The Company is a global exemplar in ''Triple Bottom Line'' performance
and is the only enterprise in the world of comparable dimensions to
have achieved and sustained the three key global indices of
environmental sustainability of being ''water positive'' (for 14 years),
''carbon positive'' (for 11 years), and ''solid waste recycling positive''
(for 9 years).
The following sections outline your Company''s progress in pursuit of
the ''Triple Bottom Line''.
The business landscape in your Company''s operating segments was
rendered extremely challenging during the year in the wake of
unprecedented pressure on the legal cigarette industry due to the
cumulative impact of steep increase in taxation and regulatory
pressures, sluggish demand and price deflationary conditions in the
FMCG space, and start-up costs relating to new products / categories
especially in the non-cigarette FMCG segment. The business environment
in the Hotels industry also remained challenging with the overhang of
excess room inventory exerting pressure on pricing apart from which the
Business had to absorb the gestation costs of new properties. Agri
exports from India were impacted during the year due to higher crop
output and steeper currency depreciation in competing origins. The
Paperboards, Paper and Packaging segment also had to contend with a
weak demand and pricing environment.
Despite the challenging business environment as aforestated, Gross
Revenue for the year grew by 3.2% to Rs. 51582.45 crores. Net Revenue
at Rs. 36475.27 crores grew by 1.1% primarily driven by a 7.7% growth
in the non-cigarette FMCG segment and 6.2% growth in the Cigarettes
segment. Excluding exports of agri- commodities, Gross Revenue and Net
Revenue for the year grew by 6.4% and 5.5% respectively. Profit Before
Tax registered a growth of 6.9% to Rs. 14958.39 crores while Net Profit
at Rs. 9844.71 crores increased by 2.5%. Earnings Per Share for the
year stood at Rs. 12.26 (previous year Rs. 12.05). Cash flows from
Operations aggregated Rs. 14079.07 crores compared to Rs. 13534.65
crores in the previous year.
Your Directors are pleased to recommend a Special Dividend of Rs. 2.00
per share in addition to the Ordinary Dividend of Rs. 6.50 per share
(previous year Rs. 6.25 per share) for the year ended 31st March, 2016.
Total cash outflow in this regard will be Rs. 8232.60 crores including
Dividend Distribution Tax of Rs. 1392.48 crores.
Your Directors also recommend issuance of 1 Bonus Share of Rs. 1/-
each, for every 2 existing Ordinary Shares of Rs. 1/- each held by
Members on the record date.
Your Directors further recommend a transfer to General Reserve of Rs.
990.00 crores (previous year Rs. 970.00 crores). Consequently, the
Surplus in Statement of Profit and Loss as at 31st March, 2016 would
stand at Rs. 9440.48 crores (previous year Rs. 8767.35 crores).
VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER
While profit growth moderated during the year especially in comparison
with your Company''s own track record, it is pertinent to note that
Value-Added by your Company, i.e. the value created by the economic
activities of your Company and its employees, grew by 8.3% over last
year to Rs. 41135 crores. Your Company''s Contribution to Exchequer
during the year stood at Rs. 30750 crores representing a growth of
11.6% over last year.
It is pertinent to note that the incremental Value-Added during the
year by your Company accrued entirely to the Exchequer. Consequently,
the share of Contribution to Exchequer in total Value-Added by your
Company increased further - from 73% in 2014-15 to 75% in 2015-16.
Including the share of dividends paid and retained earnings
attributable to government owned institutions, your Company''s
contribution to the Central and State Governments represents 81% of its
Value-Added during the year.
Your Company remains amongst the Top 3 Indian corporates in the private
sector in terms of Contribution to Exchequer.
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.
Foreign exchange earnings of the ITC Group over the last ten years
aggregated nearly US$ 6.8 billion, of which agri exports constituted
57%. Earnings from agri exports, which effectively link small farmers
with international markets, are an indicator of your Company''s
contribution to the rural economy.
During the financial year 2015-16, your Company and its subsidiaries
earned Rs. 4367 crores in foreign exchange. The direct foreign
exchange earned by your Company amounted to Rs. 3644 crores, mainly on
account of exports of agri-commodities. Your Company''s expenditure in
foreign currency amounted to Rs. 1672 crores, comprising purchase of
raw materials, spares and other expenses of Rs. 1461 crores and import
of capital goods at Rs. 211 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 2016 2015
a) Profit Before Tax 14958.39 13997.52
b) Tax Expense
Current Tax 4896.06 4020.99
Deferred Tax 217.62 368.80
c) Profit for the year 9844.71 9607.73
SURPLUS IN STATEMENT OF PROFIT AND LOSS
a) At the beginning of the year 8767.35 6139.09
b) Less: Loss for the period from 1st
April, 2013 - 8.01
to 31st March, 2014 adjusted pursuant to
the Scheme of Arrangement
[Refer Note 31(x)]
c) Add: Unrecognised Net Deferred Tax - 45.84
assets as on 1st April, 2013 adjusted
pursuant to the Scheme of
Arrangement [Refer Note 31(x)]
d) Less: Depreciation on transition to - 48.32
Schedule II of the Companies Act, 2013
on Tangible Fixed Assets (Net of
Deferred Tax Rs. Nil; 2015: Rs. 24.88
crores) [Refer Note 31(xi)]
e) Add : Profit for the year 9844.71 9607.73
Transfer to General Reserve 990.00 970.00
- Ordinary Dividend of Rs. 6.50 5230.68 5009.70
(2015 - Rs. 6.25) per share
- Special Dividend of Rs. 2.00 1609.44 -
(2015 - Rs. Nil) per share
Income Tax on Proposed Dividend
- Current Year 1392.48 1019.86
- Earlier year''s provision no (51.02) (30.58)
g) At the end of the year 9440.48 8767.35
A. FAST MOVING CONSUMER GOODS
FMCG - Cigarettes
The performance of your Company''s Cigarettes business remained subdued
during the year due to unprecedented pressure on the legal cigarette
industry in India on account of the cumulative impact of steep increase
in taxation and intense regulatory pressures.
Over the last 4 years, the incidence of Excise Duty and VAT on
cigarettes, at a per unit level, has gone up cumulatively by 118% and
142% respectively thereby exerting severe pressure on legal industry
volumes even as illegal trade grows unabated.
It is pertinent to note that steep increases in Excise Duty on
cigarettes in recent years have resulted in widening the differential
in Excise Duty rates (on a per kg. of tobacco basis) between cigarettes
and other tobacco products from 29 times in 2005-06 to over 53 times
currently as given in the chart below:
An analysis of the WHO Report on Tobacco Taxation, 20151 reveals that
at 6.5% of per capita GDP, cigarette taxes in India are amongst the
highest in the world. In fact, cigarette taxes in India are 14 times
higher than USA, 9 times higher than Japan, 7 times higher than China,
5 times higher than Australia and 3 times higher than Malaysia and
Pakistan as is evident from the chart given below:
High incidence of taxation and a discriminatory regulatory regime on
cigarettes in India have over the years led to a significant shift in
tobacco consumption to lightly taxed or tax-evaded tobacco products
like bidi, khaini, chewing tobacco, gutkha and illegal cigarettes which
presently constitute over 89% of total tobacco consumption in the
country. Thus, the share of legal cigarettes in overall tobacco
consumption has progressively declined from 21% in 1981-82 to 11% in
2014-15 even as overall tobacco consumption has increased in India.
About 68% of India''s tobacco industry is in the unorganised sector with
little or no regulatory oversight. Besides adversely impacting the
performance of the legal cigarette industry, this has led to
sub-optimisation of the revenue potential from the tobacco sector.
The imposition of discriminatory and punitive VAT rates by some States
provides an attractive tax arbitrage opportunity for illegal cigarette
trade by criminal elements. The consequential decline in legal
cigarette volumes in such States has led to stagnation/decline in
revenue collections, even as illegal cigarettes gained significant
traction. On the other hand, the pragmatic decisions of several State
Governments to rationalise VAT on cigarettes have facilitated
improvement in revenue buoyancy and containing the growth of illegal
According to an independent study conducted by Euromonitor
International - a renowned global research organisation - India is now
the 4th largest market for illegal cigarettes in the world. In fact,
illegal trade comprising smuggled foreign and domestically manufactured
tax-evaded cigarettes is estimated to constitute one-fifth of the
overall cigarette industry in India. A recent study by the Federation
of Indian Chambers of Commerce and Industry (FICCI) has estimated that
revenue loss due to illegal cigarettes is more than Rs. 9000 crores per
annum which represents a growth of nearly 50% over a two year period.
