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ITC Ltd.


Mar 18, 12:00
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Mar 18, 12:00
293.75 +2.95 (+ 1.01 %)
Volume 9166882
Prev. Close 290.80
Open Price 292.00
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You can view full text of the latest Director's Report for the company.

Market Cap. ( in Cr. ) 359958.49 P/BV 6.85 Book Value ( ) 42.86
52 Week High/Low ( ) 323/253 FV/ML 1/1 P/E(X) 31.94
Book Closure 31/05/2018 EPS ( ) 9.20 Div Yield (%) 1.75
Year End :2018-03 


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$ 7.1 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 2017-18, your Company and its subsidiaries earned Rs, 4189 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs, 3480 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency amounted to Rs, 2038 crores, comprising purchase of raw materials, spares and other expenses of Rs, 1506 crores and import of capital goods at Rs, 532 crores.


(? 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




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: Dividends

- Ordinary Dividend of Rs, 4.75 (2017: Rs, 4.33) per share



- Special Dividend of Rs, Nil (2017: Rs, 1.33) per share



- Income Tax on Dividend paid



f) Less: Transfer to General Reserve



g) At the end of the year



FMCG Cigarettes

A punitive and discriminatory taxation and regulatory regime continues to exert severe pressure on the domestic legal cigarette industry even as illegal cigarette trade grows unabated.

The legal cigarette industry, already reeling under the cumulative impact of steep increase in taxation over the last five years and intense regulatory pressures, was further impacted by the sharp upward revision in GST Compensation Cess announced in July 2017. Contrary to indications from the Government that the transition to GST would be based on the principle of maintaining revenue neutrality, tax incidence on cigarettes rose sharply by 13% with an even steeper increase of 19% for the king-size filter segment under the GST regime. Coupled with the increase in Excise Duty rates announced in the Union Budget 2017, this resulted in an incremental tax burden of over 20% on your CompanyRs,s Cigarette Business post implementation of GST.

It is pertinent to note that the tax incidence on cigarettes, after cognising for the latest increase in Cess rates, has nearly trebled over the last six years, on a comparable basis.

The Cigarette Business also had to contend with additional costs associated with the transition to GST due to non-availability of Additional Duty Surcharge credit on transition stocks and the unanticipated revision of GST Compensation Cess w.e.f. 18th July, 2017 which impacted pipeline stocks.

In addition to being subjected to punitive taxation, cigarettes continue to be discriminated against in the GST regime. Even as a uniform GST rate of 28% has been made applicable to all tobacco products the discriminatory tax incidence continues on account

of differential rates of GST Compensation Cess.

For example, a Specific GST Compensation Cess, at rates higher than the Central Excise Duty levied on cigarettes in the erstwhile regime, is levied on cigarettes in addition to an Ad-valorem GST Compensation Cess of 36% for king-size cigarettes and 5% for the other length segments. In comparison, no GST Compensation Cess is levied on bidis. Consequently, cigarette taxes remain, effectively, about 50 times higher than on other tobacco products.

The high rates of tax on cigarettes also provide attractive tax arbitrage opportunities to unscrupulous players, fanning the growth of illegal cigarette trade in the country. While the legitimate cigarette industry has declined steadily since 2010-11 at a compound annual rate of 4.8% p.a., illegal cigarette volumes in contrast have grown at about 5% p.a. during the same period, making India one of the fastest growing illegal cigarette markets in the world. It is pertinent to note that, according to Euromonitor International, India is now the 4th largest illegal cigarette market in the world.

Another factor that fuels the growth of smuggled international brands is that such cigarette packs do not carry the excessively large (85% of the surface area of both sides of the cigarette package) pictorial warnings with extremely gruesome and unreasonable images that are prescribed under Indian laws. While the legal cigarette industry scrupulously complies with the statutory provisions, smuggled international brands of cigarettes either do not bear any pictorial or other health warnings or bear warnings of much smaller dimensions, that too different from what is mandated under Indian law. Findings from research conducted by IMRB International, an independent organisation, indicate that the lack of warnings or their diminutive size creates a perception in the consumer’s mind that the smuggled cigarettes are ‘safer’ than domestic duty-paid cigarettes that carry the statutory warnings.

The attractive tax arbitrage opportunity for smuggled cigarettes allows unscrupulous players to make the products available to consumers at a fraction of the price of duty-paid domestic cigarettes. In fact, the affordability of illegal cigarettes and the other cheaper tobacco products (by reason of lower tax incidence as well as evasion of taxes) has been driving the consumption of tobacco from duty-paid cigarettes to the other forms. Consequently, India’s per capita cigarette consumption is amongst the lowest in the world and is significantly lower in comparison to Russia, Japan, China, United States and even neighboring countries such as Pakistan and Bangladesh.

While overall tobacco consumption in the country continues to grow, the share of duty-paid cigarettes has come down substantially over the years and is estimated to account for around 11% of current tobacco consumption in the country. Despite accounting for such a low share of overall tobacco consumption in the country, the legal cigarette industry contributes more than 87% of tax revenue from the tobacco sector.

The other types of tobacco products contribute barely 13% of tax revenue from the tobacco sector despite accounting for 89% of total tobacco consumption.

It is estimated that the exchequer is losing more than Rs, 13000 crores revenue annually on account of tax evasion on cigarettes alone. The loss to the exchequer is even higher when the evaded taxes on other tobacco products are also considered.

The growth of smuggled international brands has also adversely impacted the demand for domestic Flue Cured Virginia (FCV) tobacco that is used in cigarette manufacture. The absence of a strong domestic demand base has not only resulted in loss of income but has also exposed the Indian tobacco farmer to the volatilities of the international market, thereby sub-optimising earnings from tobacco crop exports as well. These developments have had a devastating impact on the Indian tobacco farmer and the 46 million livelihoods dependent on the tobacco value chain.

Soft demand for Indian FCV tobacco has prompted the Tobacco Board of India to reduce the authorized crop size for three successive years i.e. 2015-16, 2016-17, 2017-18. Further, the unprecedented drought in Andhra Pradesh in late 2016 played havoc on the actual crop output in 2017 besides adversely impacting its quality. This, in turn, has also led to lower exports of tobacco. It is estimated that the cumulative drop in farmer earnings is in excess of Rs, 3450 crores over the last three years, i.e., an average loss in earnings of over Rs, 1150 crores per year.

As reported last year, your Company and several other stakeholders had challenged the validity of the pictorial warnings. Based on a direction of the Honourable Supreme Court, all litigation on pictorial warnings were tagged together and heard by the Honourable High Court of Karnataka. The High Court, by its judgment in December 2017 held the 85% pictorial warnings with extremely gruesome imagery to be factually incorrect and unconstitutional. Upon a Special Leave Petition filed by the Government, the Honourable Supreme Court stayed the Order of the High Court. Pending the final hearing of this matter, the regime of the extremely repugnant 85% pictorial warnings continues.

It is pertinent to note that the global average size of pictorial warnings is only about 30% coverage of the principal display area. In fact, the three countries that account for about 51% of the world’s cigarette consumption, viz., USA, Japan and China have not adopted pictorial / graphical warnings and have prescribed only text-based warnings on cigarette packages.

Although India is the 3rd largest FCV tobacco grower in the world, it has put in place extremely stringent tobacco control laws. For instance, the statutorily prescribed pictorial warning occupying 85% of both sides of a cigarette pack ranks India in the 2nd position globally in terms of their stringency1. Unfortunately, these laws have fuelled, albeit unintentionally, the growth of illegal cigarettes in the country and consequently, impacted adversely on farmer incomes. In contrast, several major tobacco producing countries, including the USA, have taken into consideration the interests of their tobacco farmers in deciding whether or not to adopt large or excessive pictorial warnings. The Indian tobacco control laws have, thus, had the inadvertent and unforeseen effect of causing losses to the Indian farmer with corresponding gains to tobacco farmers in the countries that have opted for moderate and equitable tobacco control laws.

Regardless of the steps taken by the Government towards tobacco control in the country, taking advantage of the country’s large porous international borders as well as by exploiting loopholes in the policies that are in place, the smuggling of international brands of cigarettes into the country continues to grow at an alarming rate. This is confirmed by the fact that detection and seizure of smuggled cigarettes by the enforcement agencies2 has gone up from 1312 cases in 2014-15 to 3108 cases in 2016-17 - an increase of more than 136%.

Unfortunately, the taxation and regulatory policies of the country are largely cigarette-centric and based on tobacco consumption patterns prevalent in developed countries. Such policies are not suitable for India since duty-paid cigarettes account for only about 11% of tobacco consumption in the country as compared to the global average of more than 90%. The unintended consequences of the extant tobacco taxation and regulatory framework may be summarized as follows:

- Continuing decline in legal cigarette volumes in favour of lightly taxed and tax-evaded tobacco products, due to extremely attractive tax arbitrage, resulting in sub-optimization of the revenue potential of the tobacco sector and significant loss to the Exchequer.

- Further fillip to the growth of illegal cigarettes in the absence of statutory pictorial warnings on smuggled international brands.

- The greater portion of tobacco consumption in the country (estimated at about 68%3) remaining outside the tax net.

- Widespread availability of illegal cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices.

- Persistent negative impact on the livelihood of tobacco farmers and others dependent on tobacco for their livelihood.

As always, your Company complies with all regulations and laws in letter and spirit whilst remaining engaged

3 Report on the impact of current tax framework on the tobacco sector in India and suggestions for its improvement - 2014, by ASSOCHAM and KPMG.

with policy makers for reasonable, pragmatic and evidence based regulation and taxation policies that balance the health, employment and economic imperatives of the country.

Your Company’s strong product portfolio along with superior consumer insights and a strategy of continuous innovation and value creation has, once again, helped deliver superior competitive performance during the year, notwithstanding the extremely challenging operating environment. It is a matter of deep satisfaction that your Company consolidated its leadership position in the industry during the year and continues to improve its standing in key competitive markets across the country. Some of the key interventions during the year include the launch of innovative variants viz., Classic Double Burst, Gold Flake Mint Switch,

Flake Mint Switch, Bristol Magnum, Navy Cut Century and a new brand, Wave. Additionally, two brands, American Club and Players, which were launched towards the end of 2016-17 were strengthened significantly during the year.

During the year, the Electronic Vaping Devices portfolio was augmented with the launch of EON Myx, a disposable variant which is offered in adult flavours like coffee in addition to menthol and full flavour.

The consumer response to this offering has been encouraging. The rechargeable variant, EON Charge, further strengthened its performance during the year. Given the nascent state of the market and the evolving regulatory oversight globally, your Company remains engaged with the policy makers for adoption of an appropriate and equitable regulatory framework in India for this category. The research and development initiatives of your Company continue to add to the country’s bank of Intellectual Property Rights (IPR).

In addition to grant of several patents in previous years, your Company was granted three more patents during the year - two international and one national - in respect of cigarettes.

To secure increasingly higher levels of productivity and product excellence going forward, the Business continues to modernize its manufacturing facilities by inducting contemporary technologies. The Business leveraged its in-house design and development expertise and innovation capabilities to step up flexibility in manufacturing technologies and to further improve speed to market for differentiated products and pack formats. In line with its philosophy of manufacturing excellence, the Business has commenced several initiatives towards capability enhancement in the arena of Industry 4.0 including Advanced Analytics, Artificial Intelligence, Virtual Assist and Augmented Reality. These interventions are expected to bring about a digital transformation in the manufacturing process. Up gradation of on-line, real time quality assurance systems and induction of state-of-the-art technology for several product and packaging types were carried out during the year. These initiatives have further improved the speed to market for successful launches and augmented the innovation pipeline of the Business. Further, Long Term Agreements were concluded successfully with the unionized workforce at the Bengaluru and Ranjangaon cigarette factories.

