Directors Report of ITC Ltd.

Mar 31, 2025

Global growth slowed down from 3.5% in 2023 to 3.3%¹
in 2024 and remained appx. 40 bps below long-term trend
rate ²Â Amongst Advanced Economies which grew at 1.8%
(Vs. 1.7% in 2023), uptick in EU (0.9% in 2024 Vs. 0.4%
in 2023) was offset by a relatively slower pace of growth in
US & Japan. Emerging Markets & Developing Economies
grew at a subdued rate of 4.3% (Vs. 4.7% in 2023), largely
due to structural weakness in China. Rising geopolitical
tensions, evolving global trade dynamics and extreme
weather events have rendered the global macroeconomic
environment highly uncertain and volatile.

Aggregate global economic growth, as per recent IMF
estimates, is expected to decelerate sharply by 50 bps
to 2.8% in 2025. Advanced Economies are expected
to grow at a slower pace of 1.4% with US GDP growth
projected to decelerate by 100 bps to 1.8% in 2025.
Growth in Emerging Markets and Developing Economies
is estimated to decelerate by 60 bps to 3.7% in 2025.

India continues to remain the fastest growing large
economy in the world - a relatively bright spot amidst the
challenging global operating environment. The pace of
growth, however, moderated from 9.2% in FY 2023-24
to 6.5% in FY 2024-25. While headline inflation (CPI)
remained within the RBI's target range at 4.6%, food
inflation witnessed a sharp uptick (FY 2024-25: 7.3% YoY).
The impact of inflationary pressures on household savings
weighed on consumption expenditure, particularly in urban
markets; however, demand in rural markets was relatively
resilient. The weakness in consumption was reflected,
inter alia, in the muted volume growth of the FMCG sector.

While growth in Industry witnessed deceleration
at 5.6% (Vs. 10.8% in FY 2023-24), Services sector grew
at 7.3% and the Agri sector witnessed an uptick
at 4.6% (Vs. 2.7% in FY 2023-24).

India's macro-economic variables are expected to
remain stable in the year ahead, with GDP growth for
FY 2025-26 expected to be appx. 6.5%. Consumption
expenditure is expected to pick up progressively led by
continued recovery in rural demand backed by a good
monsoon, along with improvement in urban demand
as inflation stabilises and tax cuts announced in the
Union Budget boost disposable incomes. The cumulative
impact of pick-up in capex in the second half of
FY 2024-25 and front loading of Government capex outlay
in FY 2025-26, along with interest rate cuts and liquidity
support from RBI, would also be supportive of growth.

The Indian economy is poised to grow rapidly in the
years ahead driven by structural factors such as a
favourable demographic profile, increasing affluence,
rapid urbanisation, accelerated digital adoption and
the entrepreneurial spirit of its people. Government of
India's thrust on strengthening the country's physical
and digital public infrastructure, focus on enhancing the
competitiveness of the manufacturing sector, indirect/direct
taxation and financial sector reforms, along with measures
to promote ease of doing business, are expected
to power the economy going forward. While higher
capital expenditure outlays and focus on infrastructure
are expected to drive growth and competitiveness
of domestic manufacturing, focus on agri-related
schemes is expected to boost farmers' welfare and
rural consumption demand, spurring a virtuous
consumption-investment-employment cycle.

Policy interventions focused on supporting sustainable
livelihoods and fostering inclusive growth remain critical in
sustaining and accelerating India's economic growth path.

Structural support would need to be provided to sectors
with potential for large economic-multiplier impact.
In this regard, the development of robust domestic agri
and wood-based value chains hold special importance
in the Indian context, given their enormous potential to
contribute to national objectives.

India is amongst the leading producers in the world of
several agri-commodities, including milk, rice, wheat,
sugarcane, cotton, pulses, spices and fruits & vegetables.
India's agri exports have witnessed strong performance
in recent years; touching a peak of US$ 53 billion in
FY 2022-23, moderating to US$ 50 billion in FY 2024-25
due to trading restrictions on agri-commodities amidst
concerns over food security and inflation on the back of
geopolitical tensions and climate emergencies. However,
India's share of global agri-trade remains low at only
about 3%. Enhancing agricultural productivity and value
addition to international standards, while simultaneously
improving market linkages, remain critical to enhance
competitiveness of the agri sector and drive significant
increase in farmers' income.

The increasing severity and frequency of extreme
weather events such as droughts and floods pose
enormous threats to the farm sector, making it imperative
to strengthen climate resilience and adaptability of the
agri-food sector. An exponential increase in crop
production and productivity, backed by climate smart
agriculture, will be critical in meeting the growing needs
of an increasing population as also in mitigating the
potential risks. Evolving consumer preferences are also
driving a shift towards nutritious and sustainably sourced
food products. These developments accentuate the need
to enhance the competitiveness of agri value chains to
cater to the fast-evolving market requirements. India,
with its tremendous strengths in this sector, has a unique
opportunity to play a leading role in this global transition
and in forging an eco-system of sustainable, regenerative
and climate smart agriculture.

In this regard, the Government's focus on promoting Farmer
Producer Organisations (FPOs) holds immense potential
to catalyse agricultural transformation by leveraging
economies of scale, enabling sustainable agriculture,
supporting market-led production and creating larger
market access. Government interventions encouraging
private and public investment in post-harvest activities
including aggregation, modern storage, efficient supply
chain, primary and secondary processing, marketing
and branding, along with measures to harness the power
of agri-tech across the agri value chain are steps in the
right direction and will go a long way in unlocking the full
potential of the agri sector.

Your Company has adopted targeted collaborative
models to multiply the scale and impact of its agri and rural
interventions. This collaborative approach, as opposed
to a traditional transactional approach, can contribute
meaningfully towards building next generation agriculture
that is climate resilient and capable of supporting gainful
livelihoods. Digitalisation of agriculture also offers the
potential to increase productivity and foster structural
changes across the value chain thereby enabling
efficient use of resources. Your Company had launched
ITCMAARS (Metamarket for Advanced Agriculture and
Rural Services), that combines the power of cutting-edge
digital technologies with NextGen agri practices. This
initiative continues to be scaled up rapidly and currently
covers over 2.1 million farmers and over 2,050 FPOs,
across 11 states and over 18,000 villages. This 'phygital'
ecosystem continues to empower the farming community
and FPOs by delivering personalised and dynamic
advisory services as well as hyperlocal offerings including
market linkages, agri inputs and credit enablement. Further
details on this transformative initiative are provided in the
Agri Business section of this report.

It is pertinent to note that a substantial quantum of food is
wasted along the chain in India, depending on the season
and the inherent perishability of the crop. Higher levels of

food processing in the economy can create a much larger
pull for quality agri-commodities, thereby reducing farm
wastages and raising farm incomes. This would require
focused investments in developing product-specific
climate-controlled infrastructure as well as in branded
products that benefit large agri-value chains. Corporate
participation is essential not only to invest in requisite
infrastructure, but also to provide assured market linkages
to farmers. A strong focus on India's food processing
sector can play a pivotal role in catalysing a large multiplier
effect, leading to significant job creation, enhanced rural
incomes and sustainable management of food inflation.

Similarly, the Agro-forestry sector, as a source of raw
material for wood-based industry, is woefully constrained
by policies that not only impede job creation in India
but also promote avoidable imports. There is a need for
appropriate policy interventions and regulatory changes
at national level to utilise full potential of agro forestry in
the country.

Your Company's interventions across operating segments
are aligned to the national priorities of enhancing
competitiveness of Indian agriculture and industry,
generating large-scale employment opportunities and
supporting sustainable livelihoods, driving import
substitution, creating national brands to maximise value
capture in India, increasing Indian agri exports and
promoting sustainable business practices. For instance,

' ITC Mission Millets', which leverages enterprise
strengths in agriculture, food and hospitality to implement
multi-dimensional interventions in this area, has resulted
in significant increase in awareness and demand for
millets. Investments made by your Company continue to
be guided by the national objectives of 'Make in India' and
'Doubling Farmers' Income' and the overarching theme
of 'Aatma Nirbhar Bharat' that seeks to make the country
stronger, resilient and more competitive.

As reported in earlier years, your Company's collaboration
with NITI Aayog, aimed at boosting agricultural and allied

activities in 27 Aspirational Districts across eight states,
started in July 2022. The multi-year project covering a wide
range of activities, was successfully completed in the first
quarter of the year, with the Government taking forward
the farmer capability modules and the design elements of
model villages promoted by your Company. The farmer
training modules prepared by your Company are now
being used by district Krishi Vigyan Kendras (KVKs) in all
27 districts. During the year, the KVKs themselves trained
over 3,500 Government agricultural department officials
who in turn cascaded the training in over 9,500 villages.
Agricultural departments are promoting 1,350 hub villages
in these districts for demonstration of best practices.

Your Company is working towards developing community
institutions, promoting women agriculturists, facilitating
cadre of women service providers like Pashu Sakhis,
Yojana Sakhis, and Krishi Sakhis and fostering nano and
micro entrepreneurship through Agri-Business Centres
and Self-Help Groups. Custom hiring centres for farm
mechanisation, post-harvest product management
infrastructure and community managed seed banks
for self-reliance in quality seed material are also being
facilitated. Environmentally sustainable farm practices,
including zero-till sowing of wheat, direct seeding of rice,
micro-irrigation and watershed development, continue to
be promoted.

Your Company had earlier collaborated with CGIAR's
'Climate Change and Food Security Programme' to
create a template for Climate Smart Villages (CSVs),
under the Climate Smart Agriculture (CSA) programme.
The template has since been further strengthened by
your Company basis the field experiences and now
covers over 7,000 villages across 12 states covering over
21.80 lakh acres, supporting farmers in the management
of risks arising from erratic weather events.

Including the acreage in CSVs, the Climate Smart
Agriculture (CSA) programme now covers over
31.70 lakh acres in 19 states. Further, as per the

studies done by reputed ICAR - Agricultural Technology
Application Research Institute, Kanpur, the CSA practices
promoted in Rice and Wheat crops together have
demonstrated reduction of costs up to 21%, improvement
in yields up to 8% and consequently, increase in incomes
up to 23% as compared to conventional practices.

In Kapurthala District, Punjab, your Company under its
flagship programme of 'ITC Mission Sunehra Kal' has,
over the last seven years, implemented solutions that
have effectively substituted the burning of paddy stubble
by farmers. During the year, the programme covered
nearly 2.84 lakh acres with appx. 96% of the area
(2.73 lakh acres) witnessing total stoppage of stubble
burning, thereby avoiding appx. 2.14 lakh tonnes of
carbon release into the atmosphere.

Although India accounts for appx. 18% of the
world population, its share of natural resources is
disproportionately low with only 2% of global land mass,
4% of freshwater resources and 2% of forest resources.
It is more critical than ever before to redouble efforts, both
at the national and corporate level, to fashion strategies
that foster sustainable, equitable and inclusive growth.

It is your Company's belief that businesses can bring
about transformational change by pursuing innovative
business models that synergise the creation of sustainable
livelihoods and the preservation of natural capital while
enhancing shareholder value. This 'Triple Bottom Line'
approach to creating larger 'stakeholder value', as opposed
to merely focusing on uni-dimensional 'shareholder value'
creation, is the driving force that defines your Company's
sustainability vision and its growth path into the future.

Your Company is a global exemplar in 'Triple Bottom Line'
performance. The focus on creating unique business
models that generate substantial livelihoods across the
value chains has led to your Company's Businesses
supporting nearly nine million sustainable livelihoods,
many of whom belong to the weaker sections of society.

Your Company sustained its 'AA' rating by MSCI-ESG for
the seventh successive year - the highest amongst global
tobacco companies. Based on its ESG score as assessed
by S&P Global Corporate Sustainability Assessment (CSA),
your Company has also been included in the Dow Jones
Sustainability Emerging Markets Index for the fifth year in
a row - a reflection of being a sustainability leader in the
industry and a recognition of its continued commitment to
people and planet.

