The Hindu Business Line : ITC Q1 net rises 20%

Higher earnings: The Chairman of ITC Ltd. Mr Y.C. Deveshwar, delivering a speech at the 96th Annual General Meeting of the company in Kolkata on Friday. For the quarter ended June 30, 2007, ITC posted a 20 per cent rise in profit after tax at Rs 783 crore, mainly driven by non-cigarette business. - A. Roy Chowdhury

Our Bureau

Kolkata, July 27

ITC Ltd, for the quarter ended June 30, 2007, has recorded a 20 per cent growth in profit after tax at Rs 783 crore, up from Rs 652 crore in the corresponding quarter of 2006-07. Net sales for the quarter under review at Rs 3,325 crore was up 16.7 per cent.

The first quarter pre-tax profit at Rs 1,129 crore (Rs 967 crore) has increased by 16.7 per cent. EPS is at Rs 2.08. Gross income, comprising segment income and other income, has increased to Rs 5,280 crore (Rs 4,719 crore). Provision for taxation (including prior year adjustments) was at Rs 346 crore (Rs 314.87 crore). Addressing shareholders at the company’s 96th annual general meeting on Friday, Mr Y.C. Deveshwar, Chairman of the company, said the first quarter growth in both net turnover and PAT was driven by the non-cigarette business, which grew by 18 per cent. He said the key growth drivers have been the continued scale-up of the foods business, higher agri business revenues and a healthy performance by the hotels business.

Concern over ITC scrip

Responding to shareholders’ queries on the perceived uncertainty among market investors hampering the rapid appreciation of the ITC scrip, Mr Deveshwar said the cause for concern still remains the severe taxation and regulatory milieu for cigarettes in India, the consumption of which, among tobacco products, was still low.

During the quarter, VAT on cigarettes at the rate of 12.5 per cent became effective in most States, and in UP, a trade tax of 33.5 per cent (inclusive of Development Cess) was levied on cigarettes. The imposts were in addition to the increase in excise duties on cigarettes in excess of 6 per cent in the Union Budget for 2007-08.

High tax rates

According to the company statement announcing the first quarter results, such high rate of taxes on cigarettes will only drive consumers to switch to cheaper forms of tobacco, resulting in lower revenue collections from the sector.

Rs 8,000 cr in hotels

Explaining the key strategy to further grow the FMCG businesses through a greenfield approach and brand-building, especially in businesses like Foods and Hotels, Mr Deveshwar, told newspersons here on Friday that the company intended to build three deluxe hotels in Bangalore, one in Chennai on Anna Salai (slated to emerge as the largest luxury class hotel in the country when completed), and one in Ahmedabad.

Addressing a news conference after the board meeting of the company, Mr Deveshwar said the company was looking at hotel projects in all three categories of super-premium, premium and mid-segment, and an investment of Rs 8,000 crore was being envisaged for these new projects over a 5-year time-frame.

Describing land and real estate as one of the key challenges that need to be overcome for any greenfield project, he said that land for the above hotel projects were already available with the company.

Admitting that land acquisition was still a problem in many parts of the country, he said a major road-block for the proposed Rs 14,000-crore investment by the company (cleared by the board) over a 7-year time-frame was the various mandatory clearances and land availability.

He said ITC was not keen to enter modern retail in the mid segment (shopping malls) now, as in the opinion of the company the real estate market was still not reasonable. He said the company was already present in the top end premium and lower end (rural malls) of the retail spectrum.

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