Report of the Board of Directors
Profit After Tax at Rs. 12464.32 crores registered growth of 11.1% over the previous year. Total Comprehensive Income for the year stood at Rs. 12826.88 crores (previous year Rs. 11605.59 crores). Earnings Per Share for the year stood at Rs. 10.19 (previous year Rs. 9.22). Cash generated from operations aggregated Rs. 17234.93 crores.
The Directors are pleased to recommend an Ordinary Dividend of Rs. 5.75 per share (previous year Ordinary Dividend of Rs. 5.15 per share) for the year ended 31st March, 2019. Total cash outflow in this regard will be Rs. 8497.59 crores including Dividend Distribution Tax of Rs. 1448.88 crores.
Over the last five years, the Value-Added by your Company, i.e. the value created by the economic activities of your Company and its employees, aggregated around Rs. 220000 crores of which over Rs. 160000 crores accrued to the Exchequer.
Including the share of dividends paid and retained earnings attributable to government owned institutions, your Company’s contribution to the Central and State Governments represented about 80% 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$ 7.2 billion, of which agri exports constituted 56%. 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 2018-19, your Company and its subsidiaries earned Rs. 4673 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 3828 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency aggregated Rs. 2373 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1947 crores and import of capital goods at Rs. 426 crores.
PROFITS, DIVIDENDS AND RETAINED EARNINGS
(Rs. in Crores)
a) Profit Before Tax®
b) Tax Expense
- Current Tax
- Deferred Tax
c) Profit for the year®
d) Other Comprehensive Income
e) Total Comprehensive Income
STATEMENT OF RETAINED EARNINGS
a) At the beginning of the year
b) Add: Profit for the year
c) Add: Other Comprehensive Income (net of tax)
d) Add: Transfer from share option on exercise and lapse
e) Less: Dividend
- Ordinary Dividend of Rs. 5.15 (2018: Rs. 4.75) per share
- Income Tax on Dividend paid
f) At the end of the year
@Previous year includes Exceptional items representing provisions for earlier years in respect of Tamil Nadu entry tax that were written back based on a favourable order of the Honourable Supreme Court.
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, timely preparation of reliable financial information and compliance with the requirements with respect to related party transactions.
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.
Independent consultants have confirmed compliance of Internal Audit systems and processes with the Standards on Internal Audit (SIA) issued by the Institute of Chartered Accountants of India (ICAI). Although the Standards continue to be recommendatory in nature, such validation evidences the contemporariness of the Internal Audit function.
The Internal Audit function consisting of professionally qualified accountants, engineers and Information Technology (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. Information Technology systems undergo pre-implementation audit before being deployed for usage in businesses, thereby delivering an independent assurance with respect to the rigour of implementation. The usage of data analytics in audits was augmented across the organisation.
Qualified engineers in the Internal Audit function review the quality of design, planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield ‘value for money’. Internal Audit continues to use state-of-the-art tools and software for conducting project audits.
Processes in the Internal Audit function have been continuously strengthened for enhanced effectiveness and productivity including the deployment of best-in-class tools for analytics in the Audit domain, certification as complying with ISO 9001:2015 Quality Standards in its processes, ongoing knowledge improvement programmes for staff, etc. The Audit methodology is also designed to validate effectiveness of critical IT controls that are embedded in the business systems, leading to greater alignment with the business process environment.
The Audit Committee of your Board met eight 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 of statutory mandates.
HUMAN RESOURCE DEVELOPMENT
The talent management strategy of your Company focuses on sustaining ITC’s position as one of India’s most valuable corporations, remaining customer-focused, competitively-superior, performance-driven and future-ready. The initiatives and processes strive to deliver the unique talent promise of Building Winning Businesses, Developing Business Leaders and Creating Value for India. The talent development practices help create, foster and strengthen the capability of human capital to deliver critical outcomes on the vectors of strategic effectiveness, operational efficiency and capital productivity.
Your Company’s ‘Strategy of Organisation’ is based on the approach of distributed leadership enabled through a three-tier governance structure. Such an approach allows businesses, through their management committees, to focus, develop and execute business plans relevant to their product-market spaces while leveraging the institutional strengths of your Company and the opportunities for synergy between businesses.
Your Company’s strong employer equity has enabled the attraction and retention of high quality talent.
The management trainee programme augmented with recruitment of high quality talent when required, is an integral part of our leadership pipeline development process. We continue to draw the finest technical, managerial and financial talent from premier institutions in the country and are ranked amongst the leading companies in these institutions. A recent survey conducted by Nielsen amongst MBA students featured ITC amongst the Top 8 most preferred employers. Your Company’s intensive engagement with campuses over decades to communicate ITC’s talent proposition through case study competitions, knowledge sharing programmes by senior managers and the annual internship programmes have all contributed to create a compelling reason for the best candidates to aspire for a career with ITC.
Your Company’s approach to talent development is founded on the belief that learning initiatives must remain synergistic and aligned to business outcomes, emphasise experiential learning, provide an enabling and supportive environment and promote learning agility. Deep functional expertise is fostered through immersion in solving complex customer problems by the application of domain expertise early in managerial careers.
Key talent is provided critical experiences in high impact roles and mentored by senior managers. Managers are assessed on your Company’s behavioral competency framework and provided with learning and development support to address any areas identified for improvement. As part of your Company’s managerial development and capability building strategy, five platform areas have been identified - Strategic, Value Chain, Leadership, Innovation and Human Resources Development. Various programmes have been designed and customised to your Company’s requirements under these platforms, delivered by leading international faculty. Learning is further supplemented with on demand, online programmes made accessible to employees through globally recognised content platforms. Your Company’s investments in creating an internal technical training infrastructure and academy was recently acknowledged by Frost & Sullivan when the institute, ITC Gurukul, won the ‘Project Evaluation and Recognition Program 2018’ for ‘Enhancing Learning Effectiveness by Leveraging Technology’.
Your Company has further strengthened its performance management system and its culture of accountability through renewed emphasis on Management by Objectives which includes clearly defined goals, outcomes based assessment and even sharper alignment of performance and rewards.
