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Informist, Friday, Jul 26, 2024

By Avishek Rakshit

KOLKATA – ITC Ltd will invest 200 bln rupees in the next five years primarily to boost capacity for its fast-moving consumer goods business and the paper and paperboards business, Chairman and Managing Director Sanjiv Puri said today. The diversified conglomerate is also looking at upgrading its production facilities, he added.

"The larger component of around 35-40% will go towards the FMCG (fast moving consumer goods) business, a third of the investment will go towards our paper and paperboards business, and the rest will go towards our traditional and agri businesses and some at the corporate level," Puri said at an online media interaction after the company's 113th annual general meeting.

Puri said that the company is in the process of upgrading its Integrated Consumer Goods Manufacturing and Logistics facilities, or ICML as ITC calls it, and will be purchasing machinery to boost production capacity and modernise these facilities as well. ICMLs are strategic manufacturing facilities for ITC which offer the company cost synergies across its various business divisions.

ICMLs act as procurement hubs of raw materials, manufacture value-added products, and also offer logistical benefits. ITC currently has 11 ICMLs, while two of them are under construction in Sehore, Madhya Pradesh, and in Lucknow, Uttar Pradesh. Madhya Pradesh is a key raw material sourcing market for ITC.

"Some ICMLs are fully utilised, but others have some headroom for more capacity utilisation. The investments in these ICMLs will be for machinery addition, and upgrading production quality," Puri said in response to a question from Informist.

ITC is also in talks with several states to set up a greenfield project for its paper and paperboards business. This division is set to get around 35% of the planned investment by ITC.

"Our Bhadrachalam facility is saturated, and we are looking for a new site. We are in active talks for the project and will talk about it when something comes up," Puri said.

The Bhadrachalam plant in Telengana is ITC's largest paper and paperboards unit which manufactures office and student stationery under the Classmate brand. The facility also manufactures innovative paper and packaging solutions.

The FMCG business, inclusive of the company's cigarettes business, accounts for 74% of the company's annual revenue, and the paper and paperboards unit accounts for 12% of its annual turnover.

ITC is also eyeing strategic acquisitions over time to expand its portfolio. For instance, back in 2014, it acquired Bangaluru-based Balan Natural Foods B, a natural juice brand, for about 1 bln rupees. ITC scaled up the portfolio and branded the product as B-Natural, which is a fast-growing brand for the company now.

Puri said that ITC is shortly set to launch a new brand, Right Shift, which is focussed on health and nutrition products and targeted towards consumers aged 40 and above. "We will continue to build vectors to the portfolio," he added.

In 2021, ITC had announced a mega investment of $2 bln to fund new growth and category areas as well as to scale up its existing capacity across business segments by 2026. Puri said that every year ITC revisits its investment plans and continues to build on declared investments. "If you see, the investment declared now is more than what we declared in 2021. These are rolling plans," he said.

The senior official said that the consumer goods industry is seeing green shoots in demand from the rural sector, which was under stress for the past several quarters, but cautioned that the demand will depend on how the southwest monsoon pans out eventually. Further, ITC is also stepping up exploring opportunities in proximal markets for its consumer goods and hotels businesses, he said.

Today, shares of ITC closed 2.5% up at 502.2 rupees on the National Stock Exchange. End

Edited by Tanima Banerjee

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