23

from operations and retirement of debt resulted infurther reduction in interest costs.

Your Directors are pleased to recommend adividend of Rs.10 per share (previous year Rs.7.50per share) for the year ended 31st March, 2001.The consequent outflow, including the DividendTax of Rs.25.03 crores will be Rs.270.45 crores(previous year Rs.224.55 crores). Your Boardfurther recommends a transfer to General Reserveof Rs.700 crores from current year�s profits(previous year Rs.600 crores). Consequently, yourBoard recommends leaving an unappropriatedbalance in the Profit and Loss Account of Rs.282.50crores (previous year Rs.201.28 crores).

PROFITS, DIVIDENDS AND RETENTION(Rs. in crores)

2001 2000

a) Profit Before Tax 1600.30 1228.95b) Income Tax 594.04 436.51c) Profit After Tax 1006.26 792.44d) Add : Profit

brought forwardfrom previous year 201.28 187.86

e) Transfer fromHotel Foreign ExchangeEarnings Reserve 54.01 8.48Less : Transfer to Hotel

Foreign ExchangeEarnings Reserve 6.00 5.00

f) Release from InvestmentAllowance Reserve 0.40 1.22

g) Surplus availablefor Appropriation 1255.95 985.00

h) Transfer to DebentureRedemption Reserve 17.50 17.50

i) Less : Transfer from DebentureRedemption Reserve 14.50 58.33

3.00 ( 40.83)j) Transfer to General Reserve 700.00 600.00k) Proposed dividend

for the financial yearat a rate of Rs. 10per Ordinary Share(previous year Rs. 7.50per Ordinary Share) 245.42 184.06Income Tax onproposed dividend 25.03 40.49

l) Retained Profits carriedforward to thefollowing year 282.50 201.28

1255.95 985.00

REPORT OF THE DIRECTORS & Management Discussion and AnalysisFor The Financial Year Ended 31st March, 2001

Your Directors submit their Report for thefinancial year ended 31st March, 2001.

SOCIO-ECONOMIC ENVIRONMENTThe year under review witnessed a slower growth

of GDP at 6.0% in comparison to the 6.4% of theprevious year, and much lower than the target of7% set by Budget 2000. The slower growth wasmainly a result of deceleration in the growth rateof the services sector from 9.6% to 8.3% and lowerthan expected growth rates in agriculture and in-dustry.

The year ahead will be one of great challengefor the Indian industry. The competitive context ofa rapidly globalising Indian market will severely testthe inherent capabilities of Indian companies. Theuncertain prognosis on the economic slump in theUnited States, fears of slowdown in Europe and thecontinuing stagnation in Japan are already begin-ning to adversely impact export-led growth oppor-tunities for Indian companies, particularly in theInformation Technology sector. Sustaining positiveinvestor sentiment in such a depressed global eco-nomic climate will require concerted initiatives onthe part of both industry and Government. WhileIndian companies will have to hasten the achieve-ment of international competitiveness, the Govern-ment will have to play the role of a catalyst by ac-celerating reforms and upgrading social and physi-cal infrastructure.

Your Company continues the endeavour of ag-gressively building sustainable competitiveness ineach of its businesses, pursuing as always the ob-jective of significantly enlarging its contribution tothe Indian economy and thereby creating growingshareholder value.

COMPANY PERFORMANCEThe year under review concluded with your

Company crossing yet another milestone when itsPost-tax Profit at Rs.1006 crores exceeded the onethousand crore mark, registering a substantialgrowth of 27 % over the previous year. Pre-tax Profitat Rs. 1600 crores represents a growth of 30%.Despite difficult trading conditions, Sales grew by9% to touch Rs. 8679 crores. These results wereachieved through continuing focus on manage-ment of costs, productivity improvements, continu-ous value addition to products and services, qual-ity upgradation and strengthening the goodwill ofyour Company�s trademarks. Strong cash flows

24

FOREIGN EXCHANGE EARNINGSIn pursuit of creating growing value for the

Indian economy, your Company has alwaysendeavoured to maximise its foreign exchangeearnings. It is significant to note that the ITC Group,over the last decade, has generated foreignexchange earnings of over US$2 billion, which hasmore than paid for technology related capitalimports aimed at enhancing its competitivecapability.

During the year under review, your Company,its subsidiaries and the ITC Welcomgroup chaintogether contributed to foreign exchange earningsamounting to Rs.911 crores, of which Rs.697 croresrepresents direct earnings by your Company.Expenditure in foreign currency by your Companyamounted to Rs.259 crores, comprising purchaseof raw materials, spares and other expenses atRs.199 crores, and Rs.60 crores for import of capitalgoods in continuation of your Company�smodernisation programme. During the year Rs.70crores of foreign currency loans were prepaid.

Full particulars of foreign exchange earnings andoutgo are provided in Schedule 18 to the Accounts.

PRODUCT GROUPSa) Cigarettes and Cigarette Leaf Tobacco

Cigarettes

Continued discriminatory and punitive taxationat the Central and State levels over the years hasled to a progressive migration from cigarettes toother forms of tobacco consumption, with the shareof cigarettes falling from around 23% in 1971 tobelow 16% currently. This high incidence oftaxation now amounts to over 80% of the valueadded in the cigarette industry, thereby makingcigarettes increasingly unaffordable to the Indiantobacco consumer. Of the 200 million tobaccoconsumers in India, fewer than 15% can affordcigarettes, the internationally preferred format oftobacco consumption. Non-cigarette forms oftobacco consumption, although constituting nearly84% of tobacco consumption in the country,contribute barely 10% of Government revenuesfrom this sector on account of the difficulty of taxcollection and the low tax yields that characterisethis largely unorganised sector. This structure of thetobacco industry and the high rates of taxation on

cigarettes have combined to diminish the share ofcigarettes in tobacco consumption, even as theaggregate tobacco consumption in India continuesto grow, driven by the growth in non-cigaretteforms of consumption. Consequently, the taxbuoyancy of the tobacco sector stands diminished.It is now a well-established principle that sustainabletax buoyancy can be realised only from anexpanding tax base. The twin impact of moderationin tax rates and the aspiration of consumers toupgrade tobacco consumption, can multiply thesize of the cigarette segment even in a shrinkingbasket of tobacco consumption and consequentlyprovide a much larger tax base to yield the resourcesto invest in social infrastructure. Moderation in therates of tax will create a multiplier effect, the greatestbeneficiary of which will be the rural sector.

The principle of moderation in tax rates alsoextends to State sales taxes imposed under thenomenclature of �luxury and other taxes�. Apartfrom the detrimental effect of cascading taxes,differing rates of taxes among various States arefragmenting the market, thereby negating theadvantages inherent in a larger common market.Recognising the high degree of sensitivity of taxeson cigarette trade, the principle of uniform, singlepoint taxation was embodied in the understandingbetween the Centre and the States at the NationalDevelopment Council meeting of 1955, thatsubstituted State sales taxes on cigarettes withadditional excise duty. The levies of luxury and otherState taxes in recent years tantamount to aninfringement of this arrangement. This matter iscurrently being contested before the SupremeCourt and your Company is hopeful of a positiveoutcome.

Loopholes in the regulatory framework and lackof effective enforcement, together with punitiverates of taxation have spawned a flourishing tradein smuggled cigarettes. Conservative estimatesindicate that smuggling of cigarettes is causing anational loss in excess of Rs.1000 crores per annumdue to unaccounted outflow of foreign exchangeand the related loss of revenue to the Exchequerthat would otherwise accrue on equivalentdomestic manufacture. This contraband trade isestimated to be growing at an alarmingly high rateof more than 20% per annum.

25

The menace of contraband cigarettes is wellrecognised the world over. According to oneestimate, one third of the total world trade incigarettes is contraband in nature. Since tax isavoided in the exporting country and evaded inthe consuming country, smuggling of cigarettes hasbecome lucrative and appears to be highlyorganised. In this context, the recent lifting ofQuantitative Restrictions on the import of cigarettesinto the country will provide the opportunity to beused as a cover for supply to the contrabandchannel. While it is heartening to note that theGovernment has included cigarettes in the watchlist of 300 sensitive items, the imports of which willbe closely monitored, the policy framework relatedto the tobacco industry needs to take into accountthe growing menace of smuggled cigarettes andthe resultant tax export, which is detrimental tothe Indian economy. Your Company has madecomprehensive recommendations to the CentralGovernment for reform of the legal frameworkrelating to the tobacco industry and has alsohighlighted the need for effective enforcement.

The regulatory framework in respect of tobaccoproducts needs to be pragmatic and equitable, suchthat the regulation of tobacco consumption isorderly and progressive, securing maximisation ofeconomic contribution even in a shrinking basketof tobacco consumption. The Cigarettes & OtherTobacco Products Bill 2001, the intent of which isto regulate promotion of all tobacco products, inits current form would result in more stringentregulations on cigarettes as compared to any othertobacco product. For example, the proposed Billmakes the regulations governing cigarettesapplicable to the whole of India, while leaving it tothe option of the individual States to apply theseregulations to all other tobacco products. Also, thedeclaration of nicotine and tar content is sought tobe made mandatory only for cigarettes, and notfor other tobacco products which account for nearly84% of the tobacco consumption in the country.Such differential treatment will cause a further shiftto other forms of tobacco consumption which willlead to a significant reduction in the economiccontribution from the tobacco sector withoutreducing consumption of tobacco among theeconomically disadvantaged sections of our society.

The Bill inter alia also seeks to prohibit sponsorshipsand advertising in respect of all tobacco productsin the electronic and print media. In a globalisingeconomy, where a significant share of media couldbe controlled by entities outside India,implementation of the proposed ban oncommunication would not only provecumbersome, but would also provide anunintended and unfair advantage to foreigncigarette brands that continue to target the Indianmarket using such communication channels,thereby also providing a fillip to contraband trade.Such an inequity will seriously hamper thedevelopment of Indian brands, so vital for Indianenterprises to become internationally competitive.Your Company hopes that Government will takeinto account and consider the views of allconstituents of the tobacco industry beforeformulating any legislative measures. Meanwhile,as a responsible corporate citizen, your Company,in a constructive spirit, has voluntarily withdrawnfrom sponsorships of all sporting events.

Despite the unfair advantage enjoyed by brandssold through the contraband channel, yourCompany�s unwavering focus on quality, productdevelopment and modernisation of itsmanufacturing facilities has enabled it to provideworld class quality to the Indian consumer, therebyminimising the economic injury caused to yourCompany and to the Indian economy.

Your Company continues to invest incontemporary technology with a view to constantlyenhancing value to the consumers. Your Company�sworld class manufacturing facilities cater to a varietyof premium brands in different taste and flavouroptions for the domestic and export markets. As aresult, nearly three fourths of your Company�scigarette output is now in the filter format. Further,more than 60% of your Company�s filter cigarettesare now marketed in the internationally preferredHinged Lid form of packaging, up from 4% in 1995-96. In an acknowledgement of your Company�senvironment-friendly methods of managingresources, the cigarette factory at Saharanpurbecame yet another of your Company�smanufacturing units to earn the ISO 14000accreditation. Whilst your Company�s share of thetobacco sector as a whole is a modest 10%, focus

26

on product development, and initiatives to tap therural potential, together with enhancement of thequality of market coverage have led to improvementin the market share of your Company�s products inthe domestic cigarette segment, although vis-à-visthe total cigarette sales in India, your Company�smarket share declined due to the rampant trade incontraband.