During the year under review, your Company was in continuous engagement
with various enforcement agencies whose proactive initiatives have
resulted in significant increase in seizure of smuggled cigarettes.
The unprecedented fall in legal cigarette volumes and the consequent
reduction in the utilisation of Indian Flue Cured Virginia tobacco in
cigarette manufacture is having a devastating impact on tobacco farmers
in the country. The sharp decline in domestic demand coupled with the
unabated growth in illegal cigarette trade have led to a significant
drop in tobacco prices, especially in Andhra Pradesh, causing deep
distress to the livelihoods of thousands of tobacco farmers. A stable,
fair and equitable cigarette taxation policy would be imperative to
provide a strong domestic demand base to the Indian tobacco farmer,
insulating him from the volatilities typically associated with
international markets while helping realise the full export potential
of Indian leaf tobacco. This assumes critical significance especially
in view of the fact that there are no economically viable alternative
crops for farmers in the tobacco growing regions of the country.
Your Company continues to engage on an ongoing basis with policy-makers
at both the Centre and the State levels for moderation in tax rates on
cigarettes to maximise the revenue potential from the tobacco sector
and contain the growth of illegal trade. Such a policy would also
bolster the tobacco control and health objectives of the Government
which have hitherto been seriously compromised since non-cigarette
tobacco products from the unorganised sector and illegal cigarettes are
manufactured using inferior tobaccos and other ingredients of
questionable quality and hygiene without any regulatory oversight. In
addition, to combat the menace of growing illegal trade, your Company
continues to make representations to policy-makers recommending
compulsory licensing of all cigarette manufacturing units irrespective
of size, increase in customs duty on imported cigarettes to WTO bound
rate levels with suitable safeguards built-in to prevent
undervaluation, ban on manufacture of tobacco and tobacco products in
EOU and SEZ units, ban on cigarettes from personal baggage allowance
and duty-free trade and exclusion of tobacco and tobacco products from
preferential treatment under Free Trade Agreements that India is party
Over and above a punitive and discriminatory taxation regime, the legal
Cigarette industry continues to be subjected to increasingly stringent
regulations. A Government notification, originally proposed to be
effective from 1st April, 2015, increased the size of graphic health
warnings (GHW) from 40% of the surface area on one side of the
cigarette package to 85% of the surface area of both sides of the
package, and substituted the previous pictures with even more gruesome
and repulsive ones. The implementation of the new GHW was subsequently
kept in abeyance by the Central Government pending the recommendations
of the Parliamentary Committee on Subordinate Legislation (PCOSL) which
was tasked with the responsibility of examining the issue of
introduction of larger GHW in India. The decision to defer the
notification till completion of PCOSL''s review was reiterated by the
Government in the Parliament2. Nevertheless, whilst the PCOSL was
engaged in the matter, on 24th September, 2015, the Central Government
notified that the new GHW would come in to effect from 1st April, 2016.
On 15th March, 2016, the PCOSL in its Final Report recommended that the
size of the GHW should be kept at 50% on both sides of the cigarette
package as opposed to 85% proposed by the Government.
The implementation of any change in health warnings on cigarette
packages is an elaborate process for manufacturers, entailing months of
preparation involving substantial cost and effort. Since the matter of
new GHW was under the Parliamentary Committee''s consideration, and the
Government had itself held out that it would await the Committee''s
report, the industry was led to believe that the Government would
re-notify new health warnings after considering the Committee''s
recommendations. Further, the question of the legality of the new
warnings was and continues to be pending before the Court. In this
situation, your Company, as any prudent person would, did not commit to
wasting substantial resources in creating the large number of cylinders
and other tools necessary for a changeover of the warnings. As a
result, your Company was not in readiness to print the new GHW and was
compelled to cease manufacture of cigarettes with effect from 1st
April, 2016 pending clarity on the matter. Subsequently, in order to
attain clarity on the matter, your Company challenged the rules
mandating larger GHW before the Honourable High Court of Karnataka.
The Court was pleased to direct, vide Interim Order dated 12th April,
2016, that the Government should not take any coercive steps against
your Company for a period of 8 weeks during which your Company would
continue to follow the Cigarettes and Tobacco Products (Packaging and
Labelling) Rules, 2008 (2008 Rules), which prescribed 40% warning on
the front panel of the cigarette packs. Accordingly, your Company
resumed production of cigarettes at its factories from 15th April,
On 4th May, 2016, the Honourable Supreme Court directed the Honourable
High Court of Karnataka to hear and dispose of within 6 weeks, the
legal challenge to GHW pending in several High Courts. The Honourable
Supreme Court, however, also ordered that any stay order granted by any
High Court would not be given effect to till the cases are finally
disposed of. As a consequence of the above development, in compliance
with the interim requirements pending hearing in the Honourable
Karnataka High Court, your Company progressively commenced manufacture
of cigarettes with 85% warning on cigarette packaging.
The Tobacco industry in India supports the livelihood of over 45
million people including vulnerable sections of the society like
farmers, farm labour, rural poor, women, tribals etc. and contributes
around Rs. 30000 crores to the national exchequer apart from generating
valuable foreign exchange earnings of around Rs. 6000 crores.
The proposed GHW is excessively large, extremely gruesome and
unreasonable. There is no evidence to suggest that cigarette smoking
would cause the diseases depicted in the pictures or that large GHW
will lead to reduction in consumption. In fact this inadequacy of
evidence prompted the courts in USA to hold that the US FDA''s proposal
for introduction of similar GHW in that country as unconstitutional.
Further, over 100 countries representing 60% of the signatories to the
Framework Convention on Tobacco Control have not adopted GHW3. It is
pertinent to note that other major tobacco producing countries have
taken a considered view on the matter and have not adopted over-sized
and excessive graphic health warnings, thus striking a balance between
the interests of the consumer and of their farmers. It may also be
noted that the global average size for GHW is only about 30% coverage
of the principal display area. Moreover, the top three cigarette
consuming countries - USA, China and Japan - which together account for
51% of global cigarette consumption have only text based warnings and
have not adopted pictorial / graphic health warnings.
The new GHW will commoditise the market where price will be the sole or
prime driver of consumer choice thus eroding the value of your
Company''s distinctive trademarks and pack designs that have been
developed and nurtured through substantial investments over the years.
Moreover, the new GHW will encourage the flow of illegal trade of
brands owned by international companies into the country since such
brands are manufactured in many jurisdictions which do not mandate the
printing of graphic health warnings on cigarette packages as applicable
in India. The legal cigarette industry in India will be hard pressed to
counter the menace of illegal cigarettes as they will be perceived by
the consumer to be safer in the absence of the statutorily mandated
health warnings. Coupled with the fact that illegal cigarettes are
available at a fraction of the price of legal cigarettes, the new GHW
will provide further fillip to the growth of illegal cigarettes in the
It is pertinent to note that the Department of Commerce, in its
submissions to PCOSL, has stated that large warnings will lead to an
increase in overall tobacco consumption and illegal cigarettes; when
large quantities of non-cigarette tobacco products from unorganised
sector are sold loose and / or without any health warnings, it gives an
impression of these products being relatively safer than cigarettes.
As always, your Company complies fully with all regulations and laws in
letter and spirit and continues to engage with policy-makers for
reasonable, pragmatic and evidence based regulation and taxation
policies that balance the health, employment and economic imperatives
of the country.
Your Company''s strong product portfolio along with superior consumer
insights and a strategy of continuous innovation and value addition has
helped deliver superior competitive performance. Some of the key new
products launched during the year include ''Classic Fine Taste - Low
Smell'', ''Noir'' - the first 97mm super slim cigarette in the country and
new Kretek and capsule filter offers. Significant investments were
made during the year on cutting-edge anti-counterfeit technology
solutions that will enable your Company to protect its trademarks,
state-of-the-art on-line quality oversight systems and know-how for
developing innovative packaging formats in the future.
