ITC Annual Report

8/13/2019 ITC Annual Report

1/19

Insights of ITCAnalysis and Comments on Financial

Statements

Submitted to: Submitted by:

Prof. Vandana Gupta Abhas Agarwal- 211181

Anurag Sengar- 211174

Ankit Kothari- 211175

Durgendra Singh- 211172

Lavi Agarwal- 211170

Subhendu Bagchi- 211137

The analysis performed by the group on various sections is written in Brown Colored Italicfont.

The data used for analysis is collected from www.moneycontrol.com & ITC financial reporthandouts.


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Table of Contents

Chapter 1: Introduction on Company

Profile page 3

Line of Businesses page 3

Board of Directors page 4

Shareholding patterns page 5

Recent events page 5

Chapter 2: Operating Performance

Analysis of Sales Mix page 6

Pee-Comparison page 10

Export Sales page 10

Chapter 3: Financial Statement Analysis

Ratio Analysis page 12

Trend Analysis page 14

Profit/Loss & Balance Sheet Analysis page 17

Chapter 4: Cash Flow Analysis page 18

Chapter 5: SWOT Analysis page 19


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3

ITC(Indian Tobacco Company)

Introduction:-

Indianpublicconglomerate company.

Headquarter-Kolkata, West Bengal Annual Turnover-$7 Billion

Market Capitalization-$34 Billion

Chairman-Yogesh Chander Deveshwar

100 Years completion on 24 August 2010

Lineof business:-

FMCG (Mainly Cigarettes and then confectionaries, toiletries, cosmetics etc)

Hotels

Paperboards, Paper and Packaging

Agri Business

(The company is gradually moving to various new sectors, unlike their primitive

business of cigarettes, this may be because of the governmental norms growing

against promotion of cigarettes.

The latest announcement that the company has made is regarding their entry to

diary sector serving society with milk, butter, cheese and other products.)

Board of directors:-

Category NamePercentage to totalno. of Directors

Major Responsibility

ExecutiveDirectors(4)

Y.C. Deveshwar

25

Chairman

N.Anand Looks after Hotels Business

P.V.DhobaleLooks after Paper & PackagingBusiness

K.N. Grant Looks after FMCG sector

Non-ExecutiveIndependentDirectors(9)

A. Baijal

56

S.H.Khan

S.B. Mathur

P.B. Ramanujam

B.Sen

B.Vijayaraghavan

S.Banerjee

A.V. Girija Kumar

D.K. MehrotraOther Non-

ExecutiveDirectors(3)

H.G. Powell

19A.Ruys

K.vaidyanath

Total 16 100
http://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Public_company


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4

(The appointment of executive directors for various responsibilities shows that the

company is managing all its sectors well and is very considerate about them.)

Shareholding Pattern (%):-

(The shareholding pattern holding shows that the company has nearly all the equity

from public, the share of promoters is plenty. Also majority shareholders are Banks,

Financial Institutions, Mutual Funds and Insurance Companies which generally hold

the shares for a very long time. This shows that company is always cash-rich)

Banks, Financial

Institutions,

Insurance

Companies and

Mutual Funds,

34.25

Foreign

Institutional

Investors, 17.4

Foreign

Companies,

30.87

NRIs And

Foreign

Nationals,

0.54

Bodies

Corporate,

5.76 Public and

Others, 10.87

Shares

underlying

Global

Depository

Receipts, 0.31


5/19


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6

Analysis of Sales Mix

(The chart above shows that the Total Revenue of the company including all the

sectors is growing every year. Growth in FY2011-12 was 14.22%)

Visualizing the performance of each sector now

Here, instead of analysing FMCG as one sector, It is sub-divided into Cigarettes and

other FMCG sector.

(The latter includes confectionary, toiletries, cookies etc)

2009 2010 2011 2012

Total revenue 25817.32 28931.27 30527.88 34871.86

0

5000

10000

15000

20000

25000

30000

35000

40000

Axis

Title

Total revenue


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7

Cigarettes

(The figure above shows Cigarettes holds the majority of share in total revenue ofthe company. Excluding FY2011-12, the share has always risen. Also, despite there

was a drop in share of cigarettes in total revenue, still the revenue from share has

risen by12.24%)

Other FMCG Products

(The figures above shows a continuous increase in the share of other FMCG

products in the total revenue of the company, also the revenue of this section is also

continuously growing. For FY2011-12 the volume growth was 23.65%, which is

remarkable)

2009 2010 2011 2012

ciggrates 15115.07 17283.03 19821.16 22248.07

0

5000

10000

15000

20000

25000

AxisTitle

Cigarettes

58.54%

59.74%

64.93%

63.79%

2009 2010 2011 2012

Other FMCG 3014.04 3641.68 4480.12 5539.93

0

1000

2000

3000

4000

5000

6000

AxisTitle

Other FMCG

11.67%11.67%11.67%

12.58%

14.67%

15.88%


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8

Hotels

(Though this sector contributes just 2-3% in the total revenue, but still the company

predicts a high level of growth in this sector, recently it is in talks with TAJHotels,

planning to but their branch of Delhi.

