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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011
Directors Report Year End : Mar '13    « Mar 12
To The Members
 
 FINANCIAL PERFORMANCE
 
 The Company posted another year of strong performance across all
 financial parameters, leveraging its corporate strategy of creating
 multiple drivers of growth. This performance is even more encouraging
 when viewed against the backdrop of the extremely challenging business
 context in which it was achieved, namely, the continued economic
 slowdown, steep increase in taxes /duties on Cigarettes, gestation
 costs relating to the new FMCG businesses and recent investments in the
 Paperboards, Paper and Packaging and Hotels businesses.
 
 Gross Revenue for the year grew by 19.9% to Rs. 41809.82 crores. Net
 Revenue at Rs. 29605.58 crores grew by 19.4% primarily driven by a
 26.4% growth in the non-cigarette FMCG segment, 26.4% growth in Agri
 business segment and 13.4% growth in the Cigarettes segment. Profit
 before tax increased by 20.1% to Rs. 10684.18 crores while Net Profits
 at Rs. 7418.39 crores registered a growth of 20.4%. Earnings Per Share
 for the year stands at Rs. 9.45 (previous year Rs. 7.93).  Cash flows
 from Operations aggregated Rs. 9596.24 crores compared to Rs. 8333.56
 crores in the previous year.
 
 Continuing with your Companys chosen strategy of creating multiple
 drivers of growth, 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 and the countrys foremost Agri business
 player. Your Companys wholly-owned subsidiary, ITC Infotech India
 Limited, is one of Indias fast growing Information Technology
 companies in the mid-tier segment. Your Company is one of Indias
 most admired and valuable corporations with a current market
 capitalisation of over Rs. 260000 crores and has consistently featured
 amongst the top 10 private sector companies in terms of market
 capitalisation and profits.
 
 Additionally, over the last 17 years, your Companys Net Revenue and
 Net Profit recorded an impressive compound growth of 15.6% and 21.8%
 per annum respectively. During this period, Return on Capital Employed
 improved substantially from 28.4% to 45.7% while Total Shareholder
 Returns, measured in terms of increase in market capitalisation and
 dividends, grew at a compound annual growth rate of over 26%, placing
 your Company amongst the foremost in the country in terms of efficiency
 of servicing financial capital.
 
 Such an impressive performance track record, delivered consistently
 over a long period of time, won global recognition during the year with
 the Harvard Business Review ranking your Companys Chairman Mr.
 Y.C.Deveshwar - under whose stewardship this was achieved - as the 7th
 best performing CEO in the world.
 
 Your Directors are pleased to recommend a Dividend of Rs. 5.25 per
 share (previous year Rs. 4.50 per share) for the year ended 31st March,
 2013. Total cash outflow in this regard will be Rs. 4853.49 crores
 (previous year Rs. 4089.04 crores) including Dividend Distribution Tax
 of Rs. 705.03 crores (previous year Rs. 570.75 crores).
 
 Your Board further recommends a transfer to General Reserve of Rs.
 750.00 crores (previous year Rs. 650.00 crores). Consequently, your
 Board recommends leaving a surplus in Statement of Profit and Loss of
 Rs. 3788.10 crores (previous year Rs. 1972.59 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 groups contribution to foreign exchange earnings over the last
 ten years amounted to nearly US$ 5.4 billion, of which agri exports
 constituted 56%. Earnings from agri exports, which effectively link
 small farmers with international markets, are an indicator of your
 Companys contribution to the rural economy.
 
 During the financial year 2012-13, your Company and its subsidiaries
 earned Rs. 4388 crores in foreign exchange.  The direct foreign
 exchange earned by your Company amounted to Rs. 3807 crores, mainly on
 account of exports of agri-commodities. Your Companys expenditure in
 foreign currency amounted to Rs. 1966 crores, comprising purchase of
 raw materials, spares and other expenses of Rs. 1345 crores and import
 of capital goods at Rs. 621 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                                       2013         2012
 
 a) Profit Before Tax                      10684.18      8897.53
 
 b) Tax Expense
 
 - Current Tax                              2934.79      2664.29
 
 - Deferred Tax                              331.00        70.87
 
 c) Profit for the year                     7418.39      6162.37
 
 SURPLUS IN STATEMENT OF  PROFIT AND LOSS 
 
 a) At the beginning of the year            1972.59       548.67
 
 b) Add : Profit for the year               7418.39      6162.37
 
 c) Less:
 
 -Transfer to General Reserve                750.00       650.00
 
 - Proposed Dividend for the financial 
 year
 
 - Ordinary Dividend of Rs. 5.25 per 
 ordinary share of Rs. 1/- each
 (previous year Rs. 4.50 per share)         4148.46      3518.29
 
 - Income Tax on Proposed Dividends
 
 -  Current Year                           705.03       570.75
 
 -  Earlier years provision no           (0.61)       (0.59)
 longer required
 
 d)   At the end of the year                3788.10      1972.59
 
 BUSINESS SEGMENTS A.  FAST MOVING CONSUMER GOODS FMCG - Cigarettes
 
 Discriminatory and punitive taxation coupled with a growing incidence
 of smuggling and illegal manufacture are the biggest challenges
 confronted by the domestic cigarette industry. These challenges were
 further compounded during the year by the steep increase of 22% in
 cigarette Excise Duty rates announced in the Union Budget 2012 and the
 arbitrary increases in Value Added Tax (VAT) on cigarettes by some
 States. Such increases not only undermine the legal domestic cigarette
 industry and sub-optimise revenue potential from this sector but also
 fail to achieve the objective of tobacco control in the country.
 
 The pattern of tobacco consumption in India is unique and is dominated
 by non-cigarette products which are not only cheaper but also revenue
 inefficient. With over 17% of the world population, India has a
 miniscule share of only 1.8% of global cigarette consumption but
 accounts for about 90% of the global consumption of smokeless tobacco.
 According to the Global Adult Tobacco Survey, 2010 conducted by
 Ministry of Health and Family Welfare, Government of India, while 34.6%
 of all adults in India use tobacco in some form, only 5.7% of the adult
 population consume cigarettes. It is also pertinent to note that while
 cigarettes account for less than 15% of the overall tobacco consumption
 (by weight) in the country, they contribute about 75% of the total tax
 revenue from the tobacco sector accruing to the exchequer. In contrast,
 other forms of tobacco are lightly taxed in India, and in some cases
 are even tax exempt, leading to a high degree of potential tax loss.
 
 According to various independent reports, there is a high degree of
 dual consumption with an estimated 60% of cigarette consumers in India
 also consuming other forms of tobacco. The high incidence of taxation
 on cigarettes coupled with a large differential in Excise Duty rates
 between cigarettes and other tobacco products has rendered the demand
 for cigarettes highly price elastic and are driving consumers to shift
 to cheaper and revenue-inefficient forms of tobacco leading to
 sub-optimal revenue collections. The fact that cigarette consumption is
 price elastic, while consumption of tobacco per se is not, is borne out
 by the fact that the total tobacco consumption in the country increased
 from 406 million kg in 1981-82 to 475 million kg in 2010-11 even as the
 tobacco consumption in the form of cigarettes declined from 86 million
 kg to 72 million kg during the same period. Thus, while overall tobacco
 consumption is increasing in India, the share of cigarettes in overall
 tobacco consumption has declined from 21% to 15%.
 
 In fact, Indias annual per capita consumption of cigarettes is amongst
 the lowest in the world.
 
 The requirement therefore is an India-centric tax and policy framework
 for tobacco that cognises for the unique consumption pattern in the
 country.
 
 A cross-country study of cigarette prices and affordability based on
 evidence from the Global Adult Tobacco Survey, and published in Tobacco
 Control (British Medical Journal), found that the price of cigarettes
 was the highest in India relative to its income (in terms of Purchasing
 Power Parity).
 
 Interestingly, the Study also established the fact that bidis in India
 were extremely affordable with a large price differential of more than
 8 times as compared to cigarettes on account of the high levels of
 taxation on cigarettes. At 2.25% of per capita GDP, cigarette taxes
 (per 1000 cigarettes in most popular price category) in India are the
 highest in the world. In comparison, tax incidence on cigarettes (per
 1000 cigarettes in most popular price category) as a percentage of per
 capita GDP in other countries such as Japan (0.37%), Germany (0.62%),
 China (0.81%), Pakistan (0.85%), Thailand (1.20%) is much lower. Such
 high taxes make cigarettes unaffordable to a large number of consumers.
 
 The policy of high taxation narrowly focused on cigarettes has also led
 to the rapid growth of the illegal cigarettes segment. This segment has
 grown exponentially from 11 billion sticks in 2004 to 22 billion sticks
 in 2012, of which, 2 billion sticks have been added in the last one
 year alone. The illegal segment now accounts for 18% of cigarette trade
 and India is now the 5th largest market in the world for illegal
 cigarettes comprising smuggled foreign as well as domestic duty-evaded
 cigarettes.  Most of these illegal regular sized filter cigarettes are
 offered to consumers at a convenient and low price of Rs. 1 per stick.
 Such low consumer prices are feasible only if taxes are evaded, as the
 Excise Duty component alone on a regular size filter cigarette is
 significantly higher than the price point.
 
 Increasing volumes of smuggled foreign cigarettes also result in the
 decline in demand for Indian tobaccos since these cigarettes do not use
 any tobacco grown by Indian farmers. On the other hand, illegal
 cigarettes produced in India, use tobacco of dubious and inferior
 quality.  Consequently, the proliferation of duty-evaded cigarettes
 leads to a drop in demand for high quality Indian tobaccos thereby
 adversely impacting the incomes of farmers engaged in the cultivation
 of tobacco in the country.
 
 In addition, various media reports have highlighted the link between
 cigarette smuggling and organised criminal syndicates as well as
 terrorist organisations, which utilise the funds for anti-social and
 unlawful activities. If not reined in quickly, illegal cigarette trade
 has the potential of destroying the countrys social fabric.
 
 The introduction of a new segment of filter cigarettes of length not
 exceeding 65 mm announced in the Union Budget 2012, was a positive step
 towards arresting the growth of illegal cigarette trade. The industry
 has responded swiftly making significant investments and launched
 several offerings in the new segment. While initial response from the
 market has been encouraging, the high central Excise Duty rate of Rs.
 689 per thousand cigarettes applicable to this segment coupled with a
 steep increase in the rate and incidence of VAT, have made it difficult
 for the legitimate industry to fully counter the menace of illegal
 cigarettes.
 
 An appropriate policy framework will enable the domestic legal
 cigarette industry to offer viable products at competitive price points
 to consumers. It is a well-established principle of fiscal policy that
 moderate taxes enable widening of the tax base and higher compliance
 leading to enhanced buoyancy in tax collection. Your Company along with
 other stakeholders and industry bodies will continue to engage with
 relevant authorities to ensure the implementation of a pragmatic and
 equitable tax policy for the tobacco industry.
 
 The imposition of discriminatory and punitive VAT rates by some States
 provides an attractive tax arbitrage opportunity resulting in illegal
 inter-State diversion of stocks by criminal elements thus depriving the
 State Governments of their legitimate revenue share. Punitive tax rates
 on cigarettes have proved detrimental to revenue collection and have
 led to multi-fold increase in illegal trade of cigarettes without any
 visible decrease in overall tobacco consumption.
 
 Till the introduction of VAT in 2007, cigarettes were subject to single
 point taxation by the Central Government. As per the provisions of
 Additional Excise Duty (Goods of Special Importance) Act, 1957, apart
 from Basic Excise Duty, tobacco products were subject to an Additional
 Excise Duty (AED) in lieu of State level taxation. The proceeds from
 this component were exclusively distributed among States.
 
 For a revenue sensitive product like cigarettes, a revenue efficient
 single point taxation system would provide the highest levels of
 certainty in tax collection. In addition, it would help in removing
 inter-State trade distortions and barriers and is aligned to the
 principles of the proposed National Competition Policy which seeks to
 create a single unified national market. Several expert committees such
 as the Taxation Reform Committee headed by Dr. Raja Chelliah and
 Indirect Tax Reform Committee headed by Dr. Vijay Kelkar have
 recommended the single point taxation model for cigarettes.
 
 If State level taxation of cigarettes needs to continue, it would be
 appropriate to implement and adhere to the original principle
 enunciated by the Empowered Committee of State Finance Ministers on VAT
 where all goods (other than goods that were exempt or subjected to
 concessional rate) were to be taxed at a common Revenue Neutral Rate.
 Going forward, the implementation of the proposed Goods and Service Tax
 (GST) should ensure that revenue sensitive goods like cigarettes are
 subjected to uniform standard rate of tax applicable to general
 category of goods. The combined incidence of Excise Duty and GST should
 be revenue neutral i.e.  maintained at current levels.
 
 Despite such a challenging business scenario, your Company has
 successfully enhanced its market standing through robust strategies and
 excellence in execution.  Your Company will continue to invest in
 development of products that are best-in-class and offer superior
 and differentiated value propositions to consumers.
 
 As part of its efforts to continuously ensure product integrity and
 consistently deliver superior quality, your Company has deployed
 advanced tools like Six Sigma and template based quality
 predictor systems.  Modernisation of the factory in Kolkata is also at
 an advanced stage and is expected to be completed during 2013-14.
 
 With the long-term objective of enhancing skill availability, your
 Company has established an in-house technical training centre in
 collaboration with experts in the field of technical education. The
 first batch of trainees has commenced training at the centre during the
 year.
 
 This intervention is expected to create a ready pool of technical
 talent for your Companys operations in the years to come.
 
 In line with your Companys pursuit of proactive employee relations
 management, Long Term Agreements were successfully concluded at the
 Bengaluru and Kolkata factories during the year. Systemic improvements
 were made in the areas such as grievance resolution and better work
 practices were introduced in the factories to ensure harmonious and
 efficient operations.
 
 Your Companys relentless focus on Safety, Health and Sustainability in
 its operations led to several recognitions during the year. Your
 Companys Bengaluru, Saharanpur, Kolkata and Ranjangaon factories have
 received the British Safety Councils Sword of Honour award.
 
 The Munger factory received the Shreshta Suraksha Puraskar from the
 National Safety Council of India, Mumbai. The Bengaluru factory was
 conferred the award for Industrial Water Efficiency at the
 prestigious Federation of Indian Chambers of Commerce and Industry
 (FICCI) Water Awards. The Munger factory also received the Energy
 Efficient Unit award for excellence in energy management from the
 Confederation of Indian Industry (CII).
 
 Your Company is committed to the socio-economic upliftment of the
 farming community through various Social Investments / Corporate Social
 Responsibility programmes primarily in the economic vicinity of its
 operations towards making a meaningful contribution to sustainable and
 inclusive growth. Fragmented land holding, poor infrastructure,
 restricted access to scientific knowledge and endemic inefficiencies of
 the market have engulfed the farmers in a vicious cycle of low risk
 taking ability, low productivity and low margins. To address some of
 these challenges confronted by the farming community, your Company has
 been involved in the creation of on and off-farm sustainable livelihood
 opportunities which empower stakeholder communities to conserve and
 manage their resources. A recent initiative in this direction has been
 the dairy development programme in Munger, Bihar. This initiative
 focuses on enhancing milk production in the area, increasing
 productivity by adopting scientific techniques and ensuring
 remunerative prices to farmers by creating marketing opportunities for
 milk and milk products. A total of 87 Milk Producer Groups (MPGs) with
 over 2,800 members were involved in the initiative during the year. The
 dairy development programme also delivers a comprehensive package of
 extension services such as veterinary care, breeding, supply of quality
 cattle feed and feed supplement, fodder propagation and training to
 farmers.
 
 The pilot has been well received by the community in Munger. In order
 to scale-up the Dairy initiative, your Company is in the process of
 setting up a state-of-the- art Milk Processing Plant at Munger with a
 capacity to handle upto 2 lakh litres of milk per day.
 
 With steep Excise Duty hikes, discriminatory VAT taxes by various
 States, rising illegal trade and heightened competitive intensity, the
 year ahead will indeed be challenging. To serve the interests of all
 stakeholders, your Company, will continue to engage with policy makers
 for a balanced regulatory and fiscal framework for tobacco, equitable
 and harmonious VAT rates across States and implementation of a uniform
 GST rate.
 
 Your Company remains confident that despite the severe pressures, its
 robust product portfolio, world-class quality, innovation in processes
 and investments in cutting-edge technology and superior execution of
 competitive strategies will enable it to sustain and reinforce its
 market standing in the years to come.
 
 FMCG - Others
 
 The size of the Indian FMCG industry is estimated at around Rs. 250000
 crores representing nearly 2.5% of the countrys GDP. The industry has
 tripled in size over the last 10 years and has grown at approximately
 17% CAGR in the last 5 years driven by rising income levels, increasing
 urbanisation, strong rural demand and favourable demographic trends.
 These growth drivers, coupled with the low levels of penetration and
 per capita usage in India, are expected to result in robust industry
 growth in excess of 15% per annum over the medium-term.
 
