ITC chairman Sanjiv Puri has said it is going to shrink its mass market soap and shampoo brand Superia since it has not been able to meet expected performance, while the company is setting up sleep boutiques as part of its hotel business to sell products associated with sleep such as beds, fragrances and pillows which will be further expanded through physical stores and online sales.

The company is also actively looking at expanding exports of FMCG products and the recent approval from the government for its production linked incentive (PLI) application for food processing will further boost this, Puri has said.

These were shared by Puri and ITC’s top management during the company’s first ever institutional investors and financial analysts meeting held virtually on Tuesday.

According to four analysts who were present in the meet, ITC will increase investment into e-commerce, direct to consumer space in FMCG while the cigarette business has recovered rapidly and will gain further in line with overall recovery of the economy. The company’s margins are lower in FMCG currently due to multiple entry into newer categories to rapidly scale it up though it is improving every quarter and will get better.

The company’s cigarette business has recovered robustly in the first half of the fiscal, there is a premiumization of the portfolio backed by innovation and better last mile execution of the assortment, Puri has said.

“Cigarette is just 8% of tobacco consumption. In periods of stability of tax, the legal cigarette industry claws back from illicit and volumes firm up. In the recent past, when taxation went up by 15% the revenue collection from cigarettes grew by 5%. In the period of tax stability, revenue grew by 10% led by volume. We hope the government takes into consideration all these since the industry and farmers were badly impacted also due to the pandemic,” Puri has said.

Puri has said the first sleep boutique has come up in ITC Maurya Hotel in New Delhi. This will be another new revenue stream for the hotel business. He has also said while management contracts at present account for 25% of the company’s total five star rooms, it would move up to 43% in five years.

ITC’s divisional chief executive for the cigarette business Sandeep Kaul has said the company improved its market standing in the cigarette business by 100 basis points in the last 18 months. He said the company has launched over ten new products since the pandemic and the new launches accounts for 10% of revenue.

The company’s chief financial officer Supratim Dutta has said ITC’s FMCG business has an EBITDA margin of 9% in the first half of this fiscal (April-September). He has said some matured brands and power brands have double digit margins, while on an overall level there has been progress on the bottomline in the last 3-4 years.

“While this year we have been able to sustain our FMCG margins despite the challenges of unprecedented commodity inflation, it should get better in the next few years,” Dutta has said.

Dutta has said the company will recoup investment in the medium term through the incentives offered under the PLI scheme. He said the company has doubled exports of FMCG products in the last 2-3 years which it wants to scale up further.

Addressing an analyst query, Dutta has said the company is open to the option of buyback of shares and the board will take the right decision at appropriate time if it creates long term value for shareholders.

“In the last 18-20 months, our focus was on earnings growth and dividend per share. However, we constantly evaluate all options on the table. We have followed the special dividend route in the past, but feedback from investors was that they would prefer a higher amount of ordinary dividend which we implemented in FY21 even when our profit was impacted due to the pandemic. Higher ordinary dividend gives predictability to long term shareholders,” he has said.

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