The passing away of YC Deveshwar, who led ITC for over two decades without owning it, is an important landmark which provides us an opportunity to take a look at one of India’s largest, most successful and widely known corporates.

Traditionally, ITC aroused more than ordinary interest for being one of the two most prominent (the other being Larsen & Toubro) professionally run companies (leaving aside the Tatas, of course). In a country where despite decades of progress towards companies becoming widely held and professionally managed, promoters still call the shots when it comes to the crunch, this remains an issue. At a time when promoters are most reluctant to let go of hugely loss making companies even after they have come under the Insolvency and Bankruptcy Code, the value of professionals calling all the shots in the companies they manage gets highlighted.

Deveshwar’s role in ITC is also historically important because he played a key part in making it a fully Indian company. ITC which began as part of the global conglomerate BAT, faced an attempt by it to fully assert control by acquiring 51 per cent during the 1990s. His ability to access political support and hence the backing of financial institution shareholders became apparent during this battle with BAT.

Another key initiative, which currently defines ITC, is its attempt to be more than just a cigarettes company which has to bear all the adverse image load that goes with the cancer stick. ITC has now broad based itself into a company with interest in food, paper, hospitality, information technology and more. The group’s non-cigarette business now (2018) accounts for nearly half of total turnover.

But when it comes to the bottomline, it is still cigarettes that play a big part. In 2018, profit before tax from cigarettes came to ₹14,128 crore, whereas profits from non-cigarette business came to ₹2,326 crore, that is only 14 per cent of profits from cigarettes.

In comparison, Britannia Industries, which is also extensively into packaged foods, earned a profit before tax (2018) of ₹1,445 crore on a turnover of ₹9,282 crore. While the attempt to kick the dependence on cigarettes is laudable, ITC still has a long way to go before the non-cigarette business can earn a healthy profit.

Moving with times

ITC’s attempt to move with the times, in fact be a bit ahead of it, is illustrated by its innovation of the e-choupal. Nearly two decades ago it started this exercise of using digital technology to help farmers by offering them a way out of total dependence on traditional mandis to sell their produce. The initiative, other than helping in price discovery and creating a scope for transparent trading, also offered education and information to farmers to better their farming techniques.

To keep up with the times, ITC is set to launch the e-choupal 4.0, a mobile application that will act as a platform for agri-business start-ups which can take the e-choupal forward. Once this gets going ITC will stop opening new e-choupals of its own.

Another initiative of ITC which has attracted wide attention is promoting “responsible luxury” in the way ITC hotels are run. It has done this by addressing issues like waste recycling and management and energy conservation. As a result of this eight ITC luxury hotels have won the platinum award of LEED (Leadership in Engineering and Environment Design). ITC Hotels has consequently won the accolade of being the “greenest luxury hotel chain in the world”.

Harvard Business Review has done case studies on the e-choupal and “responsible luxury” projects. Deveshwar, a product of Indian Institute of Technology, Delhi and also a Harvard Business School awardee, led ITC through this entire transformation. He joined it in 1968 and had been with the organisation through his entire working life, except for a four-year period in the early nineties when he became Chairman and Managing Director of Air India.

This was part of the exercise then undertaken by the government to bring professional managers into the public sector, underlining his status as a professional manager. He ended his stint as executive chairman in 2017 and continued as non-executive chairman.

The media has highlighted that during his chairmanship, ITC’s revenue grew by 11 times, shareholder return by a compound annual rate of 23 per cent and rapid rise in market capitalisation made it the fifth most valuable company in the country. It has to be remembered that cigarette sales have played a role in rapid topline growth and market capitalisation is driven by investor confidence that cigarette smokers will find it hard to kick the habit. Thus overall ITC under Deveshwar deserves praise for trying to reduce dependence on cigarettes, and particularly for great ideas like e-choupal and “responsible luxury”. The latter is hugely important at a time when concern over global warming is at a peak.

The writer is a senior journalist

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