 Your Company continues to rapidly scale up its new FMCG businesses
 leveraging its institutional strengths viz. deep consumer insight,
 proven brand building capability, a deep & wide distribution network,
 strong rural & agri-sourcing linkages, paper and packaging expertise
 and cuisine knowledge.
 
 The new FMCG businesses comprising Branded Packaged Foods, Personal
 Care Products, Education and Stationery Products, Lifestyle Retailing,
 Incense Sticks (Agarbattis) and Safety Matches have grown at an
 impressive pace over the past several years, crossing Rs. 7000 crores
 mark during the year. Your Companys new FMCG businesses have been
 rated to be the fastest growing among top consumer goods companies
 operating in India as per a recent Nielsen report.
 
 Within a relatively short span of time, your Company has established
 several vibrant consumer brands such as Aashirvaad,
 Sunfeast, Bingo!, Yippee!, Candyman,
 mint-o, Kitchens of India in the Branded Packaged Foods
 space; Essenza Di Wills, Fiama Di Wills, Vivel and
 Superia in the Personal Care products segment; Classmate
 and Paperkraft in Education & Stationery products market;
 Wills Lifestyle and John Players in the Lifestyle Retailing
 business; Mangaldeep in Agarbattis, Aim in Matches and so
 on. In terms of annualised consumer spend, Aashirvaad and Sunfeast are
 today over Rs. 2000 crores each, Classmate at around Rs. 1000 crores
 while Bingo!, Candyman and Vivel are more than Rs. 500 crores each.
 These world-class Indian brands, which continue to gain increasing
 consumer franchise, support the competitiveness of domestic value
 chains of which they are a part and create and retain value within the
 country.
 
 The year under review saw a 26.5% growth in Segment Revenues and a
 significant improvement in profitability as reflected by the positive
 swing of Rs. 114 crores at the PBIT level. Segment Results reflect the
 gestation costs of these businesses largely comprising costs associated
 with brand building, product development, R&D and infrastructure
 creation.
 
 Your Companys relentless focus on quality, innovation and
 differentiation backed by deep consumer insights, world-class R&D and
 an efficient and responsive supply chain will further strengthen its
 leadership position in the Indian FMCG industry.
 
 Highlights of progress in each category are set out below.
 
 Branded Packaged Foods Businesses
 
 Your Companys Branded Packaged Foods businesses continued on a high
 growth trajectory recording impressive growth in market shares and
 enhanced market standing across segments. The businesses accelerated
 investments in distributed capacities and capabilities to meet
 anticipated growth and develop a differentiated and distinctive range
 of products. Significant investments in R&D and product development
 coupled with deep consumer insight have enabled launch of successful
 innovative products catering to the varied regional tastes and
 preferences of consumers across the country. Your Companys products
 continue to be best-in-class in terms of product quality.
 
 During the year, the Branded Packaged Foods businesses had to contend
 with high levels of input costs. Global demand-supply dynamics, policy
 uncertainties and adverse currency movement led to steep hike in prices
 of key commodities such as wheat, maida, edible oils, packaging
 material and industrial fuels particularly during the first half of the
 year.
 
 These cost pressures were however mitigated through a combination of
 improvements in product and process efficiencies, smart sourcing and
 supply chain initiatives.
 
 In the Bakery and Confectionery Foods business, the Biscuits and
 Confectionery categories gained significant scale and market standing
 during the year.  Sunfeast biscuits sustained its robust growth
 trajectory, especially at the value-added and premium end. Product
 range stood significantly augmented with the launch of several
 first-to-market variants including Dark Fantasy Choco Fills -
 Coffee, Dark Fantasy Choco Meltz, Butterscotch Zing,
 Kaju Badam Cookies. During the year, the brand emerged as the
 clear market leader in the highly competitive premium cream biscuits
 segment.  In the Confectionery category, Candyman and
 mint-o continued to register strong growth during the year. The
 business launched Creme Lacto and mint-o Ultramintz - a
 sugar-free extra-strong mint in select markets. These products have met
 with encouraging consumer response.
 
 In the Snack Foods business, your Company continued to enhance market
 standing and expand scale in the fast growing Savoury Snacks, Noodles
 and Pasta categories. In the Savoury Snacks category, the market
 standing of your Companys Bingo! brand has significantly
 improved, leveraging an innovative product range, enhanced brand
 building efforts, use of digital media to spur word-of-mouth and
 clutter-breaking advertising campaigns. Your Companys
 new-to-market format of Snacks, Bingo! Tangles, has been
 well received in target markets and is gaining impressive consumer
 traction. In the Instant Noodles and Pasta category, your Companys
 brand Sunfeast Yippee! has been well received by consumers and is
 the second largest brand in the market. Focused market research, deep
 consumer insights and innovative product formats under the Sunfeast
 Yippee! brand are expected to further strengthen consumer franchise
 in this fast growing and highly competitive category.
 
 In the Staples, Spices and Ready to Eat Foods business, your
 Companys Staples and Ready to Eat categories continued to grow
 rapidly. In the Staples category, Aashirvaad atta consolidated
 its leadership position aided by the strong performance of Aashirvaad
 Multi-grain atta. The premium Multi-grain and Select
 variants continued to grow rapidly with an increasing proportion of
 consumers shifting to these value-added offerings.
 
 The Branded Packaged Foods businesses continue to invest in
 manufacturing and distribution infrastructure to support larger scale
 in view of the growing demand for their products and maximise the
 benefits of distributed manufacture for efficient servicing of proximal
 markets.
 
 Buoyed by increasing consumer franchise for your Companys brands, it
 is expected that the accelerated growth of the Branded Packaged Foods
 businesses will be sustained in the years ahead. Your Company will
 continue to rapidly scale-up the Branded Packaged Foods businesses
 drawing upon the agri-sourcing strength of the e-Choupals, in-house
 cuisine knowledge, product development capabilities, packaging
 expertise and branding, sales & distribution competencies to establish
 itself as the most trusted provider of food products in the Indian
 market.
 
 Personal Care Products
 
 Your Companys Personal Care Products business continued to gain
 consumer franchise during the year aided by a slew of new product
 launches in the Personal Wash, Skin Care, Face Wash and Deodorants
 categories.  The business continues to leverage the umbrella brands,
 namely, Essenza Di Wills, Fiama Di Wills, Vivel and
 Superia and is focused on addressing various consumer benefits
 with the introduction of new variants.
 
 The launch of the Couture Spa range of soaps under the Fiama
 Di Wills brand was one of the key interventions during the year. The
 signature series, created in alliance with fashion guru Wendell
 Rodricks, provides consumers an invigorating bathing experience. The
 business also launched a Collectors Edition soap series in
 association with the Lonely Planet Magazine under the Fiama Di Wills
 Mens range. The six exciting Collectors Edition packs are
 inspired by various water sports and destinations renowned for
 rejuvenating and revitalizing experiences, in line with the brands
 value proposition of rejuvenation. The year also marked your
 Companys foray into the high growth Deodorants market with the
 launch of Aqua Pulse Deodorant Spray under the Fiama Di Wills
 Men franchise. The Skin Care range was also expanded during the year
 with the launch of Vivel Cell Renew Body Lotion, Hand Creme /
 Moisturizer and Vivel Perfect Glow Skin Toner in target markets.
 The new product launches have received encouraging consumer response.
 
 The business continues to increasingly leverage Laboratoire
 Naturel - the state-of-the-art consumer and product interaction
 centre located in Bengaluru - to connect the R&D and brand teams to the
 Indian consumer with a view to launching products with unique and
 differentiated benefits. As in previous years, in recognition of
 excellence in product quality and innovation, two of your Companys
 products - Fiama Di Wills Men Aqua Pulse De-Stressing & Brightening
 Face Wash, and Vivel Cell Renew Fortify & Repair Moisturiser -
 were voted Product of the Year in their respective categories.
 
 Innovative consumer engagement continues to be at the centre of your
 Companys personal care strategy.  Several new initiatives such as
 launch of the Couture Spa gel bathing bar, and a unique consumer
 engagement programme - christened The Fabulous Hair Show - were
 undertaken during the year. Your Company is at the forefront of
 leveraging new age media for enhanced consumer engagement pioneering
 campaigns such as Fiama Di Wills Men website launch via Google+
 Hangout and Fiama Di Wills Men - Face of the Year campaign, to
 name a few. A greater presence of your Companys brands on
 traditional as well as digital media, direct consumer interaction
 initiatives, and improved market presence contributed to your
 Companys products being tried by over 7 crore households during the
 year (as per IMRB Household Panel survey - January 2013).  In addition,
 Vivel was voted as one of the Top 5 Most Exciting Brands in
 Personal Care in India by Brand Equity and Nielsens Annual Survey
 for Most Exciting Brands.
 
 Your Companys Personal Care Products business continued to grow at a
 fast clip, distinctly ahead of industry despite competitive pressures
 from entrenched players.  This was achieved through a combination of
 innovative and differentiated offers and by leveraging the distribution
 network of your Company to reach target consumers.
 
 Input materials, especially palm oil, witnessed significant levels of
 price volatility during the year. The depreciation of the Indian Rupee
 against the US Dollar added to inflationary pressure on other input
 materials for a major part of the year. The business managed its raw
 material costs effectively by adopting a proactive sourcing strategy
 based on deep understanding of market trends, developing alternate
 sources of supply, leveraging enhanced scale of operations and prudent
 inventory management.
 
 The Personal Care industry in India continues to be on a long-term
 growth path driven by rising disposable incomes and changing consumer
 preference for enhanced personal grooming. Your Company is well poised
 to seize the emerging opportunities in this rapidly evolving industry
 and continues to invest in creation of vibrant brands, cutting-edge
 products, flexible and responsive manufacturing and supply chain
 operations, and development of high quality human capital to build
 sustainable competitive advantage.
 
 Education & Stationery Products
 
 The Stationery business recorded robust growth in revenues during the
 year, consolidating your Companys position as the leading and
 fastest growing player in the Indian Stationery market. Your
 Companys flagship brands - Classmate for the student community
 and Paperkraft for office and executive requirements - continue
 to gain increasing consumer franchise.
 
 Continuing investments in a superior product range, effective consumer
 engagement and an efficient and responsive supply chain network has
 enabled Classmate gain significant market share. During the year, brand
 Classmate was strengthened through a series of interventions resulting
 in improvement in brand health and market standing. A new television
 commercial backed by on-ground activation and social media inputs,
 repositioned Classmate as a brand that celebrates the uniqueness in
 every child. The business also made good progress during the year in
 the non-paper categories comprising pens, wood-cased & mechanical pens,
 mathematical instruments, art stationery & scholastic products. Such
 complementary products are helping position Classmate as a complete
 student stationery brand.
 
 Your Companys Social Investments Programme in primary education,
 that has cumulatively benefited over 300,000 children, is showcased on
 the back cover of every Classmate notebook. The Classmate notebook is
 itself an embodiment of the environmental capital built by your Company
 in its paper business. While the cover is made from recycled board
 sourced from your Companys Forest Stewardship Council (FSC)
 certified Kovai mill, the inner pages are made from virgin pulp sourced
 from your Companys social & farm forestry programme that has greened
 over 142,000 hectares - including substantial tracts of private waste
 lands belonging to poor tribals and marginal farmers - and provided 64
 million person days of employment. Further, used notebooks are
 collected from schools in the catchment areas of your Companys paper
 mill under the Wealth Out of Waste (WOW) programme where they are
 converted to recycled board. This sets in motion a virtuous cycle that
 continuously re-generates environmental capital. Additionally, the
 collaborative supply chain established by the business comprising 800
 customers and 30 outsourced manufacturers provides indirect employment
 to over 5,000 people. The small-scale manufacturers, with support from
 your Company, have built impressive quality and delivery capability,
 resulting in a majority of them being certified to ISO 9001:2008
 standards.
 
 The education & stationery products industry is poised for exponential
 growth driven by large investments in the education sector, growing
 literacy and the increasing scale of government initiatives in
 education. Your Company with its collaborative linkages with small &
 medium enterprises and a strong product portfolio of notebooks &
 writing instruments, is well poised to strengthen its leadership
 position in the Indian stationery market.
 
 Lifestyle Retailing
 
 During the year, your Companys Lifestyle Retailing business posted
 high growth in revenues and continued to strengthen its position in the
 branded apparel market.  While revenue growth was impacted in the
 initial part of the year due to weak consumer sentiment, there was a
 marked improvement as the year progressed.  The restoration of
 exemption of excise duty on branded readymade garments as announced in
 the Union Budget 2013, is expected to provide the much needed impetus
 for the industry.
 
 In the Premium segment, Wills Lifestyle further strengthened its
 consumer franchise on the back of significant improvements in product
 variety, enhanced availability and impactful visibility. The retail
 footprint of the brand was expanded to 90 Exclusive stores across 40
 cities and more than 500 shop-in-shops in leading departmental
 stores and multi-brand outlets. During the year, the premium imagery of
 the brand was reinforced through the association with Wills
 Lifestyle India Fashion Week, the countrys most prestigious fashion &
 lifestyle event.
 
 With the addition of a boutique store at the ITC Grand Chola, the brand
 is now available in five ITC Hotels, thereby enhancing brand
 availability to high-end business and leisure travellers. The Club
 ITC loyalty program, with over 1 lakh members, leveraged synergies
 between Wills Lifestyle and ITC Hotels to target and strengthen bonding
 with the premium consumer.
 
 Product appeal was enhanced through the introduction of differentiated
 offerings across several premium product platforms. The Wills Classic
 formal range now offers Wonderpress wrinkle-free shirts,
 Regalia superfine fabrics, premium Ecostyle organic collection
 and Creme de Cotton supersoft cottons. The Luxuria range of
 high-end formals with luxurious fabrics and superior craftsmanship
 continued to receive positive consumer response. The Wills Sport range,
 with its vibrant and fashionable portfolio, strengthened its appeal
 amongst the youth segment, widening the consumer franchise.  The
 Womens offering witnessed strong growth energised by an extensive
 high-end range, stylised formals, trendy silhouettes and premium
 accessories. The exclusive designer-wear offering, Wills Signature,
 co-created with Indias leading designers, was strengthened with the
 launch of Ritu Kumar creations, adding to the product equity.
 
 In the Youth segment, John Players has established a strong
 pan-India presence with availability in over 350 stores and 1,400
 multi-brand outlets and departmental stores. Brand reach was further
 augmented during the year with the launch of nearly 100 stores,
 penetrating more markets and acquiring new franchise.  The casual
 portfolio registered strong growth as a result of an enhanced range,
 premium differentiated washes and contemporary fits. The John Players
 Jeans brand strengthened its positioning as a vibrant and fashionable
 denim offering with impactful communication and the launch of exclusive
 John Players Jeans stores and improved availability through
 shop-in-shops. Social media and e-commerce platforms were activated to
 engage with the youth and expand reach to new consumers seeking
 affordable fashion.
 
 Product portfolio was strengthened with new designs in the core range
 and region-specific collections, robust replenishment infrastructure
 and processes.  During the year, the business operationalised its new
 state-of-the-art product development facility in Manesar, Haryana.
 Initiatives were undertaken to enhance range vitality, supply chain
 responsiveness and superior customer service for a delightful shopping
 experience.
 
 The business continued to receive industry recognition during the year.
 While Wills Lifestyle was accorded
 
 Superbrand status, John Players was rated amongst the top 10
 Most Trusted Apparel Brands 2012 by The Economic Times.
 
 The business continues to focus on enhancing the premium quotient of
 its offerings and strengthen processes for creation of winning designs
 and enhancing supply chain responsiveness on the basis of a deep
 understanding of consumer preferences.
 
 Safety Matches and Incense sticks (Agarbattis)
 
 The Agarbatti category recorded an impressive growth in revenues well
 ahead of the industry, driven by increasing consumer franchise for the
 Mangaldeep brand and enhanced distribution reach. Product
 portfolio was augmented during the year with the launch of variants
 such as Fragrance of Temple series and Dhoop 4-in-1, under
 the umbrella brand Mangaldeep.
 
 The business maintained its market leadership in the Safety Matches
 category aided by continued consumer preference for its strong brand
 portfolio across all market segments.
 
 The Matches & Agarbatti business continues to contribute to your
 Companys commitment to the Triple Bottom Line supporting over
 18,000 livelihoods, mainly amongst rural women. The business sources
 its products from over 50 small-scale and cottage sector units as well
 as womens self-help groups. It continues to provide support to such
 units through the introduction of scientific methods to enhance
 productivity and product quality. Business initiatives of introducing
 enabling tools and technology in the rural communities continue to
 enhance product quality and increase the earning potential of agarbatti
 rollers. These initiatives, along with the continuing association with
 various State Governments for setting up sourcing centres, are creating
 sustainable livelihood opportunities for rural women through agarbatti
 rolling.  Your Company continues to partner the small-scale sector by
 sourcing a significant portion of its Safety Matches requirement from
 multiple units in this sector.  Your Company is helping improve the
 competitive ability of these units by providing technical inputs
 towards strengthening systems and processes.
 