Your Company is a pioneer in the green building
movement, with 17 buildings having received Platinum
certification by USGBC (US Green Building Council)/IGBC
(Indian Green Building Council). To continuously reduce
your Company's energy footprint, green features continue
to be integrated in all new and old constructions including
manufacturing units, warehouses and office complexes.

In addition, your Company is spearheading the
implementation of Alliance for Water Stewardship
(AWS) Standard which is a credible, globally recognised
framework for ensuring sustainable water management
within the wider water catchment context. The Kovai unit
of your Company is the first site in India and the first paper
mill in the world to achieve the highest Platinum rating
under the 'Alliance for Water Stewardship Standards'.
During the year, two of your Company's units received the
AWS Platinum level certification. Till date, nine units of
your Company have achieved Platinum level certification
under the AWS Standard. Your Company is in the process
of implementing the AWS Standard at other units in high
water stress areas and will progressively obtain AWS
certification for these sites.

Your Company continues to pursue a low carbon growth
strategy through extensive decarbonisation programmes
across its value chains whilst also developing adaptation
plans across its sites. Your Company is the only
enterprise in the world of comparable dimensions to
have achieved and sustained the three key global
indices of environmental sustainability of being

'water positive' (for 23 years), 'carbon positive' (for 20 years),
and 'solid waste recycling positive' (for 18 years). With its
bold Sustainability 2.0 agenda, your Company is setting
the bar even higher and remains committed to making
a meaningful contribution across all the three sectors
of the economy - Agri, Manufacturing and Services.
Further details on this subject are available in the
Sustainability 2.0 section of this Report.

FINANCIAL PERFORMANCE

Your Company delivered a resilient performance during
the year amidst a challenging macroeconomic and
operating environment.

-    The FMCG-Others Segment delivered a resilient
performance amidst weak demand conditions and
heightened competitive intensity. Further, the impact
of sharp escalation in key input costs, viz. edible oil,
maida, potato, cocoa, packaging inputs especially
in the second half of the year, exerted pressure on
margins, which was partially offset through focused
cost management interventions, judicious pricing
actions and premiumisation. Competitive marketing
and trade investments were sustained during the year
despite heightened inflationary pressures towards
supporting growth and market standing.

-    In the FMCG-Cigarettes Segment, strategic
portfolio/market interventions continued to be made,
with focus on competitive belts and to counter illicit trade,
to drive volume-led growth and reinforce market
standing. Differentiated and premium offerings continue
to perform well. Severe cost escalation in leaf tobacco
was partially mitigated through mix enrichment.

-    The Agri Business Segment delivered robust
performance during the year. The value-added
agri portfolio recorded strong growth driven by scale up
of exports of spices and coffee. While operations
remained constrained due to continuation of trading
restrictions on certain agri-commodities, the Business

demonstrated execution agility in leveraging
opportunities in rice exports in the second half of the
year when restrictions were eased. Strong customer
relationships and focus on new business development
aided strong growth in leaf tobacco exports. Superior
grade/crop mix and strategic cost management
initiatives enabled expansion in margins, despite
steep escalation in green leaf tobacco costs.

- The Paperboards, Paper & Packaging Segment
continued to witness a challenging operating
environment, with low-priced Chinese and
Indonesian supplies in global markets including India,
soft domestic demand conditions, leading to subdued
realisations. Segment margins were impacted by the
unprecedented surge in wood costs. The Business
continued to sharpen focus on portfolio augmentation,
export customer/market development and structural
cost management to mitigate near term challenges,
while enhancing resilience for the future. The Packaging
and Printing Business continues to be acknowledged
as a 'first choice packaging partner' by several reputed
FMCG companies in the country for providing superior
and cost-effective packaging solutions. The Business
continues to aggressively pursue new business
development across various segments.

Continuing Operations: In FY 2024-25, Gross
Revenue and EBITDA stood at ' 73464.55 crores and
' 24024.83 crores respectively. Profit Before Exceptional
items and Tax at ' 26000.86 crores, grew by 1.4%
over previous year. Profit After Tax grew by 0.9% to
' 20091.85 crores (previous year ' 19910.23 crores).
Earnings Per Share for the year stood at ' 16.07
(previous year ' 15.98).

Discontinued Operations: Pursuant to the Scheme of
Arrangement ('the Scheme') amongst your Company
and ITC Hotels Limited ('ITCHL') and their respective
shareholders and creditors for demerger of the
Hotels Business of your Company into ITCHL,

which became effective from 1st January 2025,
the Hotels Business (along with all assets and liabilities
thereof, excluding ITC Grand Central, Mumbai) and the
investments held by your Company in Hospitality entities ³,
have been transferred to ITCHL on a going concern basis.
Accordingly, the operations of the Hotels Business of
your Company (excluding ITC Grand Central, Mumbai)
have been classified as 'Discontinued Operations' for the
year ended 31st March, 2025.

- The Hotels Business posted its highest ever Revenue
and operating profits on the back of strong growth
in RevPar, for the 9 months ended 31st December
2024. The Profit Before Exceptional items and Tax
for the 9 months ended 31st December 2024 stood at
' 572.52 crores (' 445.04 crores for the same period
in previous year; ' 691.22 crores for FY 2023-24).
Profit After Tax from Discontinued operations for
FY 2024-25 stood at '    15103.76 crores

(previous year ' 511.74 crores), including an
exceptional gain on demerger of ' 15163.06 crores
(FY 2023-24 - ' 7.57 crores). Refer Note 29(x) to the
financial statements.

Overall Profit After Tax for FY 2024-25 (including Profit
from Discontinued Operations) stood at ' 35195.61 crores
(previous year ' 20421.97 crores). Total Comprehensive
Income for the year stood at ' 34266.23 crores (previous
year ' 22703.03 crores).

The Directors of your Company are pleased to recommend
a Final Dividend of ' 7.85 per share for the financial
year ended 31st March, 2025. Together with the Interim
Dividend of ' 6.50 per share paid on 7th March 2025, the
total Dividend for the financial year ended 31st March, 2025
amounts to ' 14.35 per share (previous year Dividend
of ' 13.75 per share). Total cash outflow on account of
Dividend (including Interim Dividend of ' 8133.11 crores
paid in March 2025) will be ' 17956.69 crores.

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

Over the last five years, the Value-Added by your
Company, i.e., the value created by the economic activities
of your Company and its employees, aggregated over
' 315000 crores, of which over ' 211000 crores accrued
to the Exchequer.

Including the share of dividends paid and retained
earnings attributable to government owned institutions,
your Company's contribution to the Central and State
Governments represented appx. 75% of its Value-Added
during the year.

Your Company has, over the years, consistently ranked
amongst the Top 3 Indian corporates in the private sector
in terms of Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange
earnings as a priority. All Businesses in your Company's
portfolio are mandated to engage with overseas markets
with a view to testing and demonstrating international
competitiveness and seeking profitable opportunities for
growth. Foreign exchange earnings of the ITC Group over
the last ten years aggregated nearly US$ 9.5 billion, of
which agri exports constituted appx. 60%. Earnings from
agri exports, which effectively link small farmers with
international markets, are an indicator of your Company's
contribution to the rural economy.

During FY 2024-25, your Company and its subsidiaries
earned ' 10445 crores in foreign exchange. The direct
foreign exchange earned by your Company amounted
to ' 7708 crores, mainly on account of exports of
agri-commodities. Your Company’s expenditure in
foreign currency amounted to ' 3426 crores, comprising
purchase of raw materials, spares and other expenses
of ' 3280 crores and import of capital goods of
' 147 crores.

PROFITS	2024 - 25	2023 - 24
a) Profit before exceptional items and tax from continuing operations	26000.86	25632.12
b) Exceptional Items (refer note 29 (i) to the Standalone Financial Statements)	527.96	-
c) Profit before tax from continuing operations	26528.82	25632.12
d) Tax expense	Â	Â
- Current Tax	5990.17	5516.91
- Deferred Tax	446.80	204.98
e) Profit for the year from continuing operations	20091.85	19910.23
f) Profit for the year from discontinued operations	15103.76	511.74
g) Profit for the year (e + f)	35195.61	20421.97
h) Other Comprehensive Income	(929.38)	2281.06
i) Total Comprehensive Income	34266.23	22703.03
STATEMENT OF RETAINED EARNINGS	Â	Â
a) At the beginning of the year	34488.10	33687.70
b) Add: Profit for the year	35195.61	20421.97
c) Add: Other Comprehensive Income (net of tax)	(23.66)	(17.18)
d) Add: Transfer from Share Options Outstanding Account on lapse	1.00	1.67
e) Less: Dividends	Â	Â
- Final Dividend of ' 7.50	9363.54	8388.91
(2024: ' 6.75) per share	Â	Â
- Special Dividend of Nil	-	3417.70
(2024: ' 2.75) per share	Â	Â
- Interim Dividend of ' 6.50	8133.11	7799.45
(2024: ' 6.25) per share	Â	Â
- Income Tax on Dividend paid (refund)	(19.45)	-
f) Less: Transfer to General Reserve	4448.06	-
g) At the end of the year	47735.79	34488.10

Your Company's leadership position in the cigarette
industry continues to be driven by its unwavering focus on
nurturing a future-ready portfolio of world-class products
anchored on its integrated seed to smoke value chain,
superior consumer insights, robust innovation pipeline
and world-class product development capabilities.
The Business continues to make strategic portfolio and
market interventions, with focus on competitive belts
and to counter illicit trade, to drive growth and reinforce
market standing. Differentiated variants and premium
segment continue to perform well leveraging mainstream
trademarks & innovation. These interventions, coupled
with the recent stability in taxes enabling some claw back
of volumes from illicit trade, resulted in volume led growth
during the year.

A punitive and discriminatory taxation / regulatory regime
over the years has led to significant operating challenges
for the legal cigarette industry in the country. The recent
stability in taxes coupled with deterrent action on illegal
and contraband cigarettes, has helped the legal industry
in partially recovering its lost volumes, leading to higher
demand for Indian tobaccos and bolstering revenue to the
exchequer from the tobacco sector.

Your Company continues to counter illicit trade and
reinforce market standing by fortifying the product portfolio
through innovation, democratising premiumisation across
segments and enhancing product availability backed by
superior on-ground execution. The recent amendment to
the Central Goods and Services Tax Act, 2017, to include
an enabling provision for implementing 'Track and Trace'
mechanism, is also expected to strengthen the efforts
of enforcement agencies towards controlling illicit
cigarette trade.

The year continued to witness steep increase in the
prices of leaf tobacco, which was partly mitigated through
a combination of product mix enrichment, strategic cost
management and judicious pricing actions. During the
current crop year, global supply chains are normalising,
leading to moderation in leaf tobacco prices after a sharp
increase over the last couple of years.

The Business also strengthened its presence in focus
markets with the launch of several differentiated offerings
across segments leveraging its institutional strengths,
demonstrating agility in responding to evolving market
dynamics. Several innovative variants have been
introduced recently under the 'Classic', 'Gold Flake',
'American Club' and 'Flake' trademarks amongst others.

Your Company has further strengthened its direct reach in
target markets across trade channels and also augmented
the stockist network to service rural and semi-urban
markets efficiently. Your Company's investments towards
building a differentiated portfolio coupled with agile and
last mile focused micro market execution capabilities
augur well for the future.

Globally, cigarettes constitute the dominant form of
tobacco use. In the Indian context, tobacco use comprises
a diverse range of chewing and smoking formats that are
available at multiple price points consequent to punitive
and discriminatory taxation on cigarettes. While India
is the world's second largest consumer of tobacco,
legal cigarettes constitute only 10% of overall tobacco
consumption in India, as against a global average of 90%.
It is pertinent to note that India accounts for less than 2%
of global cigarette consumption despite having 18% of the
world's population - making India's per capita cigarette
consumption amongst the lowest in the world.