Your Company''s research and development initiatives continue to focus
on strengthening existing product signatures, creating differentiated
offers and developing innovative future-ready products. In this
context, it is extremely gratifying to report that during the year your
Company was granted four international patents in respect of cigarettes
- covering both product and packaging.
Electronic Vaping Devices (EVD) are gaining increasing traction with
consumers seeking alternative sources of nicotine. In line with this
trend, your Company continues to engage in this category through its
brand ''EON'' which was launched in Hyderabad and Kolkata in the previous
year. During the year, your Company extended the brand to target
markets and also augmented its product portfolio with the launch of a
rechargeable variant - ''EON Charge'' - in Bengaluru and Delhi.
Being a nascent category, regulations with respect to EVD continue to
evolve globally. European Union has proposed to regulate EVDs under its
Tobacco Products Directive, 2014 subject to certain conditions. In the
US, the Food and Drug Administration has recently issued deeming
regulations that empower it to administer EVDs as Tobacco Products
subject to fulfilment of certain conditions. In both EU and US,
manufacturers also have the option of applying for medicine / drug
licence for EVDs. In India, your Company continues to engage with the
Government to evolve appropriate regulations for this novel category.
In the Nicotine Gum category, the presence of your Company''s brand,
''Kwiknic'', was expanded with the introduction of the product in the
chemists channel during the year. The Business also launched a new
variant - ''Kwiknic Neo'' - in select markets which has received
encouraging response from consumers.
During the year, your Company''s Bengaluru, Kolkata and Saharanpur
cigarette factories were awarded and recognised as ''Future Ready
Factory - Platinum Rating: FMCG Sector, Mega Large Business'' under the
aegis of the Indian Manufacturing Excellence Awards (IMEA) by Frost &
Sullivan, a global consulting firm. This highly acclaimed award
acknowledges Indian manufacturing capability and its global
competitiveness. Concurrently, your Company''s cigarette supply-chain
was also conferred the IMEA award for ''Supply Chain Leadership'' in
recognition of consistent achievement of higher levels of recognition
(Platinum / Gold) on the Global Supply Chain Excellence model of IMEA.
This award acknowledges the strong leadership commitment, excellence in
manufacturing plants and at key supply chain partners and building of
reliable and responsive supply chains. Your Company was the only
Indian company to be honoured with this distinction during the year
The Business continues to receive industry recognition and accolades
for its commitment to and excellence in sustainability. The Bengaluru
factory received the ''Overall Leader Award'' and the Ranjangaon factory
received the ''Leader Award'' under the aegis of Green Manufacturing
Excellence Awards (GMEA) by Frost & Sullivan. The Bengaluru and
Ranjangaon factories also received the ''Excellent Energy Efficiency
Unit'' award under the Confederation of Indian Industry''s National
Awards for Excellence in Energy Management. The Munger factory
received the first prize in FICCI Water Awards.
The operating environment for the legal cigarette industry is likely to
remain extremely challenging in the year ahead in view of the high
levels of taxation which was exacerbated by a further increase of 10%
in Excise Duty as announced in the Union Budget 2016, rising illegal
trade and increasing regulatory pressures including the new graphic
health warnings. Despite these challenges, your Company remains
confident of sustaining its leadership position in the legal cigarette
industry by leveraging its superior strategies, comprehensive product
portfolio and world-class execution capabilities.
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 inter alia provides assurance on orderly and
efficient conduct of operations, security of assets, prevention and
detection of frauds / errors, accuracy and completeness of accounting
records and the timely preparation of reliable financial information.
Your Company''s independent and robust Internal Audit processes, both at
the Business and Corporate levels, provide assurance on the adequacy
and effectiveness of internal controls, compliance with operating
systems, internal policies and regulatory requirements.
The Internal Audit function consisting of professionally qualified
accountants, engineers and IT Specialists is adequately skilled and
resourced to deliver audit assurances at highest levels. In the context
of the IT environment of your Company, systems and policies relating to
Information Management are periodically reviewed and benchmarked for
contemporariness. Compliance with the Information Management policies
receive focused attention of the Internal Audit team. Qualified
engineers in the Internal Audit function review the quality of planning
and execution of all ongoing projects involving significant expenditure
to ensure that project management controls are adequate and yield
''value for money''.
Processes in the Internal Audit function have been continuously
improved for enhanced effectiveness and productivity including the
deployment of best-in-class tools for analytics in the Audit domain,
certification as complying with ISO 9001:2008 Quality Standards in its
processes, ongoing knowledge improvement programmes for staff, etc.
During the year, the Standard terms of reference for Internal Audit
which defines the framework for conduct of Internal Audits was updated
incorporating latest changes to regulatory requirements and the
evolving business context.
The Audit Committee of your Board met ten times during the year. The
Terms of Reference of the Audit Committee inter alia included reviewing
the effectiveness of the internal control environment, evaluation of
the Company''s internal financial control and risk management systems,
monitoring implementation of the action plans emerging out of Internal
Audit findings including those relating to strengthening of your
Company''s risk management systems and discharging statutory mandates.
HUMAN RESOURCE DEVELOPMENT
Your Company''s Human Resource Management systems and processes are
aimed at creating a responsive, market-focused, customer-centric
culture and enhancing organisational vitality, so that each business is
internationally competitive and equipped to seize emerging market
opportunities. It is your Company''s firm belief that the robustness and
adaptability of its Human Resource systems and processes are critical
for an organisation to remain relevant and competitive in today''s
highly dynamic and rapidly evolving business landscape. The Human
Resources function of your Company continues to align its strategic
interventions and processes with your Company''s Vision of sustaining
its position as one of India''s most admired and valuable corporations,
creating growing value for the Indian economy and the Company''s
stakeholders. Towards this end, five capability platforms relevant to
making businesses future-ready have been identified Strategic, Value
Chain, Leadership, Innovation and Human Resources Development. These
platforms are also designed to strengthen organisational systems to
facilitate speedy and competitively superior responses to market
Your Company''s talent management promise of ''Building Winning
Businesses. Building Business Leaders. Creating Value for India.''
backed by its strong corporate equity continues to play a key role in
attracting and retaining best-in-class talent. Leadership Development
is the unwavering focus of your Company''s talent management strategy
and its ''Strategy of Organisation'' creating multiple drivers of
growth through a diverse portfolio of businesses each with its own
independent leadership team - serves as an excellent platform to build
distributed business leadership.
An equally important dimension of building leadership is your Company''s
strategic learning and development agenda which flows from its Vision,
Mission and its 3-Horizon Growth strategy. Your Company has a
multi-pronged approach to learning, with focused interventions in core
and functional areas, customised business specific and
organisation-wide strategic interventions, as well as four-tiered
leadership development programmes. Based on the premise that action
learning leads to holistic development of human resources, these
programmes are designed to lay more emphasis on workplace projects and
demonstrated leadership behaviours on the job rather than classroom
learning. These interventions are, therefore, fashioned more in the
nature of long term journeys rather than short term events.
''Gurukul'', your Company''s state-of-the-art training facility in
Ranjangaon, is a significant milestone in its skilling journey. An
integrated technical training centre catering to all the FMCG
businesses under one roof, ''Gurukul'' underlines your Company''s
proactive commitment to supporting national goals by focussing on
enhancing the shop floor skills of its employees in line with the
Government''s ''Make in India'' initiative and ''Skill India Mission''. This
commitment is reinforced through your Company''s interventions geared
towards enhancing the employability of disadvantaged youth such as
apprenticeship programmes in its units and partnering with National
Skill Development Corporation (NSDC) empanelled agencies to impart
market-linked vocational training in the manufacturing and service
Your Company is dedicated to nurturing sustainable Employee Relations
and continues to leverage the ''Good Employee Relations'' approach in
ensuring responsive manufacturing, flexible work systems and, at the
same time, maintaining a cost and environment conscious ecosystem in
all units. The Employee Relations philosophy of your Company, anchored
in the tenets of Scientific Management, Industrial Democracy, Human
Relations and Employee Well-being, has contributed to building a robust
platform which has aided the conclusion of several Long Term Agreements
at multiple locations during the year and ensured the smooth execution
of large-scale change management initiatives and adoption of
contemporary management practices.