It is extremely satisfying to report that the Business continues to be recognized for its leadership role and commitment towards excellence, sustainability and HR practices. The Bengaluru factory was conferred the ‘Sustainable Factory of the Year’ award by Frost & Sullivan and The Energy & Resource Institute (TERI).

The factory has also been recertified as an IGBC Platinum Rated Green Factory Building with the highest score in India. The Saharanpur factory was awarded the First Prize under the ‘FICCI Safety Systems Excellence Awards for Industry 2017’. The Munger factory was honoured with the ‘Excellent Energy Efficient Unit’ award at the 18th National Award for Excellence in Energy Management 2017. The Kidderpore cigarette factory was the recipient of the ‘Safety Innovation Award’ by The Institution of Engineers (India). Your Company was also conferred two awards by the Association for Talent Development (ATD) and another one by Employees Federation of India (EFI) for excellence in HR practices.

A punitive and discriminatory taxation regime along with ever increasing regulatory pressures and the unabated growth in illegal trade will continue to pose several challenges in the year ahead. Your Company will continue to engage with policy makers for a tobacco taxation and regulatory policy that is non-discriminatory, helps combat the menace of illegal cigarettes and addresses the issues of all stakeholders, particularly tobacco farmers, Exchequer and consumers. Such a policy will not only help maximization of the revenue potential of tobacco even in a shrinking basket of tobacco consumption but also address the tobacco control and health objectives of the Government. Your Company remains confident that despite the severe pressures, the trust and faith reposed by the consumers coupled with the Company’s robust product portfolio, world-class quality, innovation in processes, investments in cutting-edge technology and superior execution of competitive strategies will enable it to retain its pole position and reinforce its market standing in the years to come.

FMCG - Others

The FMCG industry faced another challenging year with demand conditions remaining sluggish for the fifth year in a row. The slowdown in the broader economy, as reflected by the marked deceleration in Nominal GDP and private consumption expenditure growth, headwinds in rural demand and supply chain disruptions during the transition to the GST regime was manifest in your Company’s operating segments in the FMCG space. The year also witnessed commodity prices settling at an elevated level, exerting pressure on margins. While it is anticipated that the FMCG industry will take a few more quarters for demand revival to play out fully, the green shoots of economic recovery and expectations of normal monsoons augur well for the industry. The structural drivers of long-term growth such as increasing affluence and consumer awareness, a young and expanding workforce, increasing urbanization, Government’s thrust on infrastructure development and the rural sector, implementation of GST amongst others, remain firmly in place and the FMCG industry is poised for rapid growth in the ensuing years.

Despite the challenging conditions prevailing during the year, your Company’s FMCG-Others Businesses’ Segment Revenue at Rs, 11329 crores grew ahead of industry and recorded an increase of 11.3% (on a comparable basis) on a relatively firm base. It is pertinent to note that while the second half of 2016-17 witnessed reduced consumer off take and trade pipelines in the wake of adverse liquidity conditions, your Company’s FMCG-Others Businesses were relatively less impacted. Most major categories enhanced their market standing during the year. While ‘Bingo!’ snacks, ‘Aashirvaad’ atta and ‘Dark Fantasy Choco Fills’ premium cream biscuits were the key drivers of growth in the Branded Packaged

Foods Businesses, ‘Engage’ deodorants, ‘Vivel’/‘Fiama’ soaps & shower gels and ‘Savlon’ hand wash fuelled strong growth in the Personal Care Products Business. The Education and Stationery Products Business posted a robust performance during the year led by ‘Classmate’ notebooks, which consolidated its leadership position in the industry. However, the performance of the Lifestyle Retailing Business remained sluggish mainly on account of an early and prolonged ‘end-of-season’ sale in the wake of disruption to the trade during transition to GST and ongoing structural interventions to enhance operating efficiencies. Segment Results for the year improved to Rs, 164 crores from Rs, 28 crores in 2016-17 driven by enhanced scale, product mix enrichment and strategic cost management initiatives after absorbing the impact of sustained investment in brand building, gestation costs of new categories viz. Juices, Dairy, Chocolates and Coffee and costs associated with the ongoing structural interventions in the Lifestyle Retailing Business.

Your Company continued to make investments during the year towards enhancing brand salience and consumer connect while simultaneously implementing strategic cost management measures across the value chain. Several initiatives were also implemented during the year towards leveraging the rapidly growing e-commerce channel with a view to enhancing the reach of your Company’s products and harnessing digital and social media platforms for deeper consumer engagement.

During the year, your Company commissioned two world-class Integrated Consumer Goods Manufacturing and Logistics Units (ICMLs) at Panchla, West Bengal and Kapurthala, Punjab. Significant progress was also made in constructing several other state-of-the-art owned ICMLs across regions to secure capacity and enable the FMCG Businesses to rapidly scale up in line with long-term demand forecast. Currently, over 15 projects are underway and in various stages of development - from land acquisition/site development to construction of buildings and other infrastructure. The Businesses are focussing on deploying ‘Industry 4.0’ technologies including advanced analytics, big data and industrial Internet of Things (IoT) in areas such as overall equipment efficiency, energy management, maintenance, downtime analysis, quality and traceability.

The FMCG Businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years.

Today, your Company’s vibrant portfolio of brands represents an annual consumer spend of nearly Rs, 16000 crores in aggregate. These brands have been built organically by your Company over a relatively short period of time - a feat unparalleled in the Indian FMCG industry. In terms of annual consumer spend, ‘Aashirvaad’ is today over Rs, 4000 crores; ‘Sunfeast’ over Rs, 3500 crores; ‘Bingo!’ over Rs, 2000 crores;

‘Classmate’ and ‘YiPPee!’ over Rs, 1000 crores each and ‘Vivel’, ‘Mangaldeep’ and ‘Candyman’ over Rs, 500 crores each. These world-class Indian brands support the competitiveness of domestic value chains of which they are a part, ensuring creation and retention of value within the country.

Your Company’s FMCG brands have achieved impressive market standing in a relatively short span of time. Today, Aashirvaad is No. 1 in Branded Atta, Bingo! is No. 1 in Bridges segment of Snack Foods (No.2 overall), Sunfeast is No. 1 in the Premium Cream Biscuits segment, Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in Noodles, Engage is No. 2 in Deodorants (No. 1 in women’s segment) and Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment).

Your Company remains extremely agile and responsive to the emerging trends shaping the future of the industry. Some of the noteworthy consumer trends include the emergence of health and wellness products as a key consumer need; increasing preference for products rooted to ‘Indianness’ and with regional/cultural connects; increasing need for customized products and bespoke experiences; growth in demand for ‘on-the-go’ consumption formats and rising influence of social media and digitalization on consumer preferences and shopping behavior. Similarly, the FMCG market construct is likely to undergo rapid change driven by exponential growth in tier - II/III towns and rural India and the emergence of relatively new channels such as Modern Trade and e-commerce.

The Indian FMCG market is at an inflection point and your Company seeks to rapidly scale up the FMCG Businesses leveraging its institutional strengths viz. deep consumer insight, proven brand building capability, agri-commodity sourcing expertise, cuisine knowledge, strong rural linkages, a deep and wide distribution network and packaging know-how. In addition, your Company continues to make significant investments in Research & Development, focus on consumer insight discovery and harness digital technology to develop and launch disruptive and breakthrough products in the market place.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Demand conditions in the Branded Packaged Foods industry remained sluggish during the year due to slowdown in private consumption expenditure growth and supply chain disruptions during the transition to GST. The year was marked by heightened competitive intensity with industry players resorting to aggressive consumer promotions and trade schemes in a bid to garner volumes.

Against the backdrop of a challenging operating environment as foretasted, your Company sustained its position as one of the fastest growing branded packaged foods businesses in the country leveraging a robust portfolio of brands, a range of distinctive products customized to address regional tastes and preferences along with an efficient supply chain and distribution network that ensures benchmark levels of visibility, availability and freshness of products in the market. The Business implemented several initiatives encompassing cost management, supply chain optimization, smart procurement and recipe optimization which helped in mitigating the escalation in input costs and enhancing profitability.

Your Company’s Branded Packaged Foods Businesses continued to make significant investments towards brand building and supporting the launch of new variants apart

from absorbing the gestation costs of new categories viz. Dairy, Juices, Chocolates and Coffee.

Your Company’s vibrant and successful food brands such as ‘Aashirvaad’, ‘Sunfeast’, ‘Bingo!’, ‘YiPPee!’ and ‘B Natural’ amongst others, enable strong forward linkages for domestic agri-value chains, thereby enhancing their competitiveness and making a meaningful contribution to boost farmer earnings.

Relentless focus on delivering superior quality products to consumers remains a key source of competitive advantage for the Branded Packaged Foods Businesses. In this context, the Businesses continue to leverage your Company’s agri-commodity sourcing expertise to procure high quality raw materials thereby ensuring the highest level of quality and safety of its products.

In addition, each of your Company’s branded packaged food products is manufactured in HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms.

The Business launched several innovative, distinctive and first-to-market products during the year leveraging robust product development processes, the capabilities of your Company’s Life Sciences and Technology Centre and the cuisine expertise resident in your Company’s Hotels Business.

Several manufacturing units of your Company’s Branded Packaged Foods Businesses, competing with both the best within and outside the industry, received several awards and accolades during the year bearing testimony to your Company’s focus on manufacturing excellence, safety and quality.

Your Company continues to make investments towards augmenting the manufacturing and sourcing footprint across categories with a view to improving market responsiveness and reducing the cost of servicing proximal markets. During the year, two new owned manufacturing facilities - Kapurthala in Punjab and Panchla in West Bengal - were commissioned while capacity utilization was progressively scaled up at the Uluberia, Mysuru and Guwahati units that commenced operations in the second half of FY17. Plans are on the anvil to commission new lines at the Kapurthala, Panchla and Guwahati facilities in the ensuing year. The manufacturing unit at Pudukkottai, Tamil Nadu is at an advanced stage of completion and is expected to be commissioned shortly.

- The Staples Business posted robust performance during the year, growing well ahead of the industry. In the Staples category, Aashirvaad atta posted healthy growth and fortified its leadership position while maintaining its pricing premium in the market. The value-added product portfolio, comprising Multigrains, Select and Sugar Release Control atta, continued to record robust growth.

This was achieved despite increasing competitive pressures triggered by the imposition of 5% GST on branded atta (compared to nil VAT in most States under the erstwhile tax regime) while non-branded atta (incl. branded atta on which actionable claim or enforceable right has been foregone voluntarily) remained at nil duty. During the year, the Business also had to contend with a concerted attack on Aashirvaad atta on social media with rumour mongers circulating malicious videos and falsely alleging that Aashirvaad atta contains plastic.

The Business launched a 360 degree campaign to reassure consumers and dispel the baseless rumours surrounding Aashirvaad atta.

The communication clearly highlighted that as per FSSAI standards, atta must contain not less than 6% of wheat protein on a dry weight basis and that elasticity is a natural property of the protein without which it is not possible to bind the atta. Simultaneously, complaints were filed with the police authorities and injunction orders restraining circulation of such videos on social media were also obtained from the civil court. These interventions helped in effectively mitigating the short-term impact of the malicious videos on sales momentum, with the brand staging progressive recovery subsequently.

Your Company takes utmost care in manufacturing of its products at HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms. Powered by the trust reposed by over 2.5 crore households, your Company is confident of sustaining Aashirvaad’s position as India’s No. 1 atta brand going forward.

