Kolkata: ITC Ltd is investing in infrastructure to start selling perishable farm products such as fruits and vegetables, chairman Y.C. Deveshwar told shareholders at the company’s annual general meeting in Kolkata on Friday.
Though he didn’t give details, he said multiple projects to build infrastructure are being pursued with a collective outlay of Rs.25,000 crore over the next five years.
At his last meeting with shareholders as the company’s executive chairman, Deveshwar set for his successors an ambitious target of ramping up revenue from the consumer goods segment (other than cigarettes) to Rs.1 trillion by 2030.
After 21 years as chairman, Deveshwar is to step down early next year at the end of his current term. But he will continue as the company’s non-executive chairman for at least three more years.
On Friday, he briefly recounted his journey at the company, starting amid trying circumstances. “A battle for control of the company had ensued amidst a public smear campaign,” Deveshwar said, referring to the tussle in the mid-1990s between ITC’s professional managers and BAT Plc., one of its principal shareholders. “A media trial, on the encouragement of the then representatives of our overseas shareholder, had pronounced the Indian management inept, fraudulent and guilty (even without) any independent investigation.”
The target set by Deveshwar is more than ten times the company’s current revenue from the consumer goods segment. In fiscal year 2016, ITC clocked Rs.9,731 crore in revenue from sale of food and personal care products, and made a pre-tax profit of Rs.70.5 crore from the segment.
Going forward, the foods business is going to be one of the key growth drivers, and ITC is looking to expand product offerings in different ways. According to analysts, within ITC’s consumer goods segment, packaged food is doing better than personal care products.
According to the company’s own presentations, its Aashirvaad range of food products and Sunfeast biscuits are currently grossing Rs.3,000 crore and Rs.2,500 crore, respectively, in annual revenue.
On Friday, Deveshwar said ITC was exploring opportunities in the processed food industry in view of the poor infrastructure for preservation and processing of perishable farm products. Only 10% of India’s farm products, including milk, is processed, according to him.
ITC is “exploring the opportunity to invest in a state-of-the-art cold chain” that will allow it to sell “fresh, frozen and dehydrated” farm products, Deveshwar said. Besides creating value for shareholders, the initiative is aimed at reducing waste and improving realization for farmers as well.
To augment its already profitable foods business, ITC is looking to introduce health and wellness products. Deveshwar said ITC plans to cultivate medicinal and aromatic plants were rapidly progressing towards creating additional revenue streams for the company.
Alongside, ITC is also planning to launch a new range of high-quality spices, for which it is working closely with farmers. These are to be tested for about 450 contaminants and are to comply with European safety standards, which are far more stringent than the Indian ones, Deveshwar said.
The foods business is certainly going to be a key growth driver, according to Gautam Duggad, head of research (institutional equities) at Motilal Oswal Securities Ltd. The company’s key strengths are its dependable sourcing channel for farm products, and distribution network, Duggad said, adding that ITC has also managed to build over the past 10 years strong brands such as Aashirvaad.