The Directors submit their Report for the financial year ended 31st
Your Company continued to deliver strong financial performance with
healthy growth in revenues and high quality earnings. This performance
is particularly commendable when viewed against the backdrop of the
extremely challenging business context in which it was achieved,
namely, a sluggish macro-economic environment which saw GDP growth
remaining below 5% for the second year in succession, high inflation
and a marked deceleration in the rate of growth of Private Final
Consumption Expenditure; steep increase in taxes/duties on Cigarettes
for two years in a row; weak demand conditions in the FMCG industry;
gestation costs relating to the new FMCG businesses; sharp escalation
in input costs in the Paperboards, Paper & Packaging Businesses and a
weak demand & pricing environment in the Hotels business.
Gross Revenue for the year grew by 11.7% to Rs. 46712.62 crores. Net
Revenue at Rs. 32882.56 crores grew by 11.1% primarily driven by a 16.0%
growth in the non-cigarette FMCG segment, 14.7% growth in Paperboards,
Paper and Packaging segment and 10.6% growth in the Cigarettes segment.
Profit Before Tax registered a growth of 18.5% to Rs. 12659.11 crores
while Net Profit at Rs. 8785.21 crores increased by 18.4%. Earnings Per
Share for the year stood at Rs. 11.09 (previous year Rs. 9.45). Cash flows
from Operations aggregated Rs. 10759.50 crores compared to Rs. 9596.24
crores in the previous year.
Your Company is one of India''s most admired and valuable corporations
with a current market capitalisation of over Rs. 270000 crores and has
consistently featured amongst the top 10 private sector companies in
terms of market capitalisation and profits. Over the last 18 years,
your Company''s Net Revenue and Profit After Tax recorded an impressive
compound annual growth rate of 15.3% and 21.6% respectively. During
this period, Return on Capital Employed improved substantially from
28.4% to 45.8% while Total Shareholder Returns, measured in terms of
increase in market capitalisation and dividends, grew at a compound
annual rate of 25.9%, placing your Company amongst the foremost in the
country in terms of efficiency of servicing financial capital.
Your Directors are pleased to recommend a Dividend of Rs. 6.00 per share
(previous year Rs. 5.25 per share) for the year ended 31st March, 2014.
Total cash outflow in this regard will be Rs. 5582.90 crores (previous
year Rs. 4853.49 crores) including Dividend Distribution Tax of Rs. 810.99
crores (previous year Rs. 705.03 crores).
Your Board further recommends a transfer to General Reserve of Rs. 880.00
crores (previous year Rs. 750.00 crores). Consequently, the Surplus in
Statement of Profit and Loss as at 31st March, 2014 would stand at Rs.
6139.09 crores (previous year Rs. 3788.10 crores).
FOREIGN EXCHANGE EARNINGS
Your Company continues to view foreign exchange earnings as a priority.
All businesses in the ITC portfolio are mandated to engage with
overseas markets with a view to testing and demonstrating international
competitiveness and seeking profitable opportunities for growth. The
ITC Group''s contribution to foreign exchange earnings over the last ten
years amounted to nearly US$ 6.0 billion, of which agri exports
constituted 57%. Earnings from agri exports, which effectively link
small farmers with international markets, are an indicator of your
Company''s contribution to the rural economy.
During the financial year 2013-14, your Company and its subsidiaries
earned Rs. 5068 crores in foreign exchange. The direct foreign exchange
earned by your Company amounted to Rs. 4290 crores, mainly on account of
exports of agri-commodities. Your Company''s expenditure in foreign
currency amounted to Rs. 2073 crores, comprising purchase of raw
materials, spares and other expenses of Rs. 1343 crores and import of
capital goods at Rs. 730 crores. Details of foreign exchange earnings and
outgo are provided in Note 31 to the Financial Statements.
