itc limited one of india s most valuable corporations

itc limited one of india’s most valuable corporations 1

Performance Track Record- Snapshot Rs crores Rs. 1 crore= Rs. 10 million 2

Headline Financials: 2007/08 Rs. Crs. GTO 21356 á 10. 7 NTO 13948 á 14. 7 PBT 4572 á 16. 4 PAT 3120 á 15. 6 12817 á 15. 4 Balance Sheet Size Non Cigarettes Business 52. 4% of NTO (51. 5% LY) 3

ITC - Key Financials – 07/08 4

Segment Revenues & Results: FY 07/08 5

Segment Capital Employed: FY 07/08 6

ITC - Key Financials – Q 2 08/09 7

ITC - Key Financials – H 1 08/09 8

Q 2 Segment Revenue

Q 2 Segment Results

H 1 Segment Revenue

H 1 Segment Results

Segment Capital Employed

ITC One of India’s most valuable corporations Ø One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004 l Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are rated as the ‘most attractive companies for investors’ Ø Only Indian FMCG Company to feature in Forbes 2000 List l A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value Ø Among top in : l Sustained value creation (BT-Stern Stewart survey) l Operating profits l Cash Profits Ø Ranks No. 5 among Indian listed Private Sector Companies by market cap. (@ 30/09/08) l No. 1 in FMCG Sector Ø Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey 2006) 14

Awards & Accolades (1) • ‘ITC received the FICCI Outstanding Vision Corporate Triple Impact Award 2007 for invaluable contribution to the triple bottom line benchmarks of building economic, social and natural capital for the nation. • Sustainability Leadership Award 2007 conferred on Chairman Y C Deveshwar by the Sustainability Forum, Zurich and SAM/SPG at the International Sustainability Leadership Symposium • Business Today Award for the Best Managed Company – Retail and Consumer Products, has been conferred on ITC in recognition of its outstanding initiatives in the consumer products segment. • Asian CSR Award 2007 for Environmental Excellence given by the Asian Institute of Management • Ryutaro Hashimoto Incentive Prize 2007 for Environment & Development from the Asia Pacific Forum • In the first of its kind S&P Environmental, Social and Corporate Governance (ESG) ratings released recently, ITC ranked second among top Indian companies. • The Company has won the Corporate Social Responsibility Crown Award for Water Practices from UNESCO and Water Digest for its distinguished work carried out in the water sector in India. • NDTV Profit Business Leadership Award for being the Best Food Company of 2007. 15

Accolades & Awards (2) • e-Choupal initiative wins global recognition: – Stockholm Challenge Award 2006 in the Economic Development category which recognises initiatives that leverage Information Technology to improve living conditions and foster economic growth in all parts of the world. – First Indian Company to win the Development Gateway Award 2005 for the most exemplary contribution in the field of Information & Communication Technologies (ICT) for development during the last 10 years – World Business Award 2004: International Chamber of Commerce & the HRH Prince of Wales & International Business forum – Harvard University case study – Recognised in World Development Report 2008 published by World Bank – Applauded by President of India Dr APJ Kalam in his “special address during the national symposium to commemorate 60 th year of independence” 16

ITC - Business Portfolio itc fmcg: cigarettes other fmcg hotels agri business leaf tobacco agri commodities paperboar d paper & packaging 17

Strategy of Organisation to manage diversity of Portfolio Formal 3 -tiered governance structure: Board of Directors : Comprising executive (4) and non-executive directors (11) Strategic supervision Corporate Management Committee : Comprising executive directors and senior managers Strategic management Divisional Chief Executive & Divisional Management Committee : Executive management 18

Corporate Strategies Ø Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities Ø Pursue World class competitiveness in all businesses and across the entire value chain Ø Best-in-class in terms of: Internal Vitality Market Standing Profitability Ø Strategy of Organisation and Governance processes geared to manage multiple businesses Ø Blend core competencies and leverage ITC umbrella strengths to create new avenues of growth 19