Your Company continued with the practice of periodically assessing employee engagement through a Company-wide survey in 2018. During the year, comprehensive action plans were formulated and implemented which included the launch and strengthening of various recognition initiatives, systems for career dialoguing, employee wellbeing programmes, periodic communication by the leadership teams in each business as well as through the novel digital platform ‘Studio One’.
Driven by an ambitious growth agenda, your Company has already commissioned several world-class Integrated Consumer Goods Manufacturing and Logistics facilities across the country and the footprint is in the process of being expanded further. Your Company believes that alignment of all employees to a shared vision and purpose is vital for winning in the marketplace. It also recognises the mutuality of interests with key stakeholders and is committed to building harmonious employee relations. Your Company remains dedicated to an Employee Relations climate of partnership and mutuality while ensuring operations are cost competitive, flexible and responsive. 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 long-term agreements at several of its manufacturing units and hotel properties, ensured smooth commencement of operations at greenfield locations and the execution of productivity improvement practices. Several initiatives have been taken to foster a culture of commitment amongst the demographically diverse workforce in these new facilities.
Your Company believes that the drive for progress is in never being satisfied with the status quo. We are confident that every one of your Company’s 27,000 plus employees will relentlessly strive to meet the bold growth agenda, deliver world-class performance, innovate newer and better ways of doing things, uphold human dignity, 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 dimensions and also as a great institution - so that it continues to succeed in its relentless pursuit of creating enduring value.
Details of constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are provided in the ‘Business Responsibility Report’, forming part of Report and Accounts.
Your 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 leak of unpublished price sensitive information, or any violation of the ITC Code of Conduct, that could adversely impact your Company’s operations, business performance and / or reputation. The Policy provides that your 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 your 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 your Company’s corporate website ‘www.itcportal.com’.
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 and environmental replenishment 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, social and environmental 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 six 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 carbon positive (for 14 consecutive years), water positive (for 17 years in a row) and solid waste recycling positive (for 12 years in succession).
To contribute to the nation’s efforts in combating 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, achievement of international benchmarks in energy and water consumption. During the year, about 41% of your Company’s total energy requirements were met from renewable energy sources - a creditable performance given its expanding manufacturing base.
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 mitigating the impacts along the value chain of each business.
Your Company’s 15th Sustainability Report, published during the year details the progress made across all dimensions of the ‘Triple Bottom Line’ for the year 2017-18. This report is in conformance with the Global Reporting Initiative (GRI) standards 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 16th Sustainability Report, covering the sustainability performance of your Company for the year 2018-19, is being prepared in accordance with the GRI Standards and will be made available shortly.
In addition, the Business Responsibility Report (BRR), as mandated by the Securities and Exchange Board of India (SEBI), for the year under review is annexed to this Report and Accounts. The BRR maps the sustainability performance of your Company against the reporting framework suggested by SEBI.
Corporate Social Responsibility (CSR)
Your Company’s overarching commitment 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, your Company adopted a comprehensive CSR Policy in 2014-15 outlining programmes, projects and activities that your Company plans to undertake to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Schedule VII read with Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.
The key elements of your Company’s CSR interventions are to:
- Deepen engagement in identified core operational geographies to promote holistic development and design interventions in order to respond to the most significant development challenges of your Company’s stakeholder groups.
- Strengthen capabilities of Non-Government Organisations (NGOs) / Community Based Organisations (CBOs) in all the project catchments for participatory planning, ownership and sustainability of interventions.
- Drive the development agenda in a manner that benefits the poor and marginalised communities in your Company’s factory and agri-catchments, thereby significantly improving Human Development Indices (HDI).
- Ensure behavioural change through focus on demand generation for all interventions, thereby enabling participation, contribution and asset creation for the community.
- Continue to strive for scale by leveraging government partnerships and accessing the most contemporary knowledge / technical know-how.
Your Company’s stakeholders are confronted with multi-dimensional and inter-related concerns, 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 projects is spread over 27 States/Union Territories covering 235 districts.
Your Company’s pioneering afforestation initiative through the Social Forestry programme greened 33,982 acres during the year. It is currently spread across 16 districts in six States covering 3.29 lakh acres in 5,087 villages, impacting over 1,21,557 poor households. Together with your Company’s Farm Forestry programme, this initiative has greened nearly 7.33 lakh acres till date, and generated about 135 million person days of employment for rural households, including poor tribal and marginal farmers. Integral to the Social Forestry programme is the Agro-Forestry initiative, which cumulatively extends to over 1.12 lakh acres and ensures food, fodder and wood security.
Besides enhancing farm level employment, generating incomes and increasing green cover, this large-scale initiative also contributes meaningfully to the nation’s endeavour to create additional carbon sinks for tackling climate change.
In addition to the above, the Social and Farm Forestry initiative of your Company, through a multiplier effect, has led to improvement in pulpwood and fuelwood availability in Andhra Pradesh, Telangana, Karnataka, Chhattisgarh and Odisha. In the state of Tripura, this initiative is also creating bamboo wood source that is suitable for agarbatti manufacturing.
Soil and Moisture Conservation
The Soil and Moisture Conservation programme aims to ensure water security for all stakeholders in the factory catchments and to drought-proof the agri-catchments to minimise risks to agricultural livelihoods arising from drought and moisture stress. The programme promotes the development and management of local water resources in moisture-stressed areas by facilitating community participation in planning and implementing measures such as building, reviving and maintaining water-harvesting structures. The coverage of this programme currently extends to 43 districts of 15 States. During the year, the area under watershed increased by 1,37,105 acres, taking the cumulative coverage area till 2018-19 to over 10.12 lakh acres. 2,646 water-harvesting structures were built during the year, creating 3.39 million kilolitres of rainwater harvesting potential, taking the total number of water harvesting structures to 15,086 and total net rainwater harvesting potential to 34.64 million kilolitres.