 While the manufacture of Agarbattis is reserved for the small-scale &
 cottage sector in India considering its importance in employment
 generation, imports of raw battis (the principal raw material) are
 freely allowed at low Customs Duty rates.  This is resulting in bulk of
 the raw batti consumption in India being of imported origin leading to
 a loss of livelihood creation opportunities.  Suitable policy changes
 in arresting this trend would go a long way in creating sustainable
 livelihoods especially among rural Indian women and tribals in the
 North-East.
 
 B.  HOTELS
 
 The domestic tourism industry remained sluggish during the year in the
 backdrop of a weak global and domestic economic environment. While
 growth in foreign tourist arrivals slowed down to 2.8% during the year
 versus 9.9% in 2011-12, domestic air travel recorded de-growth.
 Industry performance was also affected due to the significant increase
 in room inventory in some of the key domestic markets.
 
 Such a challenging business environment adversely impacted business
 performance leading to a muted growth in Segment Revenues during the
 year. While your Companys Hotels business maintained its leadership
 position in terms of operating margins, Segment Results were adversely
 impacted largely by the relatively weak pricing scenario and the
 gestation costs relating to ITC Grand Chola, which commenced operations
 in September 2012.
 
 Your Companys Hotels business continues to be rated amongst the
 fastest growing hospitality chains with 93 properties at 64 locations
 in India operating under 4 brands - ITC Hotel at the luxury end,
 WelcomHotel in the 5 star segment, Fortune in the mid
 market to upscale segment and WelcomHeritage in the heritage
 leisure segment. In addition, the business has licensing and
 franchising agreements for two brands - The Luxury Collection and
 Sheraton with the Starwood Hotels & Resorts.
 
 During the year, your Company unveiled its latest offering in the super
 premium segment - ITC Grand Chola in Chennai. The hotel is part of the
 ITC Hotel brand and has 522 plush hotel rooms and suites, 78
 service apartments, 60,000 sq. ft. of conference & banqueting
 facilities, 10 Food & Beverage outlets and the award winning spa
 Kaya Kalp. The hotel has achieved the distinction of being the
 worlds largest Leadership in Energy and Environmental Design
 (LEED) Platinum rated hotel under the New Construction category and
 Indias first 5 Star Green Rating for Integrated Habitat Assessment
 (GRIHA) rated luxury hotel by the Ministry of New and Renewable Energy,
 thereby bolstering the unique positioning of ITC Hotels as the
 greenest luxury hotel chain in the world. The Food & Beverage segment
 remains a major strength of your Company and its iconic brands
 Bukhara, Dum Pukht and Dakshin continue to garner coveted
 international awards and accolades.  Other signature F&B brands viz.
 West View, Kebabs & Kurries, Edo and Pan Asian have
 firmly established themselves and continue to sustain leadership
 position in their respective cities. During the year, the business
 launched 2 new signature F&B offerings - Ottimo and Royal Vega
 - focusing on exquisite Italian cuisine and delectable vegetarian food
 from the magnificent royal kitchens of India, respectively.
 
 In line with your Companys commitment to the Triple Bottom Line,
 investments have been made in renewable energy to provide clean power
 to your Companys hotels in Bengaluru (ITC Windsor and ITC Gardenia),
 Chennai (ITC Grand Chola), Mumbai (ITC Maratha) and Jaipur (ITC
 Rajputana). With these investments, your Companys Hotels business met
 over half of its energy requirements from clean and renewable sources.
 
 During the year, the business leveraged the recently launched pan-ITC
 consumer loyalty programme - Club ITC to enhance revenues. The
 business seeks to position Club ITC - targeted at the premium
 clientele of Wills Lifestyle and ITC Hotels - as the greenest
 and most admired customer loyalty programme over the next few years.
 
 In view of the positive long-term outlook for the Indian Hotel
 industry, your Company continues to sustain its investment-led growth
 strategy. Construction activity of two new luxury properties at Kolkata
 and at Classic Golf Resort near Gurgaon is progressing satisfactorily.
 During the year, your Company invested in a newly formed wholly-owned
 subsidiary incorporated in Sri Lanka which acquired a prime plot of
 land in Colombo on a 99-year lease from the Government of Sri Lanka,
 for developing a mixed-use project including a 5-star luxury hotel.
 Further, several new projects, including joint ventures and management
 contracts, are on the anvil to rapidly scale up the business across all
 brands.
 
 The Fortune brand which caters to the mid-market to upscale
 segment continued its expansion by forging new alliances, taking the
 total number of hotels in its fold to 69 with an aggregate inventory of
 over 5,000 rooms. Of these, 30 properties are under various stages of
 development with 3 hotels slated for commissioning in the coming year.
 The WelcomHeritage brand continues to be the countrys most
 successful and largest chain of heritage hotels with 39 operating
 properties, spread across 13 States in India.
 
 Your Companys Hotels business, with its globally benchmarked levels of
 product and service excellence and customer centricity, is well
 positioned not only to sustain its leadership status in the industry,
 but also emerge as the largest hotel chain in the country over the next
 few years.
 
 C.  PAPERBOARDS, PAPER AND PACKAGING
 
 During the year, the Paperboards, Paper and Packaging segment recorded
 a growth of 9% in revenues aided by higher volumes and product mix
 enrichment. The relatively lower growth in Segment Results during the
 year, reflects the steep hike in input prices particularly of wood,
 coal and chemicals.
 
 Paperboards & Specialty Papers
 
 Global demand for paper & paperboard de-grew by 0.5% in 2012 primarily
 due to the continuing weak economic environment prevailing in Western
 Europe and the US.  The domestic market also recorded a slowdown with
 demand decelerating to around 5.9% during 2012-13 against 6.1% in the
 previous year.
 
 The global paper market continues to witness a structural shift with
 emerging economies, particularly in Asia such as China and India,
 driving the demand growth. While such structural shift in demand and
 the relatively low levels of per capita consumption in India offers
 attractive opportunities going forward, the Indian market is also
 getting increasingly competitive drawing large investments especially
 from global players. Though growth in demand is expected to absorb the
 additional capacity, increasing market share and sustaining margins
 will be a challenge in the short-term.
 
 Further, reduction of import duties under various Regional Free Trade
 Agreements especially with ASEAN is impacting the profitability of the
 domestic paper industry and the economic viability of the small paper
 mills. With the US and EU imposing anti-dumping duties against import
 of paper / paperboards from China / Indonesia to protect their domestic
 industries, the additional capacities created in these countries are
 increasingly finding their way into India given the lower levels of
 import duty.  Clearly, there is a need to ensure that the current duty
 structures are, at the very least, kept unchanged.
 
 The domestic paperboard industry is expected to grow at around 7.5% per
 annum over the medium-term. During the year, your Company consolidated
 its pre-eminent position in the industry through new product launches
 like Carte Lumina with best-in-class whiteness suited for
 high-end FMCG and over-the-counter products and Nanobev for the
 small paper cups segment.  Paperboards developed for high-end cigarette
 packaging needs are running seamlessly on the high speed packaging
 machines at your Companys cigarette factories. The business also
 strengthened its distribution network with the addition of new
 distributors, authorised stockists and market development partners for
 improved market servicing.
 
 Your Company continues to focus on the value-added product segment in
 which it is a clear market leader.  The market for value-added
 paperboard is expected to grow faster at a compound annual growth rate
 of 12% driven by higher demand for branded packaged products in the
 FMCG and Pharma sectors, increasing number of product categories
 catering to aspirational lifestyles, higher rural demand, higher
 penetration of organized retail and increasing salience of packaging in
 driving brand awareness. Towards this end, your Company successfully
 commissioned a state-of-the-art and highly energy efficient paper
 machine with an installed capacity of over 1 lakh tonnes per annum at
 the Bhadrachalam plant during the year. With this, the total capacity
 of the Bhadrachalam plant stands at over 5.5 lakh tonnes per annum,
 thereby sustaining its position as the single largest integrated pulp
 and paperboard/paper unit in the Indian industry. Your Company has also
 invested in a new 25 MW Turbine Generator and 130 tonnes per hour (TPH)
 Boiler to meet the energy requirements of this expansion.
 
 The Writing and Printing paper segment, currently estimated at
 3.8 million tonnes per annum, is projected to grow at a compound annual
 growth rate of around 7% over the medium term. Growth in the
 value-added writing and printing paper segment will continue to be
 fuelled by initiatives like Sarva Shiksha Abhiyan and Right of Children
 to Free and Compulsory Education as well as by rising literacy levels,
 changing demographic profiles and GDP growth. The business, with its
 strong forward linkages with your Companys Education and Stationery
 Products, has emerged as a leading player in this segment.
 
 Your Company continues with its strategy of promoting social forestry
 plantations for pulpwood as access to adequate supplies of pulpwood at
 competitive prices remains a major challenge for the paper industry.
 
 The industry is currently facing an acute shortage of pulpwood
 especially in Andhra Pradesh, which is largely attributable to the
 enhanced demand from new pulp capacities that have been set up without
 adequate investments in pulpwood plantations and diversion of supplies
 for alternative usage such as commercial poles, bio-fuel etc. With
 demand far exceeding supplies, pulpwood procurement prices witnessed
 steep hikes during the year, adversely impacting industry margins.
 
 Your Company expects the current demand-supply skew to be corrected
 over the next couple of years on the back of additional plantations by
 farmers due to the prevailing remunerative price levels and renewed
 efforts by pulp mills in promoting plantations in their core areas.  In
 the short to medium term, the business is exploring several options
 including procurement of wood from other states, use of bamboo in a
 limited scale etc. with a view to mitigating the cost pressure.
 
 Your Company remains focused on promoting pulpwood plantations in its
 core area of operations. During the year, the business sold /
 distributed high quality saplings/seeds to farmers that enabled
 planting of over 110 million saplings in 17500 hectares of plantations.
 With this, your Companys bio-technology based research initiatives
 have cumulatively resulted in the planting of about 656 million
 saplings leading to significant wasteland development and greening of
 over 142,000 hectares and generation of over 64 million person days of
 employment for poor tribals and marginal farmers. With a view to
 accelerating the pace of plantation activity, the business commissioned
 a state-of-the-art clonal sapling production facility during the year.
 The facility has a capacity to produce 25 million saplings with
 improved survival rates and higher productivity and will go a long way
 in supporting your Companys endeavour to augment pulpwood
 availability.
 
 Your Companys research on clonal development has resulted in the
 introduction of high yielding and disease resistant clones which are
 adaptable to a wide variety of agro-climatic conditions. Besides
 securing the long-term supply of fibre at competitive costs, this
 initiative also assists in generating farm incomes by utilisation of
 marginal wastelands. Your Companys continued focus on clonal
 plantations in core areas is expected to yield significant competitive
 advantage in the years to come.  Your Companys Life Sciences &
 Technology team is actively collaborating with several expert agencies
 to further leverage bio-technology for enhancing farm productivity,
 wood yields and improving fibre and pulp properties.
 
 Your Company continues to promote agro-forestry in pulpwood plantations
 on wasteland as well as on land where mono-cropping is practised. In
 Andhra Pradesh, mono-cropping is currently practised in cultivation of
 cotton, tobacco, maize and pulses in more than 30 lakh hectares. During
 the year under review, your Company facilitated the introduction of
 agro-forestry models, in about 1,800 hectares, incorporating
 inter-cropping practices where eucalyptus trees are grown adjacent to
 agricultural crops. By integrating tree growing with crop production,
 the problems of poor agricultural production, worsening wood shortages
 and environmental degradation can be simultaneously addressed.
 Furthermore, inter-cropping technologies / practices also help in
 reducing the pressure on the remaining natural forests and increases
 the diversity of vegetation on existing farms. Your Companys
 initiatives under this model currently extend to nearly 2,500 hectares
 assuring wood and food security to the farmer from the same unit of
 land addressing long-term sustainability. The area covered under this
 model is proposed to be substantially increased in the years to come.
 
 Hitherto, in India, the subject domain of Biodiversity has remained
 with the Ministry of Environment and Forests.  For the first time in
 the Indian paper industry, your Company has proactively attempted a
 biodiversity conservation project on private lands. On a pilot basis,
 11.52 hectares of farmer lands in Andhra Pradesh were selected and
 afforestation, reforestation, reclamation, rehabilitation, protection
 and conservation of biological resources were attempted. Further, your
 Company promoted natural regeneration, enrichment planting with native
 species and conserved threatened and endemic species. In order to
 sustain these efforts, your Company is promoting local stewardship for
 biodiversity through awareness programmes which will go a long way in
 reversing the impact created by anthropogenic pressures, integrating it
 with agriculture, pulpwood plantations, fishery, apiculture, medicinal
 plants and creating sustainable livelihood to the tribal farmers. As a
 responsible Corporate Citizen, your Company is willing to participate
 in initiatives of this nature towards preserving biodiversity on an
 ongoing basis.
 
 In India only 25% of the paper consumed is recovered for recycling as
 against about 70% in the western countries. Your Companys
 collaborative initiative, christened Wealth Out of Waste (WOW),
 continues to promote and facilitate waste paper recycling, with a view
 to conserving scarce natural resources. The waste paper industry is
 largely unorganised and a lot of effort has gone into establishing
 processes and systems in the operational areas of collection, sorting
 and grading of waste paper as well as on accounting, compliances and
 controls. It is expected that such efforts would assist in the
 availability of quality fibre on a sustainable basis at competitive
 prices. About 48,000 tonnes of waste paper were collected during the
 year and with continued focus on building capability it is expected
 that the entire waste paper requirements of the business would be
 sourced through this initiative within the next few years. In this
 context, the second anniversary of National Recycling Day was
 celebrated in Chennai on 1st July 2012 with widespread participation of
 the general public and 14,000 school children. This initiative won
 CIIs Best environmental project of the year 2012 and Most
 Useful Environmental Project awards.
 
 Your Company has the distinction of being the first paper company in
 India to have obtained the Forest Stewardship Council - Forest
 Management (FSC-FM) certification covering 8,000 hectares of social
 forestry plantations involving about 9,000 farmers with another 14,000
 hectares awaiting certification. FSC-FM certifies that the plantation
 activities of an organisation are economically, socially and
 environmentally viable.
 
 To the extent of pulp produced from such certified plantations, your
 Company will be able to commit to its customers, FSC certified paper &
 paperboard.  Environmentally conscious customers are already beginning
 to show keenness to source such green products which in turn will
 further increase the competitiveness of the business. Plans are afoot
 to steadily increase coverage over the next few years.
 
 All four manufacturing units of your Company have obtained the FSC
 Chain of Custody certification.
 
 Your Company has made significant investments in contemporary
 technologies including environment-friendly Elemental Chlorine-Free
 (ECF) and Ozone bleaching for pulp thereby improving the environmental
 standards of its manufacturing operations. Such investments are
 expected to provide customers with sophisticated products, way ahead of
 legislation, thereby creating new benchmarks in environmental
 stewardship. The Industry would welcome policies that lay down
 environmental benchmarks in tune with other industries such as
 automotives etc. and suitably reward those who achieve or exceed such
 parameters.
 
 Your Company continues to focus on recycling initiatives including
 solid waste recycling. While all manufacturing units have already
 achieved near 100% solid waste recycling by its usage for making
 products like lime, fly ash bricks, grey boards, egg trays etc., the
 procurement and recycling of about 120,000 tonnes of waste paper during
 the year has further consolidated the businesss overall positive
 solid waste recycling footprint. The Bhadrachalam unit is the first in
 India to have been awarded the GreenCo Gold certificate by CII in
 June 2012. The unit also won the Excellent Energy Efficient,
 Excellent Water Efficient and Appreciation prize - State
 Energy Conservation awards. The Bollaram unit won Silver for
 FICCI Safety System Excellence award in manufacturing while the
 Kovai unit won Best Water Efficient award at 9th National Water
 Management meet. The business also won IPMA Environmental award
 for Cleaner Technologies.
 
 The above have been made possible as a result of continuous focus on
 various safety initiatives including induction of safety stewards,
 strengthening systems, spreading awareness and integrating environment,
 health and safety (EHS) as part of the overall Total Productive
 Maintenance (TPM) initiative. With regard to energy consumption,
 strategies to contain usage across units continue to be pursued.
 Further, the business is also investing in a new high pressure fuel
 efficient boiler in its Tribeni unit, which will enable significant
 reduction in coal consumption and usage of lower grades of coal.
 
 The 7.5 MW wind energy farm in Coimbatore, continues to operate at
 optimum levels providing clean energy to the Kovai unit. It is expected
 that energy efficiency coupled with greater use of renewable sources of
 energy will enable your Company to derive benefits from sale of
 Renewable Energy Certificates (RECs) under the Electricity Act 2003 as
 well as obtain benefits from newer initiatives like Perform, Achieve
 and Trade (PAT) under the Energy Conservation Act 2001.
 