FMCG - Cigarettes 20

ITC’s Cigarettes Business Ø Market leadership Ø Powerful brands across segments Ø Leadership in all segments - geographic & price Ø Extensive FMCG distribution network Direct servicing of 1, 000 markets & 2 million retail outlets Ø World-class state-of-the-art technology and products Investment - Rs. 10 billion in six years Ø Exciting long term growth potential 21

Cigarettes: Growth potential Ø Cigarettes account for only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation Cigarettes (15% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector Ø Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes Ø Biri : Cigarettes ratio = 10 : 1 Ø Annual per capita adult cigarette consumption in India is appx. one tenth world average : 141 Ø Future growth depends on relative rates of growth of per capita income and moderation in taxes 22

Source : Based on Cigarette consumption data(2003) from “World Cigarettes”, ERC Group plc. 23

Hotels & Tourism 24

Hotels & Tourism industry Ø Foreign arrivals into India: 5 million appx. Vs. 35 million in China • The two nations were on par 2 decades ago at 750, 000 arrivals Ø Today, Beijing alone has as many hotel rooms as the whole of India Ø India’s luxury rooms availability lower than even smaller East Asian countries Source: Compendium of Tourism statistics, WTO 25

Indian hotel industry Ø Current supply – appx. 110, 000 rooms of which 5 Star category accounts for appx. 30% Ø India needs an additional 50, 000 rooms in the next 2/3 years to service projected tourist arrivals Ø Present mismatch between supply and demand expected to persist over the short term Ø As infrastructure for trade & commerce improves - growing potential for leisure tourism 26

Economic impact of the Travel & Tourism Sector Full potential yet to be harnessed in the Indian context 27

ITC’s Hotel Business Ø ITC-Welcomgroup : a leading hotel chain in India • Established presence in key business locations • Over 6000 rooms under 4 distinct brands Ø Capacity expansion underway at Bangalore and Chennai; plans for other locations also being progressed. Positions on land taken at other locations such as Hyderabad and Ahmedabad Ø Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @ 45%) amongst the 3 leading chains Ø Leverages unique service proposition and international alliance with Starwood Hotels & Resorts • ‘Luxury Collection’ / ‘Sheraton’ 28

ITC’s Hotel Business • Manages 24 full service mid-market properties (1700 + rooms ) under the Fortune Hotels brand – 100% subsidiary company : Fortune Park Hotels Ltd. • Also operates 60 properties under the ‘Welcom. Heritage’ brand in 19 states – Maharaja Heritage Resorts Ltd. 50% JV with Marudhar Hotels (P) Ltd. • Business growth expected to be impacted by financial meltdown 29

Paperboards, Paper & Packaging 30

Indian paperboard market Ø Annual paperboard demand – appx. 1. 1 million tonnes Ø Fragmented capacity & obsolete technology Ø Low per capita usage at around 6 kgs p. a. (world average – over 50 kgs p. a. ) Ø Indian paperboard market growing at 10% p. a. Ø Value Added Coated board - the fastest growing segment (20% p. a. ) in India driven by the growing sophistication of the consumer Ø Value added paper market growing at 10%-19% 31

Paperboard Demand Projections - Asia Ø Asian region demand (excluding Japan) growing by 0. 5 million tonnes per annum Ø Significant export opportunities for high quality Indian manufacturers • ITC paperboards exports - Rs. 2 billion appx. 32

ITC’s Paperboards Business Ø Market leader in growth segment - value added coated boards Ø World-class contemporary technology • Ozone bleached Pulp Mill operations commenced – only one of its kind in India meeting world-class environmental standards Ø Internationally competitive quality and cost Ø Social farm forestry in mill command area to improve access to cost effective fibre & to attain self-sufficiency • Biotech research based high yielding Clones – effectiveness tested in nearly 84, 000 hectares Ø Fully integrated operations with in-house pulping capacity at appx. 2. 20 lac MT • Expansion completed; source of sustainable competitive advantage 33