Although, in the wake of the steep increase inexcise duties imposed by Budget 2001, cigaretteindustry volumes are expected to decline in the nearterm, your Company is confident that continuousvalue addition to its brands will enable it to sustainits market standing and profitability. There is a largelatent demand for your Company�s productswith tobacco consumers aspiring to upgradeconsumption to the internationally preferredcigarette format. The growing per capita incomesof tobacco consumers, supported by moderationin taxes and effective measures to curb the flow ofcontraband can progressively enlarge the share ofcigarettes even in a shrinking tobacco basket,thereby enlarging the tax base, enhancing foreignexchange earnings from exports of cigarettetobaccos and thus providing growth opportunitiesto your Company from this sector.

In summary, the growth prospects depend uponthe rate of growth of per capita incomes of tobaccoconsumers, moderation in taxes, effectiveness ofmeasures to curb the flow of contraband and policymeasures that do not disadvantage Indian brandsin relation to brands imported from outside thecountry. Given a conducive environment, yourCompany, with its market standing and thestrength of its brands, is well positioned to sustainits leadership role in the tobacco sector.

Cigarette Leaf Tobacco

The glut in the global Flue Cured Virginia (FCV)tobacco market is beginning to exhibit early signsof a correction, although the excess of supply overdemand is likely to persist till 2002. As stated in theReport of the Directors last year, in the face ofdomestic production of FCV tobaccos far in excessof the limits authorised by the Tobacco Board, anddemands from a section of farmers in AndhraPradesh for a crop holiday, the Tobacco Boarddecided not to authorise the 2001 crop in Andhra

Pradesh. This decision was challenged by somefarmer and trade associations in the Andhra PradeshHigh Court. Your Company, as a responsible andleading partner of the Indian cigarette tobaccofarmer, with a view to protecting the interest ofthe farmer, offered guarantees in respect of pricesand volumes. This offer by your Company was oneof the factors which led the High Court to directthe Central Government to re-examine the entireissue, while simultaneously permitting farmers whohad already raised their crops to continue to nurturethem. Your Company had, as a measure ofassistance to the farmers, purchased leaf tobaccowell in excess of requirements and is thereforeadequately stocked to address market requirementsfor the coming year. While the crop holiday hascreated adverse challenges for Indian tobaccoexports, your Company is endeavouring to maintainits exports of leaf tobacco at levels achieved during2000-01.

Your Company continues to provide cropdevelopment services towards enhancing thequality of tobaccos and developing newer varietieswith export potential. Your Company has beenmaking pioneering efforts to develop internationallycompetitive Oriental tobaccos in the backwardregion of Chittoor District in Andhra Pradesh. Thereis a growing demand in world markets for thesevarieties, the cultivation of which is employmentintensive. These pilot efforts have proved successfuland your Company is now engaged in extensionactivities for such varieties.

The state-of-the-art leaf tobacco processing linesat Chirala, commissioned at a capital cost of aboutRs.104 crores, are now fully operational. Thecommissioning of these facilities has significantlyenhanced the quality of threshed tobaccos, whichwould not only enable export competitiveness, butwould also support the quality enhancement of yourCompany�s cigarettes.

b) Hotels

Your Company continued to progress its plansto complete the ITC Welcomgroup hotel chain andexpand its market presence to capture the longterm growth opportunities in the hotels business.Two significant milestones in this strategic roadmapwere attained with the opening of �ITC One�, the

27

super deluxe extension of the Maurya Sheraton, inSeptember 2000, and the launch of the ITC GrandMaratha Sheraton, Mumbai in January 2001. Boththese hotels have been well received by guests. Theconstruction of the ITC Sonar Bangla at Kolkata andthe ITC Grand Towers, Upper Worli, Mumbai ismaking steady progress. These premium hotels areexpected to open their doors to guests by the endof 2002. In order to tap the long term potential ofthe fast growing Chennai market, your Companyhas acquired 8 acres of prime land in the city.

Your Company believes that hotels constitutean important part of infrastructure for the growthof trade, commerce and industry. Globalisingmarkets and the expected high rates of growth ofthe Indian economy will lead to a growing demandfor high quality accommodation. Although in theshort term the excess supply position may persist,the long term prospects of this business areattractive, considering the fact that India is grosslyunder-roomed even in comparison with some ofits neighbours in East Asia.

Your Company, with the strength of its balancesheet, can contribute to the creation and sustenanceof such capital intensive and long gestationinfrastructure projects like hotels, so necessary tosupport rapid economic growth. The expanded ITCWelcomgroup chain, with competitively superiorhoteliering expertise and its renowned array ofbranded cuisines is well poised to rapidly attainindustry leadership.

c) Packaging and Printing

The Packaging and Printing Division continuedto maintain its status as a premier supplier of highquality printed paperboard-based packaging forthe FMCG industry, particularly for the premiumpackaging of cigarettes, liquor, foods and personalcare products. The Division�s Munger unitimplemented a major modernisation project tosupport your Company�s rapid transition to thehigher value Hinged Lid form of packaging for itscigarette brands. In an acknowledgement of theDivision�s world class capability, its exports grewby over 35%, bagging the Capexil Special ExportAward for the third consecutive year. The Division�senduring commitment to quality, innovation,

environment, occupational health and safetyyet again earned it a slew of international awardsand recognition, including the IQRS Level 6 rating,the Asia Star award for innovation in Packagingand the ISO 14001 accreditation for the Mungerunit.

Drawing upon the strengths residing within theITC Group in paperboards, printing and FMCGdistribution, the Division launched its line ofinternational quality greeting cards under theumbrella brand of Gold Flake EXPRESSIONS. Withina short span of six months, the �EXPRESSIONS�range of cards was available for consumers in over7000 outlets in around 180 towns across thecountry. The cards feature designs from leadinginternational and domestic design agencies. TheDivision entered into a licensing arrangement fordesigns with Simon Elvin Ltd., one of UK�s leadinggreeting card publishers.

The size of the organised greeting cards marketin India is estimated to be about Rs.300 crores,growing at the rate of 20% per annum. GivenIndia�s progressive cross-cultural exposure via thetelevision and the Internet, and growing disposableincomes, a higher growth rate can be expected inthe future. The Packaging Division�s strategy ofcombining your Company�s distribution strengthwith its capability to adapt its vast library ofinternational designs to Indian tastes will strengthenthe �EXPRESSIONS� brand and position thebusiness to capture growth opportunities.

The Division�s operations were dislocated for aperiod of two months as a result of a strike at itsTiruvottiyur factory in Chennai. The plant resumedoperations from the third week of May 2001.

d) Speciality Papers

The Speciality Papers business, while registeringimprovements in productivity, quality and costmanagement, continues to be a source of concernin terms of its financial performance and its overallcompetitiveness. The management of this Divisionis engaged in addressing these challenges byfocusing on creating further gains throughproductivity and technology upgradation. TheDivision continues to explore possibilities ofinternational alliances and partnerships.

28

e) Agri Exports

Although Indian exports grew by over 20% during2000-01, exports of agri and allied commoditiesdeclined in dollar terms for the third successive yearin the context of persistent low international prices.It is therefore particularly heartening that yourCompany�s agri exports grew by nearly 12% inrupee terms (Rs.362 crores against Rs. 324 croreslast year) and 2% in dollar terms. This was madepossible due to the Division�s trend-settingcustomer-centric commodity trading model,structured along the lines of service industry.This model focuses on servicing the specific needsof a select portfolio of customers in identifiedproduct lines, chosen from markets with highgrowth potential. The Division�s value propositionis anchored on well-designed knowledgemanagement and training systems aimed atsignificantly enhancing its effectiveness in thestrategically critical areas of supply chain efficiencies,risk management and customer relationships.

Project e-Choupal, a pioneering click and mortarinitiative of the Division to link the Indian farmerwith domestic and international markets, is beingrapidly scaled up, with 235 choupals covering 1000villages already operational in three chosencommodities, namely soya, coffee and aqua. Thisinitiative will directly benefit the Indian farmers byenhancing their farm productivity through web-enabled access to appropriate information andinputs. These e-choupals will simultaneously helpto reorganise the Division�s supply chain for morecost effective sourcing.

In your Company�s vision of the future, the agriexports business will play a critical role across twostrategic dimensions: first, given the country�s needto significantly boost agri exports, this Division hasthe potential to increase its revenues manifold;secondly, its network of inter-connected e-choupalsacross the country will create the transactionbackbone to support a broadband two-way supplychain fulfillment capability to serve as anothersource of revenue in the future.

f) Lifestyle Retailing

Your Company�s Lifestyle Retailing businessopened its first exclusive retail outlet in SouthExtension, New Delhi in July 2000. Its international

quality shopping experience and world classproduct range, designed by the San Francisco basedAmerican Design Intelligence Group, have been wellreceived by discerning customers. The Division iscurrently engaged in scaling up its operations toover 50 exclusive outlets across the country byMarch 2002. The Division is also engaged ingarnering capabilities to create a world class supplychain from fibre to fashion. Towards this end, astate-of-the-art Master Facility is being set up atGurgaon. The Master Facility, apart from providingdesign infrastructure, will also assist in dramaticallyshrinking time-to-market for the new designs. TheDivision�s website, named after its key brand �WillsSport�, provides customised online fashionconsultancy through its module �Fashion Guru�. Thewebsite was recently rated as the country�s finestfashion site. It is the objective of this Division toestablish �Wills Sport� as an international quality,premium full range wardrobe brand for men andwomen, constituting relaxed wear for all occasions.

NOTES ON SUBSIDIARIESa) ITC Hotels Limited

The Company earned a Gross Income ofRs.134.74 crores, representing a growth of 3% overlast year, reflecting the sluggish market conditionsprevalent during most of the year. The Company�sPost-tax Profit at Rs.12.69 crores registered a growthof 6%. The Board of Directors of the Company hasrecommended a dividend of Re.1.00 per equityshare for the year ended March 31, 2001 (previousyear: Re.1.00 per equity share).

Foreign exchange earnings of the ITCWelcomgroup chain amounted to Rs.202 crores.This comprised direct earnings of Rs.84 crores fromhotels owned by your Company, Rs.66 crores fromITC Hotels and Rs.52 crores from other propertiesof the ITC Welcomgroup chain.

The Company continues to strengthen itsproducts and processes to support competitivelysuperior value for the discerning traveller. TheCompany�s continuing focus on upgrading thecapability of its human resource, improving thequality of consumer experience, strengtheningmarketing and enlarging its distribution channelshas enabled the ITC Welcomgroup chain to becomethe preferred choice of upmarket business travellers.

29

In an affirmation of the Company�s world classstandards in hoteliering, ITC Maurya Sheratonreceived the International Hotel EnvironmentInitiative (IHEI) Award for being the global greenhotelier of the year. Further, �Namaste�, theCompany�s magazine, received the prestigiousGolden Bell Platinum award at New York.

The Company continued to keep its hotelscontemporary and competitive through theongoing upgradation and refurbishmentprogramme across the ITC Welcomgroup chain.The re-branding exercise initiated last year toeffectively position the product and service offeringsof the ITC Welcomgroup chain across its differentsegments of consumers was completed.