Given the contextual realities of your Company''s factories, your
Company''s businesses are steadily working towards developing a ''Long
Term Agreement Framework''. To meet employee expectations, your
Company''s units appropriately acknowledge the demographic diversity of
its factories and adopt a commitment based segmented approach. Your
Company''s progressive Employee Relations approach has enabled a
harmonious atmosphere across all units, which in turn has been a vital
element in ensuring that HR systems and practices remain world-class.
Your Company''s interventions in the area of Employee Relations continue
to receive accolades and industry recognition.
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 Company''s employees relentlessly strive to deliver
world-class performance and discharge their role as ''trustees'' of all
stakeholders with true faith and in the spirit of allegiance. Over
25,000 of your Company''s employees have collectively envisioned the
future with commitment to realise your Company''s vision of creating
enduring value for the nation and for the institution that is ITC.
The Company''s Whistleblower Policy encourages Directors and employees
to bring to the Company''s attention, instances of unethical behaviour,
actual or suspected incidents of fraud or violation of the ITC Code of
Conduct that could adversely impact the Company''s operations, business
performance and / or reputation. The Policy provides that the Company
investigates such incidents, when reported, in an impartial manner and
takes appropriate action to ensure that requisite standards of
professional and ethical conduct are always upheld. It is the
Company''s Policy to ensure that no employee is victimised or harassed
for bringing such incidents to the attention of the Company. The
practice of the Whistleblower Policy is overseen by the Audit Committee
and no employee has been denied access to the Committee. The
Whistleblower Policy is available on the Company''s corporate website
SUSTAINABILITY CONTRIBUTION TO THE ''TRIPLE BOTTOM LINE''
Inspired by the opportunity to sub-serve larger national priorities,
your Company redefined its Vision to not only reposition the
organisation for extreme competitiveness but also make societal value
creation the bedrock of its corporate strategy. This super-ordinate
Vision spurred innovative strategies to address some of the most
challenging societal issues including widespread poverty, unemployment
and environmental degradation. Your Company''s sustainability strategy
aims at creating significant value for the nation through superior
''Triple Bottom Line'' performance that builds and enriches the country''s
economic, environmental and social capital. The sustainability
strategy 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 Company is today a global exemplar in sustainability. It is a
matter of immense satisfaction that your Company''s models of
sustainable development have led to the creation of sustainable
livelihoods for around 6 million people, many of whom belong to the
marginalised sections of society. Your Company has also sustained its
position of being the only Company in the world of comparable
dimensions to have achieved the global environmental distinction of
being ''water positive'' (for 14 years in a row), ''carbon positive'' (for
11 consecutive years) and ''solid waste recycling positive'' (for 9 years
To contribute to the nation''s efforts in combatting climate change,
your Company''s strategy of adopting a low- carbon growth path is
manifest in its growing renewable energy portfolio, establishment of
green buildings, large- scale afforestation programme and achievement
of international benchmarks in energy & water consumption. Today, over
47% of its total energy requirements are met from renewable energy
sources - an outstanding performance given the large manufacturing base
of your Company. Further, all luxury ITC Hotels, several office
complexes and factories of your Company are LEED® (Leadership in Energy
& Environmental Design) certified at the highest level by the US Green
Building Council/ Indian Green Building Council and the Bureau of
Energy Efficiency (BEE) under its star rating scheme.
Your Company has adopted a comprehensive set of sustainability policies
that are being implemented across the organisation in pursuit of its
''Triple Bottom Line'' agenda. These policies are aimed at strengthening
the mechanisms of engagement with key stakeholders, identification of
material sustainability issues and progressively monitoring and
addressing such issues along the value chain of each Business.
Your Company''s 12th Sustainability Report, published during the year
detailed the progress made across all dimensions of the ''Triple Bottom
Line'' for the year 2014-15. This report is in conformance with the
latest Global Reporting Initiative (GRI) Guidelines - G4 under In
Accordance - Comprehensive category and is third-party assured at the
highest criteria of reasonable assurance as per International
Standard on Assurance Engagements (ISAE) 3000. The 13th Sustainability
Report, covering the sustainability performance of your Company for the
year 2015-16, is also being prepared in conformity with the above
guidelines and will be made available shortly.
In addition, the Business Responsibility Report (BRR), as mandated by
the Securities & Exchange Board of India (SEBI), was brought out as an
annexure to the Report and Accounts 2015, mapping the sustainability
performance of your Company against the reporting framework suggested
by SEBI. The BRR for the year under review is annexed to this Report
Corporate Social Responsibility (CSR)
Your Company''s overarching aspiration to create significant and
sustainable societal value is manifest in its CSR initiatives that
embrace the most disadvantaged sections of society, especially in rural
India, through economic empowerment based on grassroots capacity
building. Towards this end, the Company adopted a comprehensive CSR
policy in 2014-15 outlining programmes, projects and activities your
Company plans to undertake to create a significant positive impact on
identified stakeholders. All these programmes fall within the purview
of Schedule VII of the provisions of Section 135 of the Companies Act,
2013 and the Companies (Corporate Social Responsibility Policy) Rules,
The key elements of your Company''s CSR interventions are to:
Strengthen and empower Community Based Organisations for long-term
sustainability of interventions.
Ensure behaviour change through focus on demand generation for all
interventions to ensure ownership, participation and contribution.
Continue to strive for scale in the core operational geographies by
leveraging government partnerships.
Continue to work with key stakeholders with whom your Company has
enduring partnerships comprising (a) rural communities in the Company''s
Agri Business operational areas and (b) communities residing in close
proximity to your Company''s production units. Within these groups,
specially target poor and marginalised communities/ groups to ensure
Remain contemporary by accessing knowledge/ technical know-how
Your Company''s stakeholders are confronted with multi- dimensional and
inter-related issues, at the core of which is the challenge of securing
sustainable livelihoods. Accordingly, interventions under your
Company''s Social Investments Programme (SIP) are appropriately designed
to build their capacities and promote sustainable livelihoods.
The footprint of your Company''s SIP projects is spread over 26 states
covering 166 districts.
Your Company''s pioneering initiative of wasteland development through
the Social Forestry Programme is currently spread across 16 districts
in 3 States covering 87,674 hectares in 4,533 villages, impacting over
85,700 poor households. Together with your Company''s Farm Forestry
programme, this initiative has greened over 2,25,000 hectares till date
and generated over 101 million person days of employment for rural
households, including poor tribals and marginal farmers. Integral to
the Social Forestry programme is the agro-forestry initiative which
ensures food, fodder and wood security and currently extends to nearly
Besides enhancing farm level employment & incomes and increasing green
cover, the Social and Farm Forestry initiative of your Company has led
to improvement in pulpwood availability in Andhra Pradesh and
Telangana. This initiative is also contributing meaningfully towards
the nation''s endeavour in creating additional carbon sink for tackling
Soil and Moisture Conservation
The Soil and Moisture Conservation programme promotes the development
and management of local water resources in moisture-stressed areas by
facilitating village-based participation in planning and implementing
such measures as well as building, reviving and maintaining
water-harvesting structures. The coverage of this programme currently
extends to 42 districts across 10 States. During the year, the area
under watershed increased by 58,864 hectares taking the cumulative
coverage area till 2015-16 to over 2,59,000 hectares. 1,534 water
harvesting structures were built during the year, taking the total
number of water harvesting structures to 7,998.
