INTRODUCTION

ITC 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 310,000. 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.

1
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).

2
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 operational 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 Text liners, 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 Club
life 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

3
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.

4
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

5
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.

SECTOR INFORMATION

6
ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, and 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.

The Company's diversification in to segments other than cigarette & heavy investments in
segments like food, personal care & Paper, will reduce company's dependence on Cigarettes
business going forward, which we believe will come down to 50% levels in next 2-3 years
time. This will insulate the company against any potential danger to the cigarette business
due to government intervention or taxation policies. The Other FMCG business which is
reporting losses since its inception is expected to turnaround by last quarter of FY10 & is
expected to contribute to profits from FY11. The company in its initial years has spent huge
amounts on advertisements to gain market share & now with the company gaining substantial
market share in each of the FMCG segment the company can leverage this position to turn
profitable.

The Cigarette business of ITC, where it commands a leadership position in the market with
84% market share is expected to remain stable & we believe will grow at 6-7% going
forward. We believe the company will raise prices of few of its brands which will translate in
to better margins.

The hotel business of the company is expected to give a major boost to the earnings of the
company on the back of events like Common Wealth Games in 2010 & Cricket World Cup in
2011. We believe going forward; the hotel business will improve margins.

In the paper business ITC commands a premium in all its specialty products of paper, Paper
Boards & Packaging materials. This segment has grown at 21% in the current year as against
the paper industry growth of 9-10%. The company enjoys higher operating margins in this
segment at 19.5% which is considered to be way above the industry margins. The paper
business will grow at a CAGR of 13% from FY10E to FY11E going forward on account of
capacity expansion, backward integration and better product mix.
7
At the CMP of Rs.194 per share, the stock is currently trading at a PE of 17.1x FY10E &
14.6x FY11E, which looks quite attractive when compared to the peers in the industry. The
FMCG segment as a whole trades at an Average PE of around 24x earnings. ITC historically
has traded in the PE range of 21x to 27x with an average PE of around 24x. We recommend a
BUY rating on the stock with a Price target of 250 per share (PE of 22x FY10E) an upside of
29% over a period of one year.

ITC'sdiversifiedstatusoriginatesfromitscorporatestrategyaimedatcreatingmultiple 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 hoteling.

LIST OF PRODUCTS & BRANDS

8
ITC has a diversified presence in

 Cigarettes: W. D. & H. O. Wills, Gold Flake, Navy Cut, Insignia, India Kings,
Classic (Verve, Regular, Mild & Ultra Mild), Silk Cut, Scissors, Capstan, Berkeley,
Bristol, Lucky Strike and Flake.

 Hotels: ITC Welcomgroup Hotels, Palaces and Resorts is India's second largest hotel
chain with over 80 hotels. Based out of Hotels Division Headquarters at the ITC
Green Centre in Gurgaon, ITC Welcomgroup is also the exclusive franchisee of The
Luxury Collection brand.

In FMCG, ITC has a strong presence in:

 Foods business (Kitchens of India; Ashirvaad; Minto; Sunfeast; Candyman; Bingo

brands in Ready to Eat, Staples, Biscuits, Confectionery and Snack Foods);
 Apparel business (Wills Lifestyle and John Players brands);
 Personal Care Products business(Fiama di Wills; Vivel; Essenza di Wills; Superia
brands of products in perfumes, hair care and skincare)
 Stationery (Classmate and Paperkraft brands)
 Safety Matches and Agarbattis [Ship (through ownership of WIMCO); iKno;
Mangaldeep; Aim brands]

Other businesses include:

 Paperboard, Specialty Paper, Graphic and other Paper;

 Packaging and Printing for diverse international and Indian clientele.
 InfoTech (through its near-wholly owned subsidiary ITC InfoTech India Limited
which is a SEI CMM Level 5 company)

9
Business Analysis

The company has diversified into the businesses other than cigarette business ranging from
hotels to packaged foods to lifestyle retailing to Agri products to paper. The Company is
trying to leverage its positions; as a result, the cigarette contribution to the Overall Revenue
of the company which in 2005 was 72% has declined to 64% in 2009.

The paper board and hotel industry has become self-sustaining cash generating source For the
company, and only concern lies with the FMCG businesses incurring losses Which we feel
will be mitigated due to the cost cutting, price hikes and sales promotion, thus, contributing
positively to the margins for the company.