Consequent to preferential allotment of equityshares to financial institutions as part of thenegotiated settlement of outstanding debt, theCompany�s equity holding in Ansal Hotels Ltd.reduced to 47.52% from 54.65%. Accordingly,Ansal Hotels Ltd., which had become a subsidiaryof the Company with effect from 12th July, 2000,ceased to be so from 26th March, 2001.

b) ITC Bhadrachalam Paperboards Limited

The year 2000-01 was a year of turnaround forthe Company, with a Post-tax Profit of Rs.34.89crores, against a loss of Rs.32.12 crores last year.The turnaround was made possible by upgradingthe product mix to high value paperboards ofinternational quality, deriving economies of scalethrough effective technology absorption and fullcapacity utilisation of machines, and realising costefficiencies through consistently high resourceproductivity and energy management. The 1.2 lakhtonne capacity paperboard machine presentlyoperates at a capacity utilisation of 106%.

Despite the continuing oversupply in the paperindustry, sales during the year increased to 204,649tonnes (Rs.611 crores) from 179,715 tonnes (Rs.444crores). The Company�s products, benchmarkedagainst the global best-in-class, have substantiallysubstituted imported paperboards for premiumpackaging and value added graphic applicationsin the domestic market. Sales of value addedproducts grew to 30,233 tonnes from 15,183tonnes last year. Exports of the Company doubledfrom 19,896 tonnes (Rs.42.82 crores) last year to

39,228 tonnes (Rs.94.41 crores), testifying to theinternational quality of the Company�s products.These products now have a significant presencein Sri Lanka, Bangladesh, Malaysia, Iran and theUnited Arab Emirates. The Company has also madea recent entry into the Chinese and South Africanmarkets.

The Company continues to focus on expandingthe market for high value added products bypromoting their use for advanced functional andgraphic end use applications in diverse industrysegments. In order to exploit the increasing demandfor coated boards and to improve efficiencies, theCompany upgraded its first paper machine throughthe installation of a coater, backed by appropriatetechnology enhancements, at an outlay of Rs. 30crores. The products of this machine have alreadybeen well received. Following the turnaround, theCompany has now embarked upon a programmeto modernise its pulp mill at an outlay of aboutRs.227 crores. The Company�s farm forestryprogramme, aimed at improving access to costeffective fibrous raw materials, made steadyprogress with the distribution of nearly 2.6 millionhigh yielding disease resistant �Bhadrachalam�clonal saplings to growers in the command area ofthe mill. These initiatives are expected to furtherenhance the Company�s internationalcompetitiveness in terms of quality, costs andenvironmental compliance.

The high cost debt substitution plan initiated inthe previous year, with credit enhancement supportof your Company, led to substantial savings ininterest cost of over Rs.25 crores.

Given the quality of turnaround achieved by theCompany and its strategy of enhancing itscompetitiveness through focused productdevelopment, sustained world class quality and costmanagement, your Company is confident that ITCBhadrachalam Paperboards will emerge as a worldclass leader in the South Asian region in thepaperboards segment.

c) ITC Infotech India Limited

In accordance with the approval of theshareholders received at the last Annual GeneralMeeting, your Company restructured itsInformation Technology business into a wholly

30

owned subsidiary named ITC Infotech India Limited.This Company commenced operations in October2000 with an equity contribution of Rs.10 croresfrom your Company. In May 2001, your Companyalso sold its entire holding in ITC Infotech Limited,U.K. to ITC Infotech India Limited with due approvalfrom the Reserve Bank of India. Subsequent to theacquisition of ITC Infotech Limited, U.K., theCompany acquired direct holding of the entireequity of ITC Infotech (USA) Inc. In order tostrengthen its presence in the largest IT market inthe world, the Company invested US$ 2 million inthe equity of its US subsidiary.

The Company seeks to leverage its accumulateddomain knowledge with the aim of exploiting thesignificant global opportunities in the IT business.In pursuit of its key strategy of using offshoredevelopment to provide high quality softwareservices to international clients, the Company setup its global development centre in Bangalore. Thisdevelopment centre is already among a select fewIT units in the world to have earned the SEI CMMLevel 5 certif ication, the highest qualityaccreditation for an IT company. The Company hascreated several centres of excellence in select highgrowth technologies, including the first MicrosoftCentre of Excellence for e-commerce in South Asia.The Company continues to actively seekpartnerships with industry leaders in variousemerging technology areas in order to enrich itsservice offerings. Towards this end, it has concludedstrategic alliances with Sun Microsystems, MicrosoftCorporation and Parametric TechnologiesCorporation to acquire high-end technicalcompetencies including those relating to e-businessintegration, collaborative content management,collaborative product commerce and Internetapplication servers.

Notwithstanding the recent slowdown in the USand European markets, your Company is confidentthat ITC Infotech India Limited, with its focusedstrategies and unique skill-sets, can rapidly build aleadership position in its chosen segments.

d) Russell Credit Limited

During the year the Company purchased2,32,752 (0.77%) equity shares of ITC HotelsLimited and 37,31,467 (4.25%) equity shares ofITC Bhadrachalam Paperboards Limited.

The Company also made a counter offer atRs.115 per equity share (subsequently raised toRs.120) for acquiring 30,88,384 equity shares ofRs.10 each representing 20% of the outstandingequity share capital of VST Industries Limited as acompetitive bid pursuant to a public offer made byan acquirer for a similar number of shares at Rs.112per equity share (subsequently raised to Rs.118).This counter offer complies with the Securities andExchange Board of India (Substantial Acquisitionof Shares and Takeovers) Regulations 1997.

e) Landbase India Limited

During the year under review, your Companyacquired 70% of the equity capital in Landbase IndiaLimited, which is engaged in the business ofdevelopment and management of golf courses andresorts, and real estate development. As a resultLandbase along with its eight subsidiary companiesbecame subsidiaries of your Company. The eightsubsidiaries were amalgamated with Landbase videorder of the Hon�ble High Court of Delhi passed onMarch 29, 2001 with retrospective effect from April1, 2000 and were consequently dissolved withoutwinding up.

The Company pioneered the development ofworld class golf resorts in the country by developingand managing the Classic Golf Resort near Gurgaon,which includes a 27 hole Jack Nicklaus signaturegolf course besides other resort and conferencingfacilities. The resort is already a benchmark and hasplayed host to several prestigious national andinternational golf tournaments.

The Company also developed a premiumcondominium complex called �The Laburnum� inGurgaon. The complex contains residential units,independent villas, penthouses and centrally air-conditioned apartments, constructed andmaintained to the best world standards. �TheLaburnum� has been well received in the real estatemarket and is consistently rated among the bestresidential complexes in the country.

The Income of the Company for the year endedMarch 31, 2001 was Rs.19.51 crores. The Company,however, suffered a loss of Rs.17.4 crores primarilydue to the interest burden arising from high costcontracted debt. Your Company supported a debtrestructuring programme which will significantlyreduce interest costs in the coming year.

31

Landbase proposes to leverage its acknowledgedexpertise to pursue proposals for construction andmanagement of golf courses and residentialcomplexes on turnkey basis across the country,which would be synergistic with your Company�sleisure tourism business.

f) ITC Global Holdings Pte Ltd.

Since 8th November, 1996 the Judicial Managershave been conducting the affairs of ITC Global, inthe interest of ITC Global�s creditors under theauthority of the High Court of Singapore.

The Judicial Managers have indicated to yourCompany that the outstanding dues of ITC Globalto its creditors were likely to range between US$48 million and US$ 49.8 million (apart from thedebt of approximately US$ 9.9 million owed by ITCGlobal to ITC) and had sought your Company�sfinancial support to ITC Global to enable it to settlewith its creditors. Your Board does not accept anylegal liability in this regard and has accordinglyadvised the Judicial Managers.

However, without prejudice, and with theintention of preserving goodwill of the internationalbanking and other investing communities andthereby to subserve your Company�s future businessinterests in a fast-globalising economy, yourCompany has proposed rendering financialassistance to the tune of US$ 26 million to theJudicial Managers towards settlement ofoutstanding dues of ITC Global to its creditors. Thiswould be subject to your consent and all necessaryapprovals from all Government and otherauthorities, both at Singapore, and in India, andalso subject to concluding a comprehensiveAgreement between your Company and the JudicialManagers in this regard, which is currently inprocess.

The High Court of Singapore had ruled that, �theCompany (i.e. ITC Global) is not required toconduct any audit of the Company during theperiod of judicial management of the Company�.As a consequence of the aforesaid Order, yourCompany cannot annex the audited accounts ofITC Global and its subsidiaries for the year ended31st December, 2000, this position having alsoprevailed in the previous four years. Approval inthis regard is awaited from the Central Government

granting exemption from the provisions of Section212 of the Companies Act, 1956. Your Companyshall, as soon as such accounts are received, circulatethe same to the Members of the Company.

NOTES ON TRADE INVESTMENTSa) Surya Tobacco Company (P) Limited

The gradual upturn in the Nepalese economyreflected in the cigarette industry in Nepal growingmarginally after a decline by nearly 10% over theprevious two years. The Company�s performancefor the year ended 15th July, 2000 reflected a 5%increase in Gross Turnover and a 19% increase inProfit after Tax. Dividend for the year was increasedto 80%, compared to 50.4% last year. TheCompany�s brands continue to occupy leadershippositions in their respective segments, resultingin a value share of the cigarette industry of over62%.

The Company continues to be the largest singleprivate sector contributor to the NepaleseExchequer, accounting for 4% of the total revenuescollected by His Majesty�s Government.

b) Real Estate

Your Company believes that it can develop itsreal estate assets over time and redeem itsinvestments. Towards this end, the requisiteorganisation and management skills were set upwith your Company�s support. Architects ofinternational repute were also appointed to assistin formulating development plans. The plansfor development of a premium township havebeen finalised. However, the launch of the projectwill need to await an upturn in the real estatemarket.

c) ITC Filtrona Limited

The Company continues to support the Indiancigarette industry in its process of transition in filterusage from viscose to acetate. As a result, despitedifficult trading conditions, the Company posted avolume growth of 36%. Consequently, the marketshare improved to 55% by value in the domesticfilter market.

Gross turnover for the year at Rs. 67.2 crores,grew 13% over last year. Improvements in resourceproductivity led to a healthy growth of 40% in

32

operating profits (Profit before Interest and Tax) toRs.6.2 crores. The Board of Directors of theCompany has recommended a maiden dividendof 25%.

The Company continues its focus on solutionsand support to the Indian cigarette industry in itsendeavour to provide value added products toconsumers.

AUDIT AND SYSTEMSYour Company remains committed to ensuring

an effective internal control environment thatprovides assurance on the efficiency of operationsand security of its assets. In the context of thegrowing complexity of the business environment,the Internal Audit function focuses on ensuringadequacy of risk management policies and systemsto pre-emptively and effectively manage risk.

The adequacy and effectiveness of the internalcontrol environment across the various businesses,as well as compliance with laid down systems andpolicies are comprehensively monitored by yourCompany�s well established internal auditprocesses, both at divisional and corporate levels.The Internal Audit function also reviews theexecution of all ongoing projects involvingsignificant expenditure to ensure that controls ondeployed resources are adequate. All major IT-enabled business applications are regularly validatedfor their integrity of design, security and accesscontrols, and quality of functionality by the internalaudit teams, which are well trained in contemporaryaudit techniques and methodologies.