During the year, your Company scaled up bio-diversity conservation in
49 additional plots covering 730 hectares in the catchments of your
Company''s Agri Business operations with the objective of protecting
native flora and fauna and providing other eco-system services. The
cumulative area under bio-diversity conservation currently stands at
The Sustainable Agriculture programme aims at raising farm productivity
and quality as well as minimising cultivation costs by promoting modern
agronomic techniques and optimising natural resource use. The
programme is operational in 48 districts across 13 States. During the
year, 764 Farmer Field Schools (FFS) disseminated know-how on advanced
agri-practices to over 16,969 farmers through 2,464 demonstration plots
under different crops. In pursuit of your Company''s long-term
sustainability objective of increasing soil organic carbon, a total of
7,314 compost units were constructed during the year taking the total
number till date to 30,868 units. In addition, the ''Choupal Pradarshan
Khet'' programme promoted field demonstrations of seed varieties and
production practices in more than 5,000 villages covering around 64,000
hectares and more than 60,000 farmers.
The Livestock Development programme aims at enhancing the productivity
of cattle through artificial insemination to produce high-yielding
crossbred progenies. This programme has been implemented through 238
Cattle Development Centres (CDCs) spread across 24 districts in 7
states. These CDCs facilitated over 2,29,000 artificial inseminations
during the year, taking the total to 17,91,000 artificial inseminations
performed till 2015-16.
Currently spread across 7 districts in Bihar, West Bengal, Madhya
Pradesh, Telangana, Rajasthan and Assam, the programme on mainstreaming
of ultra-poor women covers 10,200 women who have been identified and
trained in entrepreneurial skills and provided with assets for income
generation. In addition, over 350 Self-Help Groups (SHGs) with 3,800
members were formed during the year. Members of SHGs and other
institutions were linked to individual bank accounts under the
Government of India''s Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan
Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti
Bima Yojana (PMJJY). 55,925 beneficiaries (men and women) were covered
under the PMSBY, 26,867 members under the PMJJY and 39,105 under
Pradhan Mantri Jan Dhan Yojana.
The Primary Education Programme focuses on retention and improving
learning outcomes in government primary schools in your Company''s
factory catchment areas. During the year, 45,823 children were covered
under this initiative comprising ''Read India Plus'' programme and 176
Supplementary Learning Centres to mainstream out-of-school children
into regular schools. Till date, these programmes have reached out to
over 4.60 lakh children in aggregate. In addition, 164 government
primary schools were provided infrastructure support comprising
boundary walls, additional classrooms, sanitation units, and furniture,
thus taking the total number of government primary schools covered till
date to 1,322. To ensure sustainable operations and maintenance of
infrastructure provided, School Management Committees were strengthened
in 189 schools and 113 Child Cabinets and Water and Sanitation (WATSAN)
Committees were formed in various schools with the active involvement
of students and teachers.
Skilling & Vocational Training
The Skilling & Vocational Training Programme focuses on providing
market-linked skills to young people to make potential job-seekers
industry-ready and employable in the services and manufacturing
sectors. During the year, 11,872 youth were enrolled for training
under different courses offered as part of this programme. Of the
total students enrolled, 9,447 (79% of enrolled) completed training and
6,452 (68% of trained) students were provided placement. The students
trained included a healthy mix of women and SC/ST candidates. The
initiative is spread across 31 districts covering 15 states.
Your Company continues to work with the Welcomgroup Graduate School of
Hotel Administration (WGSHA) together with Dr. TMA Pai Foundation to
cater to the ever growing need for professionally trained human
resources in the hospitality industry. WGSHA has been recently rated
by CEO World Magazine amongst the top 50 hospitality schools in the
world. In addition, since the inception of ITC Culinary Skills Training
Centre, Chhindwara in 2014, 41 trainee chefs in three batches have
successfully completed the 6-months programme wherein cooking skills
are imparted to youth from the disadvantaged sections of society.
Health & Sanitation
Your Company continues to adopt a multi-pronged approach to improve
public health. To promote a hygienic environment through prevention of
open defecation and reduce incidence of water-borne diseases, 7,175
household toilets were constructed during the year, of which, 5,231
toilets were constructed directly by your Company. With this, a total
of 15,429 low-cost sanitary units have been constructed so far in your
Company''s factory catchment areas covering 20 districts in 10 states.
In areas with water quality problems, 46 Reverse Osmosis plants have
been installed providing safe drinking water to about 40,690 rural
households in the state of Andhra Pradesh. ''Swasthya Choupal'', your
Company''s e-Choupal Rural Health initiative, was consolidated in 7
districts of Uttar Pradesh and expanded to 3 districts in Madhya
Pradesh during the year.
Solid Waste Management
Your Company''s Solid Waste Management programme - christened ''WOW -
Wellbeing out of Waste'' presently extends to Hyderabad, Chennai,
Bengaluru, Coimbatore and several towns of Telangana, enjoying the
support of over 5 million citizens, 500,000 school children, 350
corporates, more than 1,000 commercial establishments and around 200
The door-to-door waste collection programme under this initiative is
operational in 9 districts of Saharanpur, Hooghly, Kolkata, Munger,
Guntur, Madurai, Pune, Thiruvallur and Haridwar. These projects, which
together cover over 42,000 households, handled 3,975 MT of waste during
ITC Sangeet Research Academy
The ITC Sangeet Research Academy (ITC SRA), which was established in
1977, is a true embodiment of your Company''s sustained commitment to a
priceless national heritage. Your Company''s pledge towards ensuring
enduring excellence in Classical Music education has helped ITC SRA
uphold the age-old ''Guru-Shishya Parampara'' - a model that has
otherwise begun fading away owing to lack of patronage. Although
methods of music education are now changing with the advent of
digitisation, exceptionally gifted students, carefully handpicked
across India receive full scholarships to reside and pursue their music
education at the Academy''s campus. This has helped young talent who
have limited access to the newer modes of music education, to train
under the tutelage of the country''s most distinguished stalwarts who
are helping create the next generation of musical masters.
Forging Partnerships with NGOs
The substantial progress made by your Company''s Social Investments
Programme in contributing to address some of the country''s key
development challenges, has been possible in significant measure, due
to your Company''s partnerships with globally renowned NGOs such as
BAIF, DB Tech, DSC, FES, MYRADA, Pratham, SEWA Bharat, Outreach and
Water for People 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 India''s most
challenging problems of development in the years to come.
The annual report on Corporate Social Responsibility activities as
required under Sections 134 and 135 of the Companies Act, 2013 read
with Rule 8 of the Companies (Corporate Social Responsibility Policy)
Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is
provided in the Annexure forming part of this Report.
Environment, Health & Safety
Your Company''s Environment, Health & Safety (EHS) strategies are
directed towards achieving the greenest and safest operations across
all your Company''s units by optimising natural resource usage and
providing a safe and healthy workplace. Systemic and structured efforts
continue to be made towards natural resource conservation by
continuously improving resource-use efficiencies and enhancing the
positive environmental footprint following a life-cycle based approach.
Your Company''s focus on inculcating a green and safe culture is
supported through the adoption of EHS standards that incorporate best
international standards, codes and practices and ensuring compliance
through regular audits.
Your Company is addressing the critical area of climate change
mitigation through several innovative and pioneering initiatives. These
include continuous improvement in energy efficiency, enhancing the
renewable energy portfolio, integrating green attributes into the built
environment, better efficiency in material utilisation, maximising
water use efficiencies and rain water harvesting, maximising reuse and
recycling of waste and utilising post-consumer waste as raw material.
Energy Conservation and Renewable Energy
Your Company is well positioned to benefit from India-specific energy
conservation and renewable energy promotion schemes such as Perform,
Achieve and Trade (PAT) and Renewable Energy Certificates (RECs)
promoted by the Government of India. As a responsible corporate
citizen, your Company has made a commitment to reduce dependence on
energy from fossil fuels and to achieve at least 50% of its total
energy requirements from renewable sources by 2020. Significant
progress has been made in enhancing the renewable energy portfolio and
during 2015-16 over 47% of your Company''s total energy requirements was
met from carbon neutral fuels such as biomass, and wind and solar. Your
Company has developed a strategic approach and drawn up action plans
based on a feasible balance of energy conservation and renewable energy
investments to progressively move towards meeting the aforestated
With water scarcity increasingly becoming an area of serious concern,
your Company continues to focus on integrated water management
including water conservation and harvesting initiatives at its units -
while also working towards meeting the water security needs of all
stakeholders at the local watershed level. These include adopting
latest technologies to reduce fresh water intake and increase reuse and
recycling practices, best practices to achieve zero effluent
discharges, rainwater harvesting, etc., within the unit premises. These
initiatives, along with your Company''s CSR interventions in the area of
integrated watershed development, have resulted in the creation of
rainwater harvesting potential that is over 3 times the net water
consumption of your Company''s operations.