Supported by its new positioning, ‘Created by Sun and Sea - pure just like nature intended it to be’ and new pack design, Aashirvaad Salt posted robust performance during the year. In the branded Spices category, the Aashirvaad range of spices registered steady volume growth. In line with its commitment to deliver products with the highest quality and safety standards to Indian consumers, the Business continued to reinforce the value proposition of the recently launched ITC Master Chef ‘Super Safe Spices’, which are tested for over 470 pesticide residues in accordance with European standards as compared to only nine required under Indian regulations.

- In the Snacks and Meals Business, the Bingo! range of snacks recorded robust growth during the year driven by Tedhe Medhe and potato chips.

The Business achieved market leadership on an All-India basis in the Bridges segment driven by a robust portfolio of products under the Tedhe Medhe, Mad Angles and Tangles sub-brands. The potato chips portfolio recorded impressive market share gains and emerged as the leader in the South markets leveraging an optimized portfolio, revamped pack and fresh communication. During the year, the Business forayed into the extruded snacks segment with the launch of ‘No Rulz’ - a-first-of-its-kind offer comprising four different shapes of the product in a single pack. The product has received excellent response and continues to gain traction with consumers. The Bingo! range was augmented during the year with the launch of several variants customized for regional taste palates, viz. Mad Angles Kolkata Kasundi, Tedhe Medhe Lime Chatpata, Tomato Masti and Pudina Twist.

In the Instant Noodles category, YiPPee! noodles sustained its robust growth momentum during the year despite increasing competitive intensity including from several regional discount players. The year also saw the launch of ‘Mood Masala’ - an innovative variant comprising two masala mix sachets in a pack providing the consumer the option to add masala to ‘match his mood’. Mood Masala received encouraging consumer response, further strengthening the brand imagery of YiPPee! amongst tweens and young adults.

- The Confections Business scaled up operations and improved its market standing during the year. In the Biscuits category, the Business continued to focus on premiumising its product portfolio, enhancing brand affinity, strengthening the supply chain and expanding distribution reach. Consistent and impactful communication, coupled with focused marketing inputs helped improve penetration and brand health metrics. Dark Fantasy Choco Fills sustained its clear market leadership position in the Super-Premium Creams segment across the country. Brand architecture in the biscuits category was optimized with the migration of Delishus & Yumfills under the Mom’s Magic and Dark Fantasy brands respectively. The Business augmented its product portfolio in the health segment with the launch of Protein Power, a unique variant based on roasted Bengal gram flour and Digestive five grains biscuits under the Farmlite brand. The Mom’s Magic range was expanded with the addition of ‘Fruit & Milk’ variant. Your Company continues to leverage the biscuits manufacturing unit owned by North East Nutrients Private Limited, a joint venture company, to record impressive gains in market standing in the North East markets.

In the Confectionery category, in line with its strategy of premium sing the portfolio, the Business launched several unique offers in the ‘Re. 1 & above’ price points including Cola Josh, Crunchy and Clear Candy under the Candyman brand, Jelimals Sour Slides and two exciting variants under the ‘mint-o’ brand. These products have received encouraging consumer response.

- In the Dairy & Beverages Business, the ‘B Natural’ range of juices continues to gain traction amongst its target consumers aided by a clutter-breaking media campaign, on-ground trial generation initiatives and visibility & availability enhancement drives.

The journey towards making juices concentrate-free, which commenced last year with the launch of ‘B Natural 100% Pomegranate Juice’, continued during the year with the entire range of B Natural juices being migrated to the ‘not from concentrate’ platform. This first-of-its-kind initiative in India, was anchored on the twin resolve to provide consumers a more nutritive and natural tasting experience and promote the use of fruit pulp procured from Indian farmers, thereby supporting the Indian farm and food processing sector. The Business also introduced ‘Bael’ and ‘Phalsa’ variants during the year catering to regional tastes and preferences which were well received by consumers. In the Dairy segment, ‘Aashirvaad Svasti’ Ghee was extended to Delhi NCR markets during the year, gaining healthy consumer traction. During the year, the Business also forayed into the Pouch Milk segment with the launch of ‘Aashirvaad Svasti’ milk in select markets in Bihar in the vicinity of your Company’s Munger dairy plant.

- In the Chocolates category, the ‘Fabelle’ range of luxury chocolates was scaled up during the year with a view to redefining the luxury chocolate segment in India. The range is available in eight Fabelle Chocolate Boutiques located within ITC hotels and several outlets in premium malls and food stores. Product portfolio was augmented with the launch of two delectable variants of centre-filled chocolate bars - ‘Hazelnut Mousse’, & ‘Dark Choco Mousse’ which have received excellent response from discerning consumers. Towards deepening engagement with consumers, the Business launched a unique experience platform during the year christened - ‘Fabelle Societe de Chocolat’ - across

Fabelle boutiques with Ms. Billie McKay, winner of MasterChef Australia 2015, as the mentor. ‘Sunbean’ gourmet coffee, launched across all ITC Hotels last year, continues to receive excellent response from discerning consumers and plans are on the anvil to scale up presence in the ensuing years.

Your Company remains focused on establishing itself as the ‘most trusted provider of food products in the Indian market’ driven by superior product quality, a differentiated product portfolio, deep understanding of consumer needs and preferences, R&D, innovation and operational excellence across the value chain. Your Company will continue to make investments towards establishing a distributed manufacturing footprint, driving cost efficiencies in a structural manner and focus on supply chain optimization to support the rapid and profitable growth of the Branded Packaged Foods Businesses in the years ahead.

Personal Care Products

Your Company’s Personal Care Products Business delivered a robust performance and enhanced its market standing during the year against a backdrop of significant disruption to trade and supply chain following the roll out of GST. This was driven largely by sustained focus on innovation, product mix enrichment, expansion of distribution reach, proactive cost management and enhancing supply chain responsiveness.

The Business continued to focus on innovation and to delight consumers by launching a range of exciting offerings during the year. In the Fragrance category, the recently launched innovative perfume variants under the brand ‘Engage ON’ and ‘Engage ON ’, designed to drive on-the-go consumption, garnered robust consumer traction. The Business also launched a Sport range of deodorants with long lasting fragrance and a selection of premium Eau de Parfums for both men and women. In the Personal Wash category, the Business introduced a unique Gel Creme range under the ‘Fiama’ brand combining the best of gel and cream for both soap and liquid bathing products, and Vivel Lotus Oil - a unique offering enriched with Lotus Oil and Vitamin E for soft glowing skin. ‘Savlon’ handwash continued to gain ground, with the launch of a new small pack at an attractive price point.

These new innovations received excellent response from consumers during the year and were supported with refreshing communication and engaging consumer activations.

Your Company’s key brands, namely Vivel, Engage and Savlon continue to gain salience with target consumers and win industry recognition.

The Business continued to leverage innovative brand campaigns and social media platforms towards deepening consumer engagement. The recent interventions of restaging key brands anchored on Women Empowerment in the case of Vivel and Healthier Kids, Stronger India in the case of Savlon have received positive response from consumers resulting in a pick-up in sales momentum. Savlon won seven Cannes Lions Awards at the coveted Cannes Lions 2017. Considered to be the highest global accolade that recognises creative excellence in advertising and communications, Savlon won the prestigious awards for its unique and innovative ‘Healthy Hands Chalk Sticks’ initiative.

The ‘Healthy Hands’ initiative also received the Global PR SABRE as one of the Top 10 Best PR campaigns in the world. Vivel’s proposition of empowerment of women through its ‘Ab Samjhauta Nahin’ message, won

certificates of excellence at the South Asia PR SABRE awards for its integrated campaign thought and initiatives. ‘Engage’ won a Gold at Abby (India’s biggest advertising and creative award) for its social and digital campaign christened ‘Pocketful O’ Stories’. The ‘Engage’ campaign designed to introduce the Engage ON pocket perfume on social media also won two Golds at the Content Marketing Awards, South Asia for Best Use of contextual content and Best Use of Digital (Content).

‘Engage’ recorded impressive gains in the Fragrance category, consolidating its leadership position in the women’s segment and No. 2 position overall. The roll out of innovative pocket perfumes, Sport range of deodorants and the Eau de Parfums range have helped the brand grow its consumer equity significantly among both men and women besides premium sing the portfolio. ‘Savlon’ hand wash recorded significant gains during the year across brand health metrics and emerged as the fastest growing brand in the market. In the body wash segment, the ‘Fiama’ range of shower gels continued to garner increasing consumer franchise and is the fastest growing and the second largest brand nationally. The Business also launched moisturizing skin creams under the recently acquired ‘Charmis’ brand and plans are afoot to strengthen your Company’s skincare portfolio in the near to medium term.

During the year, your Company’s manufacturing facility in the North East, which was commissioned in March last year, achieved 90% capacity utilization within a short period of time. This has led to strengthening the supply chain and has enabled efficient servicing of proximal markets in the North East.

Input prices remained stable in the first half of the year, with an uptick in the latter half. The Business continued to pursue strategic cost management initiatives including product cost optimization through innovation, proactive sourcing, alternative vendor development and value capture through supply chain efficiencies which resulted not only in containing inflation but also in enhancing profitability.

Your Company continues to strengthen its presence in the Personal Care space in view of the robust long-term prospects of the industry given the low levels of per capita consumption currently, rising disposable incomes, increasing urbanization and growing consumer preference for enhanced personal grooming. Your Company is well positioned to seize the emerging opportunities and continues to invest in creation of vibrant brands, innovative consumer-centric products and a robust supply chain to emerge as a significant player in this space.

Education and Stationery Products

The Stationery industry was impacted during the year with the roll out of GST coinciding with the school opening season and trade operating with lower inventory levels due to uncertainties around the new tax regime. Despite these challenging conditions, the Business sustained its leadership position in the Indian Education and Stationery Products industry anchored on a portfolio of world-class products and brands.

The Business continued to leverage its dedicated product development cell and your Company’s Life Sciences & Technology Centre to develop & launch innovative and superior products in the market. During the year, the product portfolio was augmented with the launch of several new products including a spiral range of notebooks under Classmate, Classmate All Purpose Paper, ‘Archimedes’ premium geometry boxes with ‘spur gear’ divider and compass for higher precision and several offerings in the pens, mechanical pencils and scholastics categories. The Business also scaled up presence in the value segment of the notebook industry through its brand ‘Saathi’ with a view to consolidating its leadership position.

During the year, the Business launched ‘’ - a first-to-market initiative that offers consumers the option to personalize the images to be printed on notebook covers. The Business continued to focus on enhancing brand affinity by leveraging the ‘Classmate Spellbee’ and ‘Classmate Handwriting Competition’ platforms. These competitions collectively reach out to nearly a million children across 1000 schools in 30 cities.

The ‘Be Better Than Yourself’ campaign launched during the year under the Classmate brand across television, out-of-home, digital and social media platforms hit the right note with consumers, receiving positive reviews. The campaign seeks to drive tangible changes in society by encouraging children to realize their full potential by pursuing their personal goals and ambitions rather than comparing them with peers in terms of their marks and other achievements. The campaign has helped generate conversations amongst parents on this critical topic and garnered over seven million views across social media platforms.

In the area of supply chain, initiatives on quality and cost management through network optimization yielded superior product quality and enhanced operational efficiency. The thrust on expanding distribution continued with specific focus on institutional channel and enhancing market penetration and outlet coverage. Sales and distribution systems were strengthened further through technology interventions such as sales force automation and Customer Relationship Management system for the institutional channel.

Classmate and Paper raft notebooks leverage your Company’s world-class fibre line at Bhadrachalam - India’s first ozone treated elemental chlorine free facility - and embody the environmental capital built by your Company in its paper business. During the year, the Business scaled up the Paper raft range of notebooks using Forest Stewardship Council (FSC) certified paper, made at your Company’s paper mill, matching the best quality paper in the world.