 The year under review witnessed steep hikes in the cost of chemicals
 and coal as well as curtailment in supplies of coal by the Government
 through the reduction of allocations, forcing the industry to buy high
 cost coal in the open market. These factors, together with the sharp
 depreciation of the Indian Rupee, adversely impacted the industry.
 However, your Company with its integrated operations and strategic cost
 management actions was able to minimise the adverse impact of such cost
 escalations.
 
 The integrated nature of the business model - access to high-quality
 fibre from the economic vicinity of the Bhadrachalam mill, in-house
 pulp mill and state-of-the-art manufacturing facilities, focus on
 value-added paperboards and a robust forward linkage with the Education
 and Stationery Products business - strategically positions your Company
 to further consolidate and enhance its leadership status in the Indian
 paperboard and paper industry.
 
 Packaging and Printing
 
 Your Companys Packaging and Printing business continues to provide
 contemporary and superior packaging solutions facilitated by its
 state-of-the-art technology and processes. The business provides
 strategic support to your Companys FMCG businesses through
 innovative packaging solutions, faster speed-to-market for new launches
 and security of supplies in addition to delivering benchmarked
 international quality at competitive costs.
 
 The business continued to leverage its multiple packaging platforms to
 offer a wide range of packaging solutions and expand business both in
 domestic and export markets. Your Company continues to be a leading
 supplier of value-added packaging in cartons and flexibles.
 
 During the year, the business augmented the capacity and capability of
 its Haridwar plant with the successful commissioning of a new
 state-of-the-art line for cigarette packaging, expansion of carton line
 capacity and other downstream conversion facilities towards meeting the
 growing demand from the northern markets. The business also made
 investments in backward integration for key raw materials in the
 flexibles segment, thereby enhancing competitiveness. These in-house
 capabilities have enabled quicker turnaround of designs, pack changes
 and reduced product launch timelines for your Companys FMCG
 businesses, thereby providing a source of competitive advantage in the
 market place.
 
 The business won several awards during the year for operational
 excellence, innovation and creativity. These include three World
 Star Awards from the World Packaging Organisation, several India
 Star Awards from the Indian Institute of Packaging and Golden
 Peacock Award instituted by Institute of Directors for innovative
 product / services.
 
 The 14.1 MW wind energy farm in Tamil Nadu, set up in 2008, continues
 to operate at optimum levels providing clean energy to the Chennai
 unit. This initiative is a certified project under the Clean
 Development Mechanism of the Kyoto Protocol and is in line with your
 Companys commitment to reduce the carbon footprint of its operations.
 
 The factories at Chennai, Haridwar and Munger continued to maintain the
 highest standards in Environment, Health and Safety (EHS). The Chennai
 unit was certified for BRC IoP (British Retail Consortium, Institute of
 Packaging, global food packaging standard), SA 8000 (Social
 Accountability Certification), and FSC (Forest Stewardship Council
 Certification - Sustainable Forestry Practices).  The Haridwar unit was
 accredited with ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 for the
 new plant within six months of commissioning and also received the
 13th Annual Greentech Environment Award in the Silver category. The
 Munger unit won the Suraksha Puraskar at the National level from
 National Safety Council and International Safety Award with Merit
 from British Safety Council.
 
 With substantial investments in world-class technology & quality
 systems, and distributed & diversified manufacturing capability, the
 business is well poised to sustain its position as one of the foremost
 packaging houses in the country.
 
 D.  AGRI BUSINESS Leaf Tobacco
 
 While overall global leaf tobacco crop output saw a decline in 2012,
 the prevalent high levels of uncommitted inventory continued to limit
 demand for the fresh crop.  Global cigarette demand remained muted due
 to the weak global economic scenario, regulatory pressures, enhanced
 levels of taxation and growth in illegal trade.  Cigarette-type tobacco
 crop production in India was lower during 2012 mainly on account of the
 severe drought that adversely impacted Mysore crop output and quality.
 Your Companys focused crop development efforts at the farm level
 towards ensuring adequate availability of seedlings, educating the
 farmers on crop management and post harvest product management
 techniques helped revive the crop substantially thereby improving
 livelihoods particularly in the drought affected areas in rural
 Karnataka.
 
 Notwithstanding a sluggish global demand scenario, your Company
 recorded robust growth in export volumes and revenues by servicing
 customers based on their specific needs and leveraging strengths in
 crop development, superior sourcing and processing capabilities. The
 business not only strengthened its presence in existing markets but
 also accessed customers in new markets. The business also made progress
 during the year in growing the smokeless tobacco segment through
 customized offerings.
 
 The business continued to provide strategic sourcing support to your
 Companys cigarette business.
 
 Achieving enhanced productivity continues to be a focus area of
 research and crop development initiatives of the business. Substantial
 progress has been made in strengthening the pipeline of new hybrid
 combinations for deployment in growth zones.
 
 Your Company continues to engage in a pioneering role in promoting
 sustainable agriculture practices in the tobacco growing regions in
 Andhra Pradesh and Karnataka. Key interventions such as farm
 mechanisation, soil health management, water conservation and seedling
 production technologies through well researched dissemination models
 continue to support the farmer towards enhancing quality of produce and
 optimising costs. Your Companys efforts in this area have been
 recognised in a number of international forums. The approach on
 dissemination models of farm mechanisation has been published in the
 International Journal of Sustainability Japan, while the float seedling
 production initiative has been recognised by the World Academy of
 Science, Engineering & Technology (WASET), Amsterdam for its
 sustainability features & economic suitability to the farming
 community. These efforts are not only helping secure global demand for
 Indian leaf tobacco by providing enhanced value to global customers but
 also in improving the socio-economic status of the small / tribal
 farmer.  Capitalising on your Companys R&D efforts on varietal
 improvement, the area under coverage of flue-cured virginia hybrids was
 substantially increased in collaboration with the Central Tobacco
 Research Institute and the Tobacco Board of India.
 
 Your Companys newly commissioned Green Leaf Threshing plant in
 Mysore has stabilized and exceeded benchmarks on all operating
 parameters of throughput, processing yield and quality. This investment
 has enhanced the processing capability of the business and reduced
 transportation costs given the factorys proximity to the tobacco
 growing areas in Karnataka. The business is also actively engaged in
 augmenting its warehousing capacities and re-engineering its supply
 chain towards driving operational efficiencies and reducing costs.
 
 Further, in line with your Companys commitment to sustainable
 business practices, the business is investing in wind energy in
 Karnataka to increase usage of renewable sources of energy. With this,
 100% of the energy requirements of the newly commissioned plant at
 Mysore will be met through renewable energy sources.
 
 Your Company with its unmatched R&D capability, state-of-the-art
 facilities, unique crop development and extension expertise, deep
 understanding of customer and farmer needs, is well poised to leverage
 emerging opportunities for Indian leaf tobacco and sustain its position
 as a world-class leaf tobacco organisation.
 
 Other Agri Commodities
 
 Food grain production in India is estimated to have declined by around
 1.5% to about 255 million tonnes during 2012-13 as compared to the
 record 259 million tonnes in 2011-12. Output of major food grain items
 such as rice and wheat are expected to be lower in 2012-13. While wheat
 output is estimated to be lower by 1% at 94 million tonnes, rice output
 at about 104 million tonnes represents a decline of 1% over the
 previous year. While overall oilseed production during 2012-13 is
 expected to remain at about 31 million tonnes, soya production is
 expected to be higher at 14 million tonnes vis-a-vis 12 million tonnes
 in 2011-12.
 
 Adverse weather conditions in the major global wheat producing regions
 of Black Sea (Ukraine, Russia), South America (Brazil, Argentina) and
 Australia led to a dip in world production by about 40 million tonnes
 to about 656 million tonnes. Given the shortage in global markets as
 aforementioned, the business successfully leveraged the wheat export
 opportunity recording robust growth in revenues and asset turns. On the
 domestic front, the business continued to expand its presence with
 brand owners, private labels, food processors and millers.
 
 Global soya bean production, estimated at 270 million tonnes during the
 current season, represents an increase of 12.5% over the previous
 season. The increase is mainly attributable to higher output in South
 American origins offset by a reduction in output in the United States.
 Such a global oversupply situation coupled with higher domestic crop
 production led to a steep correction in domestic soya prices.
 Consequently, market arrivals of the domestic crop remained weak with
 farmers holding back sale of soya bean in anticipation of improved
 realisations.
 
 Your Companys uniquely structured commodity sourcing business model
 with strong competencies in multi-location sourcing, logistics and
 supply chain management enabled achieving enhanced scale and value
 capture in the wheat and soya market.
 
 The business continued to source identity preserved and special
 varieties of wheat through its e-Choupal network for your Companys
 Branded Packaged Foods businesses. The continuous focus on cost-quality
 optimisation through varietal and geographical arbitrage and driving
 supply chain and logistics efficiencies provided a competitive
 advantage to your Companys Aashirvaad Atta brand.
 
 In the area of potato sourcing, the business continued to support your
 Companys Bingo! brand of potato chips by procuring the highest quality
 chip stock potatoes at competitive prices. The endeavour of partnering
 with farmers to source locally grown potatoes in close proximity to
 manufacturing units helped minimise logistics costs.  The business
 continued to engage with the farming community towards enhancing the
 quality and variety of chip stock seed usage, adoption of best farming
 practices and improving yields.
 
 India is the worlds largest producer, consumer and exporter of spices.
 The growing concerns around food safety and product integrity have
 resulted in the increased demand for suppliers with end-to-end
 capabilities having complete custody of the supply chain, supported by
 appropriate technology, quality assurance and traceability management
 systems. Your Company is well poised to garner an increasing share of
 the fast growing domestic and export spices market leveraging its
 processing unit which is certified to the highest grade of global food
 safety standards under the BRC (British Retail Consortium) Food
 certification regime and an embedded IT enabled farm to fork
 traceability system. The business continues to provide support to your
 Companys Aashirvaad range of spices.
 
 An integrated and holistic view of the agricultural value chain is
 essential towards providing the necessary fillip to stagnating
 agricultural growth in the country. This requires a joint participatory
 approach from all stakeholders such as farmers, input vendors, traders,
 processors and the government agencies. Your Company plays a critical
 role as a catalyst in integrating farmers, input vendors and government
 agencies besides facilitating the necessary market linkages. Through
 its Choupal Pradarshan Khet initiative, the business works with
 various government and private bodies to promote new seed varieties,
 adoption of farm technologies and practices among farmers towards
 improving productivity of crops (food grains, oilseeds, cereals etc.)
 while deepening relationship with the farming community.  During the
 year, new soya seed varieties with high yield, high protein and high
 oleic acid were identified by your Companys Life Sciences & Technology
 Centre in association with the Directorate of Soybean Research, India.
 A number of farmer training programmes along with farm field
 demonstration of new technology (seed varieties and process) were
 conducted in more than 730 villages covering over 22,000 farmers
 towards yield enhancement in soybean, barley and wheat. Promotion of
 sustainability practices through the use of bio-fertilizers in paddy
 and bajra in western UP were also taken up.
 
 Your Company will continue to leverage the unique e-Choupal platform
 towards achieving the superordinate goal of enhancing agricultural
 growth and productivity in the country enmeshed with a strong
 socio-economic model for rural development and sustainability even as
 it provides structural and sustainable competitive advantage to the
 Branded Packaged Foods businesses.
 
 NOTES ON SUBSIDIARIES
 
 The following may be read in conjunction with the Consolidated
 Financial Statements enclosed with the Accounts, prepared in accordance
 with Accounting Standard 21. In view of the general exemption granted
 by the Ministry of Corporate Affairs, the report and accounts of
 subsidiary companies are not required to be attached to your Companys
 Accounts. Shareholders desirous of obtaining the report and accounts of
 your Companys subsidiaries may obtain the same upon request. The
 report and accounts of the subsidiary companies will be kept for
 inspection at your Companys registered office and those of the
 subsidiary companies.  Further, the report and accounts of the
 subsidiary companies will also be available under the Shareholder
 Value section of your Companys website, www.itcportal.com, in a
 downloadable format.
 
 ITC Global Holdings Pte. Limited, Singapore (Global), a subsidiary
 of your Company, is under winding up in terms of the Order of the High
 Court of the Republic of Singapore dated 30th November, 2007.
 Consequently, your Company is not in a position to consolidate the
 accounts of Global for the financial year ended 31st December, 2012 or
 to make available copy of the same for inspection by shareholders.
 
 Surya Nepal Private Limited
 
 During the year the operating environment in Nepal continued to remain
 uncertain with the Constituent Assembly being dissolved in May 2012.
 The caretaker Government has since made way for a new Council of
 Ministers headed by the Chief Justice of Nepal, entrusted with the
 mandate of conducting the Constituent Assembly elections.
 
 On the economic front, the GDP for the year ended 15th July 12 grew
 by 4.6% against 3.8% in the previous year on the strength of increased
 agricultural production and growth in the services sector. However,
 there was a marked slowdown in industrial production which decelerated
 to 1.6% from 2.9% in the previous year.  The company continues to
 engage with policy makers for a pragmatic and purposeful policy and
 regulatory framework that will fuel long-term investment and growth in
 the countrys industrial sector including the operating segments of
 the company.
 
 Despite these challenging circumstances, the company continued to make
 good progress and deliver superior performance. In the twelve-month
 period ended 13th March 2013 (30th Falgun 2069), the company recorded a
 15% growth in sales with Gross Turnover (net of VAT) increasing to
 Nepalese Rupees (NRs.) 1665 crores from NRs. 1443 crores in the
 previous year.  Profit after Tax at NRs 370 crores increased by 29%
 over the previous year. The company continues to be one of the largest
 contributors to the exchequer accounting for about 16% of excise
 collections and 3.3% of the total revenues of the Government of Nepal.
 
 The company further consolidated its leadership position in the
 cigarette market through continued investment in product quality and
 value addition to its product portfolio.  Its focus on remaining
 contemporary through the induction of new generation technology
 platforms and the enhancement of internal capabilities has strengthened
 the competitiveness of the business and reinforced market standing. A
 Long Term Agreement with employees of the Simara factory, premised on
 the companys philosophy of harmonious employee relations management,
 was concluded during the year. The second cigarette factory near
 Pokhara is in an advanced stage of construction and will improve market
 servicing in the long-term.
 
 In the branded apparels business, the company focused on enhancing its
 market standing, distribution infrastructure and supply chain of
 John Players and Springwood. In the safety matches
 business, the companys brand Tir continued to gain consumer
 franchise.
 
 The company remains committed to supporting and investing in endeavours
 that augment social and economic capital in alignment with the stated
 priorities of the Government of Nepal. Consistent with such commitment,
 several initiatives that are expected to provide long-term multiplier
 benefits have been initiated and sustained during the year.
 Accordingly, the company:
 
 (a) Continued to partner with Tobacco farmers in Nepal to ensure higher
 productivity and quality enhancement at the farm level through the
 induction of agricultural best practices. The adoption of such
 practices and other inputs provided by the company has led to a
 consistent improvement in quality of domestic grades of tobacco thereby
 improving marketability of the crop and farmer returns.
 
 (b) Initiated a programme to assist village farmers, proximate to the
 Simara factory, in the plantation of high quality Poplar saplings to
 improve farmer earnings.
 
 (c) Supported an initiative in the animal husbandry sector by providing
 extension services that will drive yield improvement and higher returns
 for underprivileged farmers.
 
 (d) Partnered with Nepal Tourism Board in hosting Nepals premier
 professional golf tournament - the Surya Nepal Private Limited
 Masters, with the objective of promoting Nepal as an attractive
 golfing destination.
 
 (e) Continued to sponsor the Surya Nepal Private Limited Asha Social
 Entrepreneurship Awards, to recognize entrepreneurs who have created
 employment opportunities amongst local communities.
 
 The company declared a dividend of NRs. 139/- per equity share of NRs.
 100/- each for the year ended 15th July 2012 (31st Ashad 2069).
 
 ITC Infotech India Limited
 
 A weak global economic scenario, particularly in the US and Europe,
 continued to impact technology spends during the year. Although growth
 of the Indian IT industry has slowed down in recent years given the
 economic uncertainties, favourable exchange rates and market share
 gains during the year enabled it to grow ahead of earlier estimates.
 
 The companys consolidated Total Revenue grew well above the industry
 average, clocking a growth of 23% to Rs. 1017.80 crores while its Net
 Profit grew by 33% to Rs. 66.93 crores. This robust performance is an
 outcome of the successful strategies adopted by the company in
 
 (i) building world-class capabilities in each of its service lines,
 (ii) investing in new technologies, (iii) building solutions and
 capabilities around the products of global software vendors and
 partnering with them to take the products to the market, and (iv)
 rapidly growing the high potential accounts by putting in place
 geographical and technological expansion plans.
 