The focus of the programme is on reviving ecosystem services provided to agriculture by nature such as natural regulation of pests, pollination, nutrient cycling, soil health retention and genetic diversity, which have witnessed considerable erosion over the past few decades. During the year, your Company’s biodiversity conservation initiative covered 5,937 acres in seven states and 18 districts, taking the cumulative area under biodiversity conservation to 22,031 acres. While the conservation work is being carried out in select plots of village commons, this intervention significantly benefits agricultural activity in the vicinity of these plots through soil moisture retention, carbon sequestration and by acting as hosts to insects and birds.
The Sustainable Agriculture programme attempts to de-risk farmers from erratic weather events through the promotion of climate-smart agriculture premised on dissemination of relevant package of practices, adoption of appropriate mechanisation and provision of institutional services. Currently, 3.95 lakh acres are covered under the programme, which has a significant multiplier effect in terms of adoption by the farming community. During the year, knowledge was disseminated through 4,747 Farmer Field Schools and Choupal Pradarshan Khets benefiting around 1.34 lakh farmers. 351 Agri Business Centres delivered extension services, arranged agri-credit linkages and established collective input procurement and agricultural equipment on hire. In pursuit of your Company’s long-term sustainability objective of increasing soil organic carbon, a total of 3,169 compost units were constructed during the year taking the total number till date to over 40,699 units.
The ‘Village Adoption Programme’ pioneered by your Company’s Agri Business presently covers 250 model villages in the states of Andhra Pradesh, Karnataka, Telangana and Rajasthan. This initiative is aligned to the Prime Minister’s Sansad Adarsh Gram Yojana (SAGY), an initiative to promote holistic rural development. Your Company had entered into a partnership with NITI Aayog in April, 2018 to improve agriculture and other allied services in 27 aspirational districts of eight states (Assam, Bihar, Jharkhand, Rajasthan, Madhya Pradesh, Maharashtra, Odisha and Uttar Pradesh). The plan was to train government officers who, in turn, would cascade the methodology to farmers. During the year, your Company succeeded in creating 402 block level agri-officers as Master Trainers (MT), who in turn trained 2,259 village level personnel as Village Resource Persons (VRPs) to train farmers directly. These VRPs have so far covered 2.05 lakh farmers in package of practices appropriate for the dominant crop of the region.
The programme provides an opportunity for farmers to improve their livestock based livelihoods by improving productivity of the progeny through breed improvement and dissemination of improved animal husbandry practices. The programme provided extension services, including breeding, fodder propagation and training of farmers in six States and 21 districts. During the year, 1.46 lakh artificial inseminations (AIs) were carried out which led to the birth of 0.62 lakh high yielding progeny. Cumulatively, the figures for AIs and calving stand at 23.67 lakh and 8.13 lakh respectively.
Your Company is also working with dairy farmers in Bihar and Punjab to improve farm productivity through several extension services and to facilitate higher milk production. Qualified teams comprising veterinarians and para-veterinarians have been deployed to facilitate animal breeding, animal nutrition and animal health services towards improving farm productivity and promoting commercial dairy farming among farmers. During the year, 1.29 lakh cattle of 55,074 dairy farmers across 426 villages in six districts of Bihar were supported through training programmes on clean milk production, mastitis control and animal husbandry services like deworming, ectoparasite control, etc.
This initiative provided a range of gainful employment opportunities to over 64,000 poor women cumulatively, supported with capacity building and financial assistance by way of loans and grants. Included in the total are 22,700 ultra-poor women in your Company’s core catchments, who have access to sustainable sources of income through non-farm livelihood opportunities. The financial literacy and inclusion project, in partnership with Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation, was rolled out in 765 villages across 11 districts during the year.
The Primary Education Programme aims to provide children from weaker sections of society in your Company’s factory catchments access to education with focus on learning outcomes and retention. Operational in 24 districts of 14 states, the programme covered 1.15 lakh children during the year, thus taking the total coverage to around 6.91 lakh children. In addition, nearly 27,000 children were covered through support in teaching and learning material. 199 government primary schools were provided infrastructure support comprising boundary walls, additional classrooms, sanitation units, and furniture, taking the total number of government primary schools covered till date to 1,802. To ensure sustainable operations and maintenance of infrastructure provided, 682 School Management Committees were strengthened and 566 Child Cabinets and Water and Sanitation (WATSAN) Committees cumulatively were formed in various schools with the active involvement of students and teachers.
Skilling & Vocational Training
The Skilling & Vocational Training programme provides training in market linked skills to youth to enable them to compete in the job market. 12,172 youth were enrolled under different courses during the year of which 44% were female and 36% belonged to the SC/ST communities. The programme is operational in 32 districts of 17 States. In addition, 785 youth were trained with requisite skills and provided increased opportunities for entrepreneurial development.
The 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. In addition, since the inception of ITC Culinary Skills Training Centre, Chhindwara in 2014, 103 trainee chefs have successfully completed the six-month programme wherein cooking skills are imparted to youth from economically marginalised communities.
Health & Sanitation
Your Company continues to adopt a multi-pronged approach towards improving public health and hygiene. To promote a hygienic environment through prevention of open defecation and to reduce incidence of water-borne diseases, 4,443 Individual Household Toilets (IHHT) were constructed in 26 districts of 15 States in collaboration with the respective State Governments/District sanitation departments. With this, a total of 35,916 IHHTs have been constructed so far in your Company’s catchment areas. In addition, 32 community toilets were constructed/renovated in Bihar, West Bengal and New Delhi during the year, taking the cumulative to 62. Along with sanitation infrastructure development, special focus was given to awareness campaigns to create demand and drive behavioural change.
To make potable water available to local communities in three districts of Andhra Pradesh, Reverse Osmosis (RO) water purification plants were set up in villages with poor quality water. 26 new RO plants were established in 2018-19 taking the total to 127, which provide safe drinking water to over 150,000 rural people.