The Indian Education and Stationery Products industry is poised for exponential growth driven by growing literacy, increasing enrolment ratios, government’s thrust on the education sector through various policy initiatives like Sarva Shiksha Abhiyan, Right to Education etc. and a favourable demographic profile of the country’s population. Your Company, with its strong brands and robust product portfolio, and collaborative linkages with small & medium enterprises is well poised to strengthen its leadership position in the Indian stationery market.

Lifestyle Retailing Business

2017-18 was another challenging year for the Branded Apparel industry. Transition to GST regime triggered a premature end to the Spring Summer 2017 season with most players announcing an early ‘end-of-season’ sale period which was extended in a bid to liquidate pre-GST merchandise. On the other hand, e-commerce players continued with their aggressive push to capture market share amongst value seeking consumers by offering heavy discounts and launching exclusive labels and brands. The performance of your Company’s Lifestyle Retailing Business was adversely impacted against the backdrop of the challenging environment as foretasted.

The Business continued to execute the structural interventions initiated in the previous year across channels and processes including restructuring the retail foot print, rationalization of stores, modifying the design language of its offerings, restructuring of terms of trade with business partners and sharpening working capital management. The Business refreshed the offers under Wills Lifestyle and John Players adopting a unique ‘Story-based Looks creation’ approach.

This initiative entailed re-crafting the merchandise range architecture, channel specific offerings and special focus on enhancing the portfolio of core merchandise. Distinct and time bound colour stories were introduced aimed at providing freshness to consumers in the retail stores on a continual basis.

The ‘Wills Lifestyle’ range was augmented during the year with the launch of pure superfine linens and flat knits. The brand is available in 350 outlets across multiple channels including national and regional large format stores, exclusive and multi-brand outlets including six exclusive boutique stores across ITC Hotels.

The John Players brand is available at around 750 points-of-sale across leading national and regional department stores, exclusive stores and multi-brand outlets. During the year, the range was made more vibrant and distinct with the launch of outdoor smart casual products made of innovative fabrics. The John Players Jeans range was strengthened by using unique knitted structure fabrics in denims with differentiated washes, laser printing, travel jeans with mobile charger pockets, trendy joggers in camouflage prints, Indigo shirts in checks, prints & dobbies and youthful trendy polo range in indigo, engineered designs & stretch fabrics.

During the year, the Business enhanced its core portfolio, augmented marketing activities including windows and visual merchandising, improved manufacturing productivity and efficacy of replenishment mechanisms. Analytics based on ERP and point-of-sale systems enabled enhancing consumer experience besides further strengthening inventory and receivables management.

The Business will continue to sharpen its design focus, market representation and supply chain responsiveness with a view to improving operating efficiency going forward.

Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti category witnessed increase in competitive intensity during the year with industry players resorting to aggressive media and promotion spends in a bid to garner market share. The continued presence of counterfeit products and supply chain disruptions due to transition to GST also weighed on industry performance. Against the backdrop of these challenging conditions, Mangaldeep sustained its position as the leader in the Dhoop segment and the second largest brand in the Agarbatti segment. During the year, the Business augmented its product portfolio with the launch of new variants and enhanced its distribution reach. Investments in media coupled with on-ground activation activities were made during the year towards enhancing Mangaldeep’s salience as the most preferred brand in the devotional space. Product mix enrichment and cost optimization initiatives continued to be the other key focus areas for the Business.

During the year, the Business upgraded its unique and highly innovative Mangaldeep App in partnership with

several subject matter experts with the introduction of new features which were carefully curated to cater to regional nuances. Currently available in nine languages on both the Android & iOS platforms, the App’s content caters to the everyday devotional needs of consumers by providing detailed information and steps to perform various pujas and has innovative features such as a collection of popular devotional songs, a panchang (Hindu calendar and almanac), an innovative chant counter and temple locator amongst others. The App has received excellent response with over 3,00,000 downloads and an average rating of 4.6 out of 5.0.

The Agarbatti industry continues to import raw battis primarily from Vietnam and China, although bamboo and charcoal - the principal raw materials - are available in India in plenty. This is resulting in loss of livelihood creation opportunities for women and tribals in rural areas, particularly in the North East. In this regard, the recently announced restructured National Bamboo Mission which seeks to bring more than 1,00,000 hectares under plantation and amendment in the Indian Forests Act excluding bamboo grown in non-forest areas from the definition of a ‘tree’, will inter alia encourage manufacture of raw battis from indigenous bamboo and facilitate creation of sustainable livelihood opportunities amongst small and marginal farmers.

In line with your Company’s commitment to enhancing the competitiveness of Indian value chains linked to its operations, the Business has implemented several measures including facilitating the mechanization of agarbatti manufacturing and backward integration into raw batti manufacturing using indigenous inputs at vendor locations.

While demand conditions remained sluggish during the year in the Safety Matches category, the Business sustained its leadership position by leveraging a robust portfolio of offerings across market segments.

The Business focused on enriching its product mix by enhancing the share of value-added products in the portfolio. ‘AIM’ continues to be the largest selling brand in the industry.

Introduction of GST has led to the harmonization of tax rates in the Safety Matches industry by eliminating the tax differential that existed under the erstwhile indirect tax regime between semi-mechanised and mechanized operations. This, coupled with the effective implementation of the recently introduced E-way bill, is expected to facilitate levelling the playing field and in triggering the required investments towards modernizing and enhancing the long-term sustainability and competitiveness of the industry.

Trade Marketing & Distribution

Your Company’s Trade Marketing & Distribution (TM&D) vertical has over the years developed critical insights into customer behavior and channel-specific trends in the FMCG industry. Given the diverse needs of your Company’s FMCG businesses, the TM&D vertical has crafted a differentiated and comprehensive market/outlet specific strategy to address the opportunities in the FMCG industry.

During the year, the TM&D vertical strengthened its formidable distribution network covering over one lakh markets and over six million retail outlets (directly and indirectly) across various trade channels. This further enhanced the reach and availability of your Company’s large and diverse FMCG product portfolio comprising several world-class brands and hundreds of SKUs.

In urban markets, your Company continued its customized servicing / engagement programmes for the top outlets through dedicated infrastructure.

This resulted in enhancing trade relationships and improving the market standing of your Company’s FMCG products. In rural markets, your Company continued to roll out market specific interventions including augmentation of supervision structure and increase in direct coverage, to achieve growth rates higher than industry and support enhanced scale of operations going forward.

During the year, your Company sustained its leadership position in the convenience channel while consolidating its market standing in premium grocery outlets. TM&D’s trade loyalty programmes - ‘First Club’ for retail outlets and ‘Shubh Laabh’ for the wholesale channel - continued to gain traction during the year. Sales of your Company’s FMCG products in the Modern Trade channel continued to grow on the strength of extensive deployment of in-store merchandisers, consumer connect programmes coupled with joint business planning during large-scale customer activation drives, channel specific SKUs, extensive sampling initiatives etc. Your Company continued to make progress during the year in scaling up presence of your Company’s FMCG portfolio in the chemist channel. Your Company worked closely with leading e-commerce companies towards enhancing the availability of its products on their online platforms, aiding sell-out through enhanced visibility and strengthening operational capabilities to service customer requirements. As a result of these initiatives, your Company’s business in the e-commerce segment witnessed robust growth during the year.

The scale and diversity of your Company’s distribution network continues to be a critical lever to enhance market presence, gain valuable consumer/trade insights and facilitate seamless execution of new product/category launches. During the year, TM&D executed more than 60 new launches across geographies apart from extending distribution reach of several existing products in the portfolio. Technology enablement in the form of customized mobility solutions, data analytics comprising insightful visualization tools & predictive analysis are being leveraged increasingly towards enabling quick and accurate data capture, informed decision making and scientifically designing trade promotion schemes.

TM&D’s supply chain and logistics function continues to play a vital role in enabling superior market servicing while continuously reducing cost of market servicing. During the year, several initiatives were undertaken to enhance supply chain responsiveness and cost competitiveness. These include reducing distance to market, enhancing flexibility to cater to new launches and contingencies, and reconfiguring market servicing infrastructure. In addition, innovative distribution models were implemented to optimize inventory holding and improve distribution efficiency of trade channel partners, and reduce transit time by increasing direct market servicing. Your Company is also in the process of setting up several state-of-the-art warehouses co-located with the Integrated Consumer Goods Manufacturing facilities. These modern warehouses are expected to provide long-term benefits by improving operating efficiency and enhancing product freshness in the market.

During the year, the TM&D vertical proactively engaged with its trade partners to help them re-engineer their business processes to be compliant with GST requirements besides continuing to collaborate with them to improve the frequency of servicing, reduce inventory holding and the incidence of out-of-stock situations.

TM&D continues to invest in augmenting the depth and width of your Company’s distribution network while adopting a differentiated approach to address the unique needs of your Company’s diverse FMCG product portfolio, market segments and trade channels.

With its best-in-class systems and processes, agile and responsive supply chain and synergistic relationship with trade, TM&D’s distribution highway is a source of sustainable competitive advantage for your Company’s FMCG Businesses and is well poised to support the rapid scale up of operations in the ensuing years.


The operating environment in the hospitality sector showed signs of improvement with foreign tourist arrivals crossing the ten million mark in 2017. While growth in Segment Revenue during the year was subdued at 5.6% reflecting inter alia the overhang of excess room inventory and the impact of highway liquor ban, performance during the second half was significantly better driven by increase in ARR and robust growth in Food & Beverage revenue. Improvement in room rates and operating leverage aided faster growth of 26% in Segment Results, notwithstanding the gestation costs of ITC Grand Bharat and the recently commissioned Welcome Hotel Coimbatore.

Your Company’s Hotels business remains amongst the fastest growing hospitality chains in the country with over 104 properties under four distinct brands - ‘ITC Hotel’ in the Luxury segment, ‘WelcomHotel’ in the Upper-Upscale segment, ‘Fortune’ in the Mid-market to Upscale segment and ‘WelcomHeritage’ in the Leisure & Heritage segment. The Business continues to focus on strengthening the equity and differentiation of the ITC Hotels brand anchored on unique and path-breaking ‘Responsible Luxury’ initiatives, culinary excellence and personalisation of guest services through hotels that are the truest representation of the region’s culture and ethos.

‘Club ITC’, your Company’s pan-ITC consumer loyalty programme, continues to gain franchise amongst the premium clientele of ITC hotels and Wills Lifestyle. The programme continues to leverage its strategic partnership with Starwood Preferred Guest (SPG) - the global loyalty programme of Marriott International. The dining loyalty programme, ‘Club ITC Culinaire’, has grown rapidly in popularity registering robust growth in membership base during the year.

During the year, the Business further strengthened its digital presence through targeted e-commerce activations for direct conversions, leading to increased reach and engagement with customers in both domestic and international markets. The Business also focused on social media marketing and online reputation management towards enhancing brand salience and market standing. During the year, the Business rolled out a chain-wide #soulofcity campaign, amplifying its brand proposition of ‘Hotels that define the destination’, generating appx. 4.4 million impressions. The Business received global accolades and recognition at The Global Social Hotel Awards for ‘Best Use Of A Visual Network’ and ‘2nd Best Online Reputation Management’ for 2017.

The world-class ambience of your Company’s luxury hotels continues to be leveraged for the gourmet luxury chocolates range under the ‘Fabelle’ brand with exclusive boutiques across eight ITC hotels. In addition to selling premium packaged chocolates from the Branded Packaged Foods Business, the Fabelle chocolate boutiques offer a range of exquisitely crafted desserts and cocoa beverages, created live by Fabelle Master Chocolatiers. The initiative has received encouraging response and will go a long way in establishing the Fabelle brand at the luxury end of the market.