Greenhouse Gases and Carbon Sequestration
During the year, your Company improved its ''disclosure score'' in the
Climate Disclosure Leadership Index published under the aegis of the
Carbon Disclosure Project from 94% in 2014-15 to100% in 2015-16. In
this context, it may be noted that only 3 other Indian organisations
have achieved a perfect score of 100%. The green house gas (GHG)
inventory of your Company for the year 2015-16 compiled as per the ISO
4 standard, has been assured at the highest ''Reasonable Level'' by an
independent third party assurance provider, are markable achievement
considering the scale and spread of your Company''s operations.
Reaffirming your Company''s 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. In
order to continually reduce your Company''s energy footprint, green
features are integrated in all new constructions and are also being
incorporated in existing hotels, manufacturing units, warehouses and
office complexes during retrofits.
Your Company''s Social & Farm Forestry initiatives enable sequestration
of over twice the amount of Carbon Dioxide emitted by its operations.
Besides mitigating the impact of increasing levels of GHG emissions in
the atmosphere, these initiatives help greening degraded wasteland,
prevent soil erosion, enhance organic matter content in soil and enable
ground water recharge.
Your Company continues to make significant progress in reducing
specific waste generation through constant monitoring and improvement
of efficiencies in material utilisation and also in achieving almost
total recycling of waste generated in operations. In this way, your
Company has prevented waste reaching landfills and associated problems
such as soil and groundwater contamination and GHG emissions, all of
which can impact public health. In the current year, your Company has
achieved over 99% waste recycling, with the Paperboards and Specialty
Papers Business, which accounts for 90.8% of the total waste generated
in your Company, recycling 99.7% of the total waste generated by its
operations. During the year, this Business also recycled around
1,13,213 tonnes of externally sourced post-consumer waste paper,
thereby creating yet another positive environmental footprint.
Your Company''s commitment to provide a safe and healthy workplace to
all has been reaffirmed by several national and international awards
and certifications received by various units. Your Company''s approach
is to institutionalise safety as a value-led concept with focus on
inculcating a sense of ownership at all levels to drive behavioural
change. In line with this approach, several of your Company''s operating
units are progressively implementing behavioural based safety
initiatives and custom-made risk based training programmes leading to
the creation of safety culture.
Your Company incorporates established engineering standards in the
design and project execution phase itself for all investments in the
built environment, with a view to ensuring the highest levels of safety
besides optimising costs. Environment, Health & Safety audits before
commissioning and during the operation of units are carried out to
verify compliance with standards.
Promoting Thought Leadership in Sustainability
The ''CII-ITC Centre of Excellence for Sustainable Development'',
established by your Company in 2006 in collaboration with the
Confederation of Indian Industry (CII), continues to focus on its
endeavours to promote sustainable business practices amongst Indian
enterprises. The major highlights during the year include the
Sustainability Summit inaugurated by the Honourable Union Minister in
charge of Environment, Forests & Climate Change. The Honourable Union
Minister for Railways was the Chief Guest at a Special Plenary.
The 10th CII-ITC Sustainable Awards were handed over by the Honourable
Union Minister for Railways to 26 winning companies as India''s Most
Sustainable. On the occasion of International Day for Biological
Diversity, the India Business Biodiversity Initiative (IBBI) released
''Bridging Business and Biodiversity: Innovative Approaches'' along with
the Ministry of Environment, Forest and Climate Change - a study
highlighting the best practices of Indian companies that are
signatories to the IBBI Declaration.
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.
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. LSTC has evolved over the years into
a team of nearly 350 highly qualified scientists, equipped with
world-class measurement capabilities and state-of-the-art facilities to
conduct experimental research. Several Centres of Excellence have
evolved over the past few years in the identified competency areas. In
addition, a number of areas centred around these capabilities have
secured global quality certifications of the highest order.
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 Company''s businesses.
LSTC continues to evaluate and build research collaborations with
globally recognised 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 LSTC''s efforts in creating
future generations of these crops with greater genetic and trait
diversities leading to significant benefits for your Company''s
businesses. Further, these outcomes have a strong potential to
contribute towards augmenting the nation''s ecological capital and
biodiversity as well. Several ''proof of concept'' studies have been
accomplished at the laboratory scale which are being advanced to
large-scale field trials in multiple locations. These initiatives are
expected to produce significant business impact in the years to come.
In addition, the Agrisciences team continues to focus on delivering
effective solutions using contemporary technologies in other crops such
as wheat, soya and potato.
Recognising the unique construct of your Company in terms of its strong
presence in Agri, Branded Packaged Foods and Personal Care Products
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 this trend. 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 Branded Packaged Foods and Personal Care Products Businesses.
Multiple value propositions have been identified in the area of
functional foods, which are being progressed to products of the future
with strong scientifically validated claims via clinical trials.
Similar advances have been made in the area of personal care products.
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)
and Medicinal and Aromatic Plants. New capabilities and centres of
excellence have been identified to support your Company''s aggressive
growth plans in the FMCG space.
LSTC has a clear vision and a road map for long-term R&D, to ensure an
outstanding journey 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.
In line with your Company''s relentless focus on operational excellence
and quality, each Business is mandated to continuously innovate on
processes and systems to enhance their competitive position. During
the year, your Company''s 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
Businesses continued to pursue ''Total Productive Maintenance'' (TPM)
programmes in all units, resulting in substantial cost savings and
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 operate in
compliance with stringent food safety and quality standards. Almost
all Company owned units/ hotels and 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) / ISO 22000 standards. Additionally, the quality of all FMCG
products of your Company is regularly monitored through ''Product
Quality Ratings Systems'' (PQRS).
RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE
As mentioned in the previous years'' Reports of the Directors, your
Company had secured from the District Court of New Jersey, USA, a
decree for US$ 12.19 million together with interest and costs against
Suresh and Devang Chitalia of USA and their companies, and the
Chitalias had filed Bankruptcy Petitions before the Bankruptcy Court,
Orlando, Florida, which are yet to be determined.
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 by a suit filed in India
against some associates of the Chitalias. 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 Honourable Calcutta
High Court while others are pending.
During the year, your Company''s treasury operations continued to focus
on deployment of surplus liquidity and management of foreign exchange
exposures within a well-defined risk management framework.
Easing inflation and improvement in the Fiscal and Current Account
deficit position provided sufficient comfort to the Reserve Bank of
India for reducing policy rates by a cumulative 75 basis points during
the year. However, lack of corresponding reduction in bank base rates,
tight banking liquidity conditions, and adverse demand-supply dynamics
due to higher issuance of State Development Loans impeded transmission
of rate cuts and brought about intermittent spikes in market interest
All investment decisions relating to deployment of surplus liquidity
continued to be guided by the tenets of Safety, Liquidity and Return.
Proactive management of portfolio duration helped improve treasury
performance. The portfolio mix during the year was continuously
rebalanced in line with the evolving interest rate environment.
Further, towards the year end, your Company increased the quantum of
investments in Tax-free Bonds, Taxable Bonds / Debentures and Bank
Fixed Deposits taking advantage of spikes in market interest rates.
Your Company''s 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 (INR) came under
pressure against the USD during the year. The key factors that
contributed to INR weakness include interest rate tightening by the US
Federal Reserve, monetary stimulus in the EU and Japan, risk aversion
caused by weak global economic growth and decline in commodity prices,
fears of fiscal slippage and lack of progress on the reforms agenda in
India, and depreciation of the Chinese Yuan. Under these circumstances,
the INR touched a low of 68.79 per USD in February 2016 - close to the
record low of 68.85 witnessed in August 2013. However, the INR
recovered significantly in March 2016 to close the year at 66.25
largely due to the Government''s announcement in the Union Budget 2016
of its commitment to reduce the Fiscal Deficit to 3.5% of GDP in
2016-17 and USD sell-off triggered by expectations of a more moderate
interest rate hike trajectory in the USA than anticipated earlier.