 For the year under review:
 
 (a) ITC Infotech India Limited registered a Total Revenue of Rs. 706.65
 crores (previous year Rs. 566.23 crores) and a Net Profit of Rs. 68.73
 crores (previous year Rs. 28.69 crores);
 
 (b) ITC Infotech Limited, UK, (I2B) a wholly owned subsidiary of the
 company, registered a Total Revenue of GBP 25.03 million (previous year
 GBP 24.35 million) and a Net Profit of GBP 1.86 million (previous year
 GBP 2.13 million). During the year, I2B paid an Interim Dividend of GBP
 3 (previous year : Nil) per Ordinary Share of GBP 1 each on 685,815
 shares, amounting to GBP 2,057,445 (previous year: Nil) to the company;
 
 (c) ITC Infotech (USA), Inc., (I2A) a wholly owned subsidiary of the
 company, together with its wholly owned subsidiary Pyxis Solutions LLC,
 registered Total Revenues of US$ 63.20 million (previous year US$ 49.85
 million) and a Net Profit of US$ 0.91 million (previous year US$ 0.30
 million).
 
 During the year, the company achieved an all-time high and
 best-in-class Customer Satisfaction Score based on a survey
 conducted by a reputed external agency.  Such a rating validates the
 companys world-class quality of service and stands testimony to its
 commitment to continuously raise the levels of service to meet growing
 market expectations.
 
 Apart from expanding the companys existing in-house domain solution
 capabilities, specific development programmes were implemented to
 embrace disruptive technologies such as cloud computing, social media
 and mobile computing.
 
 The company continued to enhance and strengthen its partnerships with
 leading Independent Software Vendors (ISVs) by building niche solutions
 to address white spaces and joint go-to-market initiatives. In this
 regard, a number of initiatives were progressed during the year
 including the launch of operations in new geographies, offering of
 turnkey services - from licence sales to implementation, becoming
 Authorised Training Partner in India and a consortium partner in
 Customer Experience and Comprehensive Trade Management area.
 
 During the year the companys renewed focus on Middle- East, Africa,
 India and the larger Asia-Pacific region resulted in significant
 traction in new customer acquisition, particularly in India and
 Middle-East. The company has set up a branch office in Dubai to
 increase market penetration in the region. The company is also
 extending its service lines to specific markets in Western Europe.
 
 In addition, as an important milestone in the evolution of its delivery
 capability, the company commissioned a new Development Centre at
 Trivandrum during the year.
 
 The service delivery capability of the company continued to earn global
 recognition. The company has featured for the 7th consecutive year
 amongst the Leaders Category in the 2012 Global Outsourcing Top
 100 by the International Association of Outsourcing Professionals
 (IAOP). The company also featured for the 8th consecutive year in the
 Global Services 100 survey, conducted by Global Services and Neo
 Advisory.
 
 The company achieved ISO 9001:2008 re-certification for all its
 locations with its Pune centre getting certified within six months of
 its commissioning.
 
 On the talent management front, the approach and strategy were
 continuously refined, realigned and revitalised in line with changing
 business dynamics and the enhanced global operating footprint of the
 company.  Employee engagement, in particular, continues to receive the
 necessary thrust and impetus to enable an interactive and knowledge
 pooling environment. The company also embarked on development of new
 centres in the country with a view to accessing specific skills and
 talent and driving efficiencies in service delivery.
 
 Going forward, the company will continue to review and reinforce its
 strategies and action plans to rapidly scale up its global footprint.
 Building additional technology niches remains a key focus area, and
 SMAC (Social media, Mobility, Analytics and Cloud computing) is
 currently at the forefront of this technology ecosystem.  The company,
 accordingly, continues to invest in SMAC technologies and in a new
 industry leading Testing Framework.
 
 While the outlook for the IT industry remains soft in the near term,
 the company is poised for significantly superior growth in the coming
 years aided by its strategies to expand to new markets, offer a
 portfolio of differentiated solutions, provide superior customer
 experience and deliver through strong project management capabilities,
 knowledge management, solution accelerators and a robust quality
 system.
 
 Russell Credit Limited
 
 During the year, the company registered a Total Revenue of Rs. 69.66
 crores (previous year Rs. 40.58 crores) and a Net Profit of Rs. 58.96
 crores (previous year Rs. 31.43 crores).
 
 As stated in the Report of the Directors of the previous years, a
 petition was filed by an individual in the High Court at Calcutta,
 seeking an injunction against the companys counter offer to the
 shareholders of VST Industries Limited, made in accordance with the
 Securities and Exchange Board of India (Substantial Acquisition of
 Shares & Takeovers) Regulations, 1997, as a competitive bid to a Public
 Offer made by an Acquirer in 2001.
 
 During the year, the High Court at Calcutta, vide Order dated 22nd
 June, 2012, dismissed the aforesaid petition.  Similar petitions filed
 in the High Court of Delhi at New Delhi and High Court of Judicature of
 Andhra Pradesh at Hyderabad had earlier been dismissed by the
 respective High Courts.
 
 The company, post dismissal of the aforesaid petition by the High Court
 at Calcutta, sold its entire holding in VST Industries Limited to your
 Company.
 
 Wimco Limited
 
 The company achieved a Net Revenue of Rs. 165.62 crores during the year
 (previous year Rs. 169.70 crores) and posted a Net Profit for the year
 of Rs. 1.90 crores against Rs. 45.99 crores loss in the previous year
 which included a one-time cost of Rs. 36.87 crores primarily towards
 restructuring its operations. During the year, the company allotted to
 Russell Credit Limited the unsubscribed portion of the Rights Issue of
 shares made in the previous year, thereby raising Rs. 1.69 crores.
 
 Margins in the Safety Matches business continued to remain under
 pressure mainly due to escalation in prices of raw materials like wood,
 splints, paperboard, key chemicals and the continuing high tax
 differential between the mechanised and non-mechanised sector. The
 company continues to focus on cost rationalisation and margin
 improvement.
 
 During the year, the Agri (Forestry) business revenues grew by around
 25%. Availability of critical raw materials like wood at competitive
 prices remain crucial for the success of the Safety Matches business.
 Towards this end, the Agri (Forestry) business supplied high quality
 poplar ETPs (Entire Transplants) and eucalyptus saplings to farmers in
 northern India to enhance availability at competitive prices. Apart
 from creating a long-term sustainable supply of a critical raw
 material, the companys initiative is helping create employment and
 livelihood opportunities while improving the green cover in the region.
 
 The Engineering business revenues grew by 6% during the year driven
 mainly by improved value capture through continuous product development
 in packaging machinery.  The company plans to leverage new and improved
 product design to offer superior packaging solutions to its customers.
 
 The initiatives taken by the company during the past few years to
 restructure its operations are expected to enhance operating
 performance in the years to come.
 
 Srinivasa Resorts Limited
 
 During the financial year ended 31st March, 2013, the company recorded
 a Total Revenue of Rs. 50.62 crores (previous year Rs. 57.66 crores)
 and a Profit Before Tax of Rs. 5.54 crores (previous year Rs. 11.89
 crores). Net Profit for the year stood at Rs. 4.44 crores (previous
 year Rs. 9.40 crores).
 
 The challenging environment in the State of Andhra Pradesh continues to
 have an adverse impact on the performance of the companys hotel ITC
 Kakatiya, Hyderabad. The hotel continued to focus on superior guest
 experience and strategic cost management to sustain market standing and
 protect margins.
 
 For the fourth time in a row, the hotel received the Times Food
 Guide awards for Kebabs & Kurries (Best North Indian) and
 Dakshin (Best South Indian) - with both being rated as the best
 restaurants in their respective categories. During the year, the hotel
 also received the Best Landscaping Management Award from the
 Department of Horticulture, Andhra Pradesh.
 
 The Board of Directors of the company has recommended a dividend of Rs.
 1.00 per equity share of Rs. 10/- each for the year ended 31st March,
 2013.
 
 Fortune Park Hotels Limited
 
 During the financial year ended 31st March, 2013, the company recorded
 a Total Revenue of Rs. 23.22 crores (previous year Rs. 20.78 crores)
 and earned a Net Profit of Rs. 5.97 crores (previous year Rs. 4.96
 crores).
 
 The companys Fortune hotel chain that caters to the mid-market to
 upscale segment continued its expansion by forging new alliances,
 taking the total number of hotels in its fold to 69 with an aggregate
 room inventory of over 5,000. The Fortune brand now has 39
 operating hotels and another 3 hotels are slated to be commissioned in
 the next financial year. The remaining 27 hotel projects are under
 various stages of development. The brand remains a frontrunner in its
 operating segment and is well positioned to sustain its leadership
 position in the industry.
 
 The company is well known for providing quality products and services
 which have helped position Fortune as the premier value
 brand in the Indian hospitality sector.  The My Fortune brand,
 representing a stylish lifestyle with efficient personalised
 service, is the latest addition to the bouquet of brands offered by
 Fortune Hotels.
 
 During the year, the company bagged the Best First Class Business
 Hotel Chain award at the Todays Traveller Awards 2012, SATTE
 Award for leading Mid Market Hotel Chain and Best First Class
 Full Service Business Hotel Chain in India by PATWA, ITB Berlin.
 
 The Board of Directors of the company has recommended a dividend of Rs.
 12.50 per equity share of Rs. 10/- each for the year ended 31st March,
 2013.
 
 Bay Islands Hotels Limited
 
 During the financial year ended 31st March, 2013, the company recorded
 a Total Revenue of Rs. 1.52 crores (previous year Rs. 1.37 crores) and
 Net Profit of Rs. 0.97 crores (previous year Rs. 0.92 crores).
 
 The companys hotel, Fortune Resort Bay Island in Port Blair,
 commands patronage in the city primarily due to its fabulous location,
 excellent architectural design and superior service quality. The
 company is in the process of undertaking a comprehensive renovation and
 expansion programme with a view to enhancing the market standing of the
 hotel.
 
 The Board of Directors of the company has recommended a dividend of Rs.
 70.00 per equity share of Rs. 100/- each for the year ended 31st March,
 2013.
 
 Landbase India Limited
 
 The company owns and operates the Classic Golf Resort, a Jack Nicklaus
 Signature Course, near Gurgaon. As reported in the previous years, golf
 based resorts present attractive long-term prospects in view of their
 growing popularity all over the world. The work towards creating a
 destination luxury resort hotel at the Classic Golf Resort is now
 underway and the project is progressing satisfactorily.
 
 During the financial year ended 31st March, 2013, the company recorded
 a Total Revenue of Rs. 11.82 crores (previous year Rs. 10.57 crores)
 and Net Loss of Rs. 3.81 crores (previous year Rs. 3.22 crores). During
 the year, the company issued and allotted to your Company, 30,00,000
 Redeemable Preference Shares of Rs. 100/- each for cash at par,
 aggregating Rs. 30 crores. The proceeds from the Preference Share issue
 are being utilised by the company for the construction of the
 destination luxury resort.
 
 WelcomHotels Lanka (Private) Limited
 
 During the year, WelcomHotels Lanka (Private) Limited (WLPL) was
 incorporated in Sri Lanka as a wholly-owned subsidiary of your Company
 with the objective of constructing, building and operating a mixed-use
 development project (Project) including a luxury hotel at
 Colombo. The Board of Investment of Sri Lanka provided about 5.86 acres
 of prime sea facing land in Colombo to the company on a 99-year lease
 for this purpose. The Project has been declared as a Strategic
 Development Project under the Strategic Development Projects Act No. 14
 of 2008 of Sri Lanka.
 
 Your Company has invested about US$ 75 million in WLPL by way of equity
 and loan and WLPL is in the process of finalizing the design and
 product configuration of the proposed Project.
 
 Technico Pty Limited
 
 The company continued to focus on upgradation and commercialisation of
 TECHNITUBER® Technology and field multiplication through its wholly
 owned subsidiaries in different geographies. The company is also
 engaged in the marketing of TECHNITUBER® seeds to global customers
 from the production facilities of its subsidiaries in India, China and
 Canada.
 
 The companys leadership in the production of early generation seed
 potatoes and strength in agronomy continue to be leveraged by your
 Company not only for sourcing chip stock for the Bingo! brand of
 your Companys Branded Packaged Foods businesses but also for
 servicing the seed potato requirements of the farmer base of your
 Companys Other Agri Commodities business.
 
 For the year under review:
 
 a) Technico Pty Limited, Australia registered a Turnover of Australian
 Dollar (A$) 1.39 million (previous year A$ 1.13 million) and a Net
 Profit of A$ 0.14 million (previous year A$ 0.11 million).  Turnover
 and Net Profit have improved due to higher TECHNITUBER® seed volumes
 and better price realization.
 
 b) Technico Agri Sciences Limited, India registered a Net Revenue of
 Rs. 64.04 crores (previous year Rs. 48.20 crores) and a Net Profit of
 Rs. 17.48 crores (previous year Rs. 7.83 crores). Strong demand and
 firm prices coupled with the strength of the companys brand, product
 quality, on field performance and trade and customer relationships
 drove a 33% increase in Net Revenue and 75% improvement in Profit
 Before Tax. The company has taken credit for deferred tax assets of Rs.
 3.80 crores in the year under review (previous year : Nil).
 
 c) Technico Asia Holdings Pty Limited, Australia, Technico Technologies
 Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China -
 There were no significant events to report with respect to the above
 companies.
 
 King Maker Marketing, Inc.
 
 King Maker Marketing Inc. (KMM) is a wholly owned subsidiary of your
 Company registered in the State of New Jersey, USA. It is engaged in
 the distribution of your Companys tobacco products in the US market.
 
 During the year, the cigarette industry in the US continued to witness
 persistent volume decline compounded by tax increases and the
 continuing growth of Other Tobacco Products, several of which are as
 yet unregulated by the US Food and Drug Administration (FDA). A larger
 thrust by major cigarette manufacturers into the value segment coupled
 with increase in illicit sales driven by tax differentials between the
 States, contributed further to an extremely challenging business
 environment for the company. During the year, the company maintained
 steady volumes through enhanced sales and marketing inputs while
 Revenue declined by 2% due to pricing pressure. The resultant higher
 costs of sales and marketing were offset by lower contributions under
 the Master Settlement Agreement (MSA). Further, a favourable Arbitral
 Award, memorializing a Partial Settlement between certain states and
 the Participating Manufacturers to the MSA, on payments disputed in
 previous years, increased the companys earnings during this year.
 
 As a result, the company recorded Net Sales of US$ 26.37 million
 (previous year US$ 26.95 million) and earned a Net Income of US$ 1.20
 million (previous year US$ 0.48 million) during the financial year
 ended 31st March 2013. During the year, KMM paid a Dividend of US$ 1.0
 million to your Company.
 
 Government regulations in the tobacco sector continue to take shape and
 it is expected that the industry will consolidate further as US Food
 and Drug Administration regulations evolve, including in the Other
 Tobacco Product categories like Pipe Tobaccos and Cigars.
 
 The company will continue to customise its strategies based on emerging
 regulations in the market.
 
 ITC Global Holdings Pte. Limited
 
 The Judicial Managers had been conducting the affairs of ITC Global
 Holdings Pte. Limited (Global) since 8th November, 1996 under the
 authority of the High Court of Singapore. Pursuant to the application
 of the Judicial Managers, the Singapore Court on 30th November, 2007
 ordered the winding up of Global, appointed a Liquidator and discharged
 the Judicial Managers.
 
 As stated in the previous years Reports, the Judicial Managers of
 Global had filed a Writ against your Company in November 2002 before
 the Singapore High Court claiming approximately US$ 18.10 million.
 Based on legal advice, your Company filed an appropriate application
 for setting aside the said Writ.  On 2nd March, 2006 the Assistant
 Registrar of the Singapore High Court set aside the service of Writ of
 Summons on your Company and some individuals.  Subsequently in November
 2006, your Company received a set of papers purportedly sent by Global
 including what appeared to be a copy of the earlier Writ of Summons.
 Your Company filed a fresh Motion in the Singapore High Court praying
 for setting aside the said Writ of Summons, which was upheld by the
 Assistant Registrar of the Singapore Court on 13th August, 2007.
 Global filed an Appeal against this Order before the High Court of
 Singapore, which on 30th January, 2009, set aside the order giving
 leave to Global to serve the Writ out of Singapore against your Company
 and also dismissed the said appeal. Thereafter on 14th December, 2009,
 your Company received a binder purportedly sent by Global including
 what appeared to be a copy of the same old Writ of Summons. Based on
 legal advice, your Company again filed a Motion in the Singapore High
 Court praying for setting aside the said Writ of Summons. On 18th
 November, 2010, the Assistant Registrar of the Singapore High Court
 passed an order dismissing your Companys motion to set aside the
 Writ of Summons. Your Company filed an appeal against the Assistant
 Registrars decision which appeal was dismissed by the Singapore High
 Court. Pursuant to legal advice, your Company has since filed its
 defence in the trial proceedings.
 