Over the years, high and discriminatory taxes on
Cigarettes, while aimed at reducing consumption, have
had unintended consequences of fuelling the growth of
smuggled and domestically manufactured tax-evaded
cigarettes, causing a shift to other lightly taxed/tax-evaded
forms of tobacco products, comprising illicit cigarettes, bidi,
chewing tobacco, gutkha, zarda, snuff, etc. Consequently,
while the share of legal cigarettes in total tobacco
consumption has declined from 21% in 1981-82 to a
mere 10%, aggregate tobacco consumption in the country
has increased over the same period. Despite accounting
for 1/10th of the tobacco consumed in the country,
duty-paid cigarettes contribute more than 4/5th of the
revenue generated from the tobacco sector.

Taxes on cigarettes in India remain one of the highest in
the world as depicted in the chart:

Tax per USA Japan China Germany Russia Canada Pakistan Malaysia Thailand UK Australia India Source:T P	2000 Cigarettes as a percentage of Per Capita GDP M 0.40% 0.80% 1.00% 1.03% m 1.13% 1.19% 1.50% 1.68%
	Â
	Â
	Â
	ax data - WHO Global Health Observatory, 2024 (Cigarette tax data for 2022); er Capita GDP - World Bank (Data for the year 2022)

Taxes on cigarettes in India are multiple times higher than
in developed countries viz. 14x of USA, 7x of Japan, 6x of
Germany and so on. Further, the same is also substantially
higher than that in neighbouring countries.

It may also be noted that India's per capita cigarette
consumption is amongst the lowest in the world and is
significantly lower compared to that of China, Japan, USA,
UK and even neighbouring countries such as Bangladesh
and Pakistan.

Â	1971	Per Capita Consumption of Cigarettes No. of Cigarettes per annum
Â	Â	Â	1133	Â	898	Â	897	468	394	90
Â	China		Japan	Bangladesh			USA	UK_	Pakistan	India
Source: The Tobacco Atlas ¦						- 7th Edition, 2022			Â	Â

Historically, steep increases in taxation have adversely
impacted tax collections and legal cigarette volumes, while
a stable tax regime has led to buoyancy in tax collections
as evidenced in the table below:

Period	Increase in Tax Rate	Increase in Tax Revenue Collection
FY 2012-13 to FY 2016-17 (CAGR)	15.7%	4.7%
Apr 2018 to Jan 2020 over Jul 2017 to Mar 2018	—	10.2%
Oct 2020 to Mar 2021 over Aug 2019 to Jan 2020	13.0%	1.8%
FY 2020-21 to 2022-23 (CAGR)	—	16.0%

Punitive taxes on the legal cigarette industry in earlier
years have resulted in rapid growth of illicit cigarette
trade - making India the 4th largest illicit cigarette market
globally according to Euromonitor estimates. Over the
years, this has created attractive tax arbitrage opportunities
for unscrupulous players indulging in illicit cigarette trade
accounting for about 1/3rd of the legal industry.

During the year, there were extensive media reports
on the multitude of cases of evasion of taxes/duties
by dealers in illicit cigarettes which were unearthed by
raids conducted by Directorate of Revenue Intelligence
(DRI) and other enforcement agencies. ‘Illicit markets:
A Threat to Our National Interests’, a study published
by FICCI-TARI in September 2022, noted that
“The consumption of illegal cigarettes in India has
increased, signalling a shift from legal products to cheaper
substitutes or illicit products, which have no or little tax
element in them. When taxes are raised beyond a certain
optimum level, consumers gravitate towards cheaper
alternatives orillicitsupplies, which are normally smuggled
or tax evaded goods”. It is estimated that illicit trade
causes an annual revenue loss of appx. ' 21000 crores
to the Exchequer. With respect to other tobacco
products as well, the revenue losses are significant since

about 68% ⁴ of the total tobacco consumed in the country
remains outside the tax net.

The Directorate of Revenue Intelligence (DRI), in its
report “Smuggling in India 2023-24” acknowledges the
high incidence of taxes in India providing opportunities
for illicit trade of cigarettes. The report states: “Cigarette
smuggling in India has become a growing concern, posing
serious challenges to the public health, the economy, and
law enforcement. With high domestic taxes and import
duties on tobacco products, intended to curb tobacco
consumption and safeguard public health, smuggling
has become a profitable venture of criminal networks.
The illegal trade in cigarette not only undermines
government policies aimed at reducing tobacco use but
also results in significant revenue loss”.

Tobacco control measures in India have ranked amongst
the most stringent in the world from the time of enactment
of the Cigarettes (Regulation of Production, Supply and
Distribution) Act, 1975, to the present. India is also one of
the few countries where tobacco products are regulated
across the value chain - from their manufacture to sale to
consumers. The Cigarettes and Other Tobacco Products
(Prohibition of Advertisement and Regulation of Trade
and Commerce, Production, Supply and Distribution) Act,
2003 (COTPA) requires cigarette packages to display
the statutorily mandated pictorial and textual warnings
covering 85% of the surface area of the packet - one of
the largest in the world.

It is pertinent to note that smuggled international brands
of cigarettes do not bear any of the pictorial or textual
warnings mandated by Indian laws or, bear much smaller
pictorial/textual warnings as per the tobacco laws of the
countries from where these cigarettes originate. As reported
in prior years, findings from research conducted by
IMRB International, an independent market research
organisation, show that the lack of pictorial warnings on

⁴ Report on the impact of current tax framework on the tobacco sector in India
and suggestions for its improvement - 2014, by ASSOCHAM and KPMG.

packets of smuggled international brands of cigarettes
or their diminutive size creates a perception in the
consumers' mind that these illicit cigarettes are 'safer' than
domestic duty-paid cigarettes that carry the 85% pictorial
warnings. The combination of low prices to consumers
due to tax evasion and the misleading perception created
by the absence of statutory pictorial warnings provides
significant buoyancy to illicit cigarette volumes.

India is among the top three tobacco growing countries
in the world. Tobacco plays a significant role in the Indian
economy on account of its considerable contribution to the
agricultural, industrial and export sectors ⁵ Illicit cigarette
trade also has a deleterious impact on farmers and farm
workers engaged in the tobacco value chain.

It may be noted that several major tobacco producing
countries, including the USA, have established regulatory
frameworks taking into consideration the economic
interests of their tobacco farmers. The punitive and
discriminatory taxation & regulatory regime on cigarettes
in India over the years, has adversely affected the
livelihood of Indian tobacco farmers with corresponding
gains to those countries that have opted for moderate
and equitable tobacco regulations. These developments
coupled with lower export incentives in India and relative
weakness of currencies in certain competing geographies
have, in the past, had a debilitating impact on millions of
livelihoods, dependent on the tobacco value chain in India.
However, recent stability in taxes on cigarettes backed by
deterrent actions of enforcement agencies has enabled
the legal cigarette industry to partially combat illicit trade
and claw back volumes, thereby improving demand for
Indian tobaccos.

As reported in earlier years, your Company and several
other stakeholders had challenged the validity of the
pictorial and textual warning covering 85% of the
surface area of the packet prescribed under COTPA.

The Honourable Karnataka High Court, by its judgement
in December, 2017, held the 85% pictorial warnings to
be factually incorrect and unconstitutional. Upon Special
Leave Petitions filed by the Government and others, the
Honourable Supreme Court has stayed the judgment
of the High Court. The cases are pending before the
Honourable Supreme Court.

The extremely stringent regulations along with the
discriminatory and steep taxation on cigarettes have had
numerous negative, albeit unintended repercussions.
These include:

-    rapid growth in illicit cigarette volumes, which resulted
in sub-optimisation of the revenue potential of the
tobacco sector and significant loss to the Exchequer.
It is estimated that on account of illicit cigarettes alone,
revenue loss to the Government is appx. ' 21000 crores
per annum.

-    widespread availability of illicit cigarettes and other
tobacco products of dubious quality and hygiene
to consumers at extremely affordable prices. As a
result, despite accounting for 1/10th of the tobacco
consumed in the country, duty-paid cigarettes
contribute more than 4/5th of the revenue generated
from the tobacco sector.

-    a large component of tobacco consumption in the
country, aggregating around 68%, remaining outside
the tax net.

-    persistent negative impact on the livelihood of tobacco
farmers and others dependent on tobacco. Studies
by the Central Tobacco Research Institute (CTRI)
indicate that on account of agro-climatic conditions,
there is no equally remunerative alternate crop that
can be grown in the FCV tobacco growing regions of
the country.

Your Company continues to engage with policy makers for
a framework of pragmatic, equitable, non-discriminatory,
evidence-based regulations and taxation policies that
balance the economic imperatives of the country and

tobacco control objectives, cognising for the unique tobacco
consumption pattern in India. Stability in taxes is critical to
address the interests of all stakeholders of this industry,
including tobacco farmers, consumers and the Exchequer.

Manufacturing facilities of the Business continue to set
new benchmarks in the areas of quality, sustainability,
supply chain responsiveness and productivity, driven
through investments in new technology induction, digital
technologies, innovation, and ensuring product & process
excellence. Cutting-edge technologies in the areas of
Industry 4.0 and Data Sciences are being leveraged to
build a smart manufacturing environment of connected
systems. These initiatives, coupled with innovative
capabilities, in-house design and development expertise,
have further improved the speed-to-market for launch of
new and differentiated offers of the Business.

It is extremely satisfying to report that your Company
continues to be recognised for its operational excellence.
The Bengaluru, Pune and Munger units won the
'Apex Prize for Operational Excellence' at the Integrated
Manufacturing Excellence Initiative (IMExI) Awards
organised by Kaizen Hansei Institute, a wing of
Kaizen Institute of India.

In line with your Company's commitment to the
'Triple Bottom Line' philosophy, the Business continued to
focus its efforts for resource conservation and adoption of
best-in-class technologies and processes. Sustainability
initiatives of the Business continue to receive industry
recognition, with the Kidderpore unit receiving the
'National Energy Leader Award' at the CII National Award
for Excellence in Energy Management, and the Munger
Unit being awarded the 'Winner' Award under the Best
Energy Efficient Organisation (Large Sector) at the
CII National Energy Efficiency Circle Competition.
The 21 MW wind farm in Karnataka received the
'Best Performing Wind Farm Award' from Indian Wind
Power Association in its geographical zone. Additionally,
the Pune unit secured the coveted 'Sarvashreshtha
Suraksha Puraskar' awarded by National Safety Council
of India demonstrating its commitment to safety.

As a testimony to the success of digital initiatives on
HR practices, the Business was honoured with the
prestigious CII National HR Award for Excellence in
Digital Practices.

Your Company remains well positioned to fortify its
market standing in the legal cigarette industry, leveraging
its superior strategies, integrated seed to smoke value
chain, future-ready portfolio, robust innovation pipeline,
cutting-edge manufacturing & digital technologies
and best-in-class execution capabilities. A stable and
equitable taxation & regulatory regime remains critical to
enable the legal cigarette industry to claw back volumes
from illicit trade, as also borne out by recent experience.

FMCG - OTHERS

The FMCG - Others Segment delivered a resilient
performance amidst subdued demand conditions
and significant increase in competitive intensity from
local/regional players. Costs of several major inputs
such as edible oil, wheat, maida, potato and cocoa
witnessed sharp escalation, especially in the second half
of the financial year, weighing on margins. The inflationary
pressures were partially mitigated through focused cost
management, portfolio premiumisation, supply chain
agility, digital interventions and calibrated pricing actions.
Trade and marketing investments were sustained at
competitive levels during the year towards supporting
growth and market standing. Additionally, the Notebooks
portfolio was impacted by sharp deflation in paper
prices on account of cheap imports of paper, leading to
heightened competitive intensity with opportunistic play by
local/regional brands.

Your Company's FMCG Businesses recorded
Segment Revenue of ' 21981.57 crores (previous year
' 20966.83 crores), with Segment EBITDA at
' 2163.92 crores (previous year ' 2338.50 crores).

A consumer-centric approach, driven by purpose-led
brands, a future-ready portfolio including value-added
adjacencies and agility in execution backed by smart

omni-channel capability and excellence in supply chain,
remains at the core of your Company's strategy to rapidly
scale-up the FMCG Businesses.