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 Company''s Internal Audit
Your Company''s erstwhile Public Deposit Scheme closed in the year 2000.
As at 31st March, 2016, there were no deposits due for repayment except
in respect of 2 deposit holders totalling to Rs. 20,000/- which have
been withheld on the directives received from the government agencies.
There was no failure to make repayments of Fixed Deposits on maturity
and the interest due thereon in terms of the conditions of your
Company''s erstwhile Schemes.
Your Company has not accepted any deposit from the public/ members
under Section 73 of the Companies Act, 2013 read with the Companies
(Acceptance of Deposits) Rules, 2014 during the year.
Changes in Directors
Mr. Pradeep Vasant Dhobale, Wholetime Director, retired from the
Company with effect from close of business on 6th December, 2015 after
38 years of service. Mr. Kurush Noshir Grant, Wholetime Director,
retired from the Company with effect from close of business on 22nd
January, 2016 after 35 years of service. Your Directors would like to
record their appreciation of the services rendered by Mr. Dhobale and
Mr. Sanjiv Puri and Mr. Rajiv Tandon, on the recommendation of the
Nomination & Compensation Committee, were appointed by the Board of
Directors of the Company (''the Board'') as Additional Directors of your
Company, and subject to the approval of the Members, also as Wholetime
Directors, with effect from 6th December, 2015 and 22nd January, 2016,
respectively. Mr. Tandon also continues as the Chief Financial Officer
of your Company.
Mr. Serajul Haq Khan, Independent Director, expired on 12th January,
2016. Your Directors deeply mourn the demise of Mr. Khan and place on
record their appreciation for the valuable contribution made by Mr.
Khan during his tenure.
Ms. Nirupama Rao, on the recommendation of the Nomination &
Compensation Committee, was appointed by the Board as Additional
Director, and subject to the approval of the Members, also as
Independent Director, with effect from 8th April, 2016.
Mr. Angara Venkata Girija Kumar [representing General Insurers'' (Public
Sector) Association of India], on completion of his term, ceased to be
Non-Executive Director of your Company with effect from close of
business on 22nd July, 2015. Mr. Girija Kumar, on the recommendation of
the Nomination & Compensation Committee, was appointed by the Board as
Additional Non-Executive Director on 31st July, 2015.
By virtue of the provisions of Article 96 of the Articles of
Association of your Company and Section 161 of the Companies Act, 2013
(''the Act''), Messrs. Puri, Tandon, Girija Kumar and Ms. Rao will vacate
office at the ensuing Annual General Meeting (''AGM'') of your Company.
Your Board at the meeting held on 20th May, 2016, on the recommendation
of the Nomination & Compensation Committee, has recommended for the
approval of the Members the appointment of Mr. Puri and Mr. Tandon as
Directors, and also as Wholetime Directors of your Company, for a
period of three years from the date of the AGM. Your Board at the said
meeting, on the recommendation of the Nomination & Compensation
Committee, also recommended for the approval of the Members the
appointment of Ms. Rao as an Independent Director in terms of Section
149 of the Act and Regulation 17 of the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations,
2015, for a period of five years with effect from 8th April, 2016.
Mr. Yogesh Chander Deveshwar, Wholetime Director and Chairman of your
Company, will complete his present term on 4th February, 2017. The
Nomination & Compensation Committee and the Board strongly urged Mr.
Deveshwar to continue for a longer period in his present role. Mr.
Deveshwar however expressed his desire to shed the executive role, in
accordance with the indication given by him at the 100th AGM in 2011,
and put in place a youthful leadership at the helm in the longer term
interest of the Company. At the request of the Nomination &
Compensation Committee and the Board, recognising the need for orderly
transition in a company of ITC''s size and complexity,
Mr. Deveshwar has instead agreed to provide guidance and mentorship to
the new executive management, that is planned to be put in place, as
Non-Executive Chairman on expiry of his current term.
Accordingly the Board at the meeting held on 20th May, 2016, on the
recommendation of the Nomination & Compensation Committee, has
recommended for the approval of the Members, the appointment of Mr.
Deveshwar as Non-Executive Director, not liable to retire by rotation,
and Chairman of the Company for a period of three years with effect
from 5th February, 2017.
Notices under Section 160 of the Act have been received for the
appointment of Messrs. Deveshwar, Puri, Tandon and Ms. Rao, who have
filed their consents to act as Directors of the Company, if appointed.
Appropriate resolutions seeking your approval to the aforesaid
appointments are appearing in the Notice convening the 105th AGM of
Retirement by Rotation
In accordance with the provisions of Section 152 of the Act read with
Article 91 of the Articles of Association of the Company, Mr. Nakul
Anand will retire by rotation at the AGM and being eligible, offers
himself for re-election. Your Board has recommended his re-election.
Number of Board Meetings
During the year ended 31st March, 2016, six meetings of the Board were
Attributes, Qualifications & Independence of Directors and their
The criteria for determining qualifications, positive attributes and
independence of Directors in terms of the Act and the Rules thereunder,
both in respect of Independent Directors and the other Directors as
applicable, has been approved by the Nomination & Compensation
Committee, as reported last year. The Governance Policy of the Company
also, inter alia, requires that Non-Executive Directors, including
Independent Directors, be drawn from amongst eminent professionals with
experience in business/ finance/ law/ public administration &
enterprises. The Board Diversity Policy of the Company requires the
Board to have balance of skills, experience and diversity of
perspectives appropriate to the Company. The Articles of Association of
the Company provide that the strength of the Board shall not be fewer
than five nor more than eighteen.
Directors are appointed/ re-appointed with the approval of the Members
for a period of three to five years or a shorter duration, in
accordance with retirement guidelines as determined by the Board from
time to time. The initial appointment of Executive Directors is
normally for a period of three years. All Directors, other than
Independent Directors, are liable to retire by rotation, unless
otherwise approved by the Members. One-third of the Directors who are
liable to retire by rotation, retire every year and are eligible for
The Independent Directors of your Company have confirmed that they meet
the criteria of independence as prescribed under Section 149 of the Act
and Regulation 16 of Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015.
The Company''s policy relating to remuneration of Directors, Key
Managerial Personnel and other employees is provided under the section
''Report on Corporate Governance'' in the Report and Accounts.
The Nomination & Compensation Committee has approved the Policy on
Board evaluation, evaluation of Board Committees'' functioning and
individual Director evaluation. In keeping with ITC''s belief that it is
the collective effectiveness of the Board that impacts Company
performance, the primary evaluation platform is that of collective
performance of the Board as a whole. Board performance is assessed
against the role and responsibilities of the Board as provided in the
Act and the Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015 read with the Company''s
Governance Policy. The parameters for Board performance evaluation
have been derived from the Board''s core role of trusteeship to protect
and enhance shareholder value as well as fulfil expectations of other
stakeholders through strategic supervision of the Company. Evaluation
of functioning of Board Committees is based on discussions amongst
Committee members and shared by the respective Committee Chairman with
the Board. Individual Directors are evaluated in the context of the
role played by each Director as a member of the Board at its meetings,
in assisting the Board in realising its role of strategic supervision
of the functioning of the Company in pursuit of its purpose and goals.
While the Board evaluated its performance against the parameters laid
down by the Nomination & Compensation Committee, the evaluation of
individual Directors was carried out anonymously in order to ensure
objectivity. Reports on functioning of Committees were placed by the
respective Committee before the Board.
AUDIT COMMITTEE & AUDITORS
The composition of the Audit Committee is provided under the section
''Board of Directors and Committees'' in the Report and Accounts.
The Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants
(DHS), were appointed with your approval at the 103rd AGM to hold such
office till the conclusion of the 108th AGM. The Board, in terms of
Section 139 of the Act, on the recommendation of the Audit Committee,
has recommended for the ratification of the Members the appointment of
DHS from the conclusion of the ensuing AGM till the conclusion of the
106th AGM. The Board, in terms of Section 142 of the Act, on the
recommendation of the Audit Committee, has also recommended for the
approval of the Members the remuneration of DHS for the financial year
2016-17. Appropriate resolution for the purpose is appearing in the
Notice convening the 105th AGM of the Company.