The Fabelle Societe de Chocolat, an exclusive

chocolate-making programme designed by the master chocolatiers of Fabelle chocolates at ITC luxury hotels, provides chocolate lovers and budding chocolatiers an opportunity to foster the love for chocolate and appreciate the fine nuances of chocolate making.

The initiative has received excellent response from discerning chocolate consumers and is planned to be scaled up in the ensuing year.

‘Sunbean’ gourmet coffee, launched last year, established itself as the beverage of choice in your Company’s luxury hotels. The bespoke brand experience was brought alive for the guests through ‘Sunbean Ambassadors’ - specially trained master baristas who demonstrated the brand story, supported by delightful creations.

Your Company’s Hotels Business sustained its pre-eminent position in the hospitality industry receiving several coveted accolades and recognitions during the year. ITC Hotels featured as the ‘Sectoral Leader’, for the fourth time in the Business World ‘Most Respected Companies’ listing. The Travel Leisure magazine acknowledged the chain as the ‘Best Luxury Hotel Chain’ at the ‘India’s Best Awards’. The U.S. Green Building Council presented ITC Hotels with a ‘Leadership Award’ for its commitment to Green Building Design. The Responsible Luxury Fellowship enumerating ITC Hotels’ guiding principles through video blogs won the brand the ‘Best Digital Video’ award by HOTELS magazine USA. Your Company’s world-class properties continued to receive international and domestic accolades - ITC Grand Bharat was ranked amongst the Top 10 resorts in Asia by Conde Nast Traveler USA and the ‘Best Luxury Hotel’ by Travel Leisure India & South Asia, while ITC Maurya was adjudged the ‘Most Eco Friendly Hotel’ by the Ministry of Tourism at the National Tourism Awards.

| In view of the long-term potential of the I remains committed to enhancing th

The Food & Beverage segment continues to be a major strength of your Company’s Hotels Business with some of the most iconic brands in the country. Your Company’s culinary brands retained their leadership position with ‘Bukhara’, ‘Dum Pukht’, ‘Royal Vega’, ‘Dakshin’, ‘Avartana’, ‘K&K’, ‘Ottimo’, ‘EDO’, ‘Pan Asian’ and ‘West View’ receiving the coveted Times Food Awards. ‘Avartana’, a Southern Indian mosaic brand at the ITC Grand Chola was recognized as the ‘Best Restaurant’ in Chennai at the Times Food Awards, within the first year of its opening. ‘Fabelle’ swept the Times Food Awards as the ‘Best Confectionery Destination in the Fine Dining category’ in Mumbai, New Delhi, Bengaluru and Chennai & the ‘Best Chocolatier’ in Kolkata.

Your Company’s internationally acclaimed spa brand, ‘Kaya Kalp’ was recognized at the GEOSPA Asia Spa India Awards with the ‘Most Luxurious Spa Resort’ award for ITC Grand Bharat and ‘Best Hotel Spa’ award for ITC Grand Chola.

Your Company’s Hotels Business continuously strives to reduce water and energy consumption and enhance the usage of renewable energy to meet its overall energy requirements. Such commitment to the Triple Bottom Line is manifest in the Business’s ‘Responsible Luxury’ ethos making it a trailblazer in green hoteliering globally. Over 60% of the total electrical energy consumption of the Business is currently met through renewable sources.

In view of the long-term potential of the Indian hospitality sector, your Company remains committed to enhancing the scale of the Business by adopting an ‘asset-right’ strategy that envisages building world-class tourism assets for the nation and growing the footprint of managed properties by leveraging its hotel management expertise. The Business made steady progress during the year in the construction of luxury hotels at Hyderabad, Kolkata and Ahmadabad. Construction of ITC Kohenur in Hyderabad is nearing completion and is expected to be commissioned in the first quarter of 2018-19.

In addition, your Company’s wholly-owned subsidiary in Sri Lanka made steady progress towards setting up a luxury hotel christened ‘ITC One’ and a super-premium residential apartment complex, ‘Sapphire Residences - Colombo 1’, situated at a strategic location in Colombo.

In the Upper-Upscale segment, the ‘WelcomHotel’ brand continues to build on its ‘asset-right’ strategy with its distinctive ‘charmingly local’ positioning. During the year, the Business commissioned the 103-room WelcomHotel Coimbatore and expanded presence in business and leisure destinations adding managed properties in Chennai, Bengaluru, Pahalgam and Mussoorie. The Business seeks to scale up the brand going forward with the addition of new hotels under construction at Amritsar, Guntur and Bhubaneswar along with a robust pipeline of managed properties.

The ‘Fortune’ brand sustained its pre-eminent position in the Mid-market to Upscale segment, with a sharpened brand positioning of ‘First class, full service hotels - an affordable alternative’. The Fortune brand presently comprises 45 hotels across 37 cities. The ‘WelcomHeritage’ brand remains the country’s most successful and largest chain of heritage hotels with 34 operational hotels.

As reported earlier, your Company was declared the successful bidder for a 250-room luxury beach resort located in South Goa operating under the name Park Hyatt Goa Resort and Spa, following an auction held by IFCI Limited in February 2015 in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Subsequent to your Company making full payment of the bid amount, IFCI issued the requisite Sale Certificates in favour of your Company on 25th February, 2015.

However, based on an appeal by the erstwhile owners, the sale had been struck down by the Honourable Bombay High Court. Your Company and IFCI had contested the said order before the Honourable Supreme Court. On 19th March, 2018, the Honourable Supreme Court upheld the sale of the property by IFCI Limited to your Company and directed that the hotel property be handed over within six months. Accordingly, the property is expected to be handed over to your Company in the coming months.

Your Company’s Hotels Business, with its world-class properties, iconic cuisine brands, globally benchmarked levels of service excellence and customer centricity, is well positioned to sustain its leadership status in the Indian Hospitality industry.


The domestic Paperboards, Paper and Packaging industry remained impacted by sluggish demand conditions prevailing in the FMCG, liquor and legal Cigarette industry. The transition to GST also caused short-term disruptions especially during the first half of the year. This, coupled with zero duty imports under ASEAN Free Trade Agreement, cheap imports from China and unabsorbed capacity in the industry weighed on the performance of the Business. On the positive side, relatively benign input costs, higher substitution of imported pulp with in-house pulp and continued focus on product mix enrichment resulted in margin expansion. Consequently, while Segment Revenue de-grew by 2.1%, Segment Results grew at a faster pace of 7.9% during the year.

Paperboards & Specialty Papers

Global demand for Paper & Paperboard in 2017 grew by 1% appx. to 410 million tonnes, with the paperboard segment growing by 2%. Going forward, global demand

for Paper & Paperboard is projected to grow at 0.5% to 1.0% CAGR driven by Asia, Africa and North America. The Writing & Printing and Newsprint segments, on the other hand, are expected to remain under pressure largely due to increasing adoption of digital media and proliferation of smart phone usage.

Domestic demand for Paperboard remained subdued due to sluggish off take by end-user industries besides being temporarily impacted in the first half of the year due to the transition to GST. Writing & Printing paper demand remained firm due to steady off take from the education segment, while prices witnessed an uptrend largely on account of supply disruptions due to operational discontinuities at certain mills.

Over the next five years, the domestic industry is projected to grow at 6% to 7% CAGR to reach 20 million tonnes by 2022 with the Paperboard (48% of the market) and Writing & Printing paper (30% of the market) segments estimated to grow at around 7.5% CAGR and 6.0% CAGR respectively. Within Paperboards, demand for Value-Added Paperboards (VAP) in India is projected to grow at a healthy rate of around 10.5% CAGR driven by growth in demand from the FMCG, Pharma, Publishing, and Food & Beverage industries. In the Writing & Printing paper segment, cut-size paper is projected to register the fastest growth at 9.5% CAGR, driven by the education and office stationery segments.

During the year, import of paper and paperboard from China, ASEAN and South Korea grew by 57% while overall paper imports increased by 38%. As highlighted in previous years’ reports, imports from ASEAN countries have been growing at a rapid pace since the implementation of zero duty on such imports with effect from 1st January, 2014, under various trade agreements. The trade agreement with South Korea also allows import at zero duty from January 2017. Disruption in domestic supplies during the year due to operational discontinuities at certain mills owned by competitors provided further impetus to imports.

The current import policy and extant regulations governing commercial and social forestry in the country have put the Indian Paper and Paperboard industry at a disadvantage vis-a-vis imports. The economic viability of domestic manufacturers has been severely impacted leading to the closure of several paper mills in the recent past. There is clearly a need to review the current import duty structure and re-examine the existing Free Trade Agreements (FTAs) and the new ones under formulation towards providing a level playing field to the domestic industry and encourage commercial farming of wood in India. Legislative changes along with appropriate environmental safeguards need to be implemented to enable private sector participation in commercial forestry on drylands and wastelands.

Your Company remains the clear leader in the VAP segment and continues to consolidate its preferred supplier status amongst leading end-use customers and brands. Further, your Company’s expansion project in the VAP segment at Bhadrachalam unit is nearing completion. The Specialty Papers portfolio was also expanded with the launch of new grades to service the needs of customers. The Business sustained its leadership position in the sale of eco-labelled products, volumes of which grew by appx. 12% during the year. Your Company has been recognized for its environmental transparency and improvement across parameters such as responsible fibre sourcing, clean manufacturing etc. in the WWF Environmental Paper Company Index 2017, which is considered to be the benchmark in the area of responsible pulp and paper manufacturing.

The Business continues to be a leading quality player in the Writing & Printing paper segment, leveraging strong forward linkages with your Company’s Education and Stationery Products Business. In the Specialty Papers segment, your Company sustained its leadership position in the pharma leaflets and thin printing segments. In order to meet the growing demand of quality decor papers, the decor machine at the Tribeni unit has been completely refurbished incorporating latest technology features including superior profile control and smoothness for high print resolution along with capacity expansion. The Business has recently launched an exciting range of decor papers, becoming a one-stop solution for all decor paper needs.

Your Company continues to source its wood requirements from sustainable sources. Your Company’s research on clonal development has resulted in the introduction of high yielding and disease resistant clones that are adaptable to a wide variety of agro-climatic conditions. In this context, your Company’s Life Sciences & Technology Centre is engaged in developing higher yielding second generation clones with enhanced pest & disease resistance attributes.

The Ministry of Road Transport and Highways, Government of India has promulgated the Green Highways (Plantation, Transplantation, Beautification and Maintenance) Policy, 2015, to develop green corridors along national highways through plantation and allied activity on medians, avenues and other available nearby land patches. During the year, your Company worked closely as the knowledge and technical partner of National Green Highways Mission under National Highway Authority of India (NHAI) to develop new models of plantations to expand this commendable initiative which would go a long way in enhancing the green cover of the nation and generate employment opportunities for rural communities.

Your Company has the distinction of being the first in India to have obtained the Forest Stewardship

Council-Forest Management (FSC-FM) certification, which confirms compliance with the highest international benchmarks of plantation management across the dimensions of environmental responsibility, social benefit and economic viability. Till date, your Company has received FSC-FM certification for 33,500 hectares of plantations involving over 30,000 farmers. During the year, nearly 60,000 tonnes of FSC-certified wood were procured from these certified plantations. All four manufacturing units of the Business have obtained the FSC Chain of Custody certification and have complied with all requirements during the year, thereby sustaining your Company’s position as the leading supplier of FSC-certified paper and paperboard in India.