PROFITS, DIVIDENDS AND SURPLUS
(Rs. in Crores)
PROFITS 2014 2013
a) Profit Before Tax 12659.11 10684.18
b) Tax Expense
- Current Tax 3791.13 2934.79
- Deferred Tax 82.77 331.00
c) Profit for the year 8785.21 7418.39
SURPLUS IN STATEMENT OF PROFIT AND LOSS
a) At the beginning of the year 3788.10 1972.59
b) Add : Profit for the year 8785.21 7418.39
- Transfer to General Reserve 880.00 750.00
- Proposed Dividend 4771.91 4148.46
[Rs. 6.00 (2013 - Rs. 5.25) per share]
- Income Tax on Proposed Dividend
- Current Year 810.99 705.03
- Earlier year''s provision no (28.68) (0.61)
d) At the end of the year 6139.09 3788.10
As mentioned in the Report of the Directors of earlier years, your
Company had obtained Stay Orders from the Honourable Calcutta High
Court against re-opening of past assessments for the period 1st July,
1983 to 30th June, 1986. The Honourable Calcutta High Court has now
held in your Company''s favour by allowing the concerned Writ Petitions
and the impugned notices & the proceedings thereunder have been
Also, as stated in the Report of the Directors of earlier years, in
respect of similar Income Tax notices for re-opening the past
assessments for the period 1st April, 1990 to 31st March, 1993, the
Honourable Calcutta High Court had admitted the Writ Petitions and
ordered that no final assessment orders be passed without the leave of
the Court. This status remains unchanged.
Your Company''s Public Deposit Scheme closed in the year 2000. As at
31st March, 2014, there were no deposits due for repayment except in
respect of 2 deposit holders totalling Rs. 20,000 which have been
withheld on the directives received from government agencies.
There was no failure to make repayments of Fixed Deposits on maturity
and the interest due thereon in terms of the conditions of your
Company''s erstwhile Schemes.
INVESTOR SERVICE CENTRE
The Investor Service Centre (ISC) of your Company maintains its
position as an exemplar in investor servicing.
During the year, SEBI granted your Company a Certificate of Permanent
Registration to act as Category II Share Transfer Agent for providing
in-house share registration and related services.
The ISO 9001:2008 Quality Management System Certification for investor
servicing by ISC was renewed during the year by Messrs. Det Norske
Veritas (DNV) for a further period of three years. ISC achieved the
highest ''Level 5'' rating for the fifth consecutive year – a testimony
to the excellence achieved by ISC in providing quality investor
During the year, a Shareholder Satisfaction Survey was conducted by
your Company. An overwhelming number of Members who participated in the
Survey responded that they were extremely satisfied with the services
provided by ISC.
Mr. Hugo Geoffrey Powell [representing Tobacco Manufacturers (India)
Limited, a subsidiary of British American Tobacco p.l.c., the ultimate
holding company], Dr. Basudeb Sen, Mr. Balakrishnan Vijayaraghavan and
Mr. Dinesh Kumar Mehrotra (representing the Life Insurance Corporation
of India) ceased to be Non-Executive Directors of your Company with
effect from 30th July, 2013, 27th August, 2013, 27th August, 2013 and
27th October, 2013, respectively, on completion of their terms. Mr.
Shilabhadra Banerjee (representing the Specified Undertaking of the
Unit Trust of India) resigned as Non-Executive Director of your Company
with effect from 26th March, 2014. Your Directors would like to record
their appreciation of the services rendered by Mr. Powell, Dr. Sen, Mr.
Vijayaraghavan, Mr. Mehrotra and Mr. Banerjee.
Mr. Nakul Anand and Mr. Pradeep Vasant Dhobale, Wholetime Directors of
your Company since 3rd January, 2011, completed their terms on 2nd
January, 2014. Mr. Anand and Mr. Dhobale, on the recommendations of
the erstwhile Nominations Committee and the Compensation Committee,
were appointed by the Board of Directors of your Company (the ''Board'')
as Additional Directors with effect from 3rd January, 2014, and subject
to the approval of the Members, also as Wholetime Directors, liable to
retire by rotation, for a period of five years from 3rd January, 2014.
Mr. Robert Earl Lerwill [representing Tobacco Manufacturers (India)
Limited, a subsidiary of British American Tobacco p.l.c., the ultimate
holding company], on the recommendation of the erstwhile Nominations
Committee, was appointed by the Board as Additional Non-Executive
Director of your Company with effect from 18th November, 2013. Mr.
