ITC plans to drive asset right growth in hospitality sector business

ITC Limited plans to gradually shift towards an asset light model in the hospitality sector business as it takes to further expansion.

The diversified FMCG company—which currently has four major business divisions of food and agri products, hospitality, paper and paper boards and cigarettes—is evaluating the prospect of making a foray into healthcare business, which is subject to outcome of a major study commissioned by the company.

Interacting with newspersons here today, Sanjiv Puri, Managing Director of ITC, said, “Currently our business of hospitality is handled with our own properties and managed properties in the ratio of 40:60. We are looking at driving this down to 30:70.”

Nakul Anand, CEO of Hotels business, said, “We now manage a portfolio of over 9,500 rooms across 107 properties and expect to add 24 more properties over the next five years to the portfolio.” ITC is set to add ITC Royal Bengal and ITC Narmada next year and has a strong pipeline of projects for commissioning, including those to be taken up for management.

Referring to the ₹775 crore ITC Kohenur property, which was formally inaugurated here today, Anand said that the project conforms to LEED Platinum rating and reflects the commitment of ITC towards environment. The company had invested ₹135 crore in acquiring the site for hotel in the year 2007.

Agri-focus

Puri said ITC has planned a total investment of ₹25,000 crore over the next five years, with a significant part—in the range of ₹10,000 crore to ₹12,000 crore—to be invested in the agri-business, which has potential to be a major business driver.

Describing agriculture as “Business of future in India,” Puri said, “We have signed up with the Union Food Processing Ministry and have indicated at an investment outlay of about ₹10,000 crore for setting up about 20 processing units in the country.”

Feasibility study

“The company’s foray into the healthcare industry will be based on a final report on the feasibility of our entry. Currently, an elaborate study is underway to assess the potential and prospect. Based on the outcomes, we will look into entry into this segment,” Puri said.

While highlighting the business transformation that ITC is witness to over the past two decades, earlier, YC Deveshwar, Chairman of ITC, said, “Eighty per cent of capital expenditure is non cigarette business and 90 per cent of human resources have been deployed on non-cigarette business.”

Puri said that cigarette sector has seen a number of changes and there has been steep increase in taxation and this has resulted in unintended consequence that have fuelled smuggling. As per a FICCI report this has accounted for a loss of ₹9,000 crore in revenues.

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