The Company continued to enhance awareness on various health related issues through a network of 415 women Village Health Champions (VHCs) who covered nearly 3.22 lakh women, adolescent girls and school children during the year. The programme is operational in seven districts of Uttar Pradesh and four districts of Madhya Pradesh. The VHCs conducted over 7,000 village meetings and participated in over 4,000 group events, apart from making door-to-door visits focusing on aspects like sanitation, menstrual and personal hygiene, family planning, diarrhoea prevention and nutrition.
Through your Company’s ‘Swasth India Mission’, a combination of audio-visual aids, games and practical training was leveraged to encourage healthy hygiene habits. Nearly 19.2 lakh children from around 5,247 schools in 60 cities in 12 states were covered during the year. Additionally, access to handwashing was enabled through the unique ‘ID Guard’ initiative to all the students covered in these 5,247 schools.
Over 77,000 beneficiaries were covered under Mother and Child Health initiative aimed at improving the health-nutrition status of women, adolescents and children in the catchments of a few of your Company’s factories with high maternal and infant mortality indices. This was achieved by strengthening institutional capacity, promoting greater convergence with existing government schemes and increasing access to basic services on maternal, child, and adolescent health, nutrition and child protection.
Solid Waste Management
Your Company’s waste recycling programme,
‘WOW - Well-Being Out of Waste’, enables the creation of a clean and green environment and promotes sustainable livelihoods for waste collectors. The programme continued to be executed in Coimbatore, Chennai, Bengaluru, Delhi, Muzaffarpur (Bihar), several districts of Telangana and Andhra Pradesh and now expanded to Mysuru and Chikmagalur districts during the year. The quantum of dry waste collected during the year was 51,696 tonnes from 651 wards. The programme has covered 89 lakh citizens, 48 lakh school children and 2,000 corporates since its inception.
It creates sustainable livelihoods for 14,745 waste collectors by facilitating an effective collection system in collaboration with municipal corporations.
The intervention has also created over 178 social entrepreneurs who are involved in maximising value capture from dry waste collected.
In addition to WOW Programme, another programme on solid waste management which deals with both dry and wet waste has spread to 15 districts of 10 States covering 2.12 lakh households and collected 12,608 tonnes of waste during the year. This programme focuses on minimising waste to landfill by managing waste at source. Home composting was practiced by 10,892 households. Under this programme, in 2018-19, 8,462 tonnes of wet waste was composted, 2,383 tonnes of dry waste recycled and only 14% of the total waste was sent to landfills.
ITC Sangeet Research Academy
The ITC Sangeet Research Academy (ITC SRA), which was established in 1977, is an embodiment of your Company’s sustained commitment to a priceless national heritage. The Company’s pledge towards ensuring enduring excellence in Classical Music education continues to drive ITC SRA in furthering its objective of preserving and propagating Hindustani classical music in the age-old principle of the ‘Guru-Shishya Parampara’. The eminent Gurus of the Academy, most of whom reside in the Academy’s campus, impart intensive training and quality education in Hindustani Classical Music to the Scholars. The present Gurus of the Academy are Padma Shri Pt. Ajoy Chakrabarty, Padma Shri Pt. Ulhas Kashalkar, Pt. Partha Chatterjee, Pt. Uday Bhawalkar, Vidushi Subhra Guha and Shri Omkar Dadarkar. The Academy’s focus continues to be on nurturing exceptionally gifted students selected from across India through a system of multi-level audition. Full scholarship is provided to them to reside and pursue music education in the Academy’s campus and in other designated locations under the tutelage of the country’s most distinguished musicians. The creation of the next generation of masters of Hindustani classical music for the propagation of a precious legacy continues to be the Academy’s objective.
Forging Partnerships with NGOs
The meaningful contribution made by your Company’s Social Investments Programme 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, DSC, FES, DHAN Foundation, MYRADA, Pratham, SEWA Bharat, Outreach, WASH Institute 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 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 & practices and verified 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 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. Accordingly, all factories incorporate appropriate green features and premium luxury hotels and office complexes continue to be certified at the highest level by either the US Green Building Council, Indian Green Building Council or the Bureau of Energy Efficiency (BEE).
Despite capacity augmentation during the year in FMCG, Hotels and Paperboards Businesses, about 41% of your Company’s total energy requirements were met from renewable sources such as biomass, wind and solar.
Your Company continues its efforts to achieve a 50% renewable energy share in its total energy consumption based on a mix of energy conservation and renewable energy investments, despite significant enhancement in its scale of operations going forward.
With water scarcity increasingly becoming an area of serious concern, your Company continues to focus on an integrated water management approach that includes water conservation and harvesting initiatives at its units - while at the same time working towards meeting the water security needs of all stakeholders at the local watershed level. Interventions have been rolled out to improve water-use efficiencies by adopting latest technologies and increasing reuse and recycling practices within the fence while also working with farmers and other community members towards improving their water-use efficiencies. The supply side interventions include enhancing capture and storage of rainwater (in soil and storage ponds) and recharging aquifers. These initiatives have resulted in the creation of rainwater harvesting potential that is over three times the net water consumption of your Company’s operations.
Greenhouse Gases and Carbon Sequestration
The greenhouse gas (GHG) inventory of your Company for the year 2018-19 compiled as per the ISO 14064 Standard has been assured, as in the earlier years, at the highest ‘Reasonable Level’ by an independent third party.
Reaffirming your Company’s commitment to the ethos of ‘Responsible Luxury’, premium luxury hotels of your Company are Leadership in Energy & Environmental Design (LEED®) Platinum certified, making it a trailblazer in green hoteliering globally. Your Company is a pioneer in the green buildings movement. In 2004, the ITC Green Centre at Gurugram was certified as the largest platinum rated building in the world by the US Green Building Council (USGBC-LEED).
ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst the world’s largest LEED® Platinum certified green hotels, besides holding a 5-Star rating from the Green Rating for Integrated Habitat Assessment (GRIHA) Council. The data centre at Bengaluru, ITC Sankhya, is the first data centre in the world to receive the LEED® Platinum certification by USGBC.