Rural initiatives

10
ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is one of
the India's biggest foreign exchange earners (US $ 2 billion in the last decade). The Company
'e-Chou pal' 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.

The company places computers with Internet access in rural farming villages; the e-Chou pals
serve as both a social gathering place for exchange of information (choupal means gathering
place in Hindi) and an e-commerce hub. What began as an effort to re-engineer the
procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural
India has also created a highly profitable distribution and product design channel for the
company an e-commerce platform that is also a low-cost fulfilment system focused on the
needs of rural India. The e-Chou pal system has also catalyzed rural transformation that is
helping to alleviate rural isolation, create more transparency for farmers, and improve their
productivity and incomes.

Corporate philanthropy

ITC Echoupal creatively leverages information technology to set up a meta-market in favour

of India's small and poor farmers, who would otherwise continue to operate and transact in
'un-evolved' markets.

As of July 2010, services through 6500 Echoupal across 10 states, reach more than 4 million
farmers in about 40,000 villages. Free access to Internet is also opening windows of rural
India to the world at large.

ITC Echoupal e-choupal is now being regarded as a reliable delivery mechanism for resource
development initiatives. Its potential is being tested through pilot projects in healthcare,
educational services, water management and cattle health management with the help of
several service providers including non-governmental organizations.

11
When Classmate notebooks were launched, it came up with the initiative of contributing 1
rupee towards the education of poor children, from every single notebook it sold.

Classmate, has launched a programme called Classmate Ideas for India challenge. The
programme would be a part of the company's centenary initiative. The nation-wide
programme would invite ideas of the youth, who have the potential to transform India.
Classmate Ideas for India challenge plans to reach out to 25 lakh students across 30 cities,
500 schools and 200 colleges across the country.

Forbes ranking

ITC features on the Forbes Global 2000 rankings for 2007 at position 1256.ITC is the only
Indian FMCG company that features on the Forbes Global 2000 rankings for 2009 at position
987.ITC also featured on the Forbes World's most reputable Companies List at position 95.

Global and other Honours

 ITC is the first from India and among the first 10 companies in the world to publish
its Sustainability Report in compliance (at the highest A+ level) with the latest G3
guidelines of the Netherlands-based Global Reporting Initiative (GRI), a UN-backed,
multistakeholder international initiative to develop and disseminate globally
applicable Sustainability Reporting Guidelines.

 ITC is the first Indian company and the second in the world to win the prestigious
Development Gateway Award. It won the $100,000 Award for the year 2005 for its
trailblazing ITC e-Chou pal initiative which has achieved the scale of a movement in
rural India. The Development Gateway Award recognizes ITC's e-Chou pal as the

12
 most exemplary contribution in the field of Information and Communication
Technologies (ICT) for development during the last 10 years. ITC e-Chou pal won the
Award for the importance of its contribution to development priorities like poverty
reduction, its scale and reliability, sustainability and transparency.

 ITC has won the inaugural 'World Business Award', the worldwide business award
recognising companies who have made significant efforts to create sustainable
livelihood opportunities and enduring wealth in developing countries. The award has
been instituted jointly by the United Nations Development Programme (UNDP),
International Chamber of Commerce (ICC) and the HRH Prince of Wales
International Business Leaders Forum (IBLF).

 ITC is the first Corporate to receive the Annual FICCI Outstanding Vision Corporate
Triple Impact Award in 2007 for its invaluable contribution to the triple bottom line
benchmarks of building economic, social and natural capital for the nation.

 ITC has won the Golden Peacock Awards for 'Corporate Social Responsibility (Asia)'
in 2007, the Award for ‘CSR in Emerging Economies 2005’ and ‘Excellence in
Corporate Governance' in the same year. These Awards have been instituted by the
Institute of Directors, New Delhi, in association with the World Council for Corporate
Governance and Centre for Corporate Governance.

 ITC Hotel Royal Gardenia, Bangalore is the first Indian Hotel and world's largest, to
get the LEED Platinum rating - the highest green building certification globally.

 The Stockholm Challenge 2006 for the e-Chou pal initiative. This award is for using
Information Technology for the economic development of rural communities.

 United Nations Industrial Development Organisation (UNIDO) Award at the

international conference on Sharing Innovative Agribusiness Solutions 2008 at Cairo
for ITC's exemplary initiatives in Agri-business through the e-Chou pal.