Across your Company's FMCG Businesses, the power
of digital is being leveraged to drive superior consumer
insights & innovation, deepen consumer engagement and
enhance brand loyalty. Strategic interventions continue to
be made towards delivering delightful brand experiences
seamlessly using an 'Always On' approach across
touchpoints through personalised journeys mapped to
individual needs, preferences and context.

Your Company continues to leverage deep consumer
insights and cutting-edge R&D capabilities to address
present and emergent consumer need spaces. Over
100 new products anchored on the vectors of Health &
Nutrition, Hygiene, Protection & Care, Convenience &
On-the-Go, Indulgence etc., were launched across target
markets during the year, leveraging the R&D platforms of
your Company's Life Sciences and Technology Centre
(LSTC) and agile product development teams across
Businesses.

Cutting-edge digital technologies including Industry 4.0,
Advanced Analytics, Big Data and industrial Internet of
Things (loT) continue to be deployed towards strengthening
your Company's real time operations and execution
platform, enhancing productivity, driving efficiency and
cost agility. These initiatives are anchored on the key
pillars of synchronised planning and forecasting, agile,
resilient & efficient supply chain, smart buying & value
engineering, smart manufacturing and smart demand
capture & fulfilment. Strategic investments have been
stepped up to build platforms of insights by harmonising
and integrating large and isolated datasets powered
by AI/ML technologies and 'human-centred design' &
visualisation tools.

The FMCG Businesses comprising Branded Packaged
Foods, Personal Care Products, Education and Stationery
Products, Incense Sticks (Agarbattis) and Safety Matches

have grown at an impressive pace over the past
several years.

FMCG - Other ¦ Revenue (' Crores) 1250 ¦.-slUil ii		s 51	284	1 4	472	1 8	599	19 4	209 23	21 67 21	82
FY03 FY08 FY10 FY13 FY14 FY15 FY16 FY17 FY18	FY19		O OJ B:		OJ B:		CXj CM B:	CO LO CM CM CM B: B: B:

Your Company's vibrant portfolio of over 25 world-class
Indian brands, largely built through an organic growth
strategy leveraging institutional synergies in a relatively
short period of time, represents an annual consumer
spend of over ' 34000 crores and reach over 260 million
households in India. These home-grown, purpose-led
Indian brands, powered by agile innovation, support the
competitiveness of domestic value chains, especially in
the agri space, thereby ensuring creation and retention of
value within the country.

Your Company's FMCG brands have achieved impressive
market standing⁶ in a relatively short span of time in their
respective categories viz. Aashirvaad is No. 1 in Branded Atta,
Bingo! is No. 1 in the Bridges segment of Snack Foods,
Sunfeast is No. 1 in the Cream Biscuits segment,
Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in
Noodles and Mangaldeep is No. 2 in Incense Sticks.

Your Company remains focused on rapidly scaling up the
FMCG Businesses anchored on strong growth platforms
and a future-ready portfolio. It is pertinent to note that the

chosen categories, which are largely characterised by
low household penetration levels and/or low per capita
consumption, offer significant headroom for long-term
growth. This is borne out by several reports which
highlight that your Company's total addressable market
expansion potential is amongst the highest in the Indian
FMCG space. In this context, it is noteworthy that a key
element of your Company's growth strategy is to foray
into value-added adjacencies and categories of the future
by leveraging the 25+ powerful mother brands it has
established over the years. Recent examples of such brand
extensions include Aashirvaad to Dairy, Ready-to-Eat,
Vermicelli, Rava, Besan, Indian breads, Salt and Spices;
Sunfeast to Dairy Beverages and Cakes; Bingo!
to Namkeens; ITC Master Chef to Frozen Snacks and
Cooking pastes; Classmate to Writing instruments;
Savlon to Sanitisers, Wipes and Disinfectant sprays
etc. Simultaneously, the FMCG Businesses continue to
make strategic investments in building categories of the
future and establishing your Company's 'right to win'
by progressively scaling up nascent categories where
beachheads have been created. In line with the
ITC Next Strategy of building a future-ready portfolio,
accelerating growth and enhancing competitiveness,
several value accretive acquisitions were announced
during the year viz. M/s. Sresta Natural Bioproducts
(24 Mantra Organic Foods), Mother Sparsh Baby Care
(Mother Sparsh) and Ample Foods (Prasuma & Meatigo).
These interventions are expected to augment your
Company's presence and market standing in high-growth
and future-facing businesses.

The FMCG Businesses continue to expand their export
footprint leveraging the equity of their world-class brands -
with a reach now spanning over 70 countries. Your Company
is also exploring strategic opportunities in proximal
markets as a potential vector of growth going forward.

The FMCG Businesses continue to create structural
competitive advantages and enhance profitability by
leveraging world-class distributed manufacturing and
logistics infrastructure, multi-channel distribution network

and newer routes to market, smart buying & value
engineering and smart manufacturing. Investments over
the years in several state-of-the-art Integrated Consumer
Goods Manufacturing and Logistics facilities (ICMLs) have
laid a strong foundation to drive structural advantages
such as economies of scale and scope, ensuring product
freshness, enhancing agility and responsiveness of
the supply chain, reducing cost of servicing proximal
markets through lower distance-to-market, etc. Capacity
utilisation at the 11 operational ICMLs continues to be
ramped up along with focused smart manufacturing
interventions leveraging automation and Industry 4.0
technologies to drive operational efficiencies, yield and
energy management and further enhance safety and
quality. With growing scale, supply chain operations are
being increasingly delayered through direct-to-market
shipments, thereby reducing freight costs and eliminating
multiple handling. Your Company is confident that these
strategic interventions which are already delivering
substantial benefits will realise their full potential over the
medium term and continue to create long-term value.

Your Company continues to counter the impact of
inflationary headwinds through proactive measures across
all nodes of operations and deliver competitively superior
performance leveraging its institutional strengths and
harnessing advantages of scale, smart buying initiatives
and world-class talent in a consumer-centric, agile and
innovative manner.

Notwithstanding the short-term challenges, the
structural drivers of long-term growth such as rising
disposable incomes and consumer awareness, low
levels of penetration of consumer goods, favourable
demographics, increasing urbanisation and growing
preference for trusted brands remain firmly in place. Your
Company remains confident of rapidly scaling up its FMCG
Businesses on the back of a strong future-ready portfolio
powered by purpose-led brands, world-class quality, deep
consumer insights, cutting-edge innovation and an agile,
resilient and efficient supply chain. Your Company's
institutional strengths - strong backward linkages with the

Agri Business, deep and wide multi-channel distribution
network, cuisine knowledge resident in ITC Hotels Limited
(a group entity), industry-leading packaging knowhow and
access to robust R&D platforms nurtured by LSTC - will
continue to be leveraged to serve as unique sources of
competitive advantage for the FMCG Businesses.

Branded Packaged Foods

The Branded Packaged Foods industry witnessed severe
headwinds during the year due to subdued consumer
demand and unprecedented inflationary pressure
across several key inputs viz. edible oil, wheat, maida,
potato, cocoa, packaging inputs etc. In this backdrop,
your Company sustained its position as one of India's
largest and fastest growing branded packaged foods
businesses, leveraging a robust portfolio of brands,
a slew of first-to-market products, regionally curated
offerings, supported by an efficient supply chain and
distribution network.

The Branded Packaged Foods Businesses remain
focused on addressing emerging consumer preferences
through innovations anchored on the vectors of health,
nutrition, wellness, immunity, naturals, indulgence and
convenience. Several innovative and first-to-market
products were launched during the year, leveraging
your Company's institutional strengths including superior
consumer insights, innovation capabilities of the
Life Sciences and Technology Centre (LSTC) and cuisine
expertise resident in ITC Hotels Limited, a group entity.
While fortifying core portfolio, the Businesses continued to
scale-up presence in value-added adjacencies leveraging
powerful mother brands and invest in categories of
the future.

Relentless focus on delivering superior quality products
to consumers continues to be a key source of sustainable
competitive advantage for the Branded Packaged Foods
Businesses. In this context, the Businesses continue to
leverage the agri-commodity sourcing expertise resident
in your Company's Agri Business to procure high quality
raw materials, thereby ensuring the highest level of
quality, consistency and safety in its products. In addition,

each of your Company's branded packaged food products
is manufactured in HACCP/ISO-certified manufacturing
locations ensuring compliance with all applicable laws and
adherence to the highest quality norms.

- In the Staples Business, 'Aashirvaad' delivered robust
growth on an elevated base, consolidating its market
leadership position. The value-added Atta portfolio,
consisting of Multigrain, Select and Sugar Release
Control Atta posted healthy growth driven by superior
value proposition. Millet products ('Atta with Millets',
'Gluten Free Flour', 'Ragi Flour'), Organic portfolio
('Organic Atta' and 'Organic Dals'), 'Aashirvaad
Vermicelli', 'Aashirvaad Rava' (Suji Rava, Bansi Rava,
Samba Rava) and 'Ready to Cook Chapati' continued
to witness strong growth. 'Aashirvaad Besan',
with the unique proposition of smooth & lump-free
batter, was extended to more markets and continues
to scale up rapidly. With the objective of catering to
regional preferences, a differentiated range of Atta
was launched in Mumbai ('Premium MP Sehori',
'MP Sehori', 'MP Lokwan' and 'Khapli' variants).
The Vermicelli range was expanded with the
launch of 'Roasted Short Vermicelli' in Tamil Nadu.
'Aashirvaad Soya Chunks', with the proposition of
'Juicy and Tasty' as the differentiator was launched
and has seen positive consumer response. With
superior product development, purposeful marketing
inputs, consumer activations and region-specific
interventions supported by manufacturing excellence
and sharply targeted media investments, especially
across digital platforms, your Company is confident
of further fortifying Aashirvaad's position as a
preferred 'centre-of-plate' choice amongst Indian
households, catering to all future-ready 'staple' needs
of consumers.

'Aashirvaad Salt' continued to post robust growth
in focus markets during the year, supported by its
distinctive positioning of “Iodine Assured salt for a
Smarter India”.

In the Spices category, your Company continued to
deliver strong growth with its endeavour to provide

consumers unique and personalised experiences
that meet their taste preferences and reflect regional
flavours and ethos. During the year, the Business
grew on the back of distribution expansion in focus
states, sharp region-specific communication, and
an enhanced portfolio with innovative new offerings.
The 'Sunrise' brand strengthened its market
leadership position in the core market of West Bengal
and made significant gains in newer launch markets of
the Northeast region and Bihar. The brand continued
to delight consumers by introducing unique and
differentiated products catering to regional tastes and
preferences, such as 'Sunrise Soya Curry Masala',
'Sunrise Chinese Fried Rice Masala', 'Sunrise
Schezwan Masala' and augmenting the portfolio with
novel products such as 'Sunrise Peri Peri Masala' &
'Sunrise Restaurant Magic Masala' for new age
consumers. 'Aashirvaad Spices' continues to enhance
its presence in new gen channels and core markets
to enable a full portfolio play along with expansion
of the blended portfolio. The brand's range of whole
spices, launched in the previous year, also witnessed
rapid scale-up across online platforms. Aashirvaad
has appointed Natural Star Nani as the brand
ambassador to strengthen the brand's alignment with
cultural values such as the appreciation for cinema,
culinary traditions, and a profound connection to the
region's unique customs and beliefs.

On April 17, 2025, your Company signed a Share
Purchase Agreement to acquire 100% of the share
capital of Sresta Natural Bioproducts Private Limited
('SNBPL'), an Indian company primarily engaged
in the business of manufacture and sale of
organic packaged food products under the
'24 Mantra Organic' brand in the domestic as well as
in international markets. SNBPL's portfolio comprises
a wide range of 100+ organic products spanning
branded grocery staples, spices and condiments,
edible oils, beverages, etc. SNBPL has a strong
international presence with a deep connect with

the Indian diaspora. SNBPL's vertically integrated
supply chain promotes sustainable livelihoods for
its network of appx. 27,500 farmers spread across
appx. 1.4 lakh acres of certified organic land in
10 states. The strong network of farmers and
certified organic sourcing capability are key sources
of competitive advantage for the company. The
acquisition reinforces your Company's commitment
to build a portfolio of future-facing winning brands that
addresses the evolving needs of Indian consumers
and will unlock value creation opportunities by
leveraging your Company's institutional strengths to
drive synergies in areas such as product development
& innovations, sourcing, manufacturing, supply chain
and distribution.