All manufacturing units of the Business continue to recycle nearly 100% of the solid waste generated during operations by converting the same into lime, fly ash bricks, grey boards, egg trays etc. In addition, the Business procured and recycled 1,31,000 tonnes of waste paper during the year, thereby sustaining your Company’s overall positive solid waste recycling footprint.

The manufacturing facilities at Bhadrachalam and Kovai continue to receive industry recognition for their green credentials and safety standards in line with your Company’s focus on sustainable business practices. The Bhadrachalam unit won the prestigious award for being the best performer in the ‘Pulp & Paper Sector’ under PAT Cycle 1 of the Perform Achieve and Trade (PAT) Scheme, a component of the National Mission for Enhanced Energy Efficiency (NMEEE). Organized by the Bureau of Energy Efficiency (BEE), the award was presented by the Director General of BEE for the outstanding efforts made by the unit under PAT Cycle 1. The plant has been identified as the highest achiever in energy savings above the stipulated target as set by BEE in the Pulp & Paper sector. The Kovai unit received

the National Award for Excellence in Energy Management 2017 from CII GBC (Green Business Centre) and the 1st prize in State level safety from Director of Industrial Safety, Government of Tamil Nadu. The Bollaram unit received 4 Star rating in EHS Excellence by CII Southern region.

The Business had commissioned a 46 MW wind energy project in Andhra Pradesh in July 2014, which has been generating wind power since then. As reported in previous years, permission for inter-state wheeling of power was not granted by the authorities post bifurcation of the State of Andhra Pradesh. After several representations and discussions with the concerned authorities on the matter, your Company received permission last year for wheeling of power from Andhra Pradesh to Telangana, thereby enabling the Bhadrachalam mill to utilise wind energy to meet its energy requirements. During the year, inter-state wheeling was extended to the Bollaram unit in Telangana and also your Company’s units in Karnataka. Usage of wind energy has led to a reduction of carbon foot print by lowering consumption of coal by 33000 tonnes during the year. While considerable progress has been made in streamlining the deviation settlement process for multiple inter-state transactions, the regulatory framework for levy of charges and banking of power is still evolving. Consequently, your Company continues to bear charges/levies at multiple points which have adversely impacted the expected returns on this large investment. Your Company continues to engage with State and Central regulatory authorities towards seeking relief from such additional levies/charges and remains hopeful of a favorable resolution of the matter.

In line with the objective of enhancing the share of renewable energy in its operations, the Business has implemented several initiatives including investments in a green boiler, soda recovery boilers, high pressure & efficiency circulating fluidised bed boiler, solar & wind energy and increased usage of bio-fuel. With these initiatives, renewable sources presently account for nearly 45% of total energy consumed at the Bhadrachalam, Bollaram, Tribeni and Kovai units.

The Business continues to make structural interventions in the areas of strategic cost management and import substitution. These include augmentation of in-house pulp manufacturing capacity, efficiency improvements of existing equipment and developing alternative sources of supply for key inputs on an ongoing basis. Operations of the Bleached Chemical Thermo Mechanical Pulp mill (BCTMP) at the Bhadrachalam unit stabilized during the year with progressive improvement in capacity utilization leading to reduced dependence on imported pulp and cost savings. During the year, technology interventions made in the pulp mill resulted in higher pulp production, improvement in pulp quality and reduction in chemical consumption.

Your Company has been practicing principles of TPM, Lean and Six Sigma for almost a decade now and has reaped substantial benefits through its Business Excellence initiative. During the year, the Business embarked on an ‘Industry 4.0’ journey, focusing on areas such as Internet of Things (IoT), Advanced Analytics and Artificial Intelligence. Interventions planned in this area have significant potential to enhance product quality and deliver structural cost savings going forward.

The integrated nature of the business model comprising access to high-quality fibre from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the-art manufacturing facilities along with clear market leadership in value-added paperboards and a robust forward linkage with the Education and Stationery Products Business strategically positions your Company to further consolidate and enhance its leadership status in the Indian Paperboard and Paper industry.

Packaging and Printing

Your Company’s Packaging and Printing Business is a leading provider of superior value-added packaging for the consumer packaged goods industry. The Business also provides strategic support to your Company’s FMCG Businesses by facilitating faster turnaround for new launches, design changes, ensuring security of supplies and delivering benchmarked international quality at competitive cost.

The Business caters to the packaging requirements of leading players across several industry segments viz. Food & Beverage, Personal Care, Home care, Footwear, Consumer Electronics, Pharma, Liquor and Tobacco. With its comprehensive capability-set across multiple platforms, coupled with in-house cylinder making and blown film manufacturing lines, the Business continues to provide innovative solutions to several key customers in India and overseas. With recent investments in rigid boxes and flexo corrugated packaging, the Business has consolidated its position as a ‘one-stop shop for packaging solutions’.

As in previous years, the Business won several awards for operational excellence and creative packaging solutions. The Business continues to be acknowledged as a key associate by several large FMCG companies in the country for providing superior packaging solutions. The manufacturing facilities at Tiruvottiyur, Haridwar and Munger maintained the highest standards in Quality and Environment, Health & Safety (EHS). All the three units are certified as per the Integrated Management System, consisting of ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 and have also received Social Accountability Certification (SA 8000:2008). Both the

Tiruvottiyur and Haridwar units received the highest ‘Grade A’ BRC/IOP certification (British Retail Consortium/ Institute of Packaging), for global standards in packaging and packaging materials - a key enabler for supplies to the packaged foods industry. During the year, Haridwar Unit was adjudged first runners up in National Safety Competition organized by CII IQ (Institute of Quality). The Risk Management Framework of the Business was re-certified under ISO 31000:2009 during the year. The 14 MW wind energy farm in Tamil Nadu, set up in 2008, continues to provide clean energy to the Tiruvottiyur facility, contributing towards reducing your Company’s carbon footprint.

The Packaging and Printing Business has established itself as a one-stop shop offering a wide range of superior and innovative packaging solutions. With world-class technology across a diverse range of packaging platforms, best-in-class quality management systems and a distributed manufacturing footprint, the Business is well positioned to rapidly grow its external business while continuing to service the requirements of your Company’s FMCG Businesses.


The following may be read in conjunction with the Consolidated Financial Statements prepared in accordance with Indian Accounting Standard 110. Shareholders desirous of obtaining the report and accounts of your Company’s subsidiaries may obtain the same upon request. Further, the report and accounts of the subsidiary companies will also be available under the ‘Shareholder Value’ section of your Company’s website,, in a downloadable format.

During the year, no company became or ceased to be your Company’s subsidiary, joint venture or associate company.

ITC Global Holdings Pte. Limited, Singapore (‘Global’), a subsidiary of your Company, is under winding up in terms of the Order of the High Court of the Republic of Singapore dated 30th November, 2007. Consequently, your Company is not in a position to consolidate the accounts of Global for the financial year ended 31st December, 2017.

The Policy for determining Material Subsidiaries, adopted by your Board, in conformity with Regulation 16, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, can be accessed on your Company’s corporate website at

policy-on-material-subsidiaries.aspx. Presently, your Company does not have any material subsidiary.

Surya Nepal Private Limited

The fiscal year ended July 2017 witnessed normalization of economic activity with GDP growth of 6.9% (previous year 0.01%) aided by low base effect, good monsoons and improved energy output leading to higher industrial activity. However, severe floods in August 2017 have since impacted the agriculture sector and growth estimates for the fiscal year ending July 2018 remain subdued at appx. 6%. On the external front, widening trade deficit, muted growth in remittances from overseas and weak balance of payments position continue to weigh on macroeconomic stability.

During the year under review, Nepal completed its transition to a federal structure with successful completion of elections for all three levels of government i.e. local level, provincial assemblies and federal parliament. Significant reforms such as legislation of the new Labour Act and Social Security Act were implemented during the year. These measures, in conjunction with other enabling policies across all the three levels of government, are expected to enhance the ease of doing business in the country and provide a fillip to economic growth in the near term.

The legal cigarette industry contributes 84% of Government’s revenue from the tobacco sector and 10% of the total excise revenue collected by the Government. Further, the industry provides livelihoods, directly and indirectly, to more than four lakh farmers, farm workers and others engaged in the cultivation of tobacco and the tobacco trade. However, the legal cigarette industry in Nepal continues to be adversely impacted by a harsh regulatory regime and discriminatory tobacco taxation policy which is fueling the growth of illegal cigarettes and smokeless tobacco products. This in turn is not only adversely impacting Government revenues but also compromising the tobacco related health objectives of the Government.

During the year, the company’s Revenue from Operations at Nepalese Rupees (NRs.) 3181 crores (previous year NRs. 2873 crores) and Profit After Tax at NRs. 857 crores (previous year NRs. 741 crores) recorded a growth of 11% and 16% respectively. The company continues to be one of the largest contributors to the exchequer, accounting for about 3% of the total revenues of the Government of Nepal.

The company’s Cigarette business continued to consolidate its leadership position by leveraging a portfolio of world-class products anchored on innovation and benchmarked quality backed by a robust distribution network. Adoption of best-in-class manufacturing technologies and benchmarked practices ensured delivery of products of international quality. The manufacturing systems of the company continued to maintain the targeted benchmarks in the areas of quality, productivity and sustainability. During the year, the company strengthened its quality processes, protocols and hygiene standards and introduced new metrics to facilitate ongoing monitoring in these areas.

In the Branded Apparel business, ‘John Players’ has established itself as a leading brand at the premium end of the branded menswear segment in Nepal, with a significant presence across markets through exclusive branded outlets, departmental chains and multi-brand outlets. In the Safety Matches business, the company strengthened its market leadership by leveraging its superior trade marketing & distribution reach. The company is now the largest player in both wax and wooden matches segments. In the Agarbatti business, the company scaled up operations and enhanced its market standing by offering a wide portfolio across consumer segments and improving product availability and visibility across markets.

With the objective of creating new drivers of growth, the company commenced import of confectionery products under the ‘Toffichoo’ and ‘mint-o’ brands on a test basis with the approval of the Department of Industry, Nepal. Launched in June 2017, the products have received encouraging consumer response. The company is in the process of setting up a manufacturing facility towards scaling up the business.

The company continues to support and invest in initiatives aimed at enhancing the social and economic capital of the nation. All the initiatives are woven around and are in alignment with the sustainable development goals of the Government of Nepal. Accordingly, the company continues to:

- assist farmers, proximate to the Simara factory, in agro forestry through (a) high quality Poplar plantation promoting ‘Grow Wood Grow Food’ concept through inter cropping and (b) providing vegetable seeds and constructing vermi-compost pits to increase productivity and provide alternative sources of income generation;

- support animal husbandry extension services covering animal breeding, health and nutrition towards driving milk yield improvement and generating higher returns for underprivileged farmers;

- focus on providing community health services through various ‘Suswasthya’ programmes such as periodic health camps and awareness programmes in the vicinity of the manufacturing units.

The company declared a dividend of NRs. 351.50/- per equity share of NRs. 100/- each for the year ended 15th July, 2017 (31st Ashadh, 2074) amounting to NRs. 708.62 crores.

ITC Infotech India Limited and its subsidiaries

The IT services industry continues to witness rapid transformation driven by increasing adoption of digital technologies, emergence of new models of customer value delivery, enhanced focus on experience journeys and client demands for efficiency, especially in traditional service lines through automation.

The Indian IT Services and Business Process Management (BPM) industry remained under significant pressure in 2017-18 which was marked by increasing headwinds in the form of continued rhetoric on protectionism, labour mobility issues, Brexit related uncertainty and subdued traction in the US Banking and Financial Services Industry. The challenging operating environment for the Indian IT industry is manifest in the continued deceleration in growth rates reported during the year by most of the Indian IT majors, with margins coming under increasing pressure.