There was a sharp downfall in FY2009-10, due to some internal conflicts and

mismanagement, but the sector grew 8.8% in FY2010-11, as it provided

accommodations to my players participating in Comm onwealth Games)

Agri Business

(This sector provides a share of nearly 10-12% in the total revenue of the company.

This sector however does not shows a significant growth in the share, this is

because a majority of farming is dependent on monsoons, and year 2010,2011 had

missed monsoons.

2009 2010 2011 2012

hotels 1020.27 910.81 991.47 996.3

840

860

880

900

920

940

960

980

1000

1020

1040

AxisTitle

Hotels

3.98%

3.15%

3.24% 2.86%

2009 2010 2011 2012

Agri 3845.98 3862.14 2919.55 3507.85

0

500

1000

1500

20002500

3000

3500

4000

4500

AxisTitle

Agri

14.89 % 13.35 %

9.56 %

10.06%


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9

However, the company has installed various scientific equipments to enhance the

productivity of the land, viz. Tube well; this helps in irrigating the land even in

absence of monsoons.

Also the company has now started planting tobacco, so that they can cut down their

dependence on suppliers for tobacco

The company has also started many initiative to educate farmers, Their program like

e-chaupalis helping farmers to get the environmental conditions, tips regardingfarming and also the current price of the crop

Another initiative is Chaupal-Sagar which also is regarding the welfare of the

farmers and the rural people)

Paperboards

(The share of this sector is regarding 7-10%, the total revenue got dropped in

FY2011-12 because of a significant increase in their operating expenses. This sector

grew by 11.4% in FY2011-12)

2009 2010 2011 2012

paper 2821.96 3233.61 2315.58 2579.71

0

500

1000

1500

2000

2500

3000

3500

AxisTitle

Paperboards

10.93 %

11.17 %

7.58 %7.39 %


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Peer Comparison

(The figures above show that ITC dominates over all its peers in the cigarettessector. In all the categories, ITC is at the top.)

Sales as per Geographic Divisions

ITC exports only Cigarettes in various parts of the world. The growth of the sales

within the country and outside that is given below

(The sales for the company has steeply risen within the country for cigarettes

segments)

21381.6

24020.27

28140.72

32619.1

0

5000

10000

15000

20000

25000

30000

35000

2009 2010 2011 2012

Within India

Within India


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(The sales in FY2011-12 has fallen, due to increase in excise duty in the countries

where ITC used to trade. However, as per the Directors Statement ITC is planningto export their other FMCG products too to various parts of the world. Director

focuses on Aashirwaad Aata, saying they would try to work in exporting that.)

1761.93

2239.332463.67

2252.76

0

500

1000

1500

2000

2500

3000

2009 2010 2011 2012

Outside India

Outside India


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12

Financial Ratio Analysis

Liquidity Ratios:

Year /

Ratio

2009 2010 2011 2012

Current ratio 1.73 1.01 1.07 1.11

Quick Ratio 0.76 0.45 0.45 0.49

Debtors

Payment Days11.08 10.61 10.52 9.79

By loo king at their l iquid i ty rat io, fo l lowing points c an be made

Company is very conservative as its current ratio is nearly 1, the company

uses generally its own funds. There have not been any significant changes inthe figures.

There is also stability in the quick ratio of the company, shows that

management of the company is good. In FY2011-12, this figure has

marginally increased, which is a good sign.

The debtors payment days is also in the range of 9-11 days, which is nearly

same for this sector. Also there has been a marginal downfall on this no. on

FY2011-12, which is again a good sign.

Solvency Ratios:

Year /

Ratio2009 2010 2011 2012

Debt/Equity 0.01 0.01 0.01 0.01

Debt/Asset .012 .007 .005 .006

Inventory

Turnover Days69.92 63.47 59.95 57.68

Fol lowing are the points that can be made by looking at the solvency rat io

The D/E and Debt ratio both are too thin, indicating that company depends

on its own funds. There is hardly any borrowing.

Inventory Turnover days has gradually fallen from nearly 70 in 2009 to

nearly 58 in 2012, showing that company isnt piling upthe inventory, instead

is able to sell them. Shows good Supply-Chain-Management.


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Profitability Ratios:

Year /

Ratio2009 2010 2011 2012

Operating profitmargin

21.6% 24% 24% 24.5%

Assets Turnover 1.77 1.87 2.03 2.01

ROE 25.42 29.33 33.35 35.58

Net Profit

margin16.8% 18.3% 16% 17%

Fol lowing are the points that can be m ade after visual izing these data

Operating Profit margin has gradually increased, also from the balance sheetand P/L account, it was clear that, income has risen significantly but expenses

hadnt, this shows that company is adopted new techniques to cut-down their

prices and maintain the same level of production. This increase is appreciable

for any company.

Assets Turnover ratio is also increasing or nearly stable, shows that

utilitisation of assets is done properly and this management is gradually

improving.

ROE is increasing at a significant rate, thus attracting new shareholders.

Also Net margin is gradually increasing, expect in FY2010-11, this downfall isdue to high taxes implemented by Governments. Still in FY2011-12, the net

profit margin has grown from 16% to 17%, which is remarkable.


