Faced with a barrage of questions from shareholders seeking a direction on the demerger of ITC Infotech and its FMCG business, company chairman Sanjiv Puri backed the conglomerate structure of the company underscoring its institutional strength but did not rule out the possibility in the future.
The company demerged the hotel business earlier this year, turning it into a separate listed entity, unlocking value for shareholders.
Apart from cigarettes — the money spinner for ITC, the company has an expanding FMCG portfolio, along with paper and agri commodities making up for the diversified nature of the business.
“We look at the business strategy, competitive context, the maturity of the business, opportunities, at the pros and cons of the current structure and whatever is best is what we recommend for the approval of the shareholders,” Puri said while replying to shareholders questions at the 114th annual general meeting of ITC.
Pointing out how institutional synergy has been leveraged to create business at low cost, the chairman cited the food tech business that brings together foods, hospitality and digital capabilities to curate different cuisines for online delivery platforms.
Available now in Bangalore, Hyderabad, Chennai, Mumbai and Pune via 60 cloud kitchens, ITC is expanding it across India.
Puri referred to reports by a consultancy to argue that in 50 per cent of cases conglomerates deliver superior shareholder returns than businesses being separated, because they manage diversity well.
“This is an area, I think, our distributed leadership, the governance structure (that) we have got, and the mechanism to leverage institutional synergies —I think (it) is something that ITC has demonstrated, and it’s a strength for us,” Puri argued.
In the same breath, however, he assured the shareholders that ‘nothing is cast in stone’ and the board would review the matter ‘from time to time.’
Demand outlook
Responding to shareholders, Puri hoped that there would be ‘progressive improvement’ going forward with the easing of interest rates, better weather and benign inflation.
Weak external environment, climate change, food inflation and dumping of products weighed on the demand of paper and FMCG business of ITC last year.
“The spike in inflation in the second half of the year, and this problem of growth also started in the second half of the year,” he said.
Puri said ITC has taken actions to tackle the soft demand environment — bringing in internal efficiencies, enriching products mix, focus on premiumisation – and the results will be seen in coming quarters.
Profitable growth
The chairman stressed the company management is pursuing industry leading growth and profitability in FMCG business.
“We remain committed to the guidance of 80-100 basis points increase in margins year on year,” Puri said, cautioning the growth may not be linear all the time.
He said the FMCG results account for the gestation costs of the new categories that it is building and costs of some of the ICMLs (integrated consumer goods manufacturing and logistics) facilities.
The revenue from non-tobacco FMCG business (food, personal care) grew by 4.8
per cent to ₹21,981.57 crore in FY25 but profit before tax slipped by 11.1 per cent to ₹1579.66 crore.