The Audit Committee of your Board met eighttimes during the year. It actively engaged inreviewing internal control systems, as well asfinancial disclosures. Monitoring theimplementation of internal audit recommendationsreceived focused attention of the Committee.

HUMAN RESOURCE DEVELOPMENTHuman capital is one of the key elements of

sustainable competitive advantage and shareholdervalue creation. Your Company�s human resourcephilosophy aims at nurturing an organisationalculture that respects people, empowers and enablesthem to deliver high quality performance andrewards talent with competitively superior

compensation and accelerated career growthopportunities. Your Company values in its peopleintegrity, excellence and the passion to achieve.

In the multi-business context of your Company,general management capabilities are required notjust at the apex level but also at the level of eachbusiness division. At the same time the imperativesof a globalising market demand that each of thebusinesses benchmarks itself against the global best-in-class, which requires high levels of functionalspecialism. The challenge of human resourcedevelopment in your Company therefore is toaddress the need for deep functional specialism,while at the same time developing breadth ofleadership. This mix of capabilities is sought to beachieved: (a) through a well developed appraisalsystem that clearly identifies the development pathfor each manager based on performance andpotential, and (b) by leveraging ITC�s multi-businesscontext to blend skills and competencies throughcross-functional and cross-business exposures.

Your Company fosters continuous learning andinnovation. It is of the belief that only a learningorganisation can survive and grow in a knowledge-centric, fast globalising business environment. Eachof your Company�s businesses has developedknowledge management systems appropriate to itsown unique requirements. This emphasis oninternal knowledge management processes enablesyour Company to keep its competenciescontemporary, whilst at the same time creatingexciting development opportunities for its people.

The spirit of trust, transparency and teamworkhas enabled your Company to build a traditionof partnership and harmonious industrial relations.The commitment to a shared purpose has ledto enhanced productivity, internationallybenchmarked quality, as well as fulfillment ofemployee aspirations.

Your Directors record their sincere appreciationof the dedicated efforts put in by over 11,000employees working across 60 locations.

ENVIRONMENT, OCCUPATIONAL HEALTHAND SAFETY

Your Company continues to accord the highestpriority to Environment, Occupational Health andSafety (EHS). The EHS team audits all units of your

33

Company with a view to progressively achievinginternational standards, while ensuring compliancewith statutory requirements.

The Legal and Safety Audit Committee of yourCompany�s Board reviews the findings of EHS auditsand monitors compliance with prescribed policies.As part of the review process, members of thisCommittee periodically visit the Company�soperating units across the country. In order to raiseEHS awareness and improve standards, a numberof employee training programs were conductedacross all units of your Company.

In recognition of your Company�s EHS initiatives,several awards continue to be conferred on its units,as detailed earlier in this Report.

EXCISEIn the Report & Accounts of the last fourteen

years, your Directors had mentioned that,consequent upon a search and seizure conductedby the Excise Authorities, a Show Cause Noticedated 27th March, 1987 was issued to yourCompany for alleged evasion of Excise Duty duringthe period from 1st March, 1983 to 28th February,1987. The charge was based on the premise thatyour Company allegedly colluded with retailers inselling cigarettes at a price higher than that printedon the package, which was the basis of levying dutyduring the aforesaid period. Your Company and itscontract manufacturers were therefore asked toShow Cause as to why they should not be requiredto pay duty at the higher slab corresponding tothe actual price alleged to have been charged bythe retailers, amounting to an unprecedented sumof Rs. 803.78 crores besides other penalties in law.

The hearing of the Show Cause Noticeproceeded before the Commissioner of CentralExcise, Delhi, who, by an Order dated 29thDecember, 1995 confirmed a differential exciseduty Demand of Rs. 681.54 crores against yourCompany and also levied a penalty of Rs. 66.50crores on it. Personal penalties aggregating to Rs.3.15 crores were also imposed on six ex-Directorsof your Company. The Commissioner alsoconfirmed a Demand of Rs. 118 crores on sevencontract manufacturers of your Company and leviedpenalties on them aggregating to Rs. 7 crores.

Your Company preferred an Appeal to theCustoms Excise and Gold (Control) AppellateTribunal (CEGAT) against the Commissioner�s Orderdated 29th December, 1995 as also an Applicationfor dispensing with the pre-deposit of thedifferential duty amount of Rs. 681.54 crores andpenalty amount of Rs. 66.50 crores, and for stay.Similarly, all six ex-Directors of your Company, aswell as the contract manufacturers, preferredAppeals to the CEGAT as also Applications for waiverof pre-deposit of the differential duty and penaltyamounts, and for stay.

In respect of the contract manufacturers theCEGAT directed that the pre-deposit of the entireamounts of differential duty and penalty should bedispensed with in their case. In the case of the sixex-Directors also directions for dispensing with thepre-deposit of the penalties were given by theCEGAT.

Further, by its Order dated 15th March, 1996the CEGAT directed your Company to depositRs. 110 crores on or before 30th April, 1996 and afurther amount of Rs. 240 crores in eight equalmonthly instalments commencing 1st June, 1996.The requirement of pre-deposit of the balancedifferential duty amount of Rs. 331.54 crores andthe entire penalty amount of Rs. 66.50 crores waswaived, subject to the conditions regardingpayment of instalments as indicated above andalso furnishing of Bonds. In compliance with theabove Order of the CEGAT, your Companydeposited with the Excise Collectorates havingjurisdiction over five factories of your Company, atotal amount of Rs. 350 crores, and also furnisheda Bond as directed.

Thereafter, the CEGAT heard the appealsbetween February and May 1998, and by its Orderdated 4th September, 1998 :-

a) set aside the demand of differential exciseduty on the contract manufacturers of ITC

b) set aside the penalties imposed on ITC, six ofits ex-Directors and its contract manufacturers

c) set aside the quantification of the excise dutydemand on ITC and

d) remanded the matter to the AdjudicatingAuthority for fresh quantification of duty

34

demand on ITC in accordance with theguidelines provided in the Order and aftergiving ITC an opportunity of personal hearing.

Since your Company believes that it has no legalliability to pay any differential excise duty, and theOrder of the CEGAT is, therefore, unsustainable inlaw, the Company filed an Appeal in the SupremeCourt. The Excise Department also filed Appealschallenging the CEGAT�s Order. At the admissionstage, the Supreme Court, on 15th January, 1999passed an Order to the following effect :-

a) The Appeal filed by the Company againstCEGAT�s Order holding the Company liablefor differential duty has been admitted.

b) The Appeal filed by the Excise Department inrespect of the Company has been admitted;adjudication proceedings for freshquantification of differential duty inaccordance with CEGAT�s Order maycontinue, but no orders pursuant to suchproceedings shall be passed without the leaveof the Supreme Court.

c) Excise Department�s appeals in respect ofcontract manufacturers have been admittedonly on the limited question of their liability,if any, upto six months preceding the ShowCause Notice.

d) Excise Department�s appeals challenging thequashing of penalties imposed on the formerDirectors have been dismissed.

A few days before the CEGAT passed its Orderon 4th September, 1998 the Excise Departmentfiled criminal complaints on 30th August, 1998 inthe Economic Offences Courts at Meerut,Bangalore, Mumbai, Patna and Kolkata against theCompany and the six ex-Directors on the basis ofOrder of the CCE, Delhi dated 29th December,1995. These prosecutions are being contested byyour Company and the individuals.

On applications moved by the ex-Directors, theproceedings before the Bangalore, Kolkata andMeerut Courts have been stayed by the High Courtof Karnataka, the High Court of Calcutta and theAllahabad High Court respectively.

Prior to March, 1983, duty on cigarettes was onad valorem basis. In the light of the decision of theSupreme Court in the case of Voltas in the year

1973, your Company filed Price Lists for cigarettesmanufactured at its various factories claimingabatement of certain Post-Manufacturing Expenses(PME). As disputes arose as to the maintainabilityof the claim for abatement of PME made by theCompany, the Price Lists were approved on aprovisional basis. During the period 1975 to 1985,various Show Cause Notices were issued in respectof Bangalore, Saharanpur and Munger factories ofthe Company alleging inter alia that additionalmargins were given by the Company to thewholesale dealers to meet certain expenses whichshould form part of its price to the wholesaledealers. All such Show Cause Notices were assignedto the Director General of Inspection, Customs &Central Excise, New Delhi (�DG�) who passed hisOrder on 10th April, 1986. Although the differentialduty payable under the DG�s Order was determinedon an admitted interpretation of Rule 5 of CentralExcise (Valuation) Rules (which interpretation hassince been upheld by the CEGAT and affirmed bythe Supreme Court), the Excise Department raiseddoubts on such interpretation and issued reviseddemands under the DG�s Order, in respect ofBangalore, Munger and Saharanpur factories. TheBangalore demand for Rs.27.58 crores was set asideby the Commissioner (Appeals), Bangalore, by hisOrder dated 22.11.99 against which theDepartment has filed an Appeal in CEGAT, Chennai.The Saharanpur demand of Rs.80.30 crores wasconfirmed by the Commissioner (Appeals) to theextent of Rs.76.03 crores against which yourCompany has filed an Appeal before CEGAT, Delhi,which is pending. Since your Company had to makea pre-deposit of Rs.20 crores for hearing of its Appealby the Commissioner (Appeals), CEGAT has stayedrecovery of the balance amount of Rs.56.03 crorespending disposal of your Company�s Appeal beforeit. The revised demand of Rs.8.29 crores in respect ofMunger factory is pending adjudication before theCommissioner, Patna.

As mentioned in the Report of the Directors for1987 and thereafter, the Excise Department, during1987 and 1988, again reopened some of the issuesalready settled by the Order of the DG, by issuingfresh Show Cause Notices in respect of the periodupto 28th February, 1983. The Notices proposedto recover differential duties of Rs.43.88 crores (forMunger factory), Rs.143.22 crores (for Bangalore

35

factory), Rs.31.05 crores (for Kidderpore factory),Rs.41.51 crores (for Parel factory) and Rs.26.43crores (for Saharanpur factory). All these Noticeswere assigned to the Commissioner of CentralExcise, Delhi, for investigation and adjudication.Your Company has, apart from denying any liabilityas claimed in the Notices, challenged themaintainability of all these Show Cause Notices. Onan appeal filed by your Company against an Orderof the Commissioner, rejecting the Company�scontentions on the issue of maintainability, theCEGAT, Chennai, by its Judgement dated 13thJanuary, 2000 upheld the contention of yourCompany and has set aside the Bangalore ShowCause Notice for Rs.143.22 crores with thedirection, inter alia, that the allegations madetherein should be considered by the AssessingAuthority while finalising the assessments in respectof the Bangalore factory, which has been yourCompany�s contention all along. By an order dated21st July, 2000, the Supreme Court has admittedthe appeal of the Department and stayed the orderof CEGAT, Chennai. Your Company�s Appealsagainst similar Orders relating to the Show CauseNotices issued in respect of Munger and Parelfactories are pending before CEGAT, Kolkata andMumbai respectively. As regards the Show CauseNotice in respect of Saharanpur factory, yourCompany has filed a Writ Petition in the Delhi HighCourt which is pending. In accordance with thelaw laid down by the CEGAT on interpretation ofRule 5 of the Central Excise Valuation Rules, andupheld by the Supreme Court, the exorbitantamounts set out in the pending Show Cause Noticesreferred to above would stand virtuallyextinguished. In fact while the Company�s appealagainst the show cause notice relating to Parelfactory for Rs.41.51 crores is pending before CEGAT,Mumbai, the Commissioner of Central Excise Delhiby his order dated 29th December, 2000 hasconfirmed the demand for Rs.5.96 crores or such higheror lower amount as may be redetermined by thejurisdictional officer. By the same order the liability of thetwo contract manufacturers were roughly determinedat Rs.83 lakhs and Rs.41 lakhs as against the differentialduty of Rs.6.65 crores and Rs.2.89 crores respectivelyproposed in the said show cause notice. Your

Company and also the contract manufacturershave, however, filed separate appeals in CEGAT,Mumbai against the said order of the Commissioneralong with applications for stay which are pending.