ITC’s Paperboards & Packaging businesses Ø Capacity expansion projects installed • 120000 TPA Pulp Mill – commissioning commenced; being stabilised • 100000 TPA paper machine (to support Stationery business growth plans) – production commenced. under stabilization stage (normal stabilization period is 6 -9 months) Ø Results impacted by sharp increases in input prices Ø ITC’s packaging SBU -India’s largest converter of paperboard into high quality printed packaging • Leading supplier to Indian FMCG and Consumer Electronic segments • Provides superior packaging solutions to the cigarettes and new FMCG businesses 34

Agri Businesses - Leaf Tobacco - Agri Commodities 35

Indian Leaf Tobacco industry Ø India – the third largest producer of tobacco Ø However, India’s share is only 7% in world tobacco trade Ø Upgradation of tobacco consumption from other formats to cigarettes will enable: • growing domestic base • larger opportunities for value added exports Ø ITC – India’s largest buyer, processor, consumer & exporter of cigarette tobaccos. Ø Captured significant incremental volumes as well as margins Ø Pioneering cultivation of flavourful Flue-cured, superior Burley and Oriental tobaccos in India 36

ITC’s Agri Commodity Business Ø Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Coffee etc. Ø Unique CRM programme in commodity exports Ø Leveraging IT for the transformational ‘e-Choupal’ initiative Rural India’s largest Internet-based intervention Over 38000 villages linked through around 6400 e-Choupals servicing over 3. 5 million farmers Ø Distinctive sourcing capability for ITC’s Foods business 37

e-choupal: Strategic Thrust Ø Procurement: cost & quality optimisation • strategic sourcing support to the Foods business (support creation of verticals in wheat, soya, corn, potato etc. ) • cost-effective sourcing for exports/domestic external business Ø Rural Distribution • ‘last mile connectivity’: 100 partnering companies • diverse range of goods/services : FMCG, consumer durables, agri-inputs, paid extension services etc. Ø Financial Services • insurance (focus: weather) • credit (focus: Kisan credit card scheme) Ø Rural retail • 23 Choupal Saagars operational • Rapid expansion planned in identified rural markets and Tier 2, 3 & 4 towns 38

Future Growth & Value Capture New FMCG Initiatives 39

Strategic Rationale Ø Blend multiple competencies residing within the ITC Group to create new avenues of growth Ø Best fit between internal capabilities and emerging market opportunities Ø Each segment enhances the depth and width of ITC’s FMCG distribution capability Ø Business model retains critical elements of value chains within ITC with other elements outsourced • Contributing to the competitiveness of SMEs 40

FMCG Business Initiatives Branded Packaged Foods Ø Leverages: Unique Agri sourcing skills ITC Welcomgroup’s specialist cuisine & bakery knowledge FMCG distribution synergies ITC R&D Centre, Bangalore 5 chosen categories: Staples – Aashirvaad Atta, Salt, Spices Biscuits – Sunfeast Salty Snacks – Potato chips, Bridge products : Bingo! Confectionery – Candyman, Mint-o Ready to Eat – Kitchens of India (Ready to Eat, Conserves & Chutneys and Frozen Foods), Aashirvaad (Instant Mixes & Cooking Pastes, Sunfeast Pasta 41

FMCG Business Initiatives Branded Packaged Foods • Aashirvaad Atta: – Current market leader amongst national branded players; leverages the echoupal network for cost-quality optimisation and region specific offerings • Sunfeast Biscuits: – Differentiated & innovative products; continues to build consumer franchise; distributed & outsourced supply chain being ramped up • Number of innovative products in the pipeline leveraging the capabilities of the ITC R&D Centre 42

