling international prices and a host of other relevant information. e-Choupal today is the world's largest rural digital infrastructure. The unique e-Choupal model creates a significant two-way multi-dimensional channel which can efficiently carry products and services into and out of rural India, while recovering the associated costs through agri-sourcing led efficiencies. This initiative now comprises about 6500 installations covering nearly 40,000 villages and serving over 4 million farmers. Currently, the 'e-Choupal' website provides information to farmers across the 10 States of Madhya Pradesh, Haryana, Uttarakhand, Uttar Pradesh, Rajasthan, Karnataka, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu. Over the next 5 years it is ITC's Vision to create a network of 20,000 e-Choupals, thereby extending coverage to 100,000 villages representing one sixth of rural India. Supporting the e-Choupal network are ITC's procurement teams, handling agents and contemporary warehousing facilities across India, enabling its Agri Business to source identity-preserved merchandise even at short notice. ITC's processors are handpicked, reliable high quality outfits who ensure hygienic processing and modern packaging. Strict quality control is exercised at each stage to preserve the natural flavour, taste and aroma of the various agri products.

 Choupal Saagar

Following the success of the e-Choupal, the Company launched Choupal Saagar, a physical infrastructure hub that comprises collection and storage facilities and a unique rural hypermarket that offers multiple services under one roof. This landmark infrastructure, which has set new benchmarks for rural consumers also incorporates farmer facilitation centres with services such as sourcing, training, soil testing, health clinic, cafeteria, banking, investment services, fuel station etc. 24 'Choupal Saagars' have commenced operations in the states of Madhya Pradesh, Maharashtra and Uttar Pradesh. ITC is engaged in scaling up the rural retailing initiative to establish a chain of 100 Choupal Saagars in the near future.Choupal Fresh

Choupal Fresh, ITC's fresh food wholesale and retail initiative, leverages its extensive backward linkages with farmers and supply chain efficiencies. It focuses on stocking fresh horticulture produce like fresh fruits and vegetables. Five Choupal Fresh retail stores are currently operational at Hyderabad. The company has also set up a complete cold chain for ensuring the availability of fresh products in the market, besides directly sourcing farm fresh produce from the farmers.  Choupal Pradarshan Khet

In line with its mission of improving the quality of life in rural India, ITC's Agri Business has launched a flagship extension programme called 'Choupal Pradarshan Khet' (CPK) or demonstration plots to help farmers enhance farm productivity by adopting agricultural best practices. Started in 2005-06, the crop portfolio includes soya, paddy, cotton, maize, bajra, wheat, gram, mustard, sunflower and potato. This initiative, has covered over 70,000 hectares and has a multiplier impact and reaches out to 1.6 million farmers.

Processed FruitsIn line with its strategy of achieving a higher order of value capture, the business also focuses on the value added segment, steadily enhancing its basket of offerings with several new products. These include frozen foods, IQF (individually quick frozen) fruits, niche products like baby-food quality purees and high brix pulp and organic purees. ITC seeks to focus on this segment and exploit the market opportunity for tropical fruits and fruit products, where India has a natural advantage of growing the complete range, including exotic varieties. In Processed Fruits category, ITC exports from HACCP certified plants to Western Europe, North Africa, West Asia, Japan and North America, a wide range of Processed Fruit products made from Mango (Alphonso, Kesar & Totapuri), Guava, Papaya and Pomegranate. ITC is the leading Indian exporter of Organic Fruit Products certified to European (EC 2092/91) and US (NOP) Standards.Fresh Table Grapes & Pomegranates are sourced from ITC's EUREPGAP certified farmer groups & retailed through prominent supermarkets like Sainsbury's and Albert Heijn in Europe and Daiei in Japan.

  Marine ProductsITC has been a significant exporter of seafood from India since 1971. It exports frozen as well as cooked shrimps and other seafood products to Japan, USA and Europe. Its well-known brands include Gold Ribbon, Blue Ribbon, Aqua Kings, Aqua Bay, Aqua Feast and Peninsular. 

A Customer Centric ApproachITC's Agri Business Division continues to use innovation as its core strategy to retain its position as the one-stop shop for sourcing agri-commodities from India. Besides setting benchmarks in quality, reliability and value-added services, ITC is a trendsetter in customer care particularly in commodity trading. Major customers include Cargill, Marubeni, Toepfer, among others, who source agriculture commodities and food products from India. Customers can log onto www.itcabd.com, and readily access information on crop production and forecast, market updates, the latest shipment status and the prevailing foreign exchange rates.Sourcing for ITCITC's Agri business is progressively aligning its commodity portfolio with the sourcing needs of the Company's Foods business to generate higher order value from its agri procurement infrastructure. The business has commenced procurement of chipstock potatoes, one of the critical raw materials in the manufacture of the Company's 'Bingo!' brand of potato chips. The acquisition of Technico, an Australian company with technology leadership in the production of early generation seed potatoes, helped the business access a ready pipeline of new high-yielding varieties of chipstock potato seeds.