 BFIL Finance Limited
 
 The company continues to focus its efforts on recoveries through
 negotiated settlements including property settlements and pursuit of
 legal cases against various defaulters. The company has no external
 liabilities outside the ITC group. The company will examine options for
 further business opportunities at the appropriate time.
 
 Gold Flake Corporation Limited, Wills Corporation Limited, Greenacre
 Holdings Limited, ITC Investments & Holdings Limited and MRR Trading &
 Investment Company Limited
 
 There were no major events to report with respect to the above
 companies.
 
 NOTES ON JOINT VENTURES ITC Filtrona Limited
 
 For the year ended 31st December 2012, ITC Filtrona Limited recorded a
 Gross Revenue of Rs. 229.40 crores (Rs. 180.99 crores in 2011) and
 Pre-tax profits of Rs. 19.39 crores (Rs. 15.63 crores in 2011). While
 the Cigarette Filter industry had to contend with a steep hike in raw
 material prices and adverse foreign exchange rates, the company saw an
 overall improvement in sales volume along with a better product mix.
 Continuous investment in filter making technology has enabled the
 company maintain its leadership position, enhance its technological
 edge over competition and cater to growth both in terms of product mix
 and volumes.
 
 In continuation with its philosophy of balancing the need to scale up
 capacity and capability to service the growing demand and the return
 expectation of shareholders, the Directors of the company have
 recommended a dividend of Rs. 9.00 per ordinary share of Rs. 10/- each
 for the year ended 31st December, 2012.
 
 The company strives to be the quality benchmark in cigarette filters,
 offer superior filter solutions to its customers and be the most
 preferred supplier to its customers. With excellent product and market
 development support from its joint venture partners, the company is
 well positioned for the future.
 
 Maharaja Heritage Resorts Limited
 
 Maharaja Heritage Resorts Limited, a joint venture of your Company with
 Jodhana Heritage Resorts Private Limited, currently operates 39
 heritage properties across 13 States in India. The companys brand
 portfolio comprising Legend, WelcomHeritage Hotels and
 Nature Resorts, provides uniquely differentiated propositions to
 guests in the cultural, heritage and adventure tourism segments
 respectively.
 
 During the financial year ended 31st March, 2013, the company recorded
 a Total Revenue of Rs. 3.86 crores (previous year Rs. 3.36 crores) and
 Net Profit of Rs. 0.44 crores (previous year Net Loss Rs. 0.26 crores).
 
 The company has 9 properties under the upmarket Legend brand
 which has carved a niche for itself on the basis of superior service
 delivery and brand standards.  The company also has 11 properties under
 the Nature Resorts brand and 19 properties under the
 WelcomHeritage Hotels brand which was recently awarded the
 Best Heritage Hotel Chain by Todays Traveller Awards 2012.
 
 Espirit Hotels Private Limited
 
 In July 2010, your Company had entered into a joint venture for
 developing a luxury hotel complex at Begumpet, Hyderabad. Under the
 terms of the Joint Venture Agreement, your Company acquired 26% equity
 stake in the joint venture company, Espirit Hotels Private Ltd. (EHPL)
 and will, inter-alia, provide hotel operating services to EHPL under an
 Operating Services Agreement upon commissioning of the hotel. Your
 Companys investment in EHPL stood at Rs. 46.51 crores as at 31st
 March, 2013.
 
 While the site preparatory activity is underway, the company is in the
 process of finalising the design and product configuration of the
 proposed development.
 
 Logix Developers Private Limited
 
 In September 2011, your Company entered into a joint venture for
 developing a luxury hotel-cum-service apartment complex at Sector 105
 in NOIDA. Under the terms of the Joint Venture Agreement, your Company
 acquired 26% equity stake in the joint venture company, Logix
 Developers Private Ltd. (LDPL) at an initial investment of Rs. 36.84
 crores. Your Company will, inter-alia, provide hotel operating services
 to LDPL under an Operating Services Agreement, upon commissioning of
 the hotel.
 
 The company is in the process of finalising the design and product
 configuration of the proposed development.
 
 RISK MANAGEMENT
 
 As a diversified enterprise, your Company has always had a system-based
 approach to business risk management. Backed by strong internal control
 systems, the current risk management framework consists of the
 following elements:
 
 - The Corporate Governance Policy clearly lays down the roles and
 responsibilities of the various entities in relation to risk
 management. A range of responsibilities, from the strategic to the
 operational, is specified in the Governance Policy.  These role
 definitions, inter-alia, are aimed at ensuring formulation of
 appropriate risk management policies and procedures, their effective
 implementation and independent monitoring and reporting by Internal
 Audit.
 
 - The Corporate Risk Management Cell works with the businesses to
 establish and monitor the specific profiles including both strategic
 risks and operational risks. The process includes the prioritisation of
 risks, selection of appropriate mitigation strategies and periodic
 reviews of the progress on the management of risks.
 
 - A combination of centrally issued policies and divisionally-evolved
 procedures brings robustness to the process of ensuring business risks
 are effectively addressed.
 
 - Appropriate structures have been put in place to proactively monitor
 and manage the inherent risks in businesses with unique / relatively
 high risk profiles.
 
 - A strong and independent Internal Audit function at the Corporate
 level carries out risk focused audits across all businesses, enabling
 identification of areas where risk management processes may need to be
 improved. The Audit Committee of the Board reviews Internal Audit
 findings, and provides strategic guidance on internal controls. The
 Audit Compliance and Review Committee closely monitors the internal
 control environment within your Company and ensures that Internal Audit
 recommendations are effectively implemented.
 
 - At the business level, Divisional Auditors continuously verify
 compliance with laid down policies and procedures, and help plug
 control gaps by assisting operating management in the formulation of
 control procedures for new areas of operations.
 
 - A robust and comprehensive framework of strategic planning and
 performance management ensures realisation of business objectives based
 on effective strategy implementation. The annual planning exercise
 requires all businesses to clearly identify their top risks and set out
 a mitigation plan with agreed timelines and accountability.  Businesses
 are required to confirm periodically that all relevant risks have been
 identified, assessed, evaluated and that appropriate mitigation systems
 have been implemented.
 
 The combination of policies and processes as outlined above adequately
 addresses the various risks associated with your Companys businesses.
 The senior management of your Company periodically reviews the risk
 management framework to maintain its contemporariness so as to
 effectively address the emerging challenges in a dynamic business
 environment.
 
 AUDIT AND SYSTEMS
 
 Your Company believes that internal control is a necessary concomitant
 of the principle of governance that freedom of management should be
 exercised within a framework of appropriate checks and balances. Your
 Company remains committed to ensuring an effective internal control
 environment that provides assurance on the efficiency of operations and
 security of assets.
 
 Well established and robust internal audit processes, both at business
 and corporate levels, continuously monitor the adequacy and
 effectiveness of the internal control environment across your Company
 and the status of compliance with operating systems, internal policies
 and regulatory requirements. In the networked IT environment of your
 Company, validation of IT security continues to receive focused
 attention of the internal audit team which includes IT specialists.
 
 The Internal Audit function consisting of professionally qualified
 accountants, engineers and IT specialists reviews the quality of
 planning and execution of all ongoing projects involving significant
 expenditure to ensure that project management controls are adequate to
 yield value for money.
 
 Your Companys Internal Audit function is certified as complying with
 ISO 9001:2008 quality standards in its processes.
 
 The Audit Committee of your Board met nine times during the year. It
 reviewed, inter-alia, the adequacy and effectiveness of the internal
 control environment and monitored implementation of internal audit
 recommendations including those relating to strengthening of your
 Companys risk management policies and systems. It also engaged in
 overseeing financial disclosures.
 
 HUMAN RESOURCE DEVELOPMENT
 
 Your Companys unique talent brand - Building Winning Businesses.
 Building Business Leaders. Creating Value for India - backed by its
 strong corporate equity, has enabled the attraction and retention of
 high quality talent.  This talent pool and its strong alignment with
 your Companys Vision, has contributed to enhancing your Companys
 standing as one of Indias most valuable corporations. The innovative
 engagement initiatives with premier campuses and effective use of
 social media has enabled your Company showcase the career and
 leadership opportunities available and has attracted both high quality
 entry-level talent from premier technology and management institutes as
 well as talent from the market for middle and senior-level
 opportunities. Your Companys unique Management Trainee programme has
 over the years, developed a robust talent and leadership pipeline that
 has enabled rapid growth of existing businesses and entry into new
 businesses as well. In addition, your Companys comprehensive talent
 development strategy has enabled the enhancement of the competitive
 capability of each business.
 
 Your Company believes that the achievement of its growth objectives
 will depend largely on the ability to innovate continuously, connect
 closely with the customer, and create and deliver superior and
 unmatched customer value. Towards this end, your Company has
 assiduously built a culture of continuous learning, innovation and
 collaboration across the organisation by providing cutting-edge
 learning and development inputs to its employees, along with a
 judicious blend of coaching, mentoring and on the job training. Your
 Company has been able to galvanise its human resource to become more
 agile, leverage change, stay ahead of competition and win in the
 market.
 
 Your Companys human resource management systems and processes are
 designed to empower employees and enable them adopt innovative
 approaches to creating enduring value. These processes aim to create a
 responsive, customer-centric and market-focused culture that enhances
 organisational capability and vitality, so that each business is
 internationally competitive and equipped to exploit emerging market
 opportunities.
 
 The strategy of organisation lays great emphasis on developing and
 supporting distributed leadership and this has ensured that each of
 your Companys businesses is managed by a team of competent,
 passionate and inspiring leaders, capable of building an organisation
 anchored in a culture of learning, innovation and world-class
 execution. Your Companys performance management system has been
 instrumental in creating a strong performance culture.
 
 Your Company firmly believes that alignment of all employees to a
 shared vision and purpose is vital to win in the market. Your Company
 also recognizes the mutuality of interests of key stakeholders and is
 committed to building harmonious employee relations. During the year
 under review, your Company successfully concluded long-term agreements
 at several of its manufacturing units and hotel properties and also
 ensured smooth commencement of operations at greenfield locations.  The
 collaborative spirit across all sections of employees has resulted in
 significant enhancement in quality and productivity, further bolstered
 by continuous investment in contemporary management practices and
 manufacturing systems.
 
 Your Companys human resource believes that the drive for progress is
 in being never satisfied with the status quo. Your Company is confident
 that every one of its over 25,900 employees will relentlessly strive to
 deliver world-class performance, innovate newer and better ways of
 doing things, uphold human dignity and foster team spirit and discharge
 their role as trustees of all stakeholders with true faith and
 allegiance. Your Company is committed to perpetuate this vitality of
 ITC - its growth in physical terms and also its growth as a great
 institution - so that your Company will continue to grow and succeed in
 its never-ending pursuit of value creation.
 
 SUSTAINABILITY - CONTRIBUTION TO THE TRIPLE BOTTOM LINE
 
 Your Companys Vision to subserve larger national priorities and
 create enduring societal value is the inspiration for its
 multi-dimensional sustainability initiatives that are today
 acknowledged as global exemplars. Your Companys sustainability
 strategy aims to significantly enhance national wealth through superior
 Triple Bottom Line performance that builds and enriches the
 countrys economic, environmental and societal capital. It is
 premised on the belief that the transformational capacity of business
 can be very effectively leveraged to create significant societal value
 through a spirit of innovation and enterprise. Your Companys
 Triple Bottom Line contribution is manifest in the creation of
 innovative business models that not only generate new sources of
 competitive advantage for its businesses, but also in the process
 enables the replenishment of natural capital and augmentation of
 sustainable livelihoods.
 
 It is a matter of humble pride that your Companys sustainable
 business models and value chains have supported the creation of 5
 million sustainable livelihoods, a majority of them for the weakest in
 society. It has sustained its position as the only company in the world
 to have achieved the global environmental distinctions of being carbon
 positive (for 8 consecutive years), water positive (for 11 years in a
 row) and solid waste recycling positive (for 6 years successively).
 Your Companys renewable energy portfolio enables over 41% of its
 power requirements to be met from such clean sources - a significant
 achievement given the large manufacturing base of your Company.
 Further, all the premium luxury hotels and several factories of your
 Company are LEED (Leadership in Energy & Environmental Design)
 certified at the highest Platinum level by the US Green Building
 Council / Indian Green Building Council.
 
 Your Company published its 9th consecutive Sustainability Report during
 the year that detailed the progress made across all dimensions of the
 Triple Bottom Line for the year 2011-12. The report which is
 independently assured by Ernst & Young, is in accordance with the G3
 Guidelines of the Global Reporting Initiative (GRI) and is validated by
 GRI at the highest A+ level. The 10th Sustainability Report
 covering the sustainability performance of your Company for the year
 2012-13 is in an advanced stage of finalisation and will be available
 to you shortly. This report also supports your Companys first
 Securities Exchange Board of India (SEBI) mandated Business
 Responsibility Report, which forms part of this Report and Accounts.
 
 Social Investments/Corporate Social Responsibility (CSR)
 
 Your Company believes that Corporate Social Responsibility delivered in
 the context of its businesses makes it more effective, impactful,
 scalable and sustainable. Your Companys overarching aspiration to
 create meaningful societal value is manifest in your Companys
 strategy to enhance the competitiveness of value chains of which it is
 a part. It is therefore a conscious strategy to design and implement
 Social Investments / CSR programmes in the context of your Companys
 businesses, by enriching value chains that encompass the most
 disadvantaged sections of society, especially those residing in rural
 India, through economic empowerment based on grass-roots capacity
 building.
 
 It is your Companys policy:
 
 - To pursue a corporate strategy that enables realisation of the twin
 goals of shareholder value enhancement and societal value creation in a
 mutually reinforcing and synergistic manner.
 
 - To align and integrate Social Investments / CSR programmes with the
 business value chains of your Company and make them outcome oriented.
 To support creation of on and off-farm sustainable livelihood sources
 thereby empowering stakeholder communities to conserve and manage their
 resources.
 
 - To implement Social Investments / CSR programmes primarily in the
 economic vicinity of your Companys operations with a view to
 ensuring the long-term sustainability of such interventions.
 
 - To contribute to sustainable development in areas of strategic
 interest through initiatives designed in a manner that addresses the
 challenges faced by the Indian society especially in rural India.
 
 - To collaborate with communities and institutions to contribute to the
 national mission of eradicating poverty and hunger, especially in rural
 areas, through agricultural research and knowledge sharing, superior
 farm and agri-extension practices, soil and moisture conservation and
 watershed management, conservation and development of forest resources,
 empowering women economically, supplementing primary education and
 participating in rural capacity building programmes and such other
 initiatives.
 
 - To align your Companys operations with the national objective of
 inclusive growth and employment generation by leveraging your
 Companys diversified portfolio, manufacturing bases, supply chains
 and distribution channels, to infuse an appropriate mix of capital and
 technology to further social business initiatives such as e-Choupal,
 animal husbandry, agarbatti rolling etc. and support organisations /
 institutions engaged in building linkages with local, regional and
 urban communities and markets.
 
 - To sustain and continuously improve standards of Environment, Health
 and Safety through the collective endeavour of your Company and its
 employees at all levels towards attaining world-class standards and
 support other programmes and initiatives, internal or external, for the
 prevention of illness and combating of diseases as may be considered
 appropriate from time to time.
 
 - To encourage the development of human capital of the Nation by
 expanding human capabilities through skills development, vocational
 training etc. and by promoting excellence in identified cultural
 fields.
 
 In the social sector, the two most important stakeholders for your
 Company are: (a) the rural communities with whom your Companys
 agri-businesses have forged a long and enduring partnership through
 their crop development and procurement activities. These households
 operate in rain-fed conditions in some of the most moisture-stressed
 regions of the country; and
 
 (b) the communities residing in close proximity of your Companys
 production units, who are unable to realise their full potential due to
 poor social infrastructure in the areas of education and health.
 
 In line with the stakeholder needs, the thrust of your Companys social
 sector investment is on the following:
 
 (a) Diversification of farming systems of the rural communities by
 broad-basing the farm and off-farm based livelihoods portfolio of the
 poor through an integrated approach that includes the development of
 wastelands, watersheds, agriculture and animal husbandry, and
 
 (b) In the catchment habitations of manufacturing units, the focus is
 on the economic empowerment of women and developing social capital to
 prepare the beneficiaries for relevant and contemporary skills.
 
 The footprints of your Companys Social Investments Programme now
 extends to 60 districts in the States of Andhra Pradesh, Bihar,
 Karnataka, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu,
 Uttar Pradesh and West Bengal.
 