Several of your Company’s factories and office complexes have also received the Green Building certification from Indian Green Building Council (IGBC), the LEED® certification from USGBC and star ratings from the Bureau of Energy Efficiency (BEE). Large infrastructure investments, such as the ITC Green Centre at Manesar (LEED® Platinum certified) and the ITC Green Centre at Bengaluru (pre-certified for LEED® Platinum) continue to demonstrate your Company’s commitment to green buildings. To date, 24 buildings of your Company have achieved Platinum certification by USGBC/IGBC. In order to continually reduce your Company’s energy footprint, green features are integrated in all new constructions and also incorporated in existing hotels, manufacturing units, warehouses and office complexes.
Over twice the amount of Carbon Dioxide emissions from your Company’s operations, are being sequestered through its Social and Farm Forestry initiatives. Besides mitigating the impact of increasing levels of GHG emissions in the atmosphere, these initiatives help greening of degraded wasteland, prevent soil erosion, enhance organic matter content in soil and enhance 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 the associated problems of soil and groundwater contamination and GHG emissions, all of which can adversely 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 89% of the total waste generated in your Company, recycling 99.9% of the total waste generated by its operations. During the year, this Business also recycled around 89,000 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.
Circular Economy Approach to Plastic Packaging
ITC aims to go beyond the requirements of Plastic Waste Management Rules, 2016 to ensure that, over the next decade, 100% of packaging is reusable, recyclable or compostable. Your Company is working towards optimising packaging in a way that it reduces the environmental impact arising out of post-consumer packaging waste without affecting integrity of the product. This is being done in a structured manner by optimising design, identifying alternative packaging material with lower environmental impact and suitable end-of-life solutions for packaging waste. ITC is also working towards establishing scalable, replicable and sustainable models of municipal solid waste management based on circular economy principles. ITC’s approach is centred around treating waste as a resource and ensuring that zero waste goes to landfill, which can be achieved only when waste is segregated at source. These initiatives focus on educating citizens on segregating waste at source into dry and wet waste streams and ensuring that value is derived from these resources and in the process create sustainable livelihood for waste collectors and rag-pickers. These models operate on a public-private partnership basis with active involvement of Urban Local Bodies, Civil Society and the informal sector of waste collectors.
Under its flagship ‘Well-Being Out of Waste’ (WOW) programme running across various cities in Karnataka, Bihar, Delhi, Tamil Nadu, Andhra Pradesh and Telangana, around 16,000 tonnes of post-consumer plastic waste including around 7400 tonnes of Low Value Plastics (LVP), comprising of multi-layered plastic and thin films, is being collected annually. In 2018-19, your Company also launched an LVP waste collection programme in Pune in collaboration with SWaCH, a cooperative of waste pickers with decade long experience in implementing source segregation and door-to-door collection in Pune. The collection programme was operationalised in January 2019 and has successfully started channelising post-consumer LVP waste to an authorised recycler and is targeting a collection of around 200 tonnes of LVP waste per month.
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 has been to institutionalise safety as a value-led concept with focus on inculcating a sense of ownership at all levels in order to drive behavioural change. In line with this approach, several of your Company’s operating units are progressively implementing behaviour-based safety initiatives and customised risk assessment supported by planned job observation programmes to strengthen their safety culture.
Your Company continuously strives to improve on safety performance by incorporating best-in-class engineering standards in the design and project execution phase itself for all investments in the built environment, besides optimising costs. Environment, Health & Safety audits before commissioning and during the operation of units continue to be 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 endeavour to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the following:
- The 13th edition of the Centre’s flagship event, the ‘Sustainability Summit: Everyone’s Future’, was held on 6th & 7th September, 2018 in New Delhi with focus on the ‘Circular Economy Mission’ (CEM) under the European Union Resource Efficiency Initiative. Key dignitaries included Dr Harsh Vardhan, Minister for Environment, Forest & Climate Change, Science & Technology, and Earth Sciences, Mr Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, Mr Hardeep Singh Puri, Minister for State (I/C) Housing and Urban Affairs, Mr Karmenu Vella, Commissioner for Environment, Maritime Affairs and Fisheries, European Commission and Mr Sanjiv Puri, ITC Limited. 80 delegates from 16 different countries with their representatives from industry, business associations and academia as well as research institutions were present at the EU-CEM.
- The circular economy guidebook for CEOs, titled ‘Circular Economy: A New Source of Competitiveness’, which discusses alternatives to current business models by adopting the concept of circular economy, was launched at the Sustainability Summit.
- A high-level B2G Partnership Conclave on Sustainable Development Goals (SDGs) was jointly organised by the Centre, NITI Aayog and the UNDP. The conclave focused on three core areas— water, energy and green industry—which have been identified as fast tracks for the 2030 Agenda. Key dignitaries included Mr. Raj Kumar Singh, Hon’ble Minister of State (I/C), Power and New & Renewable Energy and Mr. Amitabh Kant, CEO, NITI Aayog.
A three-year partnership MoU was signed between CII and NITI Aayog at the Conclave. This partnership aims to showcase the efforts of Indian businesses to the Government and the UNDP, increase awareness amongst businesses, share best practices and build a tracking mechanism for further improving industry engagement to achieve SDGs by 2030. The Centre also launched a report during the event titled ‘Indian Solutions for the World to Achieve SDGs’.
- The Centre’s India Business & Biodiversity Initiative (IBBI) participated in the Business & Biodiversity Forum of the 14th Meeting of the Conference of the Parties (COP 14) to the UN Convention on Biological Diversity (CBD) held in Sharm El Sheikh, Egypt from 17th to 29th November 2018 with the theme of ‘Investing in biodiversity for people and planet’.
The Centre took an Indian industry delegation to participate in the forum to present Indian companies’ initiatives and best-practice case studies on mainstreaming biodiversity into the sectors of energy, mining, infrastructure, manufacturing and processing and health.
- The Centre organised a session on voluntary climate adaptation framework for industry at the 24th Conference of Parties under United Nations Framework Convention on Climate Change (COP24) held at Katowice, Poland in December 2018.