E-CHOUPALITC's Agri Business Division, one of India's largest exporters of agricultural commodities, has conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others.

The Value Chain - Farm to Factory Gate:

'e-Choupal' also unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural resources.Such a market-led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for farmer risk management, larger investments and higher quality and productivity. Further, a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of the Indian economy. This will create another virtuous cycle propelling the economy into a higher growth trajectory.The Model in Action:Appreciating the imperative of intermediaries in the Indian context, 'e-Choupal' leverages Information Technology to virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies like the USA.'e-Choupal' makes use of the physical transmission capabilities of current intermediaries - aggregation, logistics, counter-party risk and bridge financing -while disintermediating them from the chain of information flow and market signals.With a judicious blend of click & mortar capabilities, village internet kiosks managed by farmers - called sanchalaks - themselves, enable the agricultural community access ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision making is now information-based). Real-time information and customized knowledge provided by 'e-Choupal' enhance the ability of farmers to take decisions and align their farm output with market demand and secure quality & productivity. The aggregation of the demand for farm inputs from

individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the 'mandi' system for price discovery, 'e-Choupal' eliminates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs. 'e-Choupal' ensures world-class quality in delivering all these goods & services through several product / service specific partnerships with the leaders in the respective fields, in addition to ITC's own expertise.While the farmers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.The Status of Execution:Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. 'e-Choupal' services today reach out to over 4 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses, and shrimp - in over 40,000 villages through 6500 kiosks across ten states (Madhya Pradesh, Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh, Rajasthan, Maharashtra, Kerala and Tamil Nadu).The problems encountered while setting up and managing these 'e-Choupals' are primarily of infrastructural inadequacies, including power supply, telecom connectivity and bandwidth, apart from the challenge of imparting skills to the first time internet users in remote and inaccessible areas of rural India.Several alternative and innovative solutions - some of them expensive - are being deployed to overcome these challenges e.g. Power back-up through batteries charged by Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT equipment, Mobile Choupals, local caching of static content on website to stream in the dynamic content more efficiently, 24x7 helpdesk etc.Going forward, the roadmap includes plans to integrate bulk storage, handling & transportation facilities to improve logistics efficiencies. As India's 'kissan' Company, ITC has taken care to involve farmers in the designing and management of the entire 'e-Choupal' initiative. The active participation of farmers in this rural initiative has created a sense of ownership in the project among the farmers. They see the 'e-Choupal' as the new age cooperative for all practical purposes.This enthusiastic response from farmers has encouraged ITC to plan for the extension of the 'e-Choupal' initiative to altogether 15 states across India over the next few years. On the anvil are plans to channelise other services related to micro-credit, health and education through the same 'e-Choupal' infrastructure.Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of agricultural best practices to small and marginal farmers. Backed by intensive research and knowledge, this initiative provides Agri-extension services which are qualitatively superior and involves pro-active handholding of farmers to ensure productivity gains. The services are customised to meet local conditions, ensure timely availability of farm inputs including credit, and provide a cluster of farmer schools for capturing indigenous knowledge. This initiative, which has covered over 70,000 hectares, has a multiplier impact and reaches out to over 1.6 million farmers.Source: http://www.itcportal.com/itc-business/agri-business/e-choupal.aspx

PORTER’S FIVE FORCES ANALYSIS1. Entry Barriers:-The entry barriers in the software industry are low. For instance,

to set up an ITES business, the initial investments are lower than the revenue realization per seat.

2. Inter firm rivalry: The Indian ITES industry has intense competition among themselves.

3. Bargaining power of suppliers: All suppliers have high level of maturity .So it doesn't appear relevant.

4. Threat from unorganized sector: Since quality is a key factor here, the competition will not allow the organized sector to survive

SWOT ANALYSIS1. Strengths:

The reconfiguration of traditional procurement system eliminated the need of ITCs commission agent at the mandis. The reconfiguration resulted in savings for farmers and ITC.

e–chaupal was Designed to tackle the challenges posed by the unique features of Indian agriculture, characterised by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others.

Price discovery before deciding to sell. Freedom of choice for transaction. Payment – cash on spot. Knowledge on farming best practices. Information on weather. High quality products and solutions – usage. It provided power of scale to farmers. It led to overall improvement in productivity.