 Your Companys pioneering initiative of wasteland development through
 the Social Forestry Programme currently covers 33,448 hectares in 1,717
 villages, impacting nearly 40,000 poor households. This is an integral
 part of your Companys overall Social & Farm Forestry initiative that
 covers a total of over 142,000 hectares today. This initiative is
 aligned to the pulpwood supply chain to create a sustainable source of
 raw material for your Company and also to meet the energy requirements
 of rural households. The highlight of this year was the incorporation
 of bio-diversity conservation as an integral part of the Social
 Forestry programme, which aims for in situ conservation of the local
 flora and fauna by protecting and improving production conditions in
 the selected plots.
 
 The coverage of your Companys Soil and Moisture Conservation
 programme, designed to assist farmers in identified moisture-stressed
 districts, increased by an additional 26,637 hectares. 470 water-bodies
 were created during the year. The total area covered under the
 watershed programme cumulatively stands at 116,127 hectares. Your
 Company signed three new MOUs with the Government of Rajasthan for
 promoting sustainable livelihoods through watershed development in the
 districts of Bundi, Jhalawar and Pratapgarh under the governments
 Integrated Watershed Management Programme. With this, the total area to
 be brought under soil and moisture conservation through
 public-private-partnership projects has increased to over 144,000
 hectares.
 
 With the objective of providing a major thrust to creating a
 sustainable agricultural base, the year saw significant increases in
 all major interventions in this area. The number of Farmer Field
 Schools increased from 37 to 162. There was an almost three-fold
 increase in the number of farmers (5,129) and the demonstration plots
 (4,733) covered. The number of compost units increased nearly four-fold
 (503 in 2012-13) during the year.
 
 18 new Agri Business Centres were formed during the year, taking the
 total to 51, to provide extension services to farmers. These centres
 provided agri-inputs worth Rs. 85.61 lakhs to nearly 3,211 farmers
 during the year.
 
 Your Company gave equal emphasis to milch animals, the other important
 asset of rural households. The programme for genetic improvements of
 cattle through artificial insemination to produce high-yielding
 crossbred progenies is implemented through 303 Cattle Development
 Centres (CDCs) covering nearly 5,000 villages. These CDCs provided 2.75
 lakh artificial inseminations during the year, thus taking the total to
 10.82 lakh artificial inseminations performed till date.
 
 Taking the next step in the development of a viable livestock economy,
 Dairy Development in Munger was a major focus area this year. Project
 Gomukh was launched in Munger to cater to the needs of veterinary
 services and to provide comprehensive techno- management support to
 dairy farmers. The overarching objectives of the Project are to achieve
 significant improvement in milk productivity and quality, thereby
 raising farm incomes. The milk procurement network was increased to 87
 Milk Producer Groups (MPGs) with over 2,800 members. The average
 procurement in Munger was nearly 10,000 litres per day (lpd) with a
 peak of over 17,000 lpd. Dairy development in Saharanpur was initiated
 in two hubs. Comprehensive milk mapping studies have been completed at
 two other locations to enable planning for expansion of the dairy-led
 CSR in other locations.
 
 The Womens Empowerment Programme covered over 18,791 women through
 1,557 self-help groups (SHG) with total savings of Rs. 340 lakhs.
 Cumulatively, over 40,000 women were gainfully employed either through
 micro-enterprises or assisted with loans to pursue income generating
 activities. Agarbatti production received further impetus during the
 year with the introduction of 1,326 pedal machines in the states of
 Bihar, Uttar Pradesh, Tamil Nadu, Rajasthan, Andhra Pradesh, Madhya
 Pradesh and Maharashtra. This has led to high productivity gains,
 translating into significant increase in incomes for poor rural women.
 As a result, raw agarbatti production more than doubled from the
 previous year to 834 tonnes during 2012-13, and helped create
 livelihoods for more than 3,300 women. The agarbatti scenting unit
 located at Munger, owned and managed by women, also saw a significant
 increase in dispatches - up from 235 million sticks in 2011-12 to 367
 million sticks in 2012-13 - thus enabling women to capture even greater
 value from this micro-enterprise.
 
 Over 40,000 new students were covered through Supplementary Learning
 Centres and Anganwadis. Of these, 264 first generation learners were
 enrolled into formal schools for the first time in their lives. 964
 government primary schools have so far been provided infrastructure
 support, which includes benches, classrooms, toilets, electrical
 fixtures, compound walls and gates. 627 youths were covered this year
 by the skills development initiative. In the area of sanitation, a
 total of 3,847 low cost sanitary units have been constructed
 cumulatively by the end of 2012-13.
 
 The advances made towards contributing to Indias sustainable
 development goals have been possible, in large measure, due to your
 Companys partnerships with some globally renowned NGOs like BAIF,
 Dhan, FES, MYRADA, Pratham, SEWA, SRIJAN, DSC and WOTR amongst others.
 These partnerships, which bring together the best-in-class
 management practices of your Company and the development experience and
 mobilisation skills of NGOs, will continue to provide innovative
 grassroots solutions to some of Indias most challenging problems of
 development in the years to come.
 
 Environment, Health & Safety
 
 The strategic objective of your Companys Environment, Health &
 Safety programmes is to move towards greenest and safest operations
 across all ITC Units, optimisation of natural resource usage,
 sustainability measurement and monitoring as well as safety of all its
 people and assets. Towards this, significant efforts are targeted
 towards ensuring resource security through optimisation of resource-use
 and replenishment of natural resources, aligning strategy with the
 National Action Plan on Climate Change to help create sustainable
 livelihoods, enable adaptation and mitigation in agriculture whilst
 safeguarding operations and assets.  Your Companys proactive
 processes for inculcating a safe and green culture are supported by
 regular audits based on EHS Audit guidelines that incorporate the
 latest standards and regulatory requirements.
 
 Your Company is committed to ensuring a safe and healthy workplace for
 all employees, guests and visitors, by maintaining the highest levels
 of safety and occupational health standards. All units of your Company
 have best-in-class infrastructure, competent resources,
 management systems based on international standards as well as
 state-of-the-art fire and life safety measures, which are regularly
 monitored through rigorous audits.  Your Companys approach entails
 consideration of safety as a value-led concept which drives behaviour
 change and supports the creation of a safety culture fully integrated
 with business improvement processes. In line with this philosophy,
 Behavioural Safety Culture Programs have been initiated in several of
 your Companys units which have already brought about tangible change
 in behaviour and perceptions on safety. Accordingly, this initiative
 will be rolled out across other business units in a progressive manner.
 The progress and commitment made by your Company in this vital area to
 protect its valued human resources have been reaffirmed by numerous
 national and international safety awards and certifications.
 
 Your Company has addressed the critical area of climate change
 mitigation and adaptation through several innovative and pioneering
 initiatives. These include continuous improvement in energy
 conservation and efficiency, enhanced usage of renewable energy,
 creating a green built environment, waste reduction, maximising its
 reuse and recycling and increasing use of post consumer waste as raw
 material. Extensive integrated watershed development programmes,
 promotion of sustainable agricultural practices, and carbon
 sequestration through large-scale forestry initiatives extend these
 efforts down the value chain.
 
 Several projects of your Company earn carbon credits leveraging the
 market-based mechanism for mitigating climate change, namely, the Clean
 Development Mechanism developed by United Nations Framework Convention
 on Climate Change (UNFCCC). Your Company is also well positioned to
 benefit from India specific schemes such as Perform, Achieve and Trade
 (PAT) and Renewable Energy Certificates (RECs) promoted by the
 Government of India.
 
 In line with your Companys commitment to reduce dependence on fossil
 fuel based energy, significant progress has been made in enhancing the
 renewable energy portfolio. Improved utilisation of biomass and
 additional wind mills have led to over 41% of your Companys total
 energy requirements being met from renewable sources, compared to 38.5%
 during the year 2011-12. A systemic approach is being developed to
 ensure that your Company progressively moves towards a benchmark of
 utilising at least 50% of its total energy requirements from renewable
 sources in the near future.
 
 Recognising that water resources will increasingly become an area of
 serious concern, your Company has made significant investments in water
 conservation and harvesting initiatives to enhance its positive water
 footprint. These include adopting best available technologies and
 benchmarked practices to achieve zero effluent discharges, providing
 treated wastewater for irrigation as an alternative for farmers in
 water stressed areas and enhancing rainwater harvesting both within
 units and across watershed catchment areas. All these initiatives have
 resulted in the creation of rainwater harvesting potential that is over
 two times the net water consumption of your Companys operations.
 Sustained efforts are made to ensure that your Company achieves the
 best international practices in this critical area as well as aligns
 itself with the National Water Policy that is presently under
 finalization.
 
 Reaffirming your Companys commitment to the ethos of Responsible
 Luxury, all luxury Hotels of your Company are LEED Platinum
 certified making it the greenest luxury hotel chain in the world.
 ITC Grand Chola, the newly launched premium luxury hotel in Chennai,
 has secured a 5 Star Green Rating for Integrated Habitat Assessment
 (GRIHA) - the highest national rating for Green Buildings in India. The
 ITC Grand Chola is also the worlds largest LEED Platinum certified
 (Indian Green Building Council) green Hotel. All new constructions by
 your Company incorporate green / sustainability standards and existing
 buildings are also progressively implementing validated green
 attributes.
 
 The Bombay Stock Exchange recently instituted 2 indices titled
 GREENEX & CARBONEX evaluating several green operational
 parameters as well as carbon performance. It is a matter of immense
 pride that your Company has been assigned the highest weightage in both
 the indices. Further, during the year, a detailed computation of
 greenhouse gas (GHG) inventory was carried out as per ISO 14064
 standards, which was then assured at the highest Reasonable Level
 by Lloyds Register Quality Assurance Ltd. - a unique achievement
 considering the scale and spread of your Companys operations.
 
 All units of your Company have made significant progress in achieving
 total recycling of waste generated by their operations, making your
 Company attain over 99.8% of waste recycling in 2012-13. The
 Paperboards and Specialty Papers business, which accounts for nearly
 91% of the total waste generated in your Company, recycled 99.9% of the
 total waste generated by its operations. This business also recycled an
 additional 118,462 tonnes of externally sourced post-consumer waste
 paper, thereby creating yet another positive environmental footprint.
 
 Your Companys Wealth Out of Waste (WOW) programme continues to
 create significant awareness amongst the public on the benefits of the
 Reduce- Reuse-Recycle paradigm. This initiative, which also
 contributes to the protection of environment, improvement in civic
 amenities, public health and hygiene, has received rich accolades from
 the Government, NGOs, commercial institutions and the public at large.
 Your Company thereby supports the generation of sustainable raw
 material inputs for its processes, whilst generating considerable
 livelihood opportunities for the underprivileged.
 
 During the year, an Integrated Sustainability Data Management System
 was implemented for effective monitoring & review of business specific
 Key Performance Indicators whilst providing a single platform
 across your Company for all reporting requirements such as Global
 Reporting Initiative, SEBI Business Responsibility Report and Carbon
 Disclosure Project.  This System will improve management of
 sustainability issues and drive increasing efficiencies across your
 Companys business units.
 
 Creating Thought Leadership in Sustainability
 
 The CII - ITC Centre of Excellence for Sustainable Development,
 set up by your Company jointly with the apex national chamber
 Confederation of Indian Industry (CII) in 2006, continues its
 endeavours to promote sustainable business practices amongst corporates
 across the country. During the year, the Centre trained and raised
 awareness of over 2,000 business managers on various sustainability
 issues. It has expanded its gamut of activities to meet the core
 objectives of creating awareness, promoting thought leadership and
 building capacity amongst Indian enterprises in their quest for
 sustainable growth and business solutions. The 7th Sustainability
 Summit, held in October 2012, continued its legacy of bringing together
 thought provoking leaders to share the challenges, long-term strategies
 and best practices for sustainable and inclusive development.
 
 It featured senior politicians, bureaucrats, best brains of Indian
 industry and MNCs around the globe. The Summit and Exhibition were
 attended by over 300 participants.  The CII - ITC Sustainability
 Awards, instituted to recognise excellence in sustainability
 performance, have honoured a large number of leading Indian companies
 and provided encouragement to many others. The winners of the
 Sustainability Awards 2012 were announced at an imposing function in
 Vigyan Bhawan, New Delhi on January 14, 2013 amongst an audience of
 1,500 people.  The occasion was graced by the Honble President of
 India Shri Pranab Mukherjee as the Chief Guest.
 
 The Centre is today playing a major role in engaging with policy makers
 to create an environment that encourages the adoption of sustainable
 business practices. The Centre has been engaged with various
 stakeholders for advocacy on Clause 135 of the new Companies Bill 2012,
 which refers to the CSR activities of a company. The Centre is a
 consulting partner in several policy interventions such as Green
 Guidelines for Public Procurement, Low Carbon Expert Group of the
 Planning Commission, National Innovation Council, Ministry of Corporate
 Affairs on CSR Policy, National Awards for Prevention of Pollution,
 Rajiv Gandhi Environment Awards for Clean Technology and Technology and
 Finance Committee under the Montreal Protocol. It is also represented
 on the Board of the Central Pollution Control Board and other bodies.
 
 Societal Capacity Enhancement
 
 In line with its core value of trusteeship, your Company supports
 various initiatives that build the capability of Indias rich human
 resource pool thereby empowering the nations fast growing working-age
 population. It also helps preserve Indias rich cultural heritage,
 enhancing the spirit embodied in its credo of Lets Put India
 First.
 
 To cater to the need for professionally trained human resources in the
 fast growing hospitality industry, your Company contributed to setting
 up the Welcomgroup Graduate School of Hotel Administration (WGSHA)
 together with the Dr. TMA Pai Foundation in 1987.  WGSHAs training and
 development activities are recognised by the International Hotel
 Association, Paris.  The college has been ranked amongst the top
 educational institutions in the sector over the years. Graduates of the
 college are today part of several leading hotel chains of the world.
 WGSHAs mission is to mould young men and women into competent and
 responsible professionals with the potential to emerge as future
 leaders in the hospitality industry. As part of its efforts to remain
 contemporary, WGSHA faculty members are positioned in ITC Hotels to
 understand Best Practices employed at the hotels. A significant
 number of WGSHA students are sent for 6-month internships to various
 ITC Hotels.  The college started with an annual intake of 30 students
 which has increased to 100 students over the years.
 
 The ITC Sangeet Research Academy (ITC SRA) is a true embodiment of
 sustained corporate commitment to a priceless national heritage. It is
 a unique institution recognised for being the finest repository of
 Hindustani classical music. With a commitment that has remained
 consistent for over 35 years, ITC SRA is the worlds first and only
 professionally managed modern Gurukul, blending modern day research
 methods with the purity of the age old Guru-Shishya tradition.
 ITC SRA has as its mission the preservation and propagation of
 Hindustani Classical Music. With a galaxy of 9 pre- eminent Gurus and
 50 scholars, the Academy is presently engaged in carrying the message
 of Hindustani Classical Music across our country from the metros to
 rural India.  Recent forays into neighbouring Bangladesh have brought
 home another dimension of the shared sub- continental heritage.
 
 Your Company also supports a number of initiatives for vocational
 training within the catchment areas of its operations that have proven
 to be effective in empowering youth with requisite skills to increase
 their employability in the market. Employment opportunities have also
 been created for differently-abled people suited to their capabilities.
 
 R&D, QUALITY AND PRODUCT DEVELOPMENT
 
 Your Company continues to invest in a comprehensive Research &
 Development programme leveraging its world-class infrastructure,
 benchmarked processes, state-of-the-art technology and a
 business-focused R&D strategy.
 
 As your Company moves into its second century, your Company seeks not
 only to create world-class products but also improve the quality of
 life and deliver care and wellness to consumers. In order to reflect
 this change your Companys erstwhile ITC R&D Centre has been
 transformed into ITC Life Sciences & Technology Centre.
 
 ITC Life Sciences & Technology Centre (LSTC) has a mandate to develop
 unique sources of competitive advantage and build future readiness by
 harnessing contemporary advances in several relevant areas of science
 and technology and blending the same with classical concepts of product
 development and leveraging cross business synergies. This challenging
 task of driving science-led product innovation has been carefully
 addressed by appropriately identifying the required set of core
 competency areas of science such as Plant Breeding and Genetics,
 Agronomy, Microbiology, Cell Biology, Genomics, Proteomics,
 Silviculture and several disciplines of Chemistry.  Presently, the LSTC
 team has evolved with over 250 world-class scientists and is creating
 Centres of Excellence in these areas. LSTC is carrying out research and
 securing proprietary technologies for your Companys businesses.
 
 The Agrisciences R&D team has continued its efforts in evaluating and
 introducing several germplasm lines of identified crops including
 Casuarina and Eucalyptus to increase the genetic and trait diversities
 in these species, towards developing new varieties with higher yields,
 better quality and other relevant traits for your Companys
 businesses. LSTC has initiated several research collaborations with
 globally recognized Centres of Excellence to remain contemporary and
 fast track its journey towards demonstrating multiple proofs of
 concept.  These collaborations, covering identified species, are
 designed in a manner that enables your Company in gaining fundamental
 insights into several technical aspects of plant breeding and genetics
 and the influence of agro-climatic conditions on the growth of these
 species.  Such interventions will accelerate LSTCs efforts in
 creating future generations of these crops with greater genetic and
 trait diversities and leading to significant benefits for your
 Companys businesses. Further, these outcomes have a strong potential
 to contribute towards augmenting the nations ecological capital as
 well.
 