Your Board, on the recommendation of the Audit Committee, appointed for
the financial year 2016-17:
(i) Mr. P. Raju Iyer, Cost Accountant, for audit of cost records
maintained by the Company in respect of ''Paper and Paperboard'' and
''Nicotine Gum'' products.
(ii) Messrs. Shome & Banerjee, Cost Accountants, for audit of cost
records maintained by the Company in respect of all applicable products
of the Company, other than ''Paper and Paperboard'' and ''Nicotine Gum''.
In terms of Section 148 of the Act read with the Companies (Audit and
Auditors) Rules, 2014, appropriate resolutions seeking your
ratification of the remuneration of the said Cost Auditors are
appearing in the Notice convening the 105th AGM of the Company.
Your Board appointed Messrs. S. M. Gupta & Co., Company Secretaries, to
conduct secretarial audit of the Company for the financial year ended
31st March, 2016. The Report of Messrs. S. M. Gupta & Co. is provided
in the Annexure forming part of this Report, in terms of Section 204 of
EMPLOYEE STOCK OPTION SCHEMES
Under the Company''s Employee Stock Option Schemes, 3,16,87,450 Ordinary
Shares of Rs. 1/- each, fully paid- up, were issued and allotted during
the year upon exercise of 31,68,745 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 on 31st
March, 2016, stands increased to Rs. 804,72,06,991/- divided into
804,72,06,991 Ordinary Shares of Rs. 1/- each.
Disclosures with respect to Stock Options, as required under Regulation
14 of the Securities and Exchange Board of India (Share Based Employee
Benefits) Regulations, 2014 (''the Regulations''), are available in the
Notes to the Financial Statements and can also be accessed on the
Company''s corporate website ''www.itcportal.com'' under the section
''Shareholder Value''. During the year, there has not been any material
change in the Company''s Employee Stock Option Schemes.
Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have
certified that the Company''s Employee Stock Option Schemes have been
implemented in accordance with the Regulations and the resolutions
passed by the Members in this regard.
INVESTOR SERVICE CENTRE
The Investor Service Centre (ISC) of your Company, accredited with ISO
9001:2008 certification, is registered with SEBI as Category II Share
Transfer Agent for providing in-house share registration and related
services. During the year, the infrastructure, systems and processes
in ISC were further upgraded. Messrs. Det Norske Veritas, accredited
agency for ISO certification, has accorded the highest possible Level 5
rating to ISC for the seventh consecutive year exemplifying the
superior standards practised by ISC in providing service of a high
order to the shareholders and investors.
RELATED PARTY TRANSACTIONS
All contracts or arrangements entered into by the Company with its
related parties during the financial year were in accordance with the
provisions of the Companies Act, 2013 and the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015 and erstwhile Clause 49
of the Listing Agreement. All such contracts or arrangements have been
approved by the Audit Committee. No material contracts or arrangements
with related parties were entered into during the year under review.
Further, the prescribed details of related party transactions of the
Company in Form No. AOC-2, in terms of Section 134 of the Act read with
Rule 8 of the Companies (Accounts) Rules, 2014 is given in the Annexure
to this Report.
Your Company''s Policy on Related Party Transactions, as adopted by your
Board, can be accessed on the corporate website at
DIRECTORS'' RESPONSIBILITY STATEMENT
As required under Section 134 of the Companies Act, 2013, your
Directors confirm having:
a) followed in the preparation of the Annual Accounts, the applicable
accounting standards with proper explanation relating to material
departures if any;
b) selected such accounting policies and applied them consistently and
made judgements and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of your Company at
the end of the financial year and of the profit of your Company for
c) taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies
Act, 2013 for safeguarding the assets of your Company and for
preventing and detecting fraud and other irregularities;
d) prepared the Annual Accounts on a going concern basis;
e) laid down internal financial controls to be followed by your Company
and that such internal financial controls were adequate and operating
f) devised proper systems to ensure compliance with the provisions of
all applicable laws and that such systems were adequate and operating
CONSOLIDATED FINANCIAL STATEMENTS
Your Company''s Board of Directors is responsible for the preparation of
the consolidated financial statements of your Company, its
Subsidiaries, Associates and Joint Venture entities (''the Group''), in
terms of the requirements of the Companies Act, 2013 and in accordance
with the accounting principles generally accepted in India, including
the Accounting Standards specified under Section 133 of the Act, read
with Rule 7 of the Companies (Accounts) Rules, 2014.
The respective Board of Directors of the companies included in the
Group and of its associates and joint venture entities are responsible
for maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Group and for
preventing and detecting frauds and other irregularities; the selection
and application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and the design,
implementation and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error,
which have been used for the purpose of preparation of the consolidated
financial statements by the Directors of your Company, as aforestated.
Compliance with conditions of Corporate Governance
The certificate of the Auditors, Messrs. Deloitte Haskins & Sells,
confirming compliance of conditions of Corporate Governance as
stipulated under the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 and
erstwhile Clause 49 of the Listing Agreement with Stock Exchanges in
India, is annexed.
Compliance with requirements relating to downstream investments
Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have
certified that the Company and its subsidiaries are in compliance with
the requirements relating to downstream investment as laid down in the
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Ninth Amendment) Regulations, 2013 and other
applicable FEMA Regulations.
Going Concern status
There is no significant or material order passed during the year by any
regulator, court or tribunal impacting the going concern status of the
Company or its future operations.
Extract of Annual Return
The information required under Section 134 of the Act read with Rule 12
of the Companies (Management and Administration) Rules, 2014, is
Particulars of loans, guarantees or investments
Details of Loans, Guarantees and Investments covered under the
provisions of Section 186 of the Companies Act, 2013 are provided in
Notes 11, 12, 13, 17 and 31 (iv) (a) (ii) to the Financial Statements.
Particulars relating to Conservation of Energy and Technology
Particulars as required under Section 134 of the Companies Act, 2013
relating to Conservation of Energy and Technology Absorption are also
provided in the Annexure to this Report.
The total number of employees as on 31st March, 2016 stood at 25,564.
There were 156 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, 2016. The information required under Section 197(12)
of the Companies Act, 2013 and the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 is provided in the
Annexure forming part of this Report.
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.
Over the last twenty years, your Company has created multiple drivers
of growth by developing a portfolio of world-class businesses. During
this period, your Company''s Gross Turnover and Post-tax profit have
recorded an impressive compound growth of 12.2% and 19.9% per annum
respectively. Return on Capital Employed has improved substantially
from 28.4% to 43.1% during this period. Total Shareholder Returns,
measured in terms of increase in market capitalisation and dividends,
have grown at a compound rate of 23.3% per annum during this period,
placing your Company amongst the foremost in the country in terms of
efficiency of servicing financial capital.
Your Company today, is the leading FMCG marketer in India, a
pre-eminent hotel chain and a trailblazer in green hoteliering, the
clear market leader in the Indian Paperboard and Packaging industry,
the country''s foremost Agri business player and a global exemplar in
sustainable business practices. Additionally, its wholly-owned
subsidiary, ITC Infotech India Limited, is one of India''s fastest
growing Information Technology companies in the mid-tier segment.
Your Company''s Board and employees are inspired by the Vision of
sustaining ITC''s position as one of India''s most admired and valuable
companies, creating enduring value for all stakeholders, including the
shareholders and the Indian society. The vision of enlarging your
Company''s contribution to the Indian economy is driven by its ''Let''s
Put India First'' credo as well as the core values of Trusteeship,
Transparency, Empowerment, Accountability and Ethical Citizenship,
which are the cornerstones of ITC''s Corporate Governance philosophy.
Inspired by this Vision, driven by Values and powered by internal
Vitality, your Directors and employees look forward to the future with
confidence and stand committed to creating an even brighter future for
On behalf of the Board
20th May, 2016 Y. C. DEVESHWAR Chairman
India R. TANDON Director & Chief Financial Officer