- The 13th CII-ITC Sustainability Awards 2018 took place in December 2018. Since 2006, 878 businesses have applied for the Awards, of which 275 have been recognised so far. In 2018, out of 77 applicants, 39 companies were declared winners in various categories.
- The Centre promoted capacity building in sustainability through a range of training and consulting assignments. In 2018, almost 2,000 participants were covered through 75 programmes, conducted both in India and abroad. Topics included Value Innovation, CSR Rules and Impact Measurement, Sustainability Reporting, Integrated Reporting, Cluster Platform for Transformative Solutions, Human Rights and Biodiversity.
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’s Life Sciences & Technology Centre (LSTC), Bengaluru, continues to focus on its mandate to develop unique sources of competitive advantage and build future readiness. LSTC seeks to achieve this by harnessing contemporary advances in several relevant areas of science and technology and blending the same with classical concepts of product development often leveraging cross-business synergies. Competencies are constantly evolving at LSTC as it strives for scientific rigour at par with the best our global competitors have to offer. LSTC is resourced with 350 highly qualified scientists, world-class measurement systems and state-of-the-art facilities to conduct experimental research, rapid prototyping and process development. Several Centres of Excellence have been established over the past few years in these areas in LSTC. In addition, a number of areas centred around these capabilities have secured global quality certifications.
The Agrisciences R&D team continues to engage in evaluating and introducing several germplasm lines of identified crops including Casuarina and Eucalyptus to increase the genetic and trait diversities in these species. This intervention would facilitate the development of new varieties with higher yields, better quality and other traits relevant for your Company’s businesses. These new lines are being introduced commercially and will enable farmers increase their revenues and earnings significantly on account of productivity gains and improved disease resistance. Besides pulpwood species, the Agrisciences team continues to focus on delivering world-class solutions using contemporary technologies in crops such as wheat, soya, potato and rice. This includes evaluating and building research collaborations with globally recognised centres of excellence with a view to accelerating the journey towards demonstrating multiple ‘proofs of concept’. These collaborations, covering identified crops and 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 crops that are more adaptable to varied agro-climatic conditions thereby providing farmers relatively safer and more profitable alternatives, whilst helping secure your Company’s supply chain and contributing to the vitality and competitiveness of your Company’s Branded Packaged Foods Businesses. Further, these outcomes have a strong potential to contribute towards augmenting the nation’s ecological capital and biodiversity as well.
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. In keeping with the above, during the year, your Company launched a variety of potatoes which are low in sugar content and rich in antioxidants. LSTC’s Biosciences team has designed and developed several long-term research platforms for 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. Consumer insight driven 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. Several of these initiatives have completed clinical assessment of safety and efficacy of products in line with global standards and specifically for the Indian population. These interventions will go a long way in enabling your Company to become a world-class producer of nutritionally superior food products in the near-term. Similar advances have been made in the skin care, hair care and health/hygiene arena. New best-in-class initiatives, such as data analytics, consumer experience labs and Industry 4.0 are being seeded across LSTC with a view to further strengthen your Company’s long-term competitiveness. Intellectual properties arising from these efforts have also been secured as appropriate and as of 31st March, 2019, your Company has filed 836 patents. The product development teams at LSTC were instrumental in developing over 50 unique products that were launched during the year by our FMCG Businesses.
LSTC has a clear vision and road map for long-term R&D, backed by a well-crafted Intellectual Property strategy. With scale, speed, science and sustainability considerations, LSTC is poised to deliver long-term competitive advantage 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 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 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 Rating System’ (PQRS) which measures competitive superiority of your Company’s product offerings.
PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE
In the proceedings initiated by the Enforcement Directorate in 1997, 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.
In respect of some of the remaining memoranda, your Company filed writ petitions, challenging their validity before the Honourable Calcutta High Court, which have been allowed, and the proceedings in respect of these memoranda have been quashed. 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.
The first half of the financial year witnessed a sharp spike in global price of crude oil leading to concerns on retail inflation and the Government’s ability to adhere to the fiscal deficit target. Further, exit by Foreign Institutional Investors from the capital markets led to currency depreciation, which accentuated the negative sentiment. In response, RBI increased policy interest rates. In addition, credit growth outpacing deposit growth, increase in currency holding by the public and default in debt repayment by a large non-banking finance company contributed to volatility and increase in market interest rates. In the second half of the financial year, market concerns started to abate as price of crude oil corrected significantly and domestic retail inflation remained anchored within the targeted range. Consequently, market interest rates normalised, supported by RBI reducing policy interest rates and infusing unprecedented amount of liquidity into the Banking system through open-market purchase of Government Securities.
All investment decisions relating to deployment of surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Treasury operations focused on proactive rebalancing of portfolio duration and mix in line with the evolving interest rate environment.
Your Company’s risk management processes ensured that investment of surplus liquidity was made after proper evaluation of underlying risk while remaining focused on capturing market opportunities.
US$ strength was a dominant theme in global currency markets during the year, attributed to a strong US economy (pick-up in economic growth, decline in unemployment rate) and monetary policy normalisation by the US Federal Reserve through interest rate hikes. By mid-October, the Indian Rupee (INR) depreciated by over 14% against the US$ (from 65 to 74.48). Other factors, which contributed to Rupee weakness include widening Current Account Deficit and global risk aversion due to economic/political crisis in some of the Emerging Markets. Thereafter, as global risk sentiment towards Emerging Markets improved, Rupee regained some of the losses to close the year at Rs. 69.16. In this scenario, your Company adopted a proactive forex exposure management strategy, which included the 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 size of the temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including independent check of 100% of transactions by your Company’s Internal Audit department.
Your Company’s erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2019, there were no deposits due for repayment except in respect of two 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. Yogesh Chander Deveshwar, Chairman of the Company since 1st January, 1996, passed away on 11th May, 2019. Your Directors express their sincere condolences on the demise of Mr. Deveshwar and place on record their deep appreciation for his legendary stewardship of the Company for more than two decades.