So far as the Kidderpore factory is concernedthe Notices were set aside and all pre-March 1983valuation disputes stand resolved pursuant to thefinalisation of the provisional assessments.

As mentioned in the Report of the Directors inearlier years, the Excise Authorities were alsopersisting with two more Notices, issued in 1983and 1984 for a total sum of Rs.57.66 crores by theParel Authorities on the question of treatment ofSecurity Deposit for excise valuation, in spite of thisissue having been concluded by the Order of theDG. By an Order dated 30th September, 1999,the Commissioner of Central Excise, Delhi hasconfirmed the demand in respect of these twoNotices for only Rs.75.27 Lakhs which amount hasto be adjusted with the equivalent amount alreadypaid by your Company pursuant to the DG�s Order.By the said Order, a penalty of Rs.5 lakhs has alsobeen imposed on your Company. Your Companyhas filed an Appeal before CEGAT, Mumbai againstthe said Order dated 30th September, 1999.

As reported in the 1997 Report of the Directors,the Commissioner of Central Excise, Delhi, haddirected the Departmental Authorities to finalise theassessments in respect of Bangalore, Parel andMunger for the pre-March 1983 period. Thepurported Order of finalisation of assessments dated15th January, 1998 relating to the Bangalore factoryfor Rs.23.82 crores was challenged before theCommissioner (Appeals), Bangalore, who, by hisOrder dated 20th November, 1999 allowed theCompany�s Appeal and remanded the matter forde novo adjudication setting aside the impugnedOrder. Similar Orders of finalisation of assessmentswere also passed by the Departmental Authorities inrespect of the Munger and Parel factories, anddifferential duty of Rs. 9.28 crores and Rs. 1.38 croreswere demanded respectively. Your Company�sAppeals against the said Orders of finalisation ofassessments of Munger and Parel factories have beendisposed of by remanding the matters for freshhearing. While de novo proceedings for finalisationof assessments have commenced relating to

36

Bangalore and Munger factories, the DeputyCommissioner of Central Excise, Mumbai I by hisorder dated 22nd September, 2000 has finalisedthe assessments filed relating to Parel factorybetween 1st March, 1973 and 28th February, 1983.In terms of the said Order, a sum of Rs.87.83 lakhsis shown to have been paid in excess uponadjustment of duty liability for the said period.

As mentioned in the Report of the Directors inearlier years, a fresh Show Cause Notice was issuedby the Assistant Commissioner of Central Excise,Bangalore, for recovery of alleged differential dutyof Rs.83.19 lakhs on account of FreightAdministration Charges even though theSuperintendent of Central Excise, Bangalore, hadearlier raised a demand dated 29th May, 1997 forRs.1.08 crores on account of the same. TheCommissioner (Appeals), Bangalore, by his Orderdated 28th July, 1999 has held that the earlierdemand of Rs.1.08 crores stands superseded by thesubsequent Show Cause Notice, which is beingcontested by your Company, since all liability onaccount of Freight Administration Charges hasalready been discharged by your Company.

Although your Company in a spirit of settlement,paid the differential Excise Duty that arose out ofthe Order of the Director General as early as inMarch 1987, and although the Excise Department�saforesaid Demands had either been quashed orstayed, the Collectorates in Meerut, Patna andBangalore, during the year 1995, filed criminalcomplaints in the Special Court for EconomicOffences at Kanpur, Patna and Bangalore, chargingyour Company and some of its Directors andemployees who were employed with yourCompany during the period 1975 to 1983 withoffences under the Central Excises & Salt Act, 1944,purportedly on the basis of the Order of the DirectorGeneral dated 10th April, 1986. Your Directors areadvised that no prosecution would lie on the basisof the aforesaid Order of the Director General dated10th April, 1986. In fact, the Special Court inKanpur, which initially took cognisance of thecomplaints, subsequently, on applications filed by theindividuals concerned, discharged them. Similarapplications were filed by the individuals in the Special

Court in Patna, which are pending. On applicationsmoved by the individuals concerned, the proceedingsbefore the Magistrate Court, Bangalore have beenstayed by the Karnataka High Court.

The Collector of Central Excise, Bangalore hadissued a Show Cause Notice and after adjudicationa Demand Notice was received on 12th August,1988 for Rs. 2.4 crores, including a penalty ofRs. 1.2 crores, on account of alleged variation fromthe approved surface design of one of yourCompany�s brand packs. On Appeal, the CEGAT,Delhi, passed an Order effectively bringing downthe duty liability to Rs.1.5 lakhs and the penalty toRs.1 lakh. In the opinion of your Directors even thisOrder is unsustainable. Your Company, therefore,filed an Appeal in the Supreme Court against theabove Order, which was admitted and is nowpending. While the appeal before CEGAT waspending, the Department filed a criminal complaintagainst the Company and some of its Directors andManagers before the Magistrate Court, Bangaloreand the same is pending.

In all the above instances, your Directors are ofthe view that your Company has a strong case andthe Show Cause, the Demand Notices and theComplaints are not sustainable.

Since your Company is contesting the abovecases and contending that the Show Cause, theDemand Notices and the Complaints are notsustainable, it does not accept any liability in thisbehalf. Your attention is drawn to the Note 18 (v)in the Schedules to the Accounts.

RECOVERY OF DUES FROM THE CHITALIASAND ENQUIRY BY THE ENFORCEMENTDIRECTORATE

You are aware that your Company had obtainedfrom the District Court of New Jersey, U.S.A., aDecree for U.S. $ 12.19 million against Suresh andDevang Chitalia of U.S.A. and that the Chitalias hadfiled Bankruptcy Petitions before the BankruptcyCourt, Orlando, Florida, which are being contestedby your Company.

As detailed in the Report of the Directors lastyear, in the Florida Bankruptcy Court proceedings,the Chitalias had made an Offer proposing that theywould submit to a judgment of the Bankruptcy

37

Court disallowing their applications to be dischargedas bankrupt provided your Company was willing towithdraw its objections to their claims for exemptionof some of their assets. Since your Company wasadvised by its U.S. Counsel that a large part of theChitalia claims for exempted assets was not legallysustainable, the Chitalia Offer was rejected.

Subsequently, Chitalias made a Second Offer ofJudgment in which they scaled down their claimsof exempted assets. Consequently, yourCompany�s U.S. Counsel recommended that theChitalia Offer be accepted since, under the U.S. law,they would be entitled to the remainingexemptions. Based on the Counsel�s advice, yourCompany accepted the Offer and the BankruptcyPetitions of the Chitalias were disallowed by theFlorida Bankruptcy Court, thereby defeating theobjective of the Chitalias to get themselvesdischarged as bankrupt.

The Bankruptcy proceedings before the FloridaCourt are, however, continuing for the purpose ofcollecting and distributing the property of thebankrupt estate and your Company�s efforts forrecovery of its dues against the Chitalias willcontinue.

Meanwhile, the process of inspection of thevoluminous documents relating to the Show CauseNotices by the Company and the concernedindividuals is on.

TAXATIONAs mentioned in the Report of the Directors for

the last three years, your Company had obtainedstay orders from the Hon�ble Calcutta High Courtin respect of the notices served by the Income TaxDepartment for re-opening the past assessmentsfor the period 1st July, 1983 to 30th June, 1986.This status remains unchanged.

As also stated in the Report of the Directors forthe last three years, in respect of similar notices fromthe Income Tax Department for re-opening the pastassessments for the period 1st April, 1990 to 31stMarch, 1993, the Hon�ble Calcutta High Court hadadmitted the Writ Petition and ordered that no finalassessment orders be passed without the leave ofthe Court. This status also remains unchanged.

FINANCE AND ACCOUNTSPublic Deposits

As at March 31, 2001 your Company had FixedDeposits of Rs. 84.52 crores. No fresh / renewal ofdeposits were accepted during the financial year.During the year, deposit holders whose depositshad matured were paid the interest due to them.Repayments of deposits were made to depositorsas and when claimed. Reminders have been sentto 1840 persons who did not claim repayment oftheir deposits which had become due, amountingto Rs.188.96 lakhs.

There was no failure to make repayments offixed deposits on maturity in terms of theconditions of your Company�s Schemes. The casesof fraudulent encashments as reported in previousyears, continue to be under investigation by thepolice authorities.

INVESTOR SERVICE CENTREThe Investor Service Centre (ISC) of your

Company continues to provide efficient and highquality service through a trained and dedicatedteam of professionals supported by state-of-the-artinfrastructure. Your Company�s website has asection on �Investor Relations� which providescomprehensive information on share relatedactivities carried out by the ISC, and also serves asa user-friendly online reference guide for investors.

The shares of your Company are available fortrading under both the Depository Systems in India,namely the National Securities Depository Limited(NSDL) and Central Depository Services (India)Limited (CDSL).

DIRECTORSShri Biswadev Mitter, Wholetime Director, retired

from the services of your Company with effect fromclose of business on 7th March, 2001.

Shri Kumbakonam Padmanabha Narasimhan,who represented the Life Insurance Corporation ofIndia, resigned as Non-Executive Director of yourCompany with effect from 25th October, 2000. ShriTapan Ganguli ceased to be a Non-ExecutiveDirector of your Company with effect from 17thJanuary, 2001, as a consequence of IFCI Limitedadvising your Company of its fresh nomination.

38

Your Directors would like to record theirappreciation of the services rendered by SarvashriMitter, Narasimhan and Ganguli.

Dr. Basudeb Sen continues to be on the Board ofDirectors of your Company as a Non-Executive Director.However, he ceased to be a representative of the UnitTrust of India with effect from 28th July, 2000.

Shri Krishnamoorthy Vaidyanath was appointedby the Board of Directors as Additional WholetimeDirector of your Company with effect from 17thJanuary, 2001.

Shri Brij Gopal Daga was appointed by the Boardof Directors as Additional Non-Executive Directorof your Company with effect from 28th July, 2000,as a representative of the Unit Trust of India. ShriYesh Pall Gupta was also appointed by the Boardof Directors as Additional Non-Executive Directorof your Company with effect from 25th October,2000, as a representative of the Life InsuranceCorporation of India.

IFCI Limited appointed Shri Avinash ChanderAhuja as its nominee on the Board of Directors ofyour Company with effect from 17th January, 2001.

Shri Yogesh Chander Deveshwar was re-appointed as Wholetime Director and Chairman ofyour Company with effect from 20th July, 1999 fora period of three years. His present term ofappointment will expire on 19th July, 2002. TheBoard of Directors, anticipating that ShriDeveshwar�s current term may expire before theAnnual General Meeting in 2002, and consideringthat there should be no period of the Chairman�sappointment which is not covered by the Members�approval, at its meeting held on 30th May, 2001,recommended for the approval of the Members,his re-appointment as Wholetime Director andChairman of the Company, liable to retire byrotation, from 20th July, 2002 for a further periodof five years or up to the date of his retirement asper the Rules of the Company, whichever is earlier.