Suryakant Balkrishna Mainak (representing the Life Insurance
Corporation of India), on the recommendation of the Nomination &
Compensation Committee, was appointed by the Board as Additional
Non-Executive Director of your Company with effect from 25th April,
2014. Mr. Shilabhadra Banerjee, on the recommendation of the
Nomination & Compensation Committee, was also appointed by the Board as
Additional Non-Executive Director of your Company with effect from 24th
July, 2014. By virtue of the provisions of Article 96 of the Articles
of Association of your Company and Section 161 of the Companies Act,
2013, Messrs. Lerwill, Mainak and Banerjee will vacate office at the
ensuing Annual General Meeting (''AGM'') of your Company.
Your Board at its meeting held on 23rd May, 2014, on the recommendation
of the Nomination & Compensation Committee, has recommended for the
approval of the Members the appointment of Mr. Banerjee as an
Independent Director in terms of Section 149 of the Companies Act,
2013, with effect from the date of the ensuing AGM of your Company.
Your Board at the said meeting, on the recommendation of the Nomination
& Compensation Committee also recommended for the approval of the
Members the appointment of Mr. Lerwill and Mr. Mainak as Non-Executive
Directors of the Company, liable to retire by rotation, with effect
from the date of the ensuing AGM of your Company.
Notices under Section 160 of the Companies Act, 2013, have been
received for the appointment of Messrs. Anand, Dhobale, Banerjee,
Lerwill and Mainak who have filed their consents to act as Directors of
the Company, if appointed.
Appropriate resolutions seeking your approval to the aforesaid
appointments are appearing in the Notice convening the 103rd AGM of the
In accordance with the provisions of Article 91 of the Articles of
Association of the Company, Mr. Krishnamoorthy Vaidyanath will retire
by rotation at the ensuing AGM of your Company and being eligible,
offers himself for re-election. The Board has recommended his
Messrs. Anil Baijal, Serajul Haq Khan, Sunil Behari Mathur,
Pillappakkam Bahukutumbi Ramanujam, Sahibzada Syed Habib-ur-Rehman and
Ms. Meera Shankar, by virtue of being Independent Directors of your
Company in terms of the provisions of the Companies Act, 2013, will not
be liable to retire by rotation for the residual period of their
respective terms of appointment approved by the Members of the Company.
Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, retire at
the ensuing AGM and, being eligible, have offered themselves for
re-appointment. The Board, on the recommendation of the Audit
Committee, has recommended the re-appointment of Messrs. Deloitte
Haskins & Sells for a period of five years in accordance with Section
139 of the Companies Act, 2013. Appropriate resolution seeking your
approval to the said re-appointment is appearing in the Notice
convening the 103rd AGM of the Company.
Your Company had appointed (i) Messrs. Shome & Banerjee, Cost
Accountants, Kolkata, for audit of cost records in respect of ''Paper''
products other than the cost records maintained by the Paperboards and
Specialty Papers Business. They were also appointed as the Cost
Auditors in respect of Plastics & Polymers, Apparel, Edible Oil Seeds &
Oil and Plantation products; (ii) Messrs. S. Mahadevan & Co., Cost
Accountants, Chennai, as Cost Auditor for audit of cost records
maintained in respect of Packaged Food Products; and (iii) Mr. P. Raju
Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost
records maintained by the Paperboards and Specialty Papers business for
the financial year ended 31st March, 2013. The Cost Audit Report was
filed by the Cost Auditor on 20th September, 2013 within the due date
of 27th September, 2013.
In respect of the financial year ended 31st March, 2014, your Company
has appointed (i) Messrs. Shome & Banerjee, Cost Accountants, Kolkata,
for audit of cost records in respect of ''Paper'' products other than the
cost records maintained by the Paperboards and Specialty Papers
business. They are also appointed as the Cost Auditors in respect of
Plastics & Polymers, Apparel, Edible Oil Seeds & Oil, Plantation
products and Personal Care products including Soap; (ii) Messrs. S.
Mahadevan & Co., Cost Accountants, Chennai, as Cost Auditor for audit
of cost records maintained in respect of Packaged Food Products; and
(iii) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for
audit of cost records maintained by the Paperboards and Specialty
Papers business and for all other additional applicable product groups.