Spearheading a journey of stellar growth,
Mr. Deveshwar’s leadership transformed ITC into a valuable and admired multi-business conglomerate with a robust portfolio of front-ranking businesses in FMCG, Hotels, Paperboards, Paper & Packaging and Agri Business. His vision to make societal value creation a bedrock of corporate strategy also led ITC to become a global exemplar in sustainability and the only company in the world of comparable dimensions to be carbon positive, water positive and solid waste recycling positive for over a decade, creating over six million livelihoods, many of whom represent the most disadvantaged in society.
Mr. Deveshwar’s outstanding contribution and foresight helped in creation of world-class Indian brands which capture and retain larger value in the country and national assets in the form of intellectual property, state-of-the-art manufacturing facilities and iconic hospitality properties. Mr. Deveshwar’s inspiring vision will continue to guide your Company in the journey ahead.
The Board of Directors of your Company (‘the Board’), on the recommendation of the Nomination & Compensation Committee (‘the Committee’), appointed Mr. Sanjiv Puri, Managing Director, also as the Chairman of the Company with effect from 13th May, 2019.
Mr. Suryakant Balkrishna Mainak [representing the Life Insurance Corporation of India (‘LIC’)] resigned from the Board with effect from 24th July, 2018. Your Directors place on record their appreciation for the services rendered by Mr. Mainak.
Mr. John Pulinthanam was appointed, with your approval, as a Non-Executive Director of the Company with effect from 27th July, 2018, representing the General Insurers’ (Public Sector) Association of India.
On the recommendation of the Committee, the Board at the meeting held on 27th July, 2018, appointed
Mr. Hemant Bhargava as an Additional Non-Executive Director of your Company with effect from 28th July, 2018, representing LIC.
Mr. Sumant Bhargavan, on the recommendation of the Committee, was appointed by the Board at the meeting held on 15th November, 2018, as an Additional Director of your Company and, subject to the approval of the Members, also as a Wholetime Director, with effect from 16th November, 2018.
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. Bhargava and Sumant will vacate office at the ensuing Annual General Meeting (‘AGM’) of your Company.
The Board at the meeting held on 13th May, 2019, on the recommendation of the Committee, recommended for the approval of the Members (a) appointment of Mr. Bhargava as a Non-Executive Director of your Company, liable to retire by rotation, for a period of three years from the date of the ensuing AGM, and (b) appointment of Mr. Sumant as a Director, liable to retire by rotation, and also as a Wholetime Director of your Company, for a period of three years from the date of the ensuing AGM.
Further, the Board at the meeting held on 13th May, 2019, on the recommendation of the Committee, recommended for the approval of the Members, the re-appointment of Mr. Arun Duggal, Mr. Sunil Behari Mathur and Ms. Meera Shankar as Independent Directors of your Company 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 (‘Listing Regulations 2015’) with effect from 15th September, 2019.
Requisite Notices under Section 160 of the Act have been received in respect of Messrs. Bhargava, Sumant, Duggal and Mathur and Ms. Shankar, who have filed their consents to act as Directors of the Company, if appointed.
Appropriate resolutions seeking your approval to the above are appearing in the Notice convening the 108th AGM of your Company.
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, Messrs. David Robert Simpson and John Pulinthanam will retire by rotation at the ensuing AGM and being eligible, offer themselves for re-election. The Board has recommended their re-election.
Number of Board Meetings
Eight meetings of the Board were held during the year ended 31st March, 2019.
Attributes, Qualifications & Independence of Directors and their Appointment
The Nomination & Compensation Committee, as reported in earlier years, adopted the criteria for determining qualifications, positive attributes and independence of Directors, including Independent Directors, pursuant to the Act and the Rules thereunder. The Corporate Governance Policy, inter alia, requires that Non-Executive Directors be drawn from amongst eminent professionals, with experience in business/finance/law/public administration and enterprises. The Board Diversity Policy of your Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The skills, expertise and competencies of the Directors as identified by the Board, are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.
The Articles of Association of your 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 and as may be determined by the Board from time to time. 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 re-election.
The Independent Directors of your Company have confirmed that (a) they meet the criteria of Independence as prescribed under Section 149 of the Act and Regulation 16 of the Listing Regulations 2015, and (b) they are not aware of any circumstance or situation, which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence. Further, in the opinion of the Board, the Independent Directors fulfil the conditions prescribed under the Listing Regulations 2015 and are independent of the management of the Company.
Details of the Company’s Policy on remuneration of Directors, Key Managerial Personnel and other employees is provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.
The Nomination & Compensation Committee, as reported in earlier years, formulated the Policy on Board evaluation, evaluation of Board Committees’ functioning and individual Director evaluation, and also specified that such evaluation will be done by the Board, pursuant to the Act and the Rules thereunder and the Listing Regulations 2015.
In keeping with ITC’s belief that it is the collective effectiveness of the Board that impacts Company’s 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 Listing 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 to 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 against the laid down parameters, anonymously in order to ensure objectivity. Reports on functioning of Committees were placed before the Board by the Committee Chairmen.
The Independent Directors Committee of the Board also reviewed the performance of the non-Independent Directors and the Board, pursuant to Schedule IV to the Act and Regulation 25 of the Listing Regulations 2015.
KEY MANAGERIAL PERSONNEL
During the year, Mr. Sumant Bhargavan was appointed as an Additional Wholetime Director of the Company, as stated above. There were no other changes in the Key Managerial Personnel of your Company.
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 Company’s Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants, who were appointed with your approval at the 103rd AGM for a period of five years, will complete their present term on conclusion of the ensuing 108th AGM of the Company.
The Board, on the recommendation of the Audit Committee, recommended for the approval of the Members, the appointment of Messrs. S R B C & CO LLP, Chartered Accountants (‘SRBC’), as the Auditors of the Company for a period of five years from the conclusion of the ensuing 108th AGM till the conclusion of the 113th AGM. On the recommendation of the Audit Committee, the Board also recommended for the approval of the Members, the remuneration of SRBC for the financial year 2019-20. Appropriate resolution seeking your approval to the appointment and remuneration of SRBC as the Statutory Auditors is appearing in the Notice convening the 108th AGM of the Company.
