And market grapevine has it that the company will celebrate the day with a special dividend to its shareholders.
The company was incorporated on that date in 1910. At the time it functioned from a rented office in Radha Bazar, just off Dalhousie Sqaure, the city’s main business district then and now. In 1928 it moved to Virginia House at 37, Chowringhree, in what was then a predominantly white area.
Much has changed in these 100 years. Chowringhee, the 2 km long boulevard on the eastern edge of the vast expanse of the Maidan, is a bit run down. Once home to some of the most famous British owned and managed companies, no white man owns or runs anything on the stretch now.
A few buildings down either side of Virginia House, the famous paints and chemicals company, ICI, and the medicine company, Reckitt & Colman, long ago lost their British identity and name.
ITC itself has metamorphosed in many ways, the least of which is the multiple changes in nomenclature. What began and stayed for long as only a cigarette maker has turned into a conglomerate offering a smorgasbord of products and services, ranging from hospitality to toiletry to apparel to food. Of course, cigarettes remain a big but gradually shrinking part of its overall business.
Today, ITC has a market cap of over Rs 100,000 crore and ended 2008-09 with a turnover of Rs 15,582 crore. It employs over 26,000 people at more than 60 locations across India and has 338,000 shareholders.
It is but one of scores of India’s centurion companies. Among others, Andrew Yule is alive and kicking even at 130 years of age. Then there are Allahabad Bank, Walchandnagar Industries, Tata Steel, Bank of Baroda, Indian Bank, Alembic, Corporation Bank, Canara Bank, Bank of India, Shalimar Paints, Indian Hotels, Spencer & Company, Century Textiles, Punjab National Bank and Bombay Dyeing. Many companies were originally British and became Indian through the fifties, sixties and seventies. There are many that assumed Indian names after takeovers by home-grown business houses.
Originally incorporated as Imperial Tobacco Company of India, ITC too has undergone a few name changes. As its ownership became largely Indian, it became India Tobacco Company in 1970. Then, keeping in fashion of the day, it abbreviated itself to I.T.C in 1974. That was in recognition of its changing business portfolio, which by then included hotels. Later it was to add information technology, packaging, paperboards & specialty papers, agricultural business, foods, lifestyle retailing, education & stationery products, personal care and clothing.
And, further, as if to signify that there was to be no pause in its surge, the company removed the full stops in its name and became, simply, ITC Ltd on September 18, 2001.
Analysts are expecting a special dividend from ITC in its centenary year. In ITC’s 100th year, Morgan Stanley sees good tidings coming from the conglomerate. In a note it says it expects ITC to have Rs 3,500 crore in surplus cash as at the end of the last month. With capital expenditure likely to be lower in the next two years than earlier estimates, the note adds, “We think ITC will surprise investors with a centennial year dividend. We have increased our estimate of the dividend payout ratio from 55 per cent to 67 per cent, implying a dividend yield of 2.2 per cent for the financial year 2010.
ITC is mum about the dividend buzz. Asked, an ITC spokesperson said, “It is the analysts’ view and not based on any management communications from our side. We do not comment on analyst reports.”
The Morgan Stanley note continues: “We believe that ITC, like P&G, will be a formidable new player in personal products. The management’s commitment to this segment remains strong, and the company is likely to enter skin care in the next two quarters. ITC has gained shares of 100 basis points in soaps and 20 basis points in shampoos since October, with a significantly higher investment. Due to better profitability in food categories, however, we expect the company’s non-tobacco FMCG losses to fall from Rs 360 crore to Rs 270 crore in the current year.”
Very few Indian companies have reinvented themselves as ITC has. Realising long ago that cigarette cannot be its bread and butter for long, given the rising campaign against smoking, the company first moved into hotels and then into the FMCG business – both have brought handsome rewards. Even in organisational matters, it has brought about vast changes. For example, its divisional CEOs run their businesses almost independently; yet there’s a high level of synergy across those businesses.