Shri Antonio Americo de Figueiredo Rodrigueswas appointed as Non-Executive Director at theAnnual General Meeting of the Company held on12th August, 1998, for a period of three years andhis present term of appointment will expire on 11thAugust, 2001. The Board of Directors of yourCompany at its meeting held on 30th May, 2001

also recommended for the approval of theMembers, his re-appointment as Non-ExecutiveDirector of the Company, liable to retire by rotation,for a further period of five years with effect from12th August, 2001.

Notices have been received from Members ofthe Company under Section 257 of the CompaniesAct, 1956 for the re-appointment of SarvashriDeveshwar and Rodrigues as Directors of theCompany. Appropriate resolutions seeking yourapproval to their re-appointments are appearingin the Notice convening the 90th Annual GeneralMeeting of the Company.

By virtue of the provisions of Article 96 of theArticles of Association of the Company and Section260 of the Companies Act, 1956, Shri Vaidyanath,Additional Wholetime Director and Sarvashri Dagaand Gupta, Additional Non-Executive Directors, willvacate office at the ensuing Annual General Meetingof your Company and have filed their consent toact as Directors of the Company, if appointed. TheBoard of Directors of your Company at its meetingheld on 30th May, 2001 recommended for theapproval of the Members, the appointment ofShri Vaidyanath as Wholetime Director of yourCompany, liable to retire by rotation, with effectfrom 17th January, 2001 for a period of five yearsor up to the date of his retirement as per the Rulesof the Company, whichever is earlier. The Board ofDirectors at its aforesaid meeting alsorecommended for the approval of the Members,the appointments of Sarvashri Daga and Gupta asNon-Executive Directors of your Company, liableto retire by rotation, for a period of five years fromthe date of the ensuing Annual General Meeting ofthe Company.

Notices have also been received from Membersof the Company under Section 257 of theCompanies Act, 1956 for the appointment ofSarvashri Vaidyanath, Daga and Gupta as Directors.Appropriate resolutions seeking your approval totheir appointments are appearing in the Noticeconvening the 90th Annual General Meeting of theCompany.

Shri Nigel Timothy Gourlay was appointed bythe Board of Directors of your Company as AlternateDirector to Shri Charles Richard Green with effectfrom 23rd March, 2001.

39

In accordance with the provisions of Article 91of the Articles of Association of the Company,Sarvashri Antonio Americo de Figueiredo Rodrigues,Yogesh Chander Deveshwar and PillappakkamBahukutumbi Ramanujam will retire by rotation atthe ensuing Annual General Meeting of yourCompany and being eligible, offer themselves forre-appointment. Your Board of Directors has alsorecommended their re-appointment.

AUDITORSThe Auditors, Messrs. A. F. Ferguson & Co., retire

at the ensuing Annual General Meeting of yourCompany and, being eligible, offer themselves forre-appointment. Since not less than 25% of thesubscribed share capital of your Company is heldcollectively by Public Financial Institutions, the re-appointment of Auditors is being proposed as aSpecial Resolution in accordance with Section 224Aof the Companies Act, 1956.

EMPLOYEE STOCK OPTION SCHEMEThe Members of the Company had, at the

Extraordinary General Meeting held on 17thJanuary, 2001, approved the introduction of anEmployee Stock Option Scheme for eligibleemployees of the Company and of its subsidiarycompanies, as the Board of Directors of yourCompany may decide. Options for the financial yearended 31st March, 2001 are expected to be grantedto employees in accordance with the provisions ofthe Scheme. Accordingly, the disclosure requiredunder clause 12 of the Securities and ExchangeBoard of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines,1999, in this regard will be covered in the Reportof the Directors from next year.

DIRECTORS� RESPONSIBILITY STATEMENTIn terms of Section 217 (2AA) of the Companies

Act, 1956, your Directors have:

a) followed in the preparation of the AnnualAccounts, the applicable accounting standardswith proper explanation relating to materialdepartures;

b) selected such accounting policies and appliedthem consistently and made judgements and

estimates that are reasonable and prudent so asto give a true and fair view of the state of affairsof your Company at the end of the financial yearand of the profit of your Company for thatperiod;

c) taken proper and sufficient care for themaintenance of adequate accounting records inaccordance with the provisions of the CompaniesAct, 1956 for safeguarding the assets of yourCompany and for preventing and detectingfraud and other irregularities; and

d) prepared the Annual Accounts on a goingconcern basis.

OTHER INFORMATIONThe certificate of the Auditors, Messrs. A. F.

Ferguson & Co. confirming compliance ofconditions of Corporate Governance as stipulatedunder clause 49 of the Listing Agreement of theStock Exchanges in India, is annexed. Particulars asrequired by Section 217(1)(e) of the CompaniesAct, 1956, relating to Conservation of Energy andTechnology Absorption are also provided in theAnnexure to this Report together with particularsof Employees as required under Section 217(2A) ofthe Companies Act, 1956.

CONCLUSIONYour Company continues to consolidate its

leadership position in its core businesses throughvalue addition to products and services, andprogressively gaining international competitivenessin quality and cost standards. Each business isfocused on leveraging its core competencies tobuild shareholder value and all indications are thatyour Company�s performance track record will besustained.

Your Directors look forward to the future withconfidence.

30th May, 2001Virginia House On behalf of the Board37 ChowringheeKolkata 700 071 A. SINGH DirectorIndia K. VAIDYANATH Director

40

CONSERVATION OF ENERGY

INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIESACT, 1956 READ WITH COMPANIES (DISCLOSURE OFPARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES,1988 AND FORMING PART OF THE DIRECTORS� REPORT

a) Energy conservation measures taken :

i) Installation of energy management systems andenergy cost reduction programme undertaken.

ii) Installation of variable frequency drives to motorscontinued.

iii) Use of low calorific value/heavy fuels for powerand steam generation.

b) Additional Investment and Proposals, if any, beingimplemented for reduction of consumption of energy:

i) Carrying out of specific audits to reduce powerconsumption.

ii) Enhance effective utilisation of available steamand power by installation of higher capacityenergy efficient turbine and equipment.

iii) Optimisation of power utilisation throughsynchronisation and improved distribution system.

c) Impact of measures of (a) and (b) above for reductionof energy consumption and consequent impact onthe cost of production of goods:

Energy conservation measures have resulted in savingsin energy costs of the Company.

A) POWER AND FUEL CONSUMPTION

For the For theYear ended Year ended

31st March, 31st March,Relating to speciality paper 2001 2000

1. Electricity (ExcludingConsumption in Colony)

a) Purchased

Unit (KWH) in Lakhs 157 159

Total Amount (Rs. in Lakhs) 6,28 6,53

Rate/Unit 3.99 4.09

b) Own Generation

i) Through Diesel Generation Unit Nil Nil

Unit per Litre of Diesel Oil N.A. N.A.

Cost/Unit (Rs.) N.A. N.A.

ii) Through Steam

Turbine/Generator

Units (KWH) in Lakhs 405 405

Units per Kg. of Coal 0.89 0.96

Cost/Unit (Rs.) 1.59 1.57

ANNEXURES TO THE REPORT OF THE DIRECTORSFOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2001

CERTIFICATE OF COMPLIANCE FROM AUDITORS AS STIPULATED UNDER CLAUSE 49 OF THE LISTING AGREEMENT OFTHE STOCK EXCHANGES IN INDIA

CERTIFICATETo the Shareholders,

We have examined the compliance of conditions of Corporate Governance by I.T.C. Limited for the year ended on 31st March,2001, as stipulated in clause 49 of the Listing Agreement of the said company with stock exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited toprocedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of CorporateGovernance. It is neither an audit nor an expression of opinion on the financial statements of the company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company hascomplied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that in respect of investor grievances received during the year ended 31st March, 2001, no investor grievances arepending against the company as per the records maintained by the company and presented to the Investor Services Committee.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectivenesswith which the management has conducted the affairs of the company.

For A. F. Ferguson & Co.Chartered Accountants

A. K. MahindraKolkata, 30th May, 2001 Partner

41

iii) Improvement in cigarette tissue quality leading toopening up of export markets.

iv) Continuation in the upgradation of technologyrelating to conservation of wood fuel and other naturalsources resulting in reduced cost of cultivation tofarmers.

v) Extension of yield improvement and quality of tobaccoresulting in higher returns to the farmers andavailability of flavoured tobaccos for export anddomestic.

vi) Adaptation of nutrient regime to suit Indian conditionsfor improved yield and quality of leaf tobacco.

3. Future Plan of Action :i) Implement water quality upgradation by softening

water used for paper making.ii) Achieve superior product quality of Fine Printing

papers required for special printing applications.iii) Construction of a Master Facility for developing fabric

and garment designs and finishes.iv) Extension of environment friendly green manuring

practices.v) Development of nature identical compounds for

enhancement of smoke quality.vi) Development of foliar application of growth enzymes

for tobacco crop.

4. Expenditure on R&D :For the year ended31st March, 2001

(Rs. in Lakhs)i) Capital 356.17ii) Recurring 606.90iii) Total 963.07iv) Total R&D Expenditure

as a % of total turnover 0.11

Technology Absorption, Adaptation and Innovationi) Refining system upgrade on all paper machines with

input from an overseas expert.ii) Retention improvements on PM 4 resulting in

successful manufacture of Decor paper with high levelof retained titanium dioxide.

iii) Developed low temperature, heat sealable BOPP film,suitable for light wrap/wrinkle free wrapping ofcigarette packs.

iv) Two state-of-the-art Tobacco processing lines wereinstalled and commissioned.

Benefits Derived :i) Greater market acceptance of key speciality products

such as Fine Printing papers and Decor grades.ii) Greater acceptance of Indian leaf tobacco in

international markets.iii) Reduction in production costs and energy

conservation in leaf processing.

On behalf of the Board

A. SINGH DirectorKolkata, 30th May, 2001 K. VAIDYANATH Director

2. Coal (Specify Quantity & Where Used)B/C/D/E/F Grade Coal Used

For the year ended For the year ended31st March, 2001 31st March, 2000

Process Power Total Process Power Total

Quantity (M.T.) 28484 45463 73947 29396 42009 71405Total Cost(Rs. in Lakhs) � � 1057 � � 1079Average Rate(Rs. per M.T.) � � 1429 � � 1511

3. Furnace OilQuantity(K. Litres) Nil NilTotal Amount N.A. N.A.Average Rate � �

4. Others/InternalGeneration N.A. N.A.Quantity � �Total � �Rate/Unit � �

B) CONSUMPTION PER UNIT OF PRODUCTIONFor the For the

Year ended Year ended31st March, 31st March,

2001 2000Products (Paper in MT) 19122 18841Electricity (KWH) 2940 2995Coal B/C/D/E/FGrade (M.T.) 1.49 1.56

TECHNOLOGY ABSORPTIONINFORMATION UNDER SECTION 217 (1) (e) OF THECOMPANIES ACT, 1956 READ WITH COMPANIES(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARDOF DIRECTORS) RULES, 1988 AND FORMING PART OF THEDIRECTORS� REPORT

Research and Development1. Specific areas in which R&D was carried out by the

Company :i) Retention improvements of fibres and fillers on all

paper machines with the help of a structured retentionprogramme.

ii) Identification of technology for upgrading processwater quality in terms of softening water for use inpaper making.

iii) Modification of major nutrient levels for improvingtobacco yields and application of environmentallyfriendly green manuring systems.

iv) Extension of energy saving systems in leaf tobaccocuring.

v) Extension of new varieties of tobacco seeds forproductivity and quality enhancements.