- The Biscuits category witnessed resilient performance
amidst a challenging operating environment. The
Business continues to strengthen its core portfolio with
investments behind powerful brand ideas, superior
products, cultural marketing with local insights and
unique innovations to drive growth. The 'Sunfeast Dark
Fantasy' range of differentiated cookies sustained its
leadership position in the premium segment. 'Mom's
Magic' range of cookies witnessed healthy growth
during the year. The 'Bounce' range of cream biscuits
was augmented with scale up of 'Bounce Day & night'
- a delicious dark choco biscuit with soft vanilla cream.
'Sunfeast Supermilk' biscuit harnessing the goodness
of 'Naatu Maatu Paal' continued to be scaled up in
target markets. The portfolio mix was further enriched
with the launch of 'Sunfeast Wowzers', a 14-layered
cracker enrobed with cream (currently available
in Cheese and Lemon variants) and 'Evening
Marie' - a differentiated Marie with a savoury twist,
in select markets. The Business also introduced a
portfolio of Super Premium Cookies under
'Sunfeast Baked Creations' with globally sourced
ingredients to leverage the advent of emerging niche
spaces in the Quick-commerce channel.

Towards further deepening consumer engagement,
the brand launched several meaningful and

clutter-breaking campaigns during the year.
The Dark Fantasy brand, synonymous with
turning everyday moments into extraordinary
experiences, launched its 'Big Fantasies' campaign
leveraging cutting edge technology to deliver
fantastical experiences to consumers on ground.
Mom's Magic further strengthened its core philosophy
of 'Iss Dil Ke Aage Sabki Har Hain' with the launch
of the 'Will of Change' digital campaign which puts
a spotlight on the deep-seated societal bias that
denies daughters their inheritance rights and
advocates a shift towards equality, with mothers as
the pillars of change.

'Bingo!' Snacks delivered resilient performance during
the year and strengthened its product portfolio with
the launch of exciting variants of snacks/namkeens.
During the year, Bingo! forayed into the Popped Chips
segment with the launch of three exciting
variants - 'Sour Cream & Herbs', 'Salt n Pepper' and
'Indian Spice Mix', with 30% less fat proposition for
consumers indulging in mindful snacking. Leveraging
the 'Hot & Spicy/Korean' trend, the Bingo! Snacks
portfolio was augmented with a slew of differentiated
offerings straddling across product categories
including 'Bingo! Tedhe Medhe Xtraa Teekha',
'Bingo! Mad Angles Red Alert' and 'Bingo! Nachos
Korean Flavour'. Other launches during the year
include an innovative Pink Salt flavoured
'Bingo! Original Style Pink Salt Chips' and Millet based
offering under 'Bingo! Tedhe Medhe Pudina Twist'.
Having forayed into traditional snacks through
Bingo! Tedhe Medhe Namkeens in the recent past,
the Business continues to register robust growth in
the segment. Bingo! remains the market leader in
the Bridges segment across the country, and in the
potato chips segment in South India. With a view to
reinforce its leadership position and build consumer
engagement, 'Bingo! Tedhe Medhe' launched an

exciting on-pack consumer offer with attractive prizes;
the campaign was well received with over 13 million
entries.

YiPPee! sustained its position as a strong No. 2 brand
in the Instant Noodles segment amidst heightened
competitive intensity. The Business continued to
strengthen its portfolio through a combination of
product laddering across multiple price points, wider
assortment to cater to diverse consumer cohorts
and scale up of differentiated offerings. The portfolio
was further augmented with the launch of 2 exciting
flavours in the Korean Noodles segment. Further,
the brand also forayed into Pasta Masala segment in
2 flavours - Masala and Cheese. The brand refreshed
its communication outreach with popular Indian
cricketers Jasprit Bumrah, Surya Kumar Yadav
and Rahul Dravid as celebrity brand endorsers.
Investments in several high decibel campaigns were
stepped up to connect with regional culture codes
to generate positive consumer buzz and increase
visibility across focus markets such as South region,
UP, MP, Bihar and Odisha.

The Frozen Foods Business operating under Brands
'ITC Master Chef', 'Farmland' and 'Aashirvaad'
continued to grow at an accelerated pace, powered
by a range of delicious and innovative products
catering to 'any time' snacking and meal occasions.
The launch of no-onion-no-garlic 'ITC Master Chef
Sabudana Tikki' made from 'sendha namak', suitable
for fasting occasions and innovative products like
Chicken Kievs has helped to further strengthen the
product portfolio in Retail and Food Service channels.
The Business directly distributes to over 200+ towns
leveraging emerging and traditional channels and
smart digital marketing to expand consumer franchise.
The frozen portfolio now comprises of over 80+ Indian
and Western Snacks, Parathas, Naans, Prawns and
Vegetables.

During the year, your Company signed Definitive
Agreements for acquisition of 100% of the share
capital of Ample Foods Private Limited (AFPL) in one
or more tranches. AFPL's flagship brand, 'Prasuma',
is a leading player in the frozen, chilled and ready to
cook foods space in India and is a specialist in oriental
cuisine (viz. momos, baos, Korean fried chicken),
high-quality delicatessens and raw meats, etc.,
sells a wide assortment of 170+ products, backed
by unparalleled innovation expertise in developing
'Good-for-You' products. This acquisition will further
fortify your Company's presence in these
future-facing categories, with current annual market
size of over ' 10000 crores and poised for rapid
growth in the years ahead.

-    On April 4, 2025, your Company completed the first
tranche of acquisition in AFPL to the extent of 43.75%
of the shareholding of the company, in line with the
Definitive Agreements.

-    'Aashirvaad Svasti' - fresh dairy portfolio continued
its strong growth momentum during the year, led by
strengthening its premium milk variant 'Select' and
driving significant growth in value-added products
(Curd, Lassi, Mishti Doi & Ghee) through superior &
differentiated offerings. The fresh dairy portfolio is
currently available across Bihar, West Bengal &
Jharkhand markets and it continues to enhance market
penetration through rapid scale-up of its distribution
network. The Business rolled out a new premium
variant 'Shahi Lassi' under 'Aashirvaad' brand which
elicited excellent consumer response in the launch
markets. Ghee portfolio was further augmented with
the launch of a health-focused product proposition,
'Cow Ghee with 90% low cholesterol'.

-    The Beverages portfolio has been refreshed with
launch of innovative offerings to address the evolving
consumer needs. During the year, the Business
entered the Ethnic beverages segment, a growing
space, with the launch of region-specific offers around

product formats of badam milk, lassi and buttermilk
under the mother brand 'Aashirvaad'. The core
portfolio of Dark Fantasy milkshakes has been further
augmented with the launch of a new unique product
'Vanilla milkshake with white chocolate'.

-    The Confectionery Business continued to nurture
its range of premium portfolio by leveraging
'Fantastik Chocostick', 'Jelimals' and
'Candyman Fruitee Fun 3 in 1 chews'. The Business
strengthened its leadership in the wafer rolls
category with the launch of 'Sunfeast Dark Fantasy'
creme filled choco wafer rolls. The offerings have
received excellent consumer response while the
clutter-breaking communication has enabled strong
brand recall among target groups.

-    'Fabelle' chocolates continue to receive excellent
response from discerning consumers, setting new
benchmarks in the luxury and premium chocolate
segments. During the year, your Company opened
an exclusive Fabelle store at Bengaluru airport,
expanding the availability of the luxury range of
chocolates beyond the luxury boutiques at ITC Hotels
and Quick-Commerce channel. The 'Sunfeast Fantastik'
range of chocolates, comprising Choco Almond and
Fruit & Nut variants launched in the previous year, was
scaled up across markets after receiving excellent
feedback from consumers in launch markets. The
product range was further augmented during the year
with the launch of 'Sunfeast Fantastik! 4D', a unique
product offering four indulgent layers of crunchy
wafer, milk choco, soft caramel and nutty peanuts
in every bite. The product, endorsed by celebrities
Sreeleela & Siddhant Chaturvedi, has elicited strong
consumer traction.

-    Exports remain a key focus area for the Branded
Packaged Foods Businesses. In addition to
Aashirvaad Atta exports, which is already a clear
market leader across several markets, the Business
has been continuously sighting opportunities to

scale up exports of value added adjacencies.
The Business is also witnessing green shoots in
exports of other categories such as Biscuits, Noodles
and Snacks, leveraging the equity of its core brands
such as Aashirvaad, Sunfeast Dark Fantasy,
Sunfeast Moms Magic, Sunfeast YiPPee!, Bingo! and
Kitchens of India.

With the overarching vision to 'Help India Eat Better',
your Company's Nutrition strategy seeks to create a
sustainable ecosystem anchored on a portfolio of healthier,
affordable & accessible 'Better For You/Free From'
value-added products, supported by responsible policies
in line with national priorities on health and nutrition.
Your Company's institutional strengths, as aforestated, are
being leveraged to develop products providing consumers
wholesome and enjoyable food experiences.

In line with your Company's commitment to fostering
nutrition, health and wellness, the Business has launched
a range of nutrition dense products under the 'Right Shift'
brand to address the nutritional needs of consumers aged
over 40. The portfolio has been curated using natural and
proprietary ingredients developed at LSTC. Anchored
on the vectors of better digestion, strength and energy
building, your Company launched a range of products
such as 'Jaggery Ragi Cookies', 'Millet Oats Kheer mix',
'Millet Oats Upma mix' and 'Millet Chana Mixture' during
the year. The recent acquisition of 24 Mantra Organic
would also further augment the Business' portfolio of
nutrition-led healthy food products.

The Businesses continue to use a data driven
approach to make sharp targeted brand investments,
clutter-breaking communication and deepen consumer
engagements across all touch points, along with focused
market development efforts to reinforce market standing
across operating categories. Several campaigns
launched during the year received wide recognition
and won prestigious awards across leading platforms.
'Aashirvaad Atta' won Gold at Effie’s for its innovative
'Atta - Rap' campaign in the Food, Snacks & Desserts
category, and Bronze at E4M in the Regional Campaign

category. At the E4M IDMA Awards, the Bingo AI Meme
Gallery received a Silver for Best Use of User Generated
Content and Bronze for Leveraging Social Media to
Boost ROI and Engagement; 'Sunfeast Dark Fantasy'
won Silver for Best Digital Innovation with its 'Biting into a
Million Fantasies' campaign. 'Sunfeast YiPPee!' secured
a Bronze at Effie Awards for the 'Better World - Create Magic’
campaign, under Positive Change - Environmental
Brands category. At the E4M IMA South Awards,
ITC Mission Millets won Gold in Best Use of Integrated
Marketing - FMCG, Bingo Mad Angle Song won
Gold in Branded Content -    Food &    Beverages,

Bingo Meme Premier League won Silver in Occasion/Festive
Based or Seasonal    Marketing    - FMCG    along    with

Aashirvaad Masala    Karam    winning    Bronze    in

Best Use of TV - FMCG. From advancing nutritional
and sustainable food practices with the 'Mission Millets'
campaign to empowering farmers and consumers
alike, the Business    earned a    Gold SABRE in    the

Marketing to Consumer (New Product) category.

The year marked a major step in advancing the Business'
digital maturity journey. With the vision of having a
connected digital ecosystem, the Business has launched
Real Time Consumer Data Platform. With the objective of
consistently engaging with consumers, the Business is also
building 'always-on' brand experience digital platforms,
rooted in the respective brand philosophies. In this
context, the Business went live with www.letsboing.com
for the Bingo! portfolio - an always on comedy content and
experiences platform which takes the consumer through
a fun journey of value exchanges through a curated
selection of amusing local news, newsmakers, memes,
and horoscopes, all presented in the distinctive Bingo!
flavour. During the year, the Business also launched an
'all things food & recipe' content website - www.foodiesonly.in;
with an endeavour to become a go-to website for
recipes, tips & tricks, menu planners, masterclasses for
home-chefs etc. The platform has generated excellent
consumer traction and has been one of the largest and
fastest platforms in terms of garnering consumer traffic.

