ITC Ltd, the well-known cigarettes-to-hotels conglomerate, is set to invest INR 20,000 crore in the medium term. This announcement was made by Chairman and Managing Director Sanjiv Puri during the company’s Annual General Meeting held on Friday. Puri said, “Our confidence in the India story is unwavering and is reflected in your company’s investment outlay of about INR 20,000 crore in the medium term.”
Allocation of Funds
Responding to a question from CNBC-TV18, Puri detailed the investment allocation. He mentioned that 35-40% of the total capital expenditure (capex) will go into the fast-moving consumer goods (FMCG) sector. One-third will be invested in the paperboard and packaging sectors. The remaining funds will support other businesses. These businesses include agriculture and corporate investments. These investments will focus on capacity augmentation, upgradation, and innovation. ITC is also scouting for a new greenfield site for its paperboard business.
Strategic Goals
Puri emphasized that the investment aims to enhance the structural competitiveness of ITC’s various businesses, enabling the company to seize emerging market opportunities despite current headwinds.
New Product Launches
To boost its FMCG portfolio, ITC plans to launch nearly 100 new products. These products will cater to evolving segments such as health and nutrition, hygiene, protection and care, convenience, on-the-go options, and indulgence.
Financial Performance
Puri highlighted ITC’s success in achieving sustained margin expansion driven by premiumisation, streamlining operations, agile cost management, and operating leverage. This strategy has led to an average margin expansion of 100 basis points per annum over the last seven years. Currently, ITC’s FMCG products reach 250 million households, with consumer spends amounting to INR 32,500 crore.
Cigarette and Hotel Business Recovery
ITC’s cigarette and hotel businesses have shown a strong recovery post-pandemic. The cigarette business saw revenue and results grow at a compound annual growth rate (CAGR) of nearly 13.5% over the last two years, with volumes surpassing pre-pandemic levels.
Hotel Sector Growth
In the hotel sector, ITC emerged stronger, recording nearly INR 3,000 crore in revenue and an EBITDA of over INR 1,000 crore for FY24. Over the past 24 months, ITC has opened 32 hotels. This has brought the total to nearly 140 hotels. The segment returns on capital employed (ROCE) for hotels increased by nearly 1,100 basis points over the pre-COVID period. It is a part of its asset-light strategy.
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Future Economic Outlook
Puri cited analysts’ projections that India’s per capita GDP could reach USD 4,000 by 2030. This could drive higher domestic consumption and growth. Experts also predict that India will contribute 18% to global GDP growth in the next five years. It could reach 30% between 2035 and 2040.
This significant investment by ITC underscores its confidence in the Indian market and its commitment to long-term growth across its diverse business segments.
About the Author
Mr. Radhesh Tarang Shah, is a management student at Institute of Management, Nirma University. He has a passion for writing articles and poems. He has experience as a financial analyst, author, news writer, marketer and social worker.