Technology spending is witnessing a clear shift in favour of digital technologies, which are estimated to account

for 80% of incremental IT spends. With traditional lines of businesses and business models coming under increasing pressure, the fragmented IT Services market is gearing up to meet these challenges by strengthening alternative delivery models and accelerating investments in digital capabilities.

In this context, ITC Infotech remains focused on providing specialized services led by business and technology consulting. During the year, revenue from emergent technologies (Data & Digital) saw robust growth. The company has sharply defined its Digital strategy and is on course to consolidate and drive the Digital line of business.

During the year, the company’s strategic collaboration with PTC Inc. was strengthened with the launch of the ‘Digital Solutions Innoruption Center’ and ‘ThingWorx® Co-Innovation Lab’. This intervention will facilitate the creation of Augmented Reality solutions across industries such as manufacturing, automotive, industrial, retail, consumer goods, healthcare and hospitality.

During the year, the company’s consolidated Total Income was Rs, 1652.10 crores (previous year Rs, 1554.38 crores), with Profit Before Tax of Rs, 81.69 crores (previous year Rs, 62.44 crores). Net Profit stood at Rs, 40.42 crores (previous year Rs, 37.95 crores). Revenue growth was driven by new client additions and increasing traction with existing customers especially in Europe, Asia-Pacific, Africa, Middle East and India markets. However, INR appreciation vis-a-vis the US Dollar and a subdued demand environment in the USA impacted overall revenue. Consolidation of sales focus in the Asia-Pacific, India, Middle East and Africa markets enabled synergies and led to strong growth in these regions. For the year under review:

a) ITC Infotech India Limited recorded Revenue from Operations of Rs, 1002.93 crores (previous year Rs, 911.99 crores) and Net Profit of Rs, 27.68 crores (previous year Rs, 17.89 crores). For the year under review, the company paid a dividend of Rs, 6/- per Equity Share of Rs, 10/- each aggregating Rs, 51.12 crores (previous year: Nil).

b) ITC Infotech Limited, UK, (ITC Infotech UK), a wholly-owned subsidiary of the company, recorded

Revenue of GBP 42.44 million (previous year GBP 37.00 million) and Net Profit of GBP 1.27 million (previous year GBP 1.17 million).

c) ITC Infotech (USA), Inc., (ITC Infotech USA), a wholly-owned subsidiary of the company, together with its wholly-owned subsidiary Indivate Inc., recorded Revenue of US$ 88.11 million (previous year US$ 91.44 million) and Net Profit of US$ 1.97 million (previous year US$ 1.21 million). For the year under review, ITC Infotech USA paid a maiden dividend of US$ 8 per share on 1.82.000 Common Shares (without par value) aggregating US$ 1.46 million.

The company’s superior service delivery capability continues to earn global recognition. During the year, the company was featured in the leader’s category of ‘2018 Global Outsourcing 100’ by the International Association of Outsourcing Professionals (IAOP) for the twelfth consecutive year. The company was also recognized by Information Service Group (ISG) in its Provider Lens: ADM Quadrant Report US 2017 and Provider Lens: Managed Digital Workplace Services Quadrant Report US 2017 as a ‘Product Challenger’ in the categories of End-to-End Application Development & Maintenance, Application Support & Maintenance, Application Testing and Managed Digital Workplace Services.

During the year, the company successfully organized i-Tech 2017, the third edition of its annual technology event with ‘Experience Intelligence’ as the theme, focusing on emerging technologies around Artificial Intelligence. The event generated strong interest among students, start-ups as well as professional developers to create solutions for complex business applications as part of a programming ‘Codeathon’.

The outlook for the Indian IT Industry in the near term continues to remain subdued with NASSCOM projecting a growth rate between 7% and 9% for 2018-19. This is mainly attributable to global protectionist measures in major markets on the one hand and increasing complexities in rebuilding new age skill sets required to cater to the fast changing technology landscape on the other. The company remains committed to its transformation journey with a sharper focus on select industry verticals and technology areas. The company will continue to focus on building domain specific digital solutions across identified areas and driving efficiencies through automation in delivery and other internal processes.

Technico Pty Limited and its subsidiaries

The company continues to focus on up gradation and commercialization of its TECHNITUBER® seed technology and customizing its application across various geographies. Besides, the company is engaged in the marketing of TECHNITUBER® seed to global customers produced at the facilities of its subsidiaries in China and Canada and Technico Agri Sciences Limited, India, a wholly-owned subsidiary of your Company. The Canadian subsidiary of the company is also engaged in field multiplication of seeds.

For the year under review:

a. Technico Pty Limited, Australia registered a turnover of Australian Dollar (A$) 2.52 million (previous year A$ 2.46 million) and a Net Profit of A$ 1.45 million (previous year A$ 1.36 million).

b. Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China - There were no significant events to report with respect to these companies.

Technico Agri Sciences Limited

The company’s leadership in production of early generation seed potatoes and strength in agronomy continues to support the Bingo! range of potato chips of your Company and in servicing the seed potato requirements of the farmer base of your Company’s Agri Business.

The year under review was an extremely challenging one for potato farmers and the seed potato industry. Potato production for the year stood at about 50 million tonnes representing a significant growth of 11% over the previous year. This excess production resulted in a sharp fall in potato prices compelling most farmers/producers to sell their inventory below cost, especially in November/December 2017 as the fresh potato crop reached markets. The situation was exacerbated by farmers not buying new seeds and using leftover potatoes / cheap seeds mainly due to tight liquidity conditions in the market. Consequently, the seed potato industry came under significant pressure during the year.

The company’s Revenue from Operations for the year stood at Rs, 76.89 crores (previous year Rs, 108.35 crores) with a Net Loss of Rs, 14.07 crores (previous year Net Profit Rs, 14.52 crores). Total Comprehensive Income for the year stood at (-) Rs, 14.02 crores (previous year Rs, 14.48 crores).

During the year, the company declared a dividend of Rs, 41.12 crores (including Dividend Distribution Tax of Rs, 6.95 crores).

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company was incorporated in Sri Lanka with the objective of developing and operating a mixed-use development project (‘Project’) comprising a luxury hotel and a super-premium residential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded ‘Strategic Development Project’ status entitling the company to various fiscal benefits in Sri Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.

During the year, the company made steady progress on construction of the project. Construction work is in full swing in both the hotel and residential towers.

The Experience Centre, showcasing the features of the super-premium residential apartments, is nearing completion. The company also appointed internationally renowned interior designers and consultants for marketing the super-premium residential apartments internationally.

Your Company’s investment in WLPL stood at US$ 147 million as at 31st March, 2018.

Landbase India Limited

The company owns ‘ITC Grand Bharat’ - a 104-key all-suite luxury Retreat at Gurugram, which has been licensed to your Company. The Retreat, an oasis of unhurried luxury, is co-located with the company’s prestigious Classic Golf & Country Club, a 27-hole Jack Nicklaus Signature Golf Course.

ITC Grand Bharat has received several accolades, establishing itself amongst the top luxury resort destination hotels in the world. During the year, the Retreat was ranked # 10 amongst the ‘Top 50 Resorts in Asia’ by Conde Nast Traveler, USA, and also adjudged the best Luxury Hotel at the ‘India’s Best’ Awards by Travel Leisure India & South Asia.

During the year, the Classic Golf & Country Club hosted various prestigious tournaments and sustained its leadership position in the corporate tournament segment. The Club enjoys strong brand equity with its members, guests and the golfing fraternity and continues to receive the patronage of professional and amateur golfers in the country.

During the year ended 31st March 2018, the company recorded Total Income of Rs, 30.54 crores (previous year Rs, 21.75 crores) and Net Profit of Rs, 9.84 crores (previous year Rs, 2.10 crores). Total Comprehensive Income for the year stood at Rs, 9.89 crores (previous year Rs, 2.10 crores).

Srinivasa Resorts Limited

The company’s hotel ‘ITC Kakatiya’ in Hyderabad improved its performance during the year on the back of higher room occupancy rates and robust growth in Food and Beverages revenue. However, overall room rates remained under pressure.

The company recorded Total Income of Rs, 58.37 crores (previous year Rs, 54.43 crores) for the year ended 31st March, 2018 with Net Profit of Rs, 0.48 crore (previous year Net Loss of Rs, 1.52 crores). Total Comprehensive Income for the year stood at Rs, 0.40 crore (previous year (-) Rs, 1.50 crores).

During the year, ITC Kakatiya received the Times Food Guide awards for ‘Dakshin’ (Best South Indian Fine

Dining) and ‘Marco Polo’ (Best Resto Bar).

Trip Advisor, a renowned hotel review website, rated ‘Kebabs & Kurries’ and ‘Dakshin’ as the best restaurants in Hyderabad, ranking them No.1 and No.3 respectively.

The company’s 101-key full service hotel in Amritsar, located on a land parcel assigned to the company by ITC Limited, is under development. Civil works are nearing completion and interior work is underway.

Fortune Park Hotels Limited

The company, which caters to the ‘Mid-market to Upscale’ segment through a chain of Fortune hotels, continues to forge new alliances and expand its footprint. Currently, the company has an aggregate inventory of nearly 4,200 rooms spread over 54 properties of which 45 are operating hotels. Of the balance nine properties, five are slated to be commissioned in the ensuing year while four are in various stages of development. Three hotels were migrated to the WelcomHotel brand during the year.

The company has established ‘Fortune’ as the premier ‘value’ brand in the Indian hospitality sector. The brand remains a frontrunner in its operating segment and is well positioned to sustain its leadership position in the industry.

During the year, the company bagged the ‘Today’s Traveller Award 2017’ as well as the ‘Hospitality India & Explore The World Annual International Travel Award 2017’ in the ‘Best First Class Business Hotel Chain’ category. It was also awarded the ‘Versatile Excellence Travel Award (VETA) 2018’ in the ‘Best Business Hotel Chain’ category by Travelscapes.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 27.59 crores (previous year Rs, 29.53 crores) and Net Profit of Rs, 1.93 crores (previous year Rs, 2.44 crores). Total Comprehensive Income for the year stood at Rs, 2.05 crores (previous year Rs, 2.39 crores).

The Board of Directors of the company has recommended a dividend of Rs, 12.50 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

Bay Islands Hotels Limited

Fortune Resort Bay Island, the company’s hotel in Port Blair, with its strategic location, excellent architectural design and superior service quality, continues to offer a unique gateway to the Andamans. A comprehensive renovation and expansion programme towards enhancing the market standing of the hotel is currently underway with the first phase (24 rooms) expected to be commissioned shortly.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 1.33 crores (previous year Rs, 1.98 crores) and Net Profit of Rs, 0.97 crore (previous year Rs, 0.76 crore). Total Comprehensive Income for the year stood at Rs, 0.97 crore (previous year Rs, 0.76 crore).

The Board of Directors of the company has recommended a dividend of Rs, 70/- per Equity Share of Rs, 100/- each for the year ended 31st March, 2018.

Wimco Limited

The company’s business activities comprise fabrication and assembly of machinery for tube filling, cartoning, wrapping, material handling and conveyor solutions for the FMCG and Pharmaceutical industries.

The company’s order book was impacted during the year due to sluggish demand conditions prevailing in the FMCG and Pharmaceutical industries. Consequently, the company’s Revenue from Operations for the year declined to Rs, 8.77 crores (previous year Rs, 16.15 crores) with a Net Loss of Rs, 3.03 crores (previous year Rs, 0.07 crore). Total Comprehensive Income for the year stood at (-) Rs, 3.01 crores (previous year (-) Rs, 0.09 crore).