Over the years, your Company has made significant
investments in setting up state-of-the-art Integrated
Consumer Goods Manufacturing and Logistics facilities
(ICMLs) proximal to large demand centres. These facilities
are at the heart of your Company's strategy to create
structural advantage by enhancing product freshness,
elevating market agility, minimising the cost of servicing
proximal markets, enabling scalability, while also
setting new benchmarks in safety and product quality.
Your Company continues to leverage the benefits of the
state-of-the-art Ancillary Manufacturing cum Logistics
Facilities (AMLFs) at Pudukkottai, Kapurthala and Panchla.
These automated facilities are co-located with the ICMLs
and provide several structural advantages including
inventory optimisation, delayering operations and lowering
cost of market servicing.

11 ICMLs are operational in locations proximal to large
demand centres, enabling delivery of fresher products,
reduction in distance to market and delayering of
operations. The capacity utilisation at these ICMLs
continues to be ramped up while contributing to a
progressive increase in workforce diversity and inclusion
with each new investment. During the year, the Business
also commenced operations at the new confectionery
manufacturing facility at Jammu.

With its relentless focus on quality and manufacturing
excellence, your Company received over 100 prestigious
external awards & accolades in the areas of Safety,
Sustainability, Quality & Food Safety, Manufacturing
Excellence, Cost Competitiveness, Manufacturing &
Supply Chain and HR from prestigious institutions such
as the Confederation of Indian Industry (CII), Integrated
Manufacturing Excellence Initiative (IMexI), etc. These
accolades are testament to your Company's unwavering
commitment to providing products with the highest
levels of quality while reducing environmental impact of
the same.

To counter input cost volatility and support long-term
profitability, your Company has implemented several

strategic cost management initiatives in areas such
as supply chain optimisation, smart procurement and
productivity improvement through automation, leveraging
new-age technologies such as Industry 4.0, Artificial
Intelligence/Machine Learning, advanced visual analytics
and smart utilities. These measures are instrumental in
countering significant input cost volatility witnessed during
the year, as well as offsetting gestation costs of new
initiatives and strategic brand development investments
in emerging categories. Going forward, these strategic
initiatives will aid the Business in further enhancing its
competitive positioning in the industry.

The food processing industry has immense potential
to boost agriculture by improving market linkages,
resource efficiency and exports. The development of
the food processing sector is vital for addressing food
security, controlling inflation, improving nutrition, and
preventing wastage, thereby enhancing farmer incomes.
Acknowledging the large economic multiplier impact of
the food processing industry, and growth opportunities in
the Indian market, your Company has made substantial
investments in this sector and remains focused on
establishing itself as the leading player in the branded
packaged foods industry.

Your Company's strong farm linkages, procurement
efficiencies, world-class brands and deep & wide
multi-channel distribution network, with growing presence
in new gen channels such as e-Commerce, Modern
Trade, On-the-go and Institutional sales, continues to
deliver competitive advantage through superior product
availability, visibility and freshness. Recent investments
in establishing a world-class distributed manufacturing
footprint have created a solid foundation to secure structural
advantage over time. Cutting-edge R&D platforms of
your Company's LSTC are driving agile innovation and
faster turnaround times for introduction of differentiated &
first-to-market products catering to constantly evolving
consumer needs. Investments in leading-edge digital
technologies and platforms continue to be stepped up
across the value chain to drive competitive advantage.

Your Company is well poised to strengthen its position
as one of the fastest growing food companies and the
'most trusted provider of food products' in the Indian
market. Your Company remains confident of rapidly scaling
up the Branded Packaged Foods Businesses leveraging
the strong growth platforms nurtured over the years in
chosen categories which offer immense headroom for
growth, address opportunities in value added adjacencies
by leveraging mother brands and nurture new vectors of
growth where beachheads have been created.

Personal Care Products

The Personal Care industry witnessed a challenging
year, marked by muted demand conditions, heightened
competition and unprecedented volatility in commodity
prices which intensified margin pressures. The premium
segment, however, continued to grow faster, reflecting an
ongoing shift towards value-added offerings, brand-driven
differentiation and increased demand for high-quality,
ingredient-led & sustainable products.

Despite headwinds in the operating environment,
your Company's Personal Care Business achieved robust
volume growth led by rapid scale-up in new gen channels
(E-commerce/Q-commerce & Modern Trade). Strategic
partnership with key accounts, channel specific packs &
launches and agile execution continue to drive growth.
The premium portfolio remains a significant growth driver,
reinforcing your Company's focus on delivering superior
consumer experiences through innovative offerings and
differentiated value propositions.

In the Personal Wash segment, 'Fiama' continued its
robust growth trajectory, in both gel bars and shower
gels. The Business augmented its product portfolio with
the launch of 'Fiama Moisturising Bars with Japanese
Hokkaido Milk' in 3 variants, offering moisture rich
indulgence, non-sticky nourished skin and mood uplifting
fragrances. Beyond product innovation, Fiama expanded
its Virtual Therapy platform with the MINDS Foundation.
During the year, the brand also collaborated with Filmfare

for an exclusive 'Fiama presents Best Portrayal of Mental
Health in Cinema' Award which was a first in the industry.
With a focus on premiumisation and innovation, Fiama is
well-positioned to drive continued growth.

The 'Vivel' portfolio continued to strengthen its core
association with aloe vera and natural ingredients, with
the launch of Sandal Soap, Aloe Vera based Bodywash &
a new range of naturals based Handwash liquids. Vivel's
repositioning of 'Magic of Soft Touch', is anchored on the
benefit of soft skin and highlights heartfelt emotions that
can be sparked by a gentle touch, creating cherished
memories and stories. The brand continued to strengthen
its association with Women Empowerment with its
collaboration with Azad Foundation, through 'Parvaz',
a year-long leadership training programme that fosters
women's empowerment and enables young women
leaders to be catalysts of change in their communities.

'Savlon' delivered strong growth leveraging initiatives
such as 'Savlon Lao Shaan Badhao'. As a testament to
the Business' focus on innovation, Savlon was recognised
with the NIQ BASES Breakthrough innovation award by
Nielsen, making it one of 15 winners out of 40000 new
launches across the country. Post pandemic, the brand
has been successfully transitioning its proposition from
'protection' to 'caring protection', strengthening its
differentiation and creating a base for sustained growth
momentum.

In the Home Care segment, the 'Nimyle' range of products
continued to expand rapidly across geographies and
channels. The brand provides a markedly differentiated
proposition to consumers with a 100% natural action
which is safe for kids and pets. To further enhance shelf
presence and consumer affinity, the product packaging
was revamped during the year. The brand also launched
'Nimyle Clean Equal Mission' - a first-of-its kind educative
module for children across schools, designed to foster
cleaning at homes as a shared responsibility, by raising
awareness and inspiring action among the next generation.
Anchored in its core values and a clear brand proposition,

Nimyle remains committed to deepen consumer connect
and expand availability across touchpoints.

During the year, 'Engage' continued to strengthen its
position in a dynamic and evolving fragrance market.
In recent years, the brand has pivoted based on the
emerging consumer preference for perfumes & gifting,
with both premium and mass perfume offerings growing
well. Innovation and superior fragrance profiles remain
central to the brand's strategy for scaling up consumer
traction. During the year, the 'Spirit' range of deos,
with olfactive profiles of Oudh, Musk, fruity & floral was
launched. The premium L'amante range was extended
with differentiated variants such as Oudh, Fern,
Soie and Fluer. During the year, a new range of gift
packs known as Vibes was introduced, providing a
premium gifting experience. The brand stepped up
consumer engagement to drive fragrance education with
'Engage Scents & Senses' with influencers & perfume
experts and amplified its digital content. Leveraging
robust R&D capabilities and in-house manufacturing,
the Business continues to deliver high-quality fragrances
that resonate with discerning consumers.

In the Skincare portfolio, the 'Digital-first' brand
'Dermafique' continued to leverage an Al-powered smart
skin advisor to provide personalised skin health analysis,
empowering individuals to know their skin better and
adopt solutions suited to the unique skincare needs of
Indian consumers. During the year, offline expansion
gained momentum with entry into new large-format
stores, eliciting promising consumer response. Sustained
consumer education on customised skin health remains
a core focus as Dermafique seeks to build for the future
with data, science, and differentiated storytelling.

The Business achieved a major milestone this year with
the commissioning of the state-of-the-art Neemgarh
plant, situated in Uluberia, West Bengal. This modern,
digitally-enabled facility marks the first Personal Care
Products plant in one of its most salient markets.
This site also houses the largest varieties of Neem plants

in the world, with 50 neem ecotypes sourced from
across India; your Company has tied up with a renowned
university for conducting primary research on these,
to help deepen knowledge on Neem with a view to facilitate
development of new products. This facility also enhances
the Business' ability to serve high-potential eastern and
north-eastern markets with greater agility, optimised costs
and reduced lead time.

Your Company continues to strengthen its commitment to
sustainability with meaningful progress across packaging
and consumer engagement. Fiama has expanded its use
of 50% recycled plastic across all PET bottle SKUs of
shower gels and hand wash, with clear on-pack callouts
to build consumer awareness. To further promote refill
adoption, refill pouches made with recyclable plastic have
also been introduced and are proposed to be scaled
across variants.

Your Company continued to earn widespread recognition
across national and international forums for its innovative
product design, impactful communication, and purpose-led
brand initiatives. Fiama's Mental Wellbeing Survey was
honoured with the SABRE South Asia Diamond for
excellence in PR, while the recyclable Fiama Handwash
pouch won the prestigious Global DOW Innovation Award.
Savlon Swasth India Mission received a Silver at the
London International Awards for its impactful use of
social media in Health and Wellness and secured multiple
accolades at the Effie Awards and ET Brand Equity
Brand Disruption Awards, including Golds for Influencer
Marketing and Viral Content. Vivel was awarded a Bronze
at the APAC EFFIES and a Gold at the ET Sharks Awards
for its tech-enabled campaign. Engage, Dermafique,
and Nimyle were also celebrated across forums like
ET Digi+, Fulcrum, and Entrepreneur India Awards.
These awards are a testament to the brands' growing
consumer franchise across target segments.

The Business received 14 INDIASTAR 2024 awards for
excellence in packaging and its commitment to inclusivity
was recognised with the FICCI Women Empowerment

Award. Further, the Haridwar Unit was also felicitated with
the CII Quality Circle Competition Winner Award in the
Northern Region.

The Business, with its purpose-led brands serving
discerning consumers in a dynamically evolving
environment, is well poised to seize future opportunities
on the back of innovations, impactful communications,
institutional R&D strength & formulations, state-of-the-art
manufacturing, packaging know-how and multi-channel
distribution.

Education and Stationery Products

The Education and Stationery Products industry witnessed
heightened competitive intensity with the widespread
resurgence of regional players on the back of sharp
moderation in input prices, accentuated by cheap imports
of paper. Against this challenging operating environment,
the Business delivered a resilient performance with the
flagship brand 'Classmate' sustaining its market leadership
position in the Notebooks segment. The Business
continues to leverage your Company's institutional
strengths which provide unique sources of competitive
advantage such as paper manufacturing expertise
including the capabilities of your Company's Life Sciences
and Technology Centre to enhance product superiority &
differentiation in the core notebooks category and drive
premiumisation, multi-channel distribution infrastructure
and brand building expertise.

In keeping with its proposition of 'Enjoy Learning',
the Classmate brand continues to provide differentiated
offerings through technology via eduGAMES Infinity,
that provides students the opportunity to play and learn
new skills. During the year, the Business accelerated
the adoption of 'Classmate Pulse' through targeted
activations focused on new consumer cohorts and also
strengthened the 'Paperkraft' portfolio with the launch of
a new range of notebooks with discrete design themes.
The 'Classmate Interaktiv' Notebook portfolio continues to

witness encouraging consumer response driven by wide
range of offerings that enable 'Do It Yourself' activities,
immersive technologies such as augmented reality and
playful covers.