FMCG Business Initiatives Lifestyle Retailing Ø Leverages trade mark and services expertise of hotels Ø Relaxed wear market growth > 25% p. a Ø Upmarket product range available in exclusive Wills Lifestyle stores (> 50) and multi-branded outlets/ large format retail stores across the country Ø Product and brand range being expanded • Designer association with leading Indian designers – ‘Wills Signature’ line • Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’ relaxed wear and ‘Wills Clublife’ evening wear • Strong distribution network in place for the mid-market brand ‘John Players’ • Trendy women’s wear brand ‘Miss Players’ • Wills Lifestyle rated amongst the top 5 Luxury brands in the country in a Global Luxury Survey conducted by TIME Magazine 43

FMCG Business Initiatives Education & Stationery Products Business Ø Leverages print and paper know-how. Forward linkages with new paper capacity (already commissioned). Ø An emerging (currently Rs 9000 cr stationery) market in India - growth driven by increasing cross-cultural exposure Ø Mostly commoditized. Offers opportunity for branding Ø Robust distribution network in place to scale up the Stationery business significantly • ‘Classmate’ brand already the most widely distributed brand in India • Scholastic products launched Ø Serves to expand the width of ITC’s FMCG distribution capability with negligible incremental investment Ø Comprehensive portfolio approach with new variant/category launches 44

FMCG Business Initiatives Safety Matches Ø Current industry consumer spend estimated at Rs. 1250 crores p. a. for 24 billion match boxes Ø Fragmented supply base arising from policy of reservation for small scale industry Ø Mass market moving from. 50 p price point to Re 1. 00 Ø ITC markets its brands with value added products across each price point • Support SMEs with complementary marketing strengths Ø ‘AIM’ – India’s largest selling Safety Matches brand Ø Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as at 31/03/08: 96. 82%) • Key brands: Homelites, Ship, Cheetah Fight etc. 45

FMCG Business Initiatives Incense sticks (Agarbattis) Ø Current industry consumer spend estimated at over Rs. 900 crores p. a. Ø Fragmented supply base arising from policy of reservation for small scale industry Ø ITC markets its brands with value added products across each price point Ø Support cottage sector with complementary marketing strengths Ø ‘Mangaldeep’ : the only National brand in the country 46

FMCG Business Initiatives Personal Care Products Ø Current industry consumer spend estimated at over Rs. 21000 crores p. a. (growing at 12%) Ø Brand wise Highlights – Essenza Di Wills (Super Premium) – Portfolio’s premium imagery augmented with launch of ‘Aqua’ for men in fine fragrances and grooming range – Fiama Di Wills (Premium) – Launched with Shampoos/Soaps/Shower Gels/Conditioners – Vivel Di Wills and Vivel (Mid) – Soaps and Shampoos – Superia (Popular) – Soaps and Shampoos Ø Products well received in the market, rapidly gaining customer acceptance Ø Supported by investments in brands – celebrity endorsements 47

FMCG business initiatives……. Ø Concurrently, ITC’s IT subsidiary assists in web-enabling business processes CRM initiatives ERP transaction processing systems SCM including the e-choupal capability SMIS system for efficient supply chain management of FMCG products Ø … hosted on ITC’s Virtual Private Network Ø ITC awarded the best IT user in FMCG category by Nasscom 48

Positioning of ITC A leading FMCG player in India vpn providing scm, erp & crm capability F e-choupal rural two-way A fulfillment capability R M Cigarette Trade Marketing capability E R expanded fmcg distribution capability S branded foods lifestyle retailing matches & education agarbatti stationery s M A R K E T S Personal care Products a basis for strategic partnerships with other fmcg brand owners 49

Forward-looking Statements statements in this presentation describing the company’s objectives, future prospects, estimates, expectations etc. may be “forward looking statements” within the meaning of applicable securities laws and regulations. investors are cautioned that “forward looking statements” are based on certain assumptions of future events over which the company exercises no control. therefore there can be no guarantee as to their accuracy. these statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those that may be projected or implied by these forward looking statements. such risks and uncertainties include, but are not limited to: growth, competition, acquisitions, domestic and international economic conditions affecting demand, supply and price conditions in the various businesses in the company’s portfolio, changes in government regulations, tax regimes and other 50