 The Corporate Social Responsibility Crown Award for Water Practices from
UNESCO and Water Digest for its distinguished work carried out in the water sector

13
 in India. ITC also received the National Award for Excellence in Water Management
2007 in the 'beyond the fence' category from the CII Sohrabji Godrej Green Business
Centre for its leadership role in implementing water and watershed management
practices.

 The watershed programme also won the Asian CSR Award 2007 for Environmental
Excellence given by the Asian Institute of Management. The Award recognizes and
honours Asian companies for outstanding, innovative and world-class projects. The
Company also received the Ryutaro Hashimoto Incentive Prize 2007 for Environment
& Development from the Asia Pacific Forum. This Award aims at promoting
information dissemination of good practices towards sustainable development in the
Asia-Pacific region.

 The Readers' Digest Pegasus Award for corporate social responsibility, recognising
outstanding work done by socially conscious companies.

 The Corporate Award for Social Responsibility 2008 from The Energy and Resources
Institute (TERI) in recognition of its exemplary initiatives in implementing integrated
watershed development programmes across 7 states in India. The company also won
the award in 2004 for its e-Chou pal initiative. The Award provides impetus to
sustainable development and encourages ongoing social responsibility processes
within the corporate sector.

 The 'Enterprise Business Transformation Award' for Asia Pacific (Apac), instituted by
Infosys Technologies and Wharton School of the University of Pennsylvania for its
celebrated e-Chou pal initiative.

 The Best Corporate Social Responsibility Practice Award 2008 jointly instituted by
the Bombay Stock Exchange, Times Foundation and the NASSCOM Foundation.

 The NASSCOM – CNBC IT User Award 2008 in the Retail & Logistics category.
The Company has been recognised for its pro-active and holistic approach to IT
adoption and the seamless alignment of IT with business strategy. This is the fourth
time that ITC has won Nasscom's Best IT User Award since it was instituted in 2003.

14
 The Institute of Chartered Accountants of India Award for Excellence in Financial
Reporting with its Annual Report and Accounts, adjudged as a commendable entry
under the Category 'Manufacturing and Trading Enterprises’.

 The Business Today Award for the Best Managed Company in recognition of its
outstanding initiatives in the consumer products segment.

15
 COMPANY INFORMATION
ITC Limited

Type Public (BSE: 500875)

Industry Conglomerate

Founded 24 August 1910

Headquarters Kolkata, India

Yogesh Chander Deveshwar,

Chairman
Key people K. Vaidyanath, Director,
Kurush Grant, Director,
Rajiv Tandon (CFO)

Cigarettes
Hotels
Apparel
Tobacco
Foods
Products Stationery
Personal Care
Paperboard and specialty papers
Printing and packaging
Matches and Agarbattis
InfoTech

Revenue US$6 billion (2009)

Employees 26,150 (2009)

16
Website ITCportal.com

ITC 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 310,000. 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

17
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

18
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 -
19
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.

20
Hierarchy
There are three levels of leadership at ITC. The Board of Directors at the apex, as trustee of
shareholders, holds the responsibility for strategic supervision of the Company. The strategic
management of the Company is with the Corporate Management Committee comprising the
whole time Directors and members drawn from senior management.

Recruitment
Entry-level recruitment
ITC visits premier Engineering and Management campuses every year to recruit talented
people. Manufacturing. Marketing and Human Resources . Trading, Sourcing and Logistics .
Finance

Manufacturing
ITC Visits 5 IITs (Chennai, Delhi, Kanpur, Kharagpur, and Bombay) and some of the NITs
for its technical functions from various disciplines such as Mechanical, Electrical and
Electronics, Production Engineering, Chemical and Civil.

Marketing and Human Resources

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ITC recruits talent from the premier Management Institutes of the country for Marketing and
HR functions. These campuses include the IIMs, ISB, XLRI, FMS, IIFT, TISS, JBIMS.

Finance
ITC recruits entry-level talent from qualified Chartered Accountants and MBAs (Finance) for
the Finance function.
Trading, Sourcing and Logistics
ITC visits premier institutes such as IIMA, IIFT, IRMA and MANAGE to induct talent for its
Agri Business Division.

Hospitality
ITC inducts Management Trainees every year from Hotel Management Institutes, who are
then trained at the Welcome group management Institute in Gurgaon. ITC visits selected
campuses for the purpose of inducting entry-level talent for its Hotels.