The Writing Instruments portfolio is being further
strengthened through superior writing systems and
product designs, enhancing differentiation through
strategic tie-ups and by expanding the portfolio with
innovative launches, bringing playfulness around the
brand proposition of 'Enjoy Learning'. To further strengthen
the premium portfolio, the Business introduced a set of
revamped designs elevated by premium finishes and
aesthetics under its range of Mathematical Instruments.

'Classmate All Rounder', an inter-school initiative to
promote holistic learning in line with the National Education
Policy 2020, continued to gain strong momentum in
its third edition, with participation from top schools
across the country. The initiative has engaged nearly
one million students across 33 cities since inception.

The multi-channel capability of your Company's strong
distribution network was leveraged to enhance availability
and drive sales. The Business sustained its leadership
position on e-Commerce platforms through consistent
availability of a wide assortment of products, backed by
focused interventions to enhance consumer traction.
Consumer engagement was further augmented through
Classmateshop.com, a D2C platform that provides
consumers the opportunity to 'Personalise & Capture'
memories on Classmate notebooks. The myClassmate app,
a gamified app focused on developing co-curricular skills
and make learning engaging and enjoyable, has garnered
nearly 2.5 million downloads.

Equipped with state-of-the-art technology and a newly
installed quality lab, the dedicated manufacturing
facility at Vijayawada is enabling the Business develop
differentiated notebook formats, drive cost reduction
and enhance capabilities to exploit opportunities in
overseas markets.

The Classmate and Paperkraft range of notebooks
leverage your Company's world-class fibre line at
Bhadrachalam - India's first ozone treated elemental
chlorine free facility - and embody the environmental
capital built by your Company in its paper business.
The Business also continues to scale-up the
Paperkraft range (FSC®-C181115) of notebooks using
Forest Stewardship Council® (FSC®) certified paper
(FSC®-C064218), made at your Company's paper mill
at Bhadrachalam.

With over 300 million students, India has one of the largest
education systems in the world. The Indian Education
and Stationery Products industry holds immense potential
driven by growing literacy, increasing enrolment ratios,
the Government's continued thrust on the education
sector and a favourable demographic profile of the
country's population. Your Company's Education and
Stationery Products Business, with its strong brands,
robust product portfolio, collaborative linkages with
small & medium enterprises and superior distribution
network, is well poised to sustain its leadership position
in the industry.

Incense Sticks (Agarbattis) and Safety Matches

The Incense Sticks (Agarbattis) category witnessed
robust growth during the year with your Company's
flagship brand 'Mangaldeep' further strengthening its
market standing across formats including Agarbattis,
Dhoop and Sambrani. Anchored in deep consumer
insights and spiritual relevance, Mangaldeep offers a
unique product experience that combines traditional
devotional appeal with modern sensibilities. The Business
successfully navigated an inflationary cost environment
through judicious mix enhancement and strategic
cost optimisation, thereby sustaining profitability and
volume growth.

The Brands visibility and engagement were enhanced
through a high impact thematic campaign -
“Dil Se Karo Baat, Bhagwan Ke Sath” - which struck
a powerful chord with consumers across the country.
The campaign was completed by targeted marketing
interventions across channels, further deepening
Mangaldeep's spiritual connect.

Responding to evolving consumer preferences, the
Business expanded its product portfolio through several
impactful launches. Notably, the new sub-brand 'Fusion'
was introduced with contemporary fragrances such as
Sambrani & Oud, Sandal & Vetiver and Lavender & Sage
each blending traditional aroma with a modern twist.
The 'Scent' sub-brand was also extended with new
offerings in premium dry dhoop sticks and cones, delivering
'perfume like' experiences true to its positioning.

Catering to the emerging wellness segment, the Business
launched 'Pranah', a premium range inspired by
earth-sourced aromatherapy. This included scented
candles, incense sticks, and cones, harmonising natural
inspiration with scientific wellness benefits.

To further strengthen consumer engagement, the brand
undertook large-scale on-ground activations during
the Maha Kumbh Mela in Prayagraj. These included
immersive spiritual experiences, participation in sacred
rituals, and bhajan evenings. The Jalbatti initiative — a
symbolic and sustainable ceremonial offering — added
a powerful dimension to consumer connection and
received extensive media coverage. On the digital front,
augmented reality-based experiences brought the sanctity
of Kumbh into homes, further enhancing brand resonance.

The Mangaldeep mobile app was also relaunched with a
modernised, intuitive user interface. Redesigned with
Watch, Read & Listen content streams, gamified elements
and improved navigation, the app reinforces Mangaldeep's
ambition of being a holistic spiritual companion.

In a pioneering step towards inclusive innovation,
Mangaldeep continues to collaborate with over
150 visually impaired fragrance evaluators under the
Sixth Sense initiative. This unique programme empowers
differently-abled individuals to co-create fragrances,

helping the brand deliver long-lasting and sensorially rich
offerings while fostering inclusive growth.

Over the years, the Business has implemented several
measures to enhance the competitiveness of the
agarbatti value chain in India. This includes scaling up
bamboo procurement through local sources, working
closely with manufacturers and state nodal agencies to
promote bamboo plantation and indigenous bamboo
stick manufacturing. Mangaldeep remains at the
forefront of driving bamboo stick manufacturing, enabling
import substitution while advancing national priorities of
employment generation, rural livelihood enhancement,
and inclusive economic growth.

In the Safety Matches industry, the Business strengthened
its market leadership position by leveraging the brand
'Homelites' - built on differentiated positioning of stronger,
longer and karborised sticks. The Business continues to
focus on scaling up the share of value-added products
in its portfolio and enhancing supply chain efficiency by
sourcing products manufactured closer to markets.

Leveraging its world-class brands and innovative &
superior product offerings, your Company remains
confident of scaling up its Agarbattis & Safety Matches
portfolio, and strengthen its position in the segment.

TRADE MARKETING & DISTRIBUTION

Your Company's Trade Marketing & Distribution (TM&D)
vertical continues to strengthen its multi-channel
go-to-market capabilities towards ensuring effective market
servicing and product availability. Proactive interventions
continue to be made towards addressing emerging
trends such as the rapid growth of new gen channels
(Modern Trade, e-Commerce, Quick-Commerce) and
increasing demand for premium products.

The dynamic interplay of varied and evolving consumer
preferences, multiplicity of channels including rapid
acceleration in new gen channels, diverse demographic
profiles & socio-economic factors, and a vast geographical
landscape pose a high degree of complexity for distribution
of FMCG products in India. Recognising the multifaceted
nature of these challenges, TM&D continues to sharpen
channel-specific strategies to efficiently service consumer
demand across the country. Valuable insights of consumer
behaviour and channel/region specific trends gained over
the years continue to be leveraged to deliver superior
performance in terms of product availability, visibility and
freshness.

The rapid growth of Modern Trade, e-Commerce and
Quick-Commerce channels, coupled with the emergence
of several new players, has necessitated the deployment
of tailored market/outlet specific strategies to seize the
emerging opportunities. Omni-channel presence in urban
markets enabled accelerated growth while shopper
marketing insights and agile supply chain capabilities
were leveraged to enhance operational and execution
efficiencies.

The surge in internet usage, particularly through
smartphones, amongst convenience-seeking consumers,
widespread adoption of digital payments, wide assortment
of products and faster deliveries continue to drive the
rising salience of e-Commerce and Quick Commerce
channels. Your Company's collaborations with leading
e-Commerce and Quick Commerce platforms on all
aspects of operations viz. category development, supply
chain, consumer offerings and customer acquisition
has enabled it to significantly scale-up sales in these
channels. This was augmented by development of
exclusive pack assortments, channel-specific business
plans and 'Digital First' brands. Joint Business Plans
executed in coordination with these platforms coupled
with agile supply chain initiatives have further fortified your
Company's market standing in e-Commerce and Quick
Commerce channels. Growth in the premium portfolio
was accelerated through increased visibility, focus on
target cohorts and jointly curated campaigning, including
collaborating on topical events across accounts. Digitally
enabled sales have grown rapidly in recent years and,
together with Modern Trade, now account for 31% of your
Company's FMCG ⁷ portfolio (Vs. 17% in FY 2019-20).

Your Company's multi-channel distribution network, which
facilitates availability of its products in nearly seven million
retail outlets of which more than one-third are serviced
directly, was further strengthened during the year with the
addition of new markets and outlets to its direct servicing
base. Market coverage was stepped up by more than 2x of
pre-pandemic levels. TM&D's wide and deep distribution
network and cutting-edge digital capabilities render the
FMCG Businesses with significant competitive strength.

In the General Trade channel, your Company continued
to demonstrate resilient performance through focused
market approach and differentiated product assortment.
During the year, urban markets witnessed heightened
competitive intensity from regional/local players and
accelerated channel shift with the increasing salience
of Modern Trade, e-Commerce and Quick Commerce.
Automation, data-led insighting and machine-learning
enabled solutions continue to be increasingly leveraged
to drive last mile productivity and performance across
markets. Further, emerging technologies like Generative
AI are being increasingly leveraged to automate operations
and enhance efficiency. Customised servicing based on
outlet potential and retail engagement programmes have
been deployed to stimulate demand for your Company's
products with enhanced focus on premium grocery
outlets. Specific interventions were undertaken to drive
premiumisation in General Trade outlets with store level
missions led by sharper data analytics.

In rural markets, your Company continued to deploy
market-specific interventions to enhance direct coverage
on the basis of socio-economic indicators and market
potential. This has been supported through a hub and
spoke distribution model with the continued expansion of
rural stockists network to 1.4x over the last three years.
Leveraging the synergies arising out of the deep rural
connect of your Company's Agri Business, extensive
consumer activations were undertaken in high potential
rural areas during the year aided by concerted market

development activities and further enhancements to
the digital ecosystem for the stockist channel. These
initiatives have substantially enhanced the availability of
your Company's range of products in rural markets.

The Food Service and Institutional channels continued to
witness robust growth during the year leveraging existing
partnerships and your Company's wide product range.
Strategic partnerships unlocked new routes-to-market,
catering to specialised segments including 'on-the-go'
consumption, direct marketing and QSRs. Customised
product portfolios continue to be deployed for identified
high potential segments of railways, airports and airlines
to strengthen presence in this channel.

TM&D remains at the forefront of leveraging cutting-edge
digital technologies and building a digital ecosystem to
draw actionable insights for sharp-focused interventions,
augment sales force capability, drive productivity, improve
market servicing and deepen connect with retailers.
Technology enablement in the form of customised mobility
and routing solutions, machine learning algorithms,
data science models, data analytics comprising insightful
visualisation tools and predictive analytics are being
increasingly leveraged to enable speedy and accurate
data capture, enable real-time informed decision making
and aid in optimisation of trade & marketing inputs to
enhance visibility and sales. The machine learning
models have been augmented to sharpen outlet level SKU
recommendations. Use cases for self-service analytics
tools have increased to analyse data and present insights
which are digitally integrated into business decisions,
resulting in intelligent digitalisation of business processes.

The digitally powered eB2B platform of your Company,
UNNATI, has been rapidly scaled up during the year,
covering nearly eight lakh outlets. UNNATI facilitates
sharp and direct engagement with retailers, superior
analytics, personalised recommendations of hyperlocal
baskets based on consumer purchase insights, and
deeper brand engagement.

To cater to the digital payments and financing needs of
customers and retailers, your Company has entered into
strategic collaborations with banks and Fintech partners.
These solutions have been seamlessly integrated with
the UNNATI platform to digitally empower and unlock
business growth for your Company's trade partners.

The scale and diversity of your Company's distribution
network remains pivotal in enhancing market presence,
gaining valuable insights into consumer & trade behaviour
and facilitating the execution of product launches
across geographies. In order to effectively leverage new
routes-to-markets and meet the assortment needs of
new gen channels, your Company executed over
100 new product launches across target markets besides
extending the availability of several existing products
in the portfolio.

