ITC Ltd, which is looking at a margin expansion of around 100 basis points each year, expects to achieve a double-digit EBITDA in FMCG business in the next one-to-two years. However, inflation needs to be monitored, said Sanjiv Puri, Chairman, ITC.

The company’s non-cigarette FMCG businesses recorded nine per cent growth in segment revenue at ₹15,994 crore and EBITDA grew by 10 per cent to around ₹1,449 crore with margins being sustained at 9.1 per cent in 2021-22, according to the latest annual report (2021-22). The company’s overall EBITDA during FY22 increased by 22 per cent to ₹18,934 crore.

According to Puri, though there are signs of some level of moderation in inflation, the situation is fairly dynamic and needs to be monitored. While the company is looking at a 100 basis point margin expansion per year, there is short term stress.

“Last year we expanded only by 10 basis points because of unprecedented inflation but then we have to look at it in the context of what has happened to the industry. We were actually able to marginally expand while that’s not been the trend generally. But this could just be a short-term challenge. Certainly the aspiration is for 100 basis points every year. The EBITDA is already at 9 per cent and once the situation normalises it takes about a year to get to a double-digit EBITDA and then beyond that. But we have to wait for inflation to ebb,” Puri said at a virtual press conference on Thursday.

While there has been some “cooling off” of commodity prices, it may be really difficult to predict how things will play out. Inflation is likely to remain at elevated levels as compared to earlier.

“There is a bit on supply side challenges...Energy prices still remain elevated. My sense is that while there will be some moderation as the signs show, for some time, the inflation will remain at an elevated level as compared to what was in the past,” he said.

ITC, which had to hike price of some of its products to ease pressure on its margins, would look to pass on the benefits to consumers as inputs costs moderate.

Growth plans

ITC, Puri said, would focus on building some of its core brands to adjacencies and build certain categories of the future for a bigger play in the consumer goods market.

ITC will also stress on growing its portfolio of naturals and healthcare products which it believes are categories of the future. It includes natural products like neem-based cleaners, frozen snacks, fortifying health products, new lactose-free variants of fresh dairy, and others.

“These are categories that will become big in future and this is what we are investing and scaling up,” he said.

On overall demand conditions, Puri said while demand was favourable for agriculture, hotels, and paperboards businesses, there were short-term concerns around the fast-moving consumer goods categories.

The company plans to roll out more products in laminates and moulded fibre taking advantage of the recent market opportunity which has opened up from the ban on low quality plastic use.

ITC MAARS

To power next generation agriculture, ITC has launched ITCMAARS (Meta Market for Advanced Agricultural Services) to bring in the benefits of digital technologies to farmers. ITCMAARS has been launched in seven States with over 40,000 farmers grouped in close to 200 FPOs.

The digital platform provides farmers with AI/ML driven value-added personalised and hyperlocal crop advisories. It also makes available allied services such as pre-approved loans and over time will also provide insurance, amongst others, he said. Moving forward, it plans to touch 4,000 FPOs and close to 10 million farmers through the app.

“The newly launched superapp ITCMAARS is designed to provide maximum support to marginal farmers at their doorsteps, to give them the benefits of the best in technology and access to markets. For me, ITC MAARS will be a success when it makes a meaningful contribution to multiplying farmer incomes and making India’s agri value chains competitive,” he said.

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