2. Weaknesses: The company's original business was traded in tobacco. ITC stands for

Imperial Tobacco Company of India Limited. It continues to use its original name, despite the negative connection of tobacco with poor health and premature death.

3. Opportunities: Enthusiastic response from farmers has encouraged ITC to plan for the

extension of the ‘e-Choupal’ initiative to altogether 15 states across India over the next few years. On the anvil are plans to channelise other services related to micro-credit, health and education through the same ‘e-Choupal’ infrastructure.

Direct interaction with farmers will make it easier for ITC to inform them of the market needs and influence them to grow high value strains of commodities.

4. Threats: ITC's opportunities are likely to be opportunities for other companies as well. The

obvious threat is from competition. Reliance fresh and HULs project shakti. Government regulations.

BCG ANALYSIS BCG Matrix a.k.a. Growth-Share Matrix, Boston Box, Boston Matrix,

Boston Consulting Group analysis. Created by Bruce Henderson for the Boston Consulting Group in 1970 to

help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool

in brand marketing, product management, strategic management, and portfolio analysis.

Stars Hotels Paperboards/Packaging.

Agri business.

? FMCG- Others.

Cash Cows FMCG-Cigarettes

DogsITC Infotech

FINANCIALS

In India only about 15% of tobacco is consumed in the cigarette form, whilst the remaining consumption is through other forms of tobacco products like bidi, khaini, gutkha, zarda and kimam.Taxation and regulations targeted almost exclusively at the cigarette industry in India has resulted in the share of cigarettes in total tobacco consumption in India progressively declining from 23% in 1971/72 to only about 15% currently.Despite having only a 15% share of consumption, cigarettes contribute more than 85% of the tax revenues from the tobacco sector.It is the largest manufacturer of cigarette tissue in India and continues to be the market leader with a share of 65% of the domestic market.

Tobacco Consumption (Million kg)Year Cigarettes Non-Cigarette

FormsTotal

1981/82 86 320 4062008/09e 74 421 495Difference (–) 14% (+) 32% (+) 22%Source : USDA; Tobacco Institute of India

Market Share of ITC in cigarettes industry is 87.756%.

The business has notched a volume market share of approximately 5% in soaps, and around 3.4% in shampoos.ITC is the market leader in the Paperboards segment with a value market share of around 26%.

(The Indian Paper Industry at 9 million tons per annum accounts for about 2% of the world’s production of paper and paperboards. India is globally the fastest growing market for paper, with paper consumption estimated to touch 14 million tons by 2015-16.)In the Staples category, ‘Aashirvaad’ atta sustained its leadership position with a market share of 56% among national branded players.Its ‘Sunfeast’brand continued to consolidate its position with an All India-Urban market share of 11%.In the Confectionery category, ‘Candyman’ is the clear market leader in the hard boiled segment.In the growing décor segment, it continues to record steady growth with a market share of 26%.

REVENUE GENERATIONBusiness Segments (Rs. in Crores)FMCG - Cigarettes 17283.03FMCG - Others 3638.73Hotels 904.92Agri Business 2388.18Paperboards, Paper and Packaging 2044.74Total Revenue Generated 26259.60

Geographical Segments (Rs. in Crores)

Within India 24020.27Outside India 2239.33

Total Revenue 26259.60

Shareholding Pattern of ITC:

Market Data:

(Source: Capitaline Plus)

Index Comparision:

(Source: www.bseindia.com)

TREND ANALYSIS

The revenue is increasing continuously.

Current ratio gives an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short term assets (cash, inventories, receivables).A current ratio of 1.33 is considered ideal for a company.In case of ITC it is not always higher than the ideal norm.

At present ITC has a current ratio of 1.12. This means that ITC has Rs. 1.12 to pay Rs. 1.The trend of current ratio of ITC is not regular.

We can clearly see that ITC is not a debt free company.However ITC is reducing its dependency on external debt for financing itself.This has certain positive implications as well as negative, such as the company is not dependent on the external borrowers and is free from the interest burden and hence has a high profit, but it lowers its EPS.We can also say that the company has a strong support from the shareholders.

ITC was showing a positive trend in EPS upto the year 2005.After that there is a sharp decline in the EPS. This may be due to stock split in the year 2005-06 due to which the face value of the shares changes from Rs. 10/- per share to Rs. 1/- per share.It started again showing a positive trend in its EPS after the year 2006. It indicates that the profit of the company is growing and thus is a good sign for the investors. If the company will use debt for financing itself, then EPS may rise further.

It is amount of sales generated for each rupee of asset.It shows how efficiently the company is utilizing its assets in generating revenue.