Several interventions were undertaken by TM&D during
the year to drive structural improvement in operational
effectiveness and productivity. During the year, your
Company continued to leverage the integrated planning
and supply chain tool, powered by best-in-class algorithms
for inventory optimisation and productivity enhancement
to significantly improve supply chain agility and market
servicing through enhanced forecast accuracy. The
supply chain network was redesigned to enhance the
premium portfolio availability both in existing and target
markets across urban and rural markets. TM&D continues
to augment warehousing infrastructure leveraging
cutting-edge technologies to cater to the growing scale of
your Company's FMCG Businesses.

In line with your Company's commitment to the
'Triple Bottom Line', TM&D continued to focus its efforts
for adoption of renewable energy sources in its operations.
As part of your Company's Sustainability 2.0 agenda,
TM&D is rapidly expanding its Green Logistics efforts for
mid mile and last mile deliveries in key cities across the
country. Collaborations with multiple Original Equipment

Manufacturers (OEMs) and fleet aggregators facilitated
adoption of Electrical Vehicles (EV) in TM&D operations.
The number of EV trips increased by 3x over the
previous year.

TM&D's distribution highway is a source of sustainable
competitive advantage for your Company's FMCG
Businesses and is well-positioned to support the rapid
scale-up of operations in the ensuing years leveraging
its best-in-class systems and processes, an agile and
responsive supply chain, and a synergistic relationship
with its channel partners.

PAPERBOARDS, PAPER AND PACKAGING

Paperboards & Specialty Papers

After achieving record highs in FY 2022-23, the domestic
industry has faced significant challenges over the past two
years. The industry contended with a difficult operating
environment, characterised by low-priced supplies of
paperboards and paper from China and Indonesia in
global markets, including India, as well as weak demand
conditions, resulting in subdued realisations.

On the inputs front, wood prices witnessed sharp
escalation during the year, with wood availability and
quality being significantly sub-optimal on account of
lower plantations during the pandemic period and higher
demand from competing Wood Based Industries (WBI).

The cumulative impact of subdued realisations, excess
supply in domestic markets led by unprecedented
increase in low-priced imports into India from China,
Indonesia etc., sharp surge in wood costs, and
currency-led volatility exerted pressure on margins during
the year. The Business was able to partially mitigate
the impact of these challenges by leveraging structural
advantages of the integrated business model, stepped-up
end-user engagements, Digital interventions and
increase in salience of exports and Plastic substitution
(PlaSub) products.

The Business has also undertaken several initiatives to
address the challenges of wood availability and surge in
costs, including inter alia, opportunity based wood imports,
evaluation of leased plantation models, and acceleration
in plantations in collaboration with industry stakeholders.
Your Company is pioneering a first ever initiative in
Indian Wood Based Industry using satellite imaging for
plantation monitoring and wood assessment to monitor
pulpwood plantations and assess future harvestable
wood quantity available in various catchments.

The Business sustained its leadership position in the
Value-Added Paperboard (VAP) segment through focused
innovations and development of customised solutions
for end-use industries. The Business also consolidated
its leadership position in the eco-labelled products and
premium recycled paperboards segments.

During the year, the Specialty Papers segment witnessed
robust growth driven by capacity augmentation in
Decor paper. Market standing in the segment continues
to be driven by product mix enrichment and diversification
of the customer base. The domestic industry remained
under pressure due to cheap supplies from China.
The levy of Anti-dumping duty on Decor paper has
partially provided a level playing field for domestic industry,
which is critical towards fostering domestic value chains
and enabling import substitution.

During the year, your Company signed a Business Transfer
Agreement to acquire the Pulp and Paper Undertaking
('CPP') of Aditya Birla Real Estate Limited ('ABREL') at
Lalkuan (Nainital, Uttarakhand). Commissioned in 1984,
CPP is a well-established player in the Indian Paper
industry with an installed capacity of 4.8 Lakh tonnes
per annum. CPP is a one-of-a-kind asset with a strong
strategic fit with your Company's Paperboards & Specialty
Papers Business. The acquisition (which is expected to
be completed in about six months) will immediately add
significant scale and economies to existing operations
with potential for further capacity expansion, provide
locational advantage for efficient customer servicing and

proximity to key raw material sources, mitigate operational
risks through multi-site operations and enhance resilience
across industry cycles through portfolio diversification.
The Business expects to drive structural improvement
in profitability of CPP through several value unlock
interventions such as capacity debottlenecking, product
quality upgrade, efficiency improvement leveraging
TPM/Digital initiatives, supply chain optimisation, costs
and procurement efficiencies. The acquisition is also
expected to strengthen the market standing of your
Company's Paperboards and Specialty Papers Business
and engender new opportunities in the domestic and
international markets. The acquisition aligns with your
Company's strategy of driving the next horizon of growth
in the Paperboards and Specialty Papers Business by
expanding capacity at a new location considering that
the existing facilities are already saturated. The strong
linkages to afforestation and livelihood creation pursued
by both the entities will also contribute meaningfully to
national priorities.

The paperboards and packaging industry is poised
for transformative change in the medium term.
Customers are increasingly seeking solutions that are
bio-degradable, substitute single use plastic and meet
stakeholder & regulatory expectations across industries
including food serving & delivery, pharmaceutical, beauty
and electronics.

The Business has adopted a multi-tiered strategy to
build solutions that will replace single use plastics and
meet emergent consumer needs. Within the sustainable
products portfolio - 'Platform 1’ comprises a range of
recyclable, compostable and barrier coated boards and
includes the 'Filo' series - 'FiloBev' (for beverage cups),
'FiloServe' (for QSR, bakeries, food retail) & 'FiloPack'
(packaging for sweets and deep freeze applications).
'FiloBev Mini' (for economic cup variant for short servings)
was developed during the year and has quickly gained
market share in focus markets. The Filo series has
been certified compostable by the Central Institute of
Petrochemicals Engineering & Technology (CIPET) and the
manufacturing unit at Bollaram has been registered as a

compostable products manufacturer. The state-of-the-art
Coater machine set up during the year has enabled the
business to quickly penetrate this fast-evolving space
which holds immense growth potential, supported by
the R&D capabilities of your Company's Life Sciences &
Technology Centre, and through external collaborations
with global specialists. The range of products in this
segment is witnessing strong growth momentum both
in domestic and international markets. 'Platform 2’
comprises a range of first-to-market Fusion boards that
are fully recyclable and replace plastic 'foam' board.
End-use applications include indoor display solutions
involving replacement of plastic signboards and shelves.

‘Platform 3’ offers futuristic packaging solutions
comprising premium Moulded Fibre Products (MFP) made
from renewable natural fibres such as wood, bamboo,
bagasse, waste paper etc. Your Company's wholly-owned
subsidiary, ITC Fibre Innovations Limited (IFIL), forayed
into the fast-growing MFP space with the commissioning
of a state-of-the-art MFP manufacturing facility in
Badiyakhedi, Madhya Pradesh in March 2024. During
the year, IFIL has substantially stabilised operations
and scaled up commercial shipments. Going forward,
IFIL will leverage the expertise of the Business in
fibre value chain, manufacturing excellence and strong
sustainability credentials to rapidly scale-up business
with continued focus on developing innovative plastic
substitution solutions.

Your Company's Packaging Board Centre of Excellence
was institutionalised during the year to further drive
customer engagement on technical aspects, improve
product performance and focus on new-gen product
development.

The Business continues to procure wood, a key raw
material, from sustainable sources. Research on clonal
development has resulted in introduction of high-yielding
and disease-resistant clones that are adaptable to a
wide variety of agro-climatic conditions. This has not only
aided in increasing farmer incomes but has also enabled

greater consistency in farmer earnings. In this context,
your Company's Life Sciences & Technology Centre is
engaged in developing higher yielding second generation
clones with enhanced pest and disease resistant attributes.
The Business continues to focus on scaling up wood
sourcing from core areas and has increased plantations
in core area during the year. In addition, initiatives such
as bund plantations and scaling up plantations in new
catchment areas in Odisha and Chhattisgarh have enabled
procurement of nearly 10% of total wood requirement of
the Business from such new areas, with further potential
for increasing cost-effective access to fibre in the future.
Business has achieved highest ever plantation area of
~65000 ha (growth of appx. 30%) during the year.

Your Company has the distinction of being the first in India
to have obtained the Forest Stewardship Council-Forest
Management (FSC®-FM) certification (FSC®-C102390),
which confirms compliance with the highest international
benchmarks of plantation management across the
dimensions of environmental responsibility, social benefit,
and economic viability. Till date, your Company has received
FSC®-FM certification for over 1.49 lakh acres of
plantations involving over 25000 farmers. During the year,
nearly 4.85 lakh tonnes of FSC®-certified wood was
procured from these certified plantations. Your Company
sustained its position as the leading supplier of
FSC®-certified paper and paperboards (FSC®-C064218)
in India.

Your Company's Paperboards & Specialty Papers
Business is a pioneer in the adoption of Digital
technologies. In recent years, the Business has embarked
upon a comprehensive Digital Transformation Programme
across the vectors of manufacturing, supply chain and
support services to achieve operational excellence,
enable decarbonisation of operations, drive improvement
in profitability and improve safety across the value chain.
The multi-dimensional digital interventions encompass
Industrial IoT for Smart Operations, Integrated Data
Platform, AI/ML algorithms for manufacturing process
optimisation, AI/ML based image analytics and IoT based

crop monitoring & advisory, and computer vision-based
solutions to improve workforce safety. The Business
continues to collaborate with partners from the start-up
ecosystem, as well as established solution providers,
in building scalable solutions that are custom fit to business
requirements. The Business' Digital App Suite has more
than forty applications across themes of automated data
reporting, image and video analytics, intelligent root
cause analysis, smart simulation, numerical optimisation,
advanced AI models, low-code/no-code applications,
process digital twins, etc. The Business was the Global
winner at the BRICS Industrial Innovation Contest under
the theme of 'Intelligent Manufacturing using AI/ML' and
the Asia-Pacific Regional winner at the Gartner's Eye for
Innovation Awards under the categories of 'Advanced
Manufacturing', and 'Energy, Power and Utilities'.

The Business also embarked upon a Supply Chain
Transformation Project 'OJAS', establishing a dedicated
supply chain vertical to enhance customer service and realise
value from supply chain optimisation. This initiative has
led to significant improvements in On-Time-In-Full (OTIF),
reductions in Order to Delivery Time (ODLT), and other
customer service delivery metrics.

The Business has adopted the principles of
Total Productive Maintenance (TPM), Lean and
Six Sigma for over a decade and continues to reap
substantial benefits through several Business Excellence
initiatives.

All manufacturing units of the Business continue to
recycle nearly 100% of the solid waste generated during
operations by converting the same into lime, fly ash
bricks, cement, grey boards, egg trays etc. In addition,
the Business recycled around 1.1 lakh tonnes of waste
paper during the year, thereby sustaining positive solid
waste recycling footprint of the Business.

In line with the objective of enhancing the share of
renewable energy in its operations, the Business has
implemented several initiatives including investments in a
green boiler, high efficiency circulating fluidised bed boiler,
solar & wind energy and increased usage of bio-fuel.
The recently commissioned state-of-the-art and
future-ready High Pressure Recovery Boiler at the
Bhadrachalam mill is progressively enhancing energy
efficiency and reducing the carbon footprint of the unit's
operations by significantly lowering coal consumption
by appx. 25%. These investments are a testament
to your Company's commitment towards embedding
sustainability in its operations and supporting the
'Make in India' initiative. With these initiatives, renewable
sources presently account for more than 50% of
total energy consumed at the four manufacturing units
of the Business.

The Business continues to strengthen its safety
management processes, adopt globally recognised
best practices and ensure that facilities are designed,
constructed, operated and maintained in an inherently safe
manner. Business continues to deploy various measures
including the use of Data Analytics Tools to identify risk
prone areas for proactive mitigation of incidents, video
analytics, digitally enabled systems such as Mobile based
app, 'Gensuite', etc.

The manufacturing facilities at Bhadrachalam, Kovai,
Tribeni and Bollaram continue to receive industry
recognition for their green credentials and safety
standards in line with the focus on