2. Benefits derived as a result of the above R&D :i) Cost effective imported pulps were identified and

introduced in the product finish.ii) Improved product quality of alkaline sized Fine

Printing papers.

42

Particulars of Employees under Section 217 (2A) of the Companies Act, 1956 and forming part of the Directors� Report

Employed throughout the year and in receipt of remuneration aggregating Rs. 12,00,000/- or more.

Ahmad S.M. 47 Exec. V.P., 20,32,738 B.A., M.A. 24 06.03.1980 ANZ Grindlays BankMarketing (ITD) Plc.

Ahmed O. 50 G.M. Product Dev. (ITD) 18,84,331 B.Tech. (Hons.) 28 15.11.1972 TISCO Ltd., Grad. Engineer

Balaji L.N. 39 Corp. Plans Mgr. 12,97,846 B.Com.(Hons.), A.C.A. 16 17.06.1985 Nil

Bandyopadhyay S. 36 Mgr. Investments 13,66,516 B.Com.(Hons.) , 15 17.05.1989 ICI (I) Ltd.,I.C.W.A., A.C.A. Asst. Mgr. Accounts

Banerjea P. 48 Exec. V.P., Funds & 19,06,518 B.Sc., M.Sc., F.C.A., 21 01.10.1982 Shaw Wallace & Co. Ltd.,Planning F.I.C.W.A. Financial Accountant

Banerjee A.R. 44 Mgr. - Finance & 12,31,471 B.A. (Hons.), M.A.(Econ.), M.B.A. 18 15.02.1985 Golden Gate Univ.,Planning (ITD) (U.S.A.) Scheduling & Events Asst.

Basu Asit Kumar 50 V.P. Information Tech. 13,52,745 B.E., M.Tech. 27 12.01.1976 Tata Consultancy Services,Asst. Systems Analyst

Basu Shekhar 49 Exec. V.P. & Corp. 20,00,917 A.C.A., F.C.A. 31 02.01.1978 Whinney Murray & Co., London,Chief Accountant (Eng. & Wales) Audit Asst.

Biswas S. 51 G.M. Marketing (IBD) 12,46,545 B.Com., L.M.E. 30 01.04.1971 Nil

Chand A. 36 District Mgr. (TM) 12,86,824 B.A., M.B.A. 13 01.06.1988 Godfrey Philips (I) Ltd.,(ITD) Mktg. Exec.

Chatterjee B.B. 48 Exec. V. P. & Co. 23,68,024 B.Com.(Hons.), 23 16.05.1983 Wacsgen,Secretary F.C.A., F.C.S., LL.B. Deputy Mgr.

Chatterjee P. 51 Exec. V.P. Internal 19,12,659 B.Com.(Hons.), 29 16.09.1974 MacNeil & Barry Ltd.,Audit F.C.A. Accountant

Dar H. 37 Brand Group Mgr. 12,43,046 B.Com.(Hons.), 14 01.07.1987 Nil(ITD) M.B.A.

Das C.S. 45 SBU Chief Exec. 13,17,820 B.Tech.(Hons.), 21 15.04.1980 Larsen & Toubro Ltd.,(GCB) M.B.A. Trainee

Dasaka S.N.C. 57 G.M. Leaf (ITD) 16,68,845 B.Sc., Dip. In 32 16.02.1981 Mysore Tobacco Co.,Computer Mgmt. Factory Mgr.

Deveshwar Y.C. 54 Chairman 1,37,36,368 B.Tech. (Mech.) 32 11.02.1994 Air India Ltd.,Chairman & M.D.

Ganesh D. 51 Chief Engineer 16,61,034 B.E., D.M.S., 28 19.11.1979 Metal Box (I) Ltd.,(ITD) Memb. Inst. of Foreman

Standards Engrs.

Govil S. 33 Divisional Mgr. 13,39,877 B.Sc., M.B.A. 12 01.06.1989 NilEmp. Relations (ITD)

Grant K.N. 43 Div. Chief Exec. (ITD) 19,89,426 B.A. (Hons.), 22 02.06.1980 DCM Ltd.,M.B.A. Mgmt. Trainee

Gupta P. 44 G.M., Taxation 16,36,774 B.Com.(Hons.), 21 15.02.1989 Hindustan Lever Ltd.,A.C.A., Group Audit Mgr.D.M.A.(I.C.A.)

Jacob R.G. 55 Div. Chief Exec.(TTD) 20,77,455 B.Tech. 34 15.09.1967 Nil

Janardhana Reddy S. 52 V.P. Mktg., R.&D. 16,29,151 B.Sc. 28 27.12.1972 Nil(ILTD)

Jhabak M.K. 44 V.P. Corp. Affairs 13,88,715 B.Com. 22 01.09.1987 ITC Classic Ltd.

Keshava S. 42 Div. Chief 18,09,568 B.Com.(Hons.) 17 03.10.1989 S.A.S. Chemicals Pvt. Ltd.Exec. (LRBD)

Kumar M. 48 V.P. Corporate Affairs 12,98,688 M.Com., LL.B. 20 01.04.1981 Nil

Kumaraswamy H.S. 51 Mgr. Projects (ITD) 12,03,416 B.E., M.E.(Mech.), M.I.E., 28 01.10.1982 Dunlop India Ltd.,Chartered Engineer Sr. Project Engr.India

Lakshminarayanan N. 50 V.P. Finance (IBD) 15,11,502 B.Com.(Hons.), 26 19.06.1978 Coromandel Leather (P) Ltd.,F.C.A. Chief Accounts Officer

Lall U. 50 Exec. V.P. - 19,58,000 B.A.(Hons.) 29 03.01.1972 PARCO, Officer on Spl. DutyTobacco &Regulatory Affairs (ITD)

Mahesh T.P. 45 Mgr., ERP Task 12,17,210 B.Sc. 24 01.12.1981 Miniature Motor Co.,Force (ITD) Sales Rep.

Malhotra B.N. 55 Exec. V.P. Projects 19,17,525 B.Tech., M.Tech., 29 17.03.1975 ITDC, Asst. Engr.P.G. Dip. in Soil Mech.

Mehta R.R. (Dr.) 40 Asst. Solicitor 13,14,776 B.Com.(Hons.), LL.B., LL.M., 16 10.06.1994 LegalLL.M., M.S. (Wis.), Ph.D. Practitioner

Name Age Designation/ Gross Qualifications Experi- Date of Previous Employment/Nature of Duties Remu- ence Commence- Position Held

neration (Years) ment ofRs. Employment

1 2 3 4 5 6 7 8

ANNEXURES TO THE REPORT OF THE DIRECTORSFOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2001

43

Name Age Designation/ Gross Qualifications Experi- Date of Previous Employment/Nature of Duties Remu- ence Commence- Position Held

neration (years) ment ofRs. Employment

1 2 3 4 5 6 7 8

Mukerji A.K. 42 Controller Finance 16,95,015 B.Com.(Hons.), 19 01.11.1982 Gupta Chowdhury & Ghose,& Accounts (ITD) A.C.A. Jr.Officer

Murthy P.S.R. 57 E.H.S. Manager 12,14,952 B.Tech., M.Tech. 33 20.12.1969 Garden Reach Workshop Ltd.,Planning Engr.

Nambiar K.T.R. 50 Services on loan to 13,06,521 B.Sc., A.C.A. 25 15.05.1978 A.F. Ferguson & Co.,Subsidiary Co. Audit Asst.

Naware R. 51 Exec. V.P. 21,73,792 B.Tech., M.M.S. 28 01.07.1974 Otis Elevator Co. (P) Ltd.,Technical (ITD) Mgmt. Trainee

Nayak A. 49 Exec. V. P., Corp. 20,25,913 B.Sc., P.G.D.I.R. 28 14.05.1973 NilHuman Resources

Parasuram R. 42 V.P. Finance & MIS 15,38,765 B.Com.(Hons.), 19 15.09.1982 Nil(ILTD) A.C.A.

Pathak A. 41 V.P. Finance & MIS 16,38,088 B.Com.(Hons.), 18 20.06.1983 Nil(TTD) F.C.A.

Philipose P.S. 50 Services on loan to 17,91,241 B.Sc.(Hons.), M.B.A. 28 16.12.1974 VST Industries Ltd.,Associate Co. G.M. Mktg. & Sales

Prasad N.V.S.S.V. 54 Project Mgr. 13,42,186 M.Tech., F.I.E. 29 19.01.1972 Nil(ILTD)

Puri R. 48 Services on loan to 14,29,360 B.Com.(Hons.), 23 16.01.1979 B.M. Chatrath, Audit Sr.Associate Co. A.C.A.

Puri S. 38 Divisional Mgr. 13,30,467 B.Tech. 16 20.01.1986 TELCO Ltd., TraineeE-Commerce (ITD)

Raghavaiah K.V. 54 G.M., Corporate 16,01,731 B.A., P.G.D.P.M.I.R. 35 01.09.1985 Coromandel Fertilisers Ltd.,Human Resources & L.L. Asst. Manager (Pers & Ind. Relations)

Rai R.K. 38 Senior Trader 15,64,548 B.A.(Mktg.), 18 16.08.1990 Britannia Industries Ltd.,(IBD) P.G.D. in Export Commercial Officer

& Imports

Ramakrishna S. 46 Factory Mgr. (ILTD) 12,38,147 B.E. 22 12.11.1980 Sirpur Silks Ltd.,Maintenance Engr.

Ranganathan R. 53 Exec. V.P., Leaf 14,39,939 B.Com., M.A.I.M.A. 34 12.01.1967 Nil

Rangrass S. 40 G.M. 16,44,791 B.Tech. 19 01.07.1982 NilOperations (ITD)

Rao A.K. 50 V.P. Processing & 15,57,220 B.Tech. 29 15.05.1972 NilTechnical (ILTD)

Rao K. Nageswara 52 Leaf Mgr. (ILTD) 12,93,556 M.A. 27 01.12.1973 Nil

Rao K.S. 58 Div. Chief Exec. (ILTD) 23,18,143 B.Sc.(Hons.) 39 01.07.1967 Sirsilk Ltd., Planning & Dev. Officer

Rao Mangina S. 40 Business Mgr. (IBD) 12,46,658 B.Com.(Hons.), 16 08.06.1989 Banaras House,P.G.Dip. in Exp. Mgmt., Mgr., International Trade Div.M.B.A.

Rao R.A. 58 Exec. V.P., Safety 18,62,455 D.M.I.C.E., 41 01.06.1967 ITC Hotels Ltd.,& Environment A.M.R.S.H. V.P., Tech. & Safety

Rastogi M. (Ms) 33 Div. Mgr. Human 12,48,680 B.A., M.A. 12 01.06.1989 NilResources (LRBD)

Reddy M.D. 56 G.M. Exports (ILTD) 14,34,954 B.Sc., LL.B., 35 10.01.1972 Tungabhadra Industries,LL.M. Processing I.C.