 Recognising the unique construct of your Company in terms of its strong
 presence in agriculture, food and personal care businesses, a
 convergence of R&D capabilities is being leveraged to deliver future
 products aimed at nutrition, health and well-being. Advances in
 biosciences are creating a convergence of these areas and it is
 likely that several future developments in these businesses and their
 products are heavily influenced by convergence. In this context,
 LSTC has created a Biosciences R&D team to design and develop several
 long-term research platforms evolving multi-generation product concepts
 and associated claims that are fully backed by scientific evidence for
 the Foods and Personal Care businesses. In addition, LSTC has evolved a
 strategy in building a new value chain called, Nutrition with a
 special focus on Indianness and health and well-being
 founded on the basis of value added agriculture (VAA). The initial
 activities related to VAA have already commenced with a focus on Soya.
 
 LSTC has a clear vision and a road map for long-term R&D, to ensure an
 outstanding journey in to the next century backed by a well-crafted
 Intellectual Property Strategy. With scale, speed, science and
 sustainability considerations, LSTC is poised to deliver long-term
 competitive advantage and play a lead role in creating significant
 business impact for your Company.
 
 Pursuing your Companys relentless commitment to quality, each
 business is mandated to continuously innovate on processes and systems
 to deliver superior competitive capabilities. During the year, your
 Companys Hotels business leveraged its Lean and Six
 Sigma programmes to improve business process efficiencies.  This
 will further enhance capability to create superior customer value
 through a service excellence framework.  The Paperboards, Paper &
 Packaging business continued to pursue Total Productive
 Maintenance (TPM) programmes in all units, resulting in substantial
 cost savings and productivity improvements.
 
 All manufacturing units of your Company have ISO quality certification.
 All manufacturing units of the Branded Packaged Foods businesses
 (including contract manufacturing units) and hotels have stringent food
 safety and quality systems. All Company owned units / hotels and almost
 all contract manufacturing units of the Branded Packaged Foods
 businesses are certified by an accredited third party in
 accordance with Hazard Analysis Critical Control Points (HACCP)
 methodology. Additionally, the quality of all FMCG products of your
 Company is regularly monitored through Product Quality Ratings
 Systems (PQRS).
 
 EXCISE
 
 As mentioned in the previous years Report of the Directors, a demand
 for Rs. 27.58 crores made by Central Excise Department, Bengaluru, in
 respect of a period prior to March 1983, was set aside by the
 Commissioner (Appeals), Bengaluru, by his Order dated 22nd November,
 1999, which order was confirmed by the CEGAT, Chennai vide its order
 dated 18th December, 2003.  The Department has filed an appeal before
 Supreme Court, which is pending.
 
 With respect to the Munger factory, proceedings for finalisation of
 assessments for the period prior to March 1983 resulted in the Deputy
 Commissioners Orders dated 29th August, 2002 and 8th October, 2002
 demanding Rs. 13.09 crores and Rs. 1.73 crores for clearances of
 cigarettes and smoking mixtures respectively. These were confirmed by
 the Commissioner (Appeals), Patna vide his orders dated 22nd December,
 2004, against which your Company has preferred appeals before CESTAT,
 Kolkata, which are pending. Your Company had made pre-deposits of Rs. 2
 crores and Rs. 0.55 crores against the aforesaid demands at the stage
 when its appeals were pending before Commissioner (Appeals), Patna.
 
 Although your Company, in a spirit of settlement, paid the differential
 Excise Duty that arose out of an Order of the Director General dated
 10th April, 1986, as early as in March, 1987, and although the Excise
 Departments aforesaid Demands had either been quashed or stayed, the
 Collectorates in Meerut, Patna and Bengaluru, during the year 1995,
 filed criminal complaints in the Special Court for Economic Offences at
 Kanpur, Patna and Bengaluru, charging your Company and some of its
 Directors and employees who were employed with your Company during the
 period 1975 to 1983 with offences under the Central Excises & Salt Act,
 1944, purportedly on the basis of the Order of the Director General
 dated 10th April, 1986. Your Directors are advised that no prosecution
 would lie on the basis of the aforesaid Order of the Director General
 dated 10th April, 1986. As earlier reported, the criminal case in
 respect of the Bengaluru factory was quashed by the Court. In the
 proceedings relating to Saharanpur and Munger factories, the
 individuals concerned have been discharged.
 
 In all the above instances, your Directors are of the view that your
 Company has a strong case and the Demands and the Complaints are not
 sustainable.
 
 Since your Company is contesting the above cases and contending that
 the Show Cause, the Demand Notices and the Complaints are not
 sustainable, it does not accept any liability in this behalf. Your
 attention is drawn to the Note 31(iv) in the Notes to the Financial
 Statements and Note 28(iv) in the Notes to the Consolidated Financial
 Statements.
 
 LUXURY TAX
 
 As mentioned in earlier years, the Honble Supreme Court declared the
 various State luxury tax levies on cigarettes and other goods as
 unconstitutional. The Court further directed that if any party, after
 obtaining a stay order from the Court, had collected any amount towards
 luxury tax from its customers / consumers, such amounts should be paid
 to the respective State governments. Since your Company had not charged
 or collected any amounts towards luxury tax during the relevant period,
 there is no liability on your Company in this regard. However, the
 State of Andhra Pradesh has filed a contempt petition in the Supreme
 Court claiming a sum of about Rs. 323.25 crores towards luxury tax, and
 a further sum of about Rs. 261.97 crores towards interest, on the
 allegation that your Company had charged and collected luxury tax from
 its customers, but in view of a stay order passed by the Court on 1st
 April, 1999, did not pay the tax to the government. The States
 contention is baseless, contrary to facts and is also contrary to the
 assessment orders passed by the State luxury tax authorities
 consistently holding that your Company, right from 1st March, 1997, did
 not charge or collect any amount towards luxury tax from its customers.
 Accordingly, the States petition is being contested.
 
 RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE
 ENFORCEMENT DIRECTORATE
 
 You are aware that your Company had secured from the District Court of
 New Jersey, U.S.A, a decree for US$ 12.19 million together with
 interest and costs against Suresh and Devang Chitalia of U.S.A and
 their companies, and that the Chitalias had filed Bankruptcy Petitions
 before the Bankruptcy Court, Orlando, Florida, which are yet to be
 determined.
 
 As explained in the previous reports of the Directors, though your
 Company has written off the export dues in foreign exchange from the
 Chitalias with the approval of the Reserve Bank of India, your Company
 continues with its recovery efforts in the Indian suit against the
 Chitalia associates. The suit is in progress.
 
 In the proceedings initiated by the Enforcement Directorate, in respect
 of some of the show cause memoranda issued by the Directorate, after
 hearing arguments on behalf of your Company, the appropriate authority
 has passed orders in favour of your Company, and dropped those
 memoranda.
 
 Meanwhile, some of the prosecutions launched by the Enforcement
 Directorate have been quashed by the Calcutta High Court while others
 are pending.
 
 TREASURY OPERATIONS
 
 During the year, your Companys treasury operations continued to
 focus on deployment of temporary surplus liquidity and manage the
 foreign exchange exposures within a well-defined risk management
 framework.
 
 The year under review was characterized by falling interest rates with
 the Reserve Bank of India reducing Policy rates by a cumulative 100
 basis points. However, tight liquidity conditions in the Banking system
 brought about intermittent spikes in money market interest rates.  In
 this environment your Company, by appropriately managing portfolio
 duration continued to improve its treasury performance.
 
 All investment decisions in deployment of temporary surplus liquidity
 continued to be guided by the tenets of Safety, Liquidity and Return.
 The portfolio mix during the year was constantly rebalanced in line
 with changing interest rate scenario which helped enhance yields.
 Further, by the year end, in line with expectations of lower interest
 rates, the portfolio was rebalanced with exposures in long-dated Fixed
 Maturity Plans and Bank Fixed Deposits. Your Companys risk management
 processes ensured that all deployments were made with proper evaluation
 of underlying risk while remaining focused on capturing market
 opportunities.
 
 In the foreign exchange market, the Indian Rupee depreciated during the
 year and was witness to bouts of high volatility. In a scenario where
 Rupee was under continuous pressure, your Company adopted an
 appropriate forex management strategy, which included use of foreign
 exchange forward contracts and plain vanilla options, to protect
 business margins and reduce risks / costs.
 
 As in earlier years, commensurate with the large size of the temporary
 surplus liquidity under management, treasury operations continue to be
 supported by appropriate control mechanisms, including an independent
 check of 100% of transactions, by your Companys Internal Audit
 department.
 
 TAXATION
 
 As mentioned in the Report of the Directors of earlier years, your
 Company had obtained Stay Orders from the Honble Calcutta High Court
 in respect of the Income Tax notices for re-opening the past
 assessments for the period 1st July, 1983 to 30th June, 1986. This
 status remains unchanged.
 
 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 Honble 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
 also remains unchanged.
 
 PUBLIC DEPOSITS
 
 Your Companys Public Deposit Scheme closed in the year 2000. As at
 31st March, 2013, 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
 Companys erstwhile Schemes.
 
 INVESTOR SERVICE CENTRE
 
 The Investor Service Centre (ISC) of your Company, accredited with ISO
 9001:2008 certification, provides best-in-class investor services
 through an experienced team of professionals. ISC continues to upgrade
 its infrastructure, systems and processes to provide exemplary services
 to the shareholders and investors of the Company. The level 5 rating,
 the highest possible rating, accorded by Messrs. Det Norske Veritas for
 the fourth consecutive year, stands testimony to the excellence
 achieved by ISC in providing quality investor services.
 
 ISC, in its constant endeavour to further improve its services,
 requests feedback on your experience as a shareholder or investor. The
 Shareholder Satisfaction Survey questionnaire for this purpose is being
 sent to the Members. This questionnaire can also be accessed from the
 Companys corporate website www.itcportal.com under the section
 Investor Relations and can be submitted online.
 
 DIRECTORS
 
 Mr. Kurush Noshir Grant, a Wholetime Director of your Company since
 20th March, 2010, completed his term on 19th March, 2013. The Board of
 Directors of your Company (the Board) at its meeting held on 18th
 January, 2013, appointed Mr. Grant as Additional Director with effect
 from 20th March, 2013, and subject to the approval of the Members, also
 as Wholetime Director for a period of five years from 20th March, 2013.
 
 Ms. Meera Shankar and Mr. Sahibzada Syed Habib-ur- Rehman were
 appointed by the Board at its meeting held on 27th July, 2012 as
 Additional Non-Executive Directors of your Company with effect from 6th
 September, 2012 and 27th July, 2012, respectively.
 
 By virtue of the provisions of Article 96 of the Articles of
 Association of your Company and Section 260 of the Companies Act, 1956,
 Ms. Shankar and Mr. Rehman will vacate office at the ensuing Annual
 General Meeting (AGM) of your Company.
 
 Your Board at its meeting held on 17th May, 2013, recommended for the
 approval of the Members the appointment of Ms. Shankar and Mr. Rehman
 as Non- Executive Directors of the Company, liable to retire by
 rotation, with effect from the date of the ensuing AGM of your Company.
 
 Mr. Dinesh Kumar Mehrotra, Mr. Sunil Behari Mathur and Mr. Pillappakkam
 Bahukutumbi Ramanujam were appointed as Non-Executive Directors of your
 Company with effect from 30th July, 2008 and their present term will
 expire on 29th July, 2013. Your Board at its meeting held on 17th May,
 2013 recommended for the approval of the Members the re-appointment of
 Messrs. Mehrotra, Mathur and Ramanujam as Non-Executive Directors of
 the Company, liable to retire by rotation, with effect from 30th July,
 2013.
 
 Notices, under Section 257 of the Companies Act, 1956, have been
 received from Members of the Company for the appointment /
 re-appointment of Ms. Shankar, Messrs.  Grant, Rehman, Mehrotra, Mathur
 and Ramanujam, who have filed their consents to act as Directors of the
 Company, if appointed.
 
 Appropriate resolutions seeking your approval to the aforesaid
 appointments / re-appointments are appearing in the Notice convening
 the 102nd AGM of your Company.
 
 In accordance with the provisions of Article 91 of the Articles of
 Association of the Company, Mr. Shilabhadra Banerjee, Mr. Angara
 Venkata Girija Kumar, Mr. Hugo Geoffrey Powell, Dr. Basudeb Sen and Mr.
 Balakrishnan Vijayaraghavan will retire by rotation at the ensuing AGM
 of your Company and being eligible, offer themselves for re-election.
 The Board has recommended their re-election.
 
 AUDITORS
 
 Statutory Auditors
 
 Your Companys Auditors, Messrs. Deloitte Haskins & Sells, retire at
 the ensuing AGM and, being eligible, offer themselves for
 re-appointment. Since not less than 25% of the Subscribed Share Capital
 of your Company is held collectively by Public Financial Institutions,
 the re-appointment of Auditors is being proposed as a Special
 Resolution in accordance with Section 224A of the Companies Act, 1956.
 
 Cost Auditors
 
 Your Company had appointed (i) Mr. P. Raju Iyer, Cost Accountant,
 Chennai, as Cost Auditor for audit of cost records maintained by the
 Paperboards and Specialty Papers business and (ii) Messrs. Shome &
 Banerjee, Cost Accountants, Kolkata, for cost records in respect of
 Paper products other than the cost records maintained by the
 Paperboards and Specialty Papers business for the financial year ended
 31st March, 2012. The Cost Audit Report was filed by the Cost Auditor
 on 23rd January 2013 within the due date of 28th February 2013.
 
 In respect of the financial year ended 31st March, 2013, your Company,
 has appointed (i) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost
 Auditor for audit of cost records maintained by the Paperboards and
 Specialty Papers business (ii) Messrs. Shome & Banerjee, Cost
 Accountants, Kolkata, for 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. (iii) Messrs.
 
 S.Mahadevan & Co., Cost Accountants, Chennai, were appointed as the
 Cost Auditors for Packaged Food products. The due date for filing the
 Cost Audit Reports is 27th September, 2013.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 Under your Companys Employee Stock Option Schemes, 8,34,08,810
 Ordinary Shares of Rs. 1/- each, were issued and allotted during the
 year upon exercise of 83,40,881 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,
 2013 stands increased to Rs. 790,18,33,110/- divided into 790,18,33,110
 Ordinary Shares of Rs. 1/- each.
 
 Details of the Options granted up to 31st March, 2013 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 Companys Auditors, Messrs. Deloitte Haskins & Sells, have
 certified that your Companys 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
 that period;
 
 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.
 
 OTHER INFORMATION
 
 The total number of employees as on 31st March, 2013 stood at 25,959.
 
 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.
 
 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 83 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, 2013. 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
 Report.
 
 FORWARD-LOOKING STATEMENTS
 
 This Report contains forward-looking statements that involve risks and
 uncertainties. When used in this Report, the words anticipate,
 believe, estimate, expect, intend, will
 and other similar expressions as they relate to the Company and/or its
 businesses are intended to identify such forward-looking statements.
 The Company undertakes no obligation to publicly update or revise any
 forward-looking statements, whether as a result of new information,
 future events, or otherwise. Actual results, performances or
 achievements could differ materially from those expressed or implied in
 such forward-looking statements. Readers are cautioned not to place
 undue reliance on these forward-looking statements that speak only as
 of their dates. This Report should be read in conjunction with the
 financial statements included herein and the notes thereto.
 
 CONCLUSION
 
 Your Companys Board and employees are inspired by the Vision of
 sustaining ITCs position as one of Indias most admired and
 valuable companies, creating enduring value for all stakeholders,
 including the shareholders and the Indian society. Your Company has
 created multiple drivers of growth by developing a portfolio of
 world-class businesses which have synergised to deliver Total
 Shareholder Returns at a compound annual growth rate of over 26%
 during the 17 year period from 1996 to 2013. Each business within the
 portfolio is continuously engaged in upgrading strategic capability to
 effectively address the challenge of growth in an increasingly
 competitive market scenario. Effective management of diversity enhances
 your Companys adaptive capability and provides the intrinsic ability
 to effectively manage business risk. The vision of enlarging your
 Companys contribution to the Indian economy is manifest in the
 creation of unique business models that foster international
 competitiveness of not only 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
 all stakeholders.
 
 17th May, 2013                           On behalf of the Board
 
 Virginia House 
 
 37 J L Nehru Road
 
 Kolkata 700071                Y. C. DEVESHWAR     Chairman
 
 India                         P. V. DHOBALE       Director
Source : Dion Global Solutions Limited
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