The company is focusing on strengthening its business model, widening its customer base and developing superior solutions towards addressing customer requirements.

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East Nutrients Private Limited (NENPL), a company formed with the objective of setting up a food processing facility in Mangaldoi, Assam to cater to the fast-growing biscuits market in Assam and other north-eastern States.

In August 2015, the company commissioned a state-of-the-art facility comprising three biscuit manufacturing lines in Mangaldoi, Assam.

During the year, the company implemented several initiatives which resulted in improvement in operational efficiency, processing yield and productivity.

The company was awarded the ‘Trophy for Outstanding performance in Food Safety Excellence’ by the Confederation of Indian Industry.

Revenue from Operations for the year stood at Rs, 150.30 crores (previous year Rs, 138.05 crores). The company recorded a Net Profit of Rs, 3.15 crores (previous year Net Loss Rs, 1.81 crores) while Total Comprehensive Income for the year stood at Rs, 3.30 crores (previous year (-) Rs, 1.83 crores).

Russell Credit Limited

During the year, the company registered Total Revenue of Rs, 82.48 crores (previous year Rs, 59.67 crores) and Net Profit of Rs, 63.82 crores (previous year Rs, 34.22 crores). Total Revenue and Net Profit during the year includes Rs, 33.78 crores and Rs, 18.28 crores respectively attributable to the sale of Non-Convertible Preference Shares of ICICI Bank. Temporary surplus liquidity of the company is mainly deployed in bonds, debt mutual funds and bank fixed deposits. The company continues to explore opportunities to make strategic investments for the ITC Group.

Gold Flake Corporation Limited

During the year, the company registered Total Income of Rs, 3.44 crores (previous year Rs, 3.46 crores) and Net Profit of Rs, 2.37 crores (previous year Rs, 2.55 crores). The company holds 50% equity stake in ITC Essentra Limited - a joint venture with Essentra Group, UK.

Greenacre Holdings Limited

During the year, the company recorded Total Income of Rs, 5.45 crores (previous year Rs, 6.34 crores) and Net Profit of Rs, 1.87 crores (previous year Rs, 2.25 crores). The company continues to provide maintenance services for commercial office buildings.

ITC Investments & Holdings Limited

The company, a Core Investment Company within the meaning of the Core Investment Companies (Reserve Bank) Directions, 2011, recorded Total Revenue of Rs, 0.06 crore during the year (previous year Rs, 0.07 crore) and Net Profit of Rs, 0.03 crore (previous year Rs, 0.05 crore).

MRR Trading & Investment Company Limited

The company, a wholly-owned subsidiary of ITC Investments & Holdings Limited, holds tenancy rights in a commercial building located in Mumbai and also provides estate maintenance services. During the year, the company recorded Total Income of Rs, 0.07 crore (previous year Rs, 0.07 crore).

Pavan Poplar Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Revenue of Rs, 0.16 crore (previous year Rs, 0.20 crore) and Net Loss of Rs, 0.29 crore (previous year Rs, 0.32 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Revenue of Rs, 0.07 crore (previous year Rs, 0.05 crore) and Net Loss of Rs, 0.004 crore (previous year Rs, 0.06 crore).

ITC Global Holdings Pte. Limited

ITC Global Holdings Pte. Ltd (under Judicial Management, hereinafter “Global”) has withdrawn its suit filed in 2002 claiming US$ 18.10 million from the Company.

After protracted litigation of over 15 years, the Company was approached by the Liquidator of Global with an offer to settle the said suit upon payment of US$ 2 million.

Subsequently, the Liquidator agreed to receive a sum of US$ 200,000, discontinue the suit, unconditionally withdraw all claims and take all steps to complete dissolution of Global expeditiously. Your Company, without admission of any liability, remitted the sum of US$ 200,000 to Global after receiving RBI’s approval for the same.


The relentless pressure on volumes of the legal cigarette industry on account of the steep increase in taxes and intense regulatory burden continues to adversely impact the demand for cigarette filters. Despite such adverse business conditions, the company retained its leadership position of being the preferred supply chain partner for several well-known national and international brands leveraging its core strengths - strong customer relationships, access to world-class innovation, superior execution, consistent delivery and best-in-class quality.

During the year ended 31st March, 2018, on a comparable basis, the company’s Gross Sales Value (net of rebates/discounts) stood at Rs, 272.16 crores (previous year Rs, 277.79 crores). Net Profit during the year stood at Rs, 16.45 crores (previous year Rs, 9.94 crores).

During the year, in line with its philosophy of developing internal capabilities on an ongoing basis, the company established capability for manufacturing capsule filters to cater to the anticipated growth in this segment. Investments continue to be made in technology induction and capability building towards sustaining the company’s position as the innovation and quality benchmark in the

Indian cigarette filter industry. The company continues to focus on scaling up exports by leveraging a portfolio of high quality products. The Board of Directors of the company has recommended a dividend of Rs, 12.00 per Ordinary Share of '10/- each for the year ended 31st March, 2018.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 34 heritage properties across 13 States in India. The company, with its WelcomHeritage brand portfolio comprising ‘Legend Hotels’,

‘Heritage Hotels’ and ‘Nature Resorts’, provides uniquely differentiated offerings to guests in the cultural, heritage and adventure tourism segments respectively.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 4.06 crores (previous year Rs, 3.49 crores) and Net Loss of Rs, 0.33 crore (previous year Net Loss Rs, 0.77 crore). Total Comprehensive Income for the year was a Loss of Rs, 0.33 crore (previous year Loss at Total Comprehensive Income level was Rs, 0.78 crore).

The ‘WelcomHeritage Hotels’ brand was awarded the ‘Best Heritage Hotel Chain’ by Today’s Traveller Awards 2017.

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and the Ambience Group, Hyderabad for developing a luxury hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in EHPL and will, inter alia, provide hotel operating services, upon commissioning of the hotel.

As reported in the previous year, the Ambience Group has expressed its desire to review the timing of further investments in EHPL, citing concerns about the viability of the project in view of the challenging economic environment and the sluggish demand conditions currently prevailing in Hyderabad.

Your Company continues to explore its options in this regard.

Your Company’s investment in EHPL stood at Rs, 46.51 crores as at 31st March, 2018.

Logix Developers Private Limited

Logix Developers Private Limited (LDPL) is a joint venture between your Company and Logix Estates Private Limited for developing a luxury hotel-cum-service apartment complex at the company’s site located at Sector 105 in NOIDA. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in LDPL and will, inter alia, provide hotel operating services, upon commissioning of the hotel by LDPL.

As reported in the previous year, your Company reiterated its position with the JV partner that it was committed to developing a luxury hotel-cum-service apartment complex as envisaged under the JV Agreement and that it was not interested in progressing with any alternative project plans proposed by the JV partner. However, the JV partner refused to progress the project and instead expressed its intent to exit from the JV by selling its stake to your Company.

Subsequently, the JV partner proposed that both parties should find a third party to sell the entire shareholding in LDPL. In view of these developments, your Company had filed a petition before the Company Law Board (CLB) submitting that the affairs of the JV entity were being conducted in a manner that was prejudicial to the interest of your Company and the JV entity. The matter is currently before the National Company Law Tribunal (NCLT) which replaced the erstwhile CLB. The JV partner had also filed a petition before the Honourable Delhi High Court for winding up the JV company, which was transferred to the NCLT during the year by the Honourable Delhi High Court. The matters were heard before the NCLT on several occasions during the year and hearing for final arguments for both the matters have been scheduled on 23rd May, 2018.

During the year ended 31st March, 2018, the company recorded a Net Loss of Rs, 24.87 crores (previous year Rs, 22.75 crores). The Net Worth of the company stood at (-) Rs, 1.89 crores as at 31st March, 2018 (previous year Rs, 22.98 crores). Your Company’s total investment in LDPL was Rs, 41.95 crores and it currently owns 27.90% of the equity capital of the company. During the year, in view of the aforestated developments, your Company made a provision of Rs, 23.45 crores towards diminution in the carrying value of investment in LDPL.

The financial statements of LDPL for the year ended 31st March, 2018 are yet to be approved by its Board of Directors. In the absence of audited financial statements of LDPL, the Consolidated Financial Statements of your Company for the year ended 31st March, 2018 have been prepared based on financial statements prepared by the management of LDPL.

NOTES ON ASSOCIATES International Travel House Limited

The company offers a full range of travel services including air ticketing, car rentals, inbound and outbound tourism, domestic holidays, conferences, events and exhibition management and foreign exchange services to travellers.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 207.69 crores (previous year Rs, 205.74 crores) and Net Profit of Rs, 6.95 crores (previous year Rs, 11.17 crores). Total Comprehensive Income for the year stood at Rs, 6.02 crores (previous year Rs, 10.46 crores).

The Board of Directors of the company has recommended a dividend of Rs, 4.25 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

Gujarat Hotels Limited

The company’s hotel, ‘WelcomHotel Vadodara’, at Vadodara is operated by your Company under an Operating License Agreement.

During the financial year ended 31st March, 2018, the company recorded Total Income of Rs, 5.02 crores (previous year Rs, 5.12 crores), Net Profit and Total Comprehensive Income of Rs, 3.37 crores (previous year Rs, 3.86 crores).

The Board of Directors of the company has recommended a dividend of Rs, 3.50 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

ATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. During the year, the company recorded Total Revenue of Rs, 23.13 crores (previous year Rs, 21.03 crores) and Net Profit of Rs, 0.66 crore (previous year Rs, 0.22 crore).

The company continued to maintain high levels of operational responsiveness, benchmark quality and cost efficiency during the year. The company was conferred the ‘Suraksha Puraskar’ by the National Safety Council of India and the ‘Long Term Nil Lost Time Accident Award’ by the Tamil Nadu State Government.

Associates of Russell Credit Limited Russell Investments Limited

During the year, the company recorded Total Revenue of Rs, 7.59 crores (previous year Rs, 3.72 crores) and Net Profit of Rs, 6.75 crores (previous year Rs, 2.78 crores). The company continues to explore opportunities to make investments.

Divya Management Limited

During the year, the company recorded Total Revenue of Rs, 0.49 crore (previous year Rs, 0.52 crore) and Net Profit of Rs, 0.21 crore (previous year Rs, 0.20 crore). The company continues to explore opportunities to make investments.

Antrang Finance Limited

During the year, the company recorded Total Revenue of Rs, 0.28 crore (previous year Rs, 0.30 crore) and Net Profit of Rs, 0.10 crore (previous year Rs, 0.09 crore). The company continues to explore opportunities to make investments.


The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The ITC Code of Conduct commits management to financial and accounting policies, systems and processes.

The Corporate Governance Policy and the ITC Code of Conduct stand widely communicated across the enterprise at all times, and, together with the ‘Strategy of Organisation’, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Company’s Financial Statements.

Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across the Company. The Accounting Policies are reviewed and updated from time to time. These, in turn, are supported by a set of divisional policies and Standard Operating Procedures (SOPs) that have been established for individual businesses.

Your Company uses ERP Systems as a business enabler and also to maintain its Books of Account. The SOPs in tandem with transactional controls built into the ERP Systems ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation.

Your Company has in place adequate internal financial controls with reference to the Financial Statements. Such controls have been assessed during the year taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by The Institute of Chartered Accountants of India. Based on the results of such assessment carried out by management, no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed. Nonetheless your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis.


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 and the timely preparation of reliable financial information.

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 are recommendatory in nature, such validation evidences the contemporariness of the Internal Audit function.

The Internal Audit function consisting of professionally qualified accountants, engineers and 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. 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’.

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.

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