Much of the change has come about under the stewardship of chairman YC Deveshwar, who has adopted a three-pronged strategy to continue growth in the years to come. As ITC officials say the strategy is to “emerge as a sustainable company with national priorities and further Indianise capital and resources”.
The company will increasingly focus on volume-based businesses and areas with the highest scope for direct interface with customers. It will strive to turn as many brands as possible into market leaders, officials in the know say.
“It is the right move at the right time,” says Samir Ghosh, former vice-chairman of ITC. Ghosh spent nearly four decades in ITC and its parent British American Tobacco (BAT) in the UK and Hong Kong and set up ITC’s corporate planning & diversification division. He told Financial Chronicle, “The company could survive and grow for so long simply because of its professional management and thrust on training and retraining of employees. One of every seven employees is sent for extensive training and, if need be, re-training. As the company reinvents itself, its employees are also re-trained.”
He said the company’s transformation that started in 1968 was not easy or smooth. “ITC’s overseas shareholders were only interested in the tobacco business. We had to convince them so that they stay invested in the company. Dealing with the government on various approval-related issues was not easy either,” he said.
The former vice-chairman and director of corporate strategies of ITC said the recent strategies had been working wonders for the company. “We have all along stayed away from very high tech areas. Over the years, the company has concentrated on -- and should continue to concentrate on -- socially relevant areas, where there are volumes and higher customer contacts like hotel, paper, etc, and areas where the company can leverage its proverbial distribution network,” Ghosh said.
ITC has had legendary people in the chairman’s post – such as AN Haksar and JN Sapru -- in the past. In the mid-nineties it fought off takeover attempts by the foreign partner, BAT.
For six decades after its inception, the focus was solely on cigarettes and leaf tobacco business; the seventies saw the beginnings of a corporate transformation.
According to its website, the company’s diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on distribution reach, brand-building, effective supply chain management and service skills in the hotel business.
The packaging & printing business was set up in 1925 as a strategic backward integration for the cigarettes business. The hotel business was started in 1975 with the acquisition of a hotel in Chennai. The property was later rechristened ITC-Welcomgroup Hotel Chola. Today, the company has over 100 owned and managed properties spread across India.
In 1979 ITC entered the paperboards business by promoting ITC Bhadrachalam Paperboards, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with ITC in March 2002 and became a division. In November the same year this division merged with the company's Tribeni Tissues division to form the paperboards & specialty papers division.
In 1990, leveraging its sourcing competency, ITC set up the agricultural business division for export of commodities. The division is today one of India’s largest exporters. Ten years later, it started what was then unique and by now widely acknowledged e-choupal initiative with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over four million farmers.
Also in 2000 ITC forayed into the greeting, gifting and stationery product business with the launch of the ‘Expressions’ range of greeting cards. A line of premium range of notebooks under the Paperkraft brand was launched in 2002. A year later, it launched the Classmate brand of notebooks to reach a wider body of students. It is now India’s biggest notebook brand which includes school bags. Between 2007 and last year, it launched children’s books, geometry boxes, pens and pencils too.
Lifestyle retailing was embraced in 2000 with the Wills Sport range for men and women. Within two years it widened its portfolio with the men's wear brand, John Players.
The information technology business was turned into a wholly owned subsidiary, ITC Infotech India, in 2000.
ITC stepped into the foods business in 2001 with a range of ready-to-eat Indian gourmet dishes under the Kitchens of India brand. Then came the confectionery and staples segments with Mint-O and Candyman and Aashirvaad atta (wheat flour). Sunfeast biscuits followed quickly.
The next move was a logical extension of the food business. Bingo, the snack brand, came in 2007. In eight years, the foods business has grown significantly, with over 200 differentiated products under six distinctive brands.
Among other products launched in the past eight years are safety matches and agarbattis, the latter in partnership with the cottage sector.
In toiletry, ITC’s Fiama Di Wills, a premium range of shampoos, shower gels and soaps came in quick succession in the last four months of 2007. Around the same time, the mass-market and shampoos were introduced. The higher-end Vivel de Wills and Vivel range of soaps and shampoos came in 2008.
(With inputs from Amit Mudgill)