It indicates the number of times average debtors are turned over during a year.A high ratio shows that the firm is more efficient in the management of debtors.

It indicates how efficiently a business is using its materials and labour in the production process.It shows how much of every rupee of sales, ITC actually keeps in earnings.A high ratio shows that ITC is making a reasonable profit on sales.

It measures the firm’s ability of generating profits from every unit of shareholders’ equity. It shows how well a company uses investment funds to generate earnings.It was highest in the FY 1998.ROE has increased to 29.33 in FY 2010 as compared to 25.42 in FY 2009. It shows that ITC has utilized shareholders’ fund more efficiently. This is favourable for its image and it will result in increase in confidence of investors.

FUTURE PROJECTIONS:ITCStrategic Rationale:

Blend multiple competencies residing within the ITC Group to create new avenues of growth

Best fit between internal capabilities and emerging market opportunities Each segment enhances the depth and width of ITC’s FMCG distribution

capability Business model retains critical elements of value chains within ITC with other

elements outsourced Contributing to the competitiveness of SMEs.

Initiatives: Leverages:

Unique Agri sourcing skills ITC Welcomgroup’s specialist cuisine & bakery knowledge

FMCG distribution synergies ITC R&D Centre, Bangalore.

4 chosen categories: Staples

Aashirvaad Atta, Salt, Spices Snack Foods

Sunfeast Biscuits Confectionery

Candyman, mint-o Ready to Eat

Kitchens of India, Aashirvaad ReadyMeals, Sunfeast PastaAashirvaad Atta:

current market leader amongst national branded players; leverages the e-choupal network for cost-quality optimization and region specific offerings

Sunfeast Biscuits: Differentiated & innovative products; continues to build consumer

franchise; distributed & outsourced supply chain being ramped up. Number of innovative products in the pipeline leveraging the capabilities

of the ITC R&D centre.Lifestyle:

Leverages trade mark and services expertise of hotels Relaxed wear market growth > 25% p.a Upmarket product range available in exclusive Wills Lifestyle stores and multi-

branded outlets/ large format retail stores across the country State-of-the-art Master Facility aids speed of execution Outsourced JIT plant for ‘quick response’ manufacturing Product and brand range being expanded ‘Wills’ range expanded to Formals and Social evening wear segments Strong distribution network in place for the mid-market brand ‘John Players’.

Stationary: Leverages print and paper know-how An emerging market in India - growth driven by increasing cross-cultural

exposure ITC’s ‘Expressions’ range commenced with greeting cards; now widened

to include stationery & gift wraps Distribution network being strengthened to scale up the Stationery

business significantly Serves to expand the width of ITC’s FMCG distribution capability with

negligible incremental investment.Safety Matches:

Current industry consumer spend estimated at Rs.1250 crores p.a. for 24 billion match boxes

Fragmented supply base arising from policy of reservation for small scale industry

ITC markets its brands with value added products across each price point

o Support SMEs with complementary marketing strengths ‘AIM’ – India’s largest selling Safety Matches brand Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as

at 26th May 2006: 93.66%) Key brands: Homelites, Ship, Cheetah Fight etc. Incense sticks:

Current industry consumer spends estimated at over Rs. 900 crores p.a. Fragmented supply base arising from policy of reservation for small scale

industry ITC markets its brands with value added products across each price point Support cottage sector with complementary marketing strengths ‘Mangaldeep’: the only National brand in the country.

Business Initiatives: Concurrently, ITC’s IT subsidiary assists in web-enabling business processes

CRM initiatives ERP transaction processing systems SCM including the e-choupal capability

hosted on ITC’s Virtual Private Network ITC awarded the best IT user in FMCG category by Nasscom.

CONCLUSIONStatements describing the Company’s objectives, future prospects, estimates, expectations etc. may be “forward looking statements” within the meaning of applicable securities laws and regulations. Investors are cautioned that “forward looking statements” are based on certain assumptions of future events over which the Company exercises no control. Therefore there can be no guarantee as to their accuracy. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be projected or implied by these forward looking statements. Such risks and uncertainties include, but are not limited to: growth, competition, acquisitions, domestic and international economic conditions affecting demand, supply and price conditions in the various businesses in the Company’s portfolio, changes in Government regulations, tax regimes and other statutes, and the ability to attract and retain high quality human resource.

? - To be handled with care. Strategic forays into emerging high growth markets. E-Choupal is a transformational strategy. Strong brand building capability will be tested. Corporate strategy of creating multiple drivers of growth anchored on its core

competencies and distribution reach. Embracing difficult and challenging corporate strategy. (Ex: Paperboards). EHS philosophy: Contribution to the triple bottom line- Economic, Environment

and social capital.