Research & Development

ITC inducts R&D professionals for its Group R&D Center located in Bangalore as well as for
its Agricultural Research Centers at Rajahmundry and Sarapaka. ITC recruits
MScs/B.Techs/M.Techs and PhDs in this area as Research Associates and Scientists.
Individuals could be either fresh graduates or have relevant work experience in other
organizations.

Secretarial
ITC's Secretarial function offers careers to people who are qualified Company Secretaries.
These professionals are members of the Institute of Company Secretaries of India. Additional
qualifications could be in Chartered Accountancy or Law.

Summer Internships
ITC offers summer internships to students from the IITs and premier Management Institutes
every year.

Registered Office

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Virginia house
37 J.L..Nehru Road, Kolkata 700 071
EPABX no.: 91-(0) 33 22889371

Corporate Affairs Office

Thapar House,
2nd Floor, 124 Janpath,
New Delhi 110001
Tel-41502301, 41502302, 41502163

TOPIC INFORMATION

ITC’s Cigarette Business

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it

has a leadership position in every segment of the market. With three out of four cigarettes

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consumed in India coming from its stable, ITC is a clear leader in the business.

ITC enjoys an 84% share of the cigarette by market value. Its cigarette business accounts

for 83% of overall profit. Excise and other duties on cigarettes make up 58% of the selling

price and thus the pricing of cigarettes is largely driven by government policies.

ITC's three main competitors in the Indian cigarette industry are VST, Godfrey Phillips And

Golden Tobacco. Together the four firms account 90% of the market share.

ITC has been able to reach the top position because of its single minded focus on value

Creation for the consumers via its significant investments in product design, innovation,

Manufacturing technology, quality, marketing and distribution. ITC's cigarettes are produced

in its state-of-the-art factories which are situated at Bangalore, Munger, Saharanpur and

Kolkata. These factories are known for their extremely high levels of quality, contemporary

Technology and work environment.

The last two years though cigarette volumes remain underpressure (down2-3percent In H1,

FY09) thanks to adverse changes in duty rates (excise duty raised, VAT imposed in

FY08, duty on non-filter cigarettes introduced).Even then, ITC has managed to grow its

Sales and profits in this business, led by cost cutting measures, up grading customers to

Filter-cigarettes and price hikes.

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25
CIGERETTE TAX STRUCTURE

Cigarettes of various lengths are taxed at different specific rates, by the Centre.However,the

tax burden on the unorganized sector is negligible. There are difficulties in regulating the

consumption of tobacco products through tax policy because over 80 per cent of tobacco

consumption is in the unorganized sector.

Raising the price of tobacco products is the most effective means of reducing tobacco

consumption. Governments can do this directly through raising the excise duty on tobacco

and limiting duty-free product sales.

The tobacco industry has received a tax shocks over a couple of times, yet ITC's earnings

Remain edquite stable. Furthermore, the fixed nature of excise duties (VAT 12.5%)paid to

the state government and excise duties collected by the central government (specified in

Rs./per stick and on the length of the stick) have the leveraging benefit to the company as

ITC was able to pass on these hikes in excise duty to the customer in the form of increase in

selling price and thus, was able to maintain its EBIT margins. We believe that going

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forward, the effect of smoking ban in public places will have minimal impact in the revenue

generation of the company and the company will be able to maintain its EBIT margin

because we feel that the implementation of the policies holds a key, and we are of the view

that as its not been a revenue generation activity for government, the implementation will

be problematic.

CONCLUSION
There is a constant problem of distributors selling across there boundaries, which is because
of higher targets for distributors and market demand helping them in achieving higher

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margins. Also some distributors do not have large enough warehouses to store large number
of SKUs, so they need to disperse goods quickly.

The consumer survey shows that consumers are less driven by price and more by brand
loyalty. And with the growing number of young demography they are more chances of
shifting to higher brands. An organization like ITC can make sure that there is a higher
availability to premium brands in all regions. This could fetch them higher margins as they
are more flexible towards price variation.

The distributor has more or less constant margins across all brands, which makes storage and
transportation a more costly affair and hence discourages them to keep such SKUs. This
restricts the flow of premium brands in the market. So the manufacturer must encourage its
storage by providing higher incentives.

There is dearth of bridge products across price segments of similar brands. The consumer
survey shows that consumers are taste and brand oriented. And premium brands command a
higher profit margin so introducing products like a smaller 69mm classic, or an 84 mm flake.
To move customers to higher segment, larger profit and more attractive brands.

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