The due date for filing the Cost Audit Reports is 27th September, 2014.
EMPLOYEE STOCK OPTION SCHEME
Under your Company''s Employee Stock Option Schemes, 5,13,49,840
Ordinary Shares of Rs. 1/- each, were issued and allotted during the year
upon exercise of 51,34,984 Options; such shares rank pari passu with
the existing Ordinary Shares of your Company. Consequently, the Issued
and Subscribed Share Capital of your Company as at 31st March, 2014
stands increased to Rs. 795,31,82,950/- divided into 795,31,82,950
Ordinary Shares of Rs. 1/- each.
Details of the Options granted up to 31st March, 2014 and other
disclosures as required under Clause 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 (the ''SEBI Guidelines'') are set out
in the Annexure to this Report.
Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have
certified that the Company''s Employee Stock Option Schemes have been
implemented in accordance with the SEBI Guidelines and the resolutions
passed by the Members in this regard.
DIRECTORS'' RESPONSIBILITY STATEMENT
As required under Section 217 (2AA) of the Companies Act, 1956, your
Directors confirm having:
a) followed in the preparation of the Annual Accounts, the applicable
accounting standards with proper explanation relating to material
departures if any;
b) selected such accounting policies and applied them consistently and
made judgements and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of your Company at
the end of the financial year and of the profit of your Company for
c) taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 1956 for safeguarding the assets of your Company and for
preventing and detecting fraud and other irregularities; and
d) prepared the Annual Accounts on a going concern basis.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with Accounting Standard 21 - Consolidated Financial
Statements, ITC Group
Accounts form part of this Report & Accounts. These Group Accounts also
incorporate the Accounting Standard 23 - Accounting for Investments in
Associates in Consolidated Financial Statements and Accounting Standard
27 - Financial Reporting of Interests in Joint Ventures as notified
under the Companies (Accounting Standards) Rules, 2006. These Group
accounts have been prepared on the basis of audited financial
statements received from Subsidiary, Associate and Joint Venture
Companies, as approved by their respective Boards.
The total number of employees as on 31st March, 2014 stood at 25917.
The certificate of the Auditors, Messrs. Deloitte Haskins & Sells,
confirming compliance of conditions of Corporate Governance as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges in India, is annexed.
Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have
certified that the Company and its subsidiaries are in compliance with
the requirements relating to downstream investment as laid down in the
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Ninth Amendment) Regulations, 2013 and other
applicable FEMA Regulations.
Particulars as required under Section 217(1)(e) of the Companies Act,
1956 relating to Conservation of Energy and Technology Absorption are
also provided in the Annexure to this Report.
There were 135 employees, who were employed throughout the year and
were in receipt of remuneration aggregating Rs. 60 lakhs or more or were
employed for part of the year and were in receipt of remuneration
aggregating Rs. 5 lakhs per month or more during the financial year ended
31st March, 2014. The information required under Section 217(2A) of the
Companies Act, 1956 and the Rules thereunder, in respect of the
aforesaid employees, is provided in the Annexure forming part of this
Your Company is today, the leading FMCG marketer in India, a
trailblazer in ''green hoteliering'' and the second largest Hotel chain
in India, the clear market leader in the Indian Paperboard and
Packaging industry, the country''s foremost Agri business player and a
global exemplar in sustainable business practices. Your Company''s
wholly-owned subsidiary, ITC Infotech India Limited, is one of India''s
fast-growing Information Technology companies in the mid-tier segment.
Your Company''s Board and employees are inspired by the Vision of
sustaining ITC''s position as one of India''s most admired and valuable
companies, creating enduring value for all stakeholders, including the
shareholders and the Indian society. The vision of enlarging your
Company''s contribution to the Indian economy is manifest in the
creation of unique business models that foster international
competitiveness not only of its businesses but also the entire value
chain of which they are a part.
Inspired by this Vision, driven by Values and powered by internal
Vitality, your Directors and employees look forward to the future with
confidence and stand committed to creating an even brighter future for
On behalf of the Board
23rd May, 2014 Y. C. DEVESHWAR
India P. V. DHOBALE