Rehman S.S.H. 57 Director 63,65,180 Graduate, Indian Army 37 21.11.1997 ITC Hotels Ltd., Managing Director

Sarkar A.C. 60 Exec. V.P., 26,74,068 B.A.(Hons.) 41 01.12.1960 Hindustan Steel Ltd.,Indust. Affairs (ITD) Graduate Apprentice

Sarma C.V. 39 Mgr. Treasury 16,39,195 B.Com., 13 03.05.1993 ITC Limited,A.I.C.W.A., Assistant FinanceA.C.A., A.C.S.,P.G.D.M.

Satyanarayana M. 47 Exec. V.P. Finance 22,66,854 B.Sc., F.C.A., 22 03.04.1979 Mysore Paper Mills,& MIS (ITD) A.I.C.W.A., A.C.S. Financial Accountant

Sengupta P. 43 V.P. (Finance) 12,22,213 B.Sc.(Hons.), A.C.A. 19 01.07.1987 Indian Aluminium Co. Ltd.,(PPD) Finance Officer

Sengupta R. 56 Exec. V.P., H.R. (ITD) 18,58,432 B.A., M.A. (Cantb.) 36 21.07.1969 ITC Hotels Ltd., V.P., H.R.D.

Shihn A.S. 44 Services on loan to 14,90,477 B.Com., A.C.A. 19 01.12.1982 Eicher Goodearth Ltd., Jr. Exec.Associate Co.

Shome P.K. 54 Divisional Mgr. 12,24,321 B.E., P.G. Dip. 33 01.10.1974 Ralli Wolf,IT Projects (ITD) in I.E. Jr. Indust. Engr.

Singh A. 56 Director 58,63,553 B.Tech.(Hons.) 33 01.03.1968 Nil

44

Name Age Designation/ Gross Qualifications Experi- Date of Previous Employment/Nature of Duties Remu- ence Commence- Position Held

neration (years) ment ofRs. Employment

1 2 3 4 5 6 7 8

Employed for a part of the year and in receipt of remuneration aggregating Rs. 1,00,000/- or more per month.

Awasthi J.N. 58 Mgr. EHS (ITD) 7,62,427 P.G. Dip. in B. & 36 01.02.1967 Ministry of Defence,I.M., Sr. Scientific OfficerF.I.E.C.E.(I)

Babu J.K. 57 Leaf Mgr., 10,52,124 M.Sc. 34 07.01.1967 NilDevelopment (ILTD)

Babu V.V.R. 46 Divisional Head, 8,10,366 B.Sc. , M.Sc., 23 01.03.1979 Andhra Bank,India Operations M.Phil. Officer Grade II(ISD)

Bakhle V.V. 58 Branch Mgr. (P) 10,76,852 M.I.M.A.R.E., 38 03.01.1975 The Shipping Corpn.(ITD) Chartd. Engr. of India Ltd.,

Ch. Engr. Officer

Balachandran M. 58 Mgr. Industry Affairs 5,15,857 B.Sc., M.Sc., 34 01.06.1972 Larsen & Toubro Ltd.,(ITD) Dip. in S.O.C., Statistician

P.G. Dip. inBus. Mgmt.

Bijlani S.A. 42 Divisional Head, 11,29,810 B.Sc.(Hons.), 18 01.06.1982 NilHuman Resources (ISD) LL.B., M.A.

(P.M. & I.R.)

Bunyan E.E. 56 Asst. Production 2,55,372 Dip. In M.E. 21 15.02.1979 NilMgr. (ITD)

Chary K.R. 57 V.P. (TQM)(PPD) 10,53,722 A.M.I.E. 34 15.02.1974 Metal Box (I) Ltd.,Branch Engr.

Dasaratharaman K. 41 G.M. Brands (ITD) 3,31,019 B.Tech., P.G.D.M. 16 01.06.1984 Nil

Dhruvakrishnan C.T. 48 On Secondment 1,71,105 B.Com.(Hons.) 22 01.08.1974 Nil

Garewal H.S. 37 Divisional Head, 6,32,827 B.Tech., M.B.A. 12 01.06.1988 NilBusinessDevelopment (ISD)

Iyappa K.B. 42 Asst. Solicitor 5,79,041 B.Com., LL.B. 18 01.09.1991 Larsen & Toubro Ltd.,Asst. Legal Officer

Khattar S. 43 G.M. - Internal 5,31,488 B.Com.(Hons.), 19 07.11.1988 NagarjunaAudit F.C.A. Finance Ltd.,

Sr. Mgr. Treasury

Singh K. 36 Branch Mgr. 12,19,566 B.Tech. 15 20.02.1992 Asian Paints (I) Ltd.,(P) (ITD) Plant Engg. Exec.

Singh P.P. (Dr.) 59 Chief Scientist (ITD) 17,77,113 B.Sc., M.Sc., Ph.D. 36 01.01.1980 Atira, Research Associate

Singhi R.K. 36 Deputy Company 12,32,504 B.Com.(Hons.), 16 01.08.1988 Chemcrown (I) Ltd.,Secretary LL.B., F.C.S. Asst. Secretary

Sivakumar S. 40 Div. Chief Exec. (IBD) 25,82,104 B.Sc., P.G.Dip. in 18 18.09.1989 Gujarat Co-op. Oil SeedsRural Mgmt. Growers� Federation Ltd., Mgr. Mktg.

Sridhar R. 42 V.P. HRD & 15,49,039 B.Sc., P.G.Dip. 19 01.06.1982 NilPublic Affairs (ILTD) in P.M. & I.R.

Srinivasan R. 49 Div. Chief Exec. (PPD) 19,66,106 B.Tech. (Hons.), 27 10.09.1974 Nil

Srinivasan Ravi 44 Mgr. Training & 13,28,489 B.Com.(Hons.), 21 01.07.1988 Punjab Agro Industries Corpn. Ltd.,Development P.G.D.P.M. & I.R. Mgr., Manpower Dev.

Sumant B. 37 Branch Mgr. (P) (ITD) 12,46,301 B.E. 15 20.01.1986 Nil

Suresh K.S. 41 Company Solicitor 19,89,586 B.A., B.L., 18 01.09.1990 Chambers of Sri C.S.P.G.D.P.M., I.R & L.W. Venkata Subramaniam, Advocate

Suresh K.N. 48 Chief Blender (ITD) 12,01,648 B.Sc., M.Sc. 26 01.03.1977 Gamon Ferchems, Tech. Trainee

Tandon R. 47 Finance Advisor 17,90,022 B.Sc., A.C.A. 23 01.01.1987 Triveni Handlooms Ltd.,Finance Mgr. & Secy.

Tyagi S. 42 Trade Mktg. Dev. 13,20,117 B.Sc., M.Sc., Dip. 19 01.02.1982 NilMgr. (ITD) in Mktg. Mgmt.

Vaidyanath K. 51 Director 24,01,818 B.Com.(Hons.), 28 16.01.1976 Shriram RefrigerationM.B.A. Industries Ltd., Mgmt. Trainee

Vaidyanathan K.S. 61 Sr. V.P., Corp. 33,01,623 B.Com.(Hons.) 38 08.10.1982 T.V.S. Southern Roadways Ltd.,Affairs Resident Mgr.

Venkatramani S.H. 44 Head, Corp. 15,66,574 B.A., M.A. 18 01.08.1999 Ranbaxy Labs. Ltd.Communications Director - Corp.

Affairs

Verma Sanjay 42 Services on loan to 16,62,970 B.E. 19 01.11.1981 NilSubsidiary Co.

45

Krishnaiah T. 58 Deputy Leaf Mgr. (ITD) 4,55,383 B.A., M.A. 35 19.10.1971 Binny & Co. Ltd.,Asst. Sales

Kundu Prasenjit 36 Branch Engr. (ITD) 4,85,532 B.Tech., M.B.A. 13 01.06.1989 Union Carbide (I) Ltd.,Engineer Proj. & Dev.

Mitra A.K. 49 G.M. Information 6,07,135 B.Ch.E., M.Tech. 24 01.01.1992 Price WaterhouseTechnology (ISD) Associates,

Managing Consultant

Mitter A. 45 Corp. MIS Mgr. 8,61,618 B.E.(Hons.) 21 05.12.1980 Western IndiaIndustries Ltd.,Marketing Executive

Mitter B. 58 Director 92,51,006 B.Sc., F.C.A. 35 15.11.1971 Thornton Baker & Co.(Eng. & Wales), Ltd., U.K.,P.G.D.B.A. Audit Mgr.

Mubayi A. 52 Exec. V.P., Corp. 14,52,631 B.A.(Hons.) 30 01.12.1970 Mahindra & MahindraAffairs Ltd.,

Mgmt. Trainee

Naganand D.P. 51 Exec. V.P., 8,07,179 B.Tech.(Hons.), 30 26.09.1977 G.E.C. Ltd.,Strategic Planning M.B.A. Production Incharge

Narang V.K. 58 V.P. Mktg. (ITD) 11,91,298 B.Tech. (Hons.) 37 01.07.1972 I.B.M. World TradeCorp.,Industrial Engr.

Rajasekhar V.V. 36 Mgr., IT Projects 8,35,940 B.E., M.B.A. 11 01.06.1989 Nil(ITD)

Ray Subrata 54 G.M., T.Q.M. (TTD) 2,66,310 B.E., Dip. In 30 28.03.1994 National ProductivityIndust. Engg. Council, Regional Director

Razdan V.K. 34 H.R. Mgr., E.R.P. 5,36,602 B.Com.(Hons.), 12 01.06.1988 NilTask Force (ITD) P.G.D.P.M.I.R.

Reddy K. P. 56 Div. Quality 2,05,753 M.Sc. 31 01.02.1969 Dept. of Agriculture (A.P.),Assurance Mgr. (ILTD) Asst. Agronomist

Rustagi S.C.* 52 V.P. Corp. EHS 8,25,241 B.Sc., 29 10.02.1983 Shriram Fertilisers &P.G.D.(Engg.) Chemicals,

Mech. Engr.

Syam A.(Mrs.) 58 Exec. V.P., Corp. 7,45,078 M.A. (Cal & 33 14.07.1969 Bengal Chamber ofCommunications London) Commerce,

Div. Secretary

* Reverted to ITC during the year upon completion of secondment.

Abbreviations denote:

IBD - International Business Division

ISD - Information Systems Division

ILTD - Indian Leaf Tobacco Development Division

ITD - India Tobacco Division

LRBD - Lifestyle Retailing Business Division

PPD - Printing & Packaging Division

TTD - Tribeni Tissues Division

SBU - Strategic Business Unit

GCB - Greeting Cards Business

Notes:1. Gross remuneration comprises salary, allowances, medical reimbursement, leave travel assistance, Company's contribution to provident, pension and gratuity funds, monetary

value of other perquisites on the basis of the Income Tax Act and Rules, performance bonus for Wholetime Directors and excludes ex-gratia payment on separation.2. All appointments are/were contractual, other terms and conditions are as per Company's Rules.3. None of the above employees is a relative of any Director of the Company.

On behalf of the Board

A. SINGH DirectorKolkata, 30th May, 2001 K. VAIDYANATH Director

Name Age Designation/ Gross Qualifications Experi- Date of Previous Employment/Nature of Duties Remu- ence Commence- Position Held

neration (years) ment ofRs. Employment

1 2 3 4 5 6 7 8