ITC will not pull back from investments as it expects consumer demand to pick up in India, its chairman Sanjiv Puri said.
In a post-AGM press meet, Mr. Puri expressed optimism about a demand pick up, saying that structural growth drivers were all favourable for India, as are government reform measures. “Given the government’s past reforms and the policy direction, demand will pick up... we are scaling up and not pulling back from investments,” he said. ITC is currently implementing a ₹25,000-crore investment plan across FMCG, hotels and paper segments.
Right valuations
Mr. Puri, who took over as chairman after Y.C. Deveshwar’s demise, said that to boost the non-cigarette FMCG business, ITC would invest and acquire companies “if right opportunities come at right valuations.”
The multi-segment company launches around 50 products annually and has introduced 26 new items so far this fiscal. He said that from an annual consumer spend of ₹18,000 crore accounting for 25% of ITC’s segment revenue, new FMCGs are projected to be on a high-growth trajectory. “However, profits are linked with gestation costs of new categories,” he said, adding that although FMCG growth rate slowed down in the latter part of 2018-19, ITC was ahead of industry growth rates.
In the last three years, ITC has entered six new FMCG categories such as skincare, floor cleaners, hand sanitisers, chocolates, coffee and dairy. Some of these forays have been through acquisitions. “We are incubating portfolios,” he said without elaborating.
ITC may also invest in an FMCG start-up, he said, adding that so far it had only invested in an Alternate Investment Fund and had committed support to another one that helped start-ups.
Mr. Puri added that ITC was also exploring opening of shops in high footfall areas, to showcase its new FMCG products. “We are not into retailing and do not want to compete with channel partners... but we are examining this proposal.”
To a question, Mr. Puri said that the ongoing restructuring of the apparel business (which saw sale of the Jon Player brand to Reliance) will be completed this fiscal. “The business is being recast through optimisation of retail footprints and backend operations,” he said, adding that over the years, it was found that the strategic fit of the lifestyle apparel business had weakened, he observed. The number of shops has already come down to around 70 from 140.