Your Board, as recommended by the Audit Committee, appointed for the financial year 2019-20:
(i) Mr. P. Raju Iyer, Cost Accountant, for audit of Cost Records maintained by the Company in respect of ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.
(ii) Messrs. S. Mahadevan & Co., Cost Accountants, for audit of Cost Records maintained in respect of all applicable products of the Company, other than ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.
Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolutions seeking your ratification to the remuneration of the aforesaid Cost Auditors are appearing in the Notice convening the 108th AGM of the Company.
The Company maintains necessary cost records as specified by Central Government under sub-section 1 of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014.
Your Board appointed Messrs. Vinod Kothari & Company, Practising Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2019. The Report of Messrs. Vinod Kothari & Company is provided in the Annexure forming part of this Report, pursuant to Section 204 of the Act.
CHANGES IN SHARE CAPITAL
During the year, 5,43,36,690 Ordinary Shares of Rs. 1/- each, fully paid-up, were issued and allotted upon exercise of 54,33,669 Options under the Company’s Employee Stock Option Schemes.
Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2019, stands increased to Rs. 1225,86,31,601/- divided into 1225,86,31,601 Ordinary Shares of Rs. 1/- each.
The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.
EMPLOYEE STOCK OPTION SCHEMES
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 Employee Stock Option Schemes of the Company 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 of your Company (‘ISC’), accredited with ISO 9001:2015 certification, is registered with the Securities and Exchange Board of India as Category II Share Transfer Agent for providing in-house share registration and related services. ISC continues to focus on upgrading its infrastructure, systems and processes for providing contemporary and efficient services to the shareholders and investors of your Company, in compliance with the applicable statutory requirements.
During the year, Messrs. Det Norske Veritas, accredited agency for ISO certification, accorded the highest possible ‘Level 5’ rating to ISC’s systems and processes for the tenth consecutive year, exemplifying the excellence achieved by ISC in providing quality investor services.
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 Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. All such contracts or arrangements have been approved by the Audit Committee, as applicable. No material contracts or arrangements with related parties were entered into during the year under review. Further, the prescribed details of related party transaction 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 https://www.itcportal.com/about-itc/policies/policy-on-rpt.aspx.
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 that period;
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 are adequate and were operating effectively; and
f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CONSOLIDATED FINANCIAL STATEMENTS
Your Company’s Board of Directors is responsible for the preparation of the consolidated financial statements of your Company & its Subsidiaries (‘the Group’), Associates and Joint Venture entities, in terms of the requirements of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act.
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 and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgements 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 Report
The certificate from your Company’s Auditors,
Messrs. Deloitte Haskins & Sells, confirming compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations 2015, is annexed.
The Company has voluntarily prepared its Integrated Report for the financial year 2018-19. As a green initiative, the Report has been hosted on the Company’s corporate website at https://www.itcportal.com/about-itc/shareholder-value/index.aspx#sectionb2 .
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 provided in the Annexure forming part of this Report.
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 4, 5, 6, 9 and 27 (v) (a) (ii) to the Financial Statements.
Particulars relating to Conservation of Energy and Technology Absorption
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.
Compliance with Secretarial Standards
The Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company
Secretaries of India and approved by the Central Government under Section 118(10) of the Act.
The total number of employees as on 31st March, 2019 stood at 27,279.
There were 91 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 102 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 8.5 lakhs per month or more during the financial year ended 31st March, 2019. 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.
Dividend Distribution Policy
The Company’s Dividend Distribution Policy is provided in the Annexure forming part of this Report and is also available on the Company’s corporate website ‘www.itcportal.com’. There has been no change in the Policy during the year.
Key Financial Ratios
Key Financial Ratios for the financial year ended 31st March, 2019, are 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.
Inspired by the opportunity to serve a larger national purpose, your Company redefined its Vision about two decades ago to transform itself into a vibrant engine of growth that would make a substantial contribution to the Indian economy, whilst rewarding shareholders by creating growing value for the Indian society.
Over the last 23 years, your Company has created multiple drivers of growth by developing a portfolio of world-class businesses across all sectors of the national economy spanning agriculture, manufacturing and services. Your Company ranks amongst the Top 3 in the private sector in terms of Contribution to the Exchequer. Over the last 23 years, your Company’s Value Addition aggregated Rs. 4.6 lakh crores of which nearly 75% accrued to the Exchequer at the Central and State levels. During this period, your Company’s net revenue and post-tax profit have recorded an impressive compound annual growth of 13.3% and 18.3% respectively. Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, have grown at a compound rate of 22.3% per annum during this period, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital.
Your Company’s non-cigarette businesses have grown over 21-fold since 1996 and presently constitute appx. 60% of net segment revenue. In aggregate, the non-cigarette businesses account for over 80% of your Company’s operating capital employed, about 90% of the employee base and over 80% of annual investments.
Your Company today is the leading FMCG marketer in India, a pre-eminent hotel chain and a globally acclaimed icon in green hoteliering, the clear market leader in the Indian Paperboard and Packaging industry, a pioneering trailblazer in farmer and rural empowerment through its Agri Business and a global exemplar in sustainable business practices.
Aligned with the Government’s Make in India Vision, your Company is building national assets in the manufacturing and tourism sector. As stated earlier in this Report, several world-class Integrated Consumer Manufacturing & Logistics facilities are being built to deliver sustainable competitive advantage to your Company’s FMCG businesses. Several projects with an aggregate outlay of Rs. 25000 crores are in various stages of implementation / planning across the length and breadth of the country facilitating regional and national economic development. Recognising that tomorrow’s world will belong to those who create, own and nurture intellectual capital, your Company continues to invest in augmenting the capability of its globally benchmarked Life Sciences and Technology Centre to ensure that its Businesses are future-ready and contribute to building intellectual property assets for the nation.
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 anchored on 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 all stakeholders.
On behalf of the Board
13th May, 2019
Gurugram S. PURI Chairman & Managing Director
India R. TANDON Director & Chief Financial Officer