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Trend Analysis

(The gross income of the company is increasing in every fiscal year. The growth in

FY2011-12 is 14.8%. There has been a significant increase in sales of sector like

cigarettes, other FMCG and Agri Business.)

23593.64

26814.32

31399.1

36072.59

0

5000

10000

15000

20000

25000

30000

35000

40000

2009 2010 2011 2012

Gross Income

Gross Income

5393.47

6688.77

7992.53

9673.96

0

2000

4000

6000

8000

10000

12000

2009 2010 2011 2012

PBDIT

PBDIT


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(There has been an increase in Income of the company from all the sectors while the

percentage growth in expenditure is marginal, thereby making that PBDIT rise

continuously.

Also company has increased the price of cigarettes once a year, and this sector

contributes a major section for their growth.)

(There has been marginal growth in equity from 2009 to 2011, but the equity has

increased in FY2011-12, as company has issued some shares)

(The long term liability is growing with a moderate rate, which is mainly due to

Deferred tax liability. The company has however made some repayment of the loans

in FY2009-10.)

27470.16 28128.76

31906.54

37583.78

0

5000

1000015000

20000

25000

30000

35000

40000

2009 2010 2011 2012

Equity

Equity

1053.58

921.93

1003.07

1072.68

800

850

900

950

1000

1050

1100

2009 2010 2011 2012

Long-term Liablity

Long-term Liablity


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(The current liability is not a great issue to focus on, because a majority of share in

these figures are of Tax payable and Dividends payable, the latter giving good

signals to the shareholders.)

(The growth in Net worth per share is proportional to the growth of the company, and

can make shareholder happy)

4695.55

8019.038477.48

9101.83

0

2000

4000

6000

8000

10000

2009 2010 2011 2012

Current liability

Current liability

18.2 18.4220.62

24.04

0

5

10

15

20

25

30

2009 2010 2011 2012

Net worth per share

Net worth per share


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(The increasing growth of the share price of the company is shown above. The data

is recorded on April 1, of the corresponding year, and current value is pertaining toSept 11,2012. There has been a remarkable growth in the value of the shares.)

(ITC has always been kind to their shareholders, they provide annual dividends, also

in 2010, Company go t its 100 years com pletedand provided an specia l dividend

worth Rs 5.5 per share to all their shareholders, also since there was a remarkable

growth in companys performance in half-yearly reports of 2011, company has also

given in ter im dividendworth Rs 1.65 per share)

92.4

131.58

181.45

226.85

268.15

0

50

100

150

200

250

300

2009 2010 2011 2012 Current Value

Share price

share price

3.74.5

2.84.5

5.5

1.65

0

2

4

6

8

10

12

2009 2010 2011 2012

Dividend Special

Dividends


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Cash Flow Analysis

After visualising the graph and data above, following points are concluded:-

Cash from operating activities of the company is growing at a very significant

rate; this is a good sign as it makes trust in the minds of the investors that the

company is growing. For FY2011-12 Growth rate is 14.26%.

Cash from investing activities is seen to be negative in almost all the year; this

is because company regularly believes in purchasing fixed assets and ahuge amount of Current investments. Also it supports many of its

subsidiaries.

Cash from financing activities is also generally seen to be negative; This is

because company pays a huge amount of dividends to its equity

shareholders and Income tax for dividends. Distribution of dividends is

always a good sign for shareholders. But there is always a significant inflow of

cash from the issue of share capital.

3279

4630

5264

6015

-1260

-3531

-616

-2210

-1556 -1009

-3551

-3246

2009 2010 2011 2012

Cash Flow Analysis

Operating Activity Investing Activity Financing Activity


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SWOT Analysis

Strengths

They are into Cigarettes from so long, thus introduction of new FMCG

products to the market is not very tough as same distribution channel is

required to meet the retailers, so the expenses of the company will be low. The company has planned to rely on renewable sources of energy for their

almost sectors specially Hotels, This will help them in cutting down their

operating expenses.

Subsidy in their Agriculture business by government.

Weakness

High taxation in their cigarettes segment; nearly 60% of the price of cigarettes

constitute for taxes.

Currently States like U.P. and Karnataka has imposed VAT of 50% ontobacco products.

Due to this Company cannot maintain a uniform price across the country.

Opportunity

The company is planning to expand their FMCG sector, recently they have

announced to enter into Dairy Sector.

The company is ready to invest 25000 Cr. In its FMCG, logistics and Hotels

segments in the next 5-7 years.

The company is planning to buy Hotel Ashok, Delhi.

Threats

Their Cigarettes division is always on target, Governments both state and

central; impose new tax and duties every now and then. This bounds the

company to raise the price of this segment which contributes more than 50%

of their business.

Their majority of Agriculture Business is still dependent on monsoons, thus

any absence of monsoon results in overall loss for this sector.

Entries of new players in FMCG sector, viz. Sahara Q, Easy Day etc. If FDI in retailgets permitted there will also be many foreign players entering

Indian Market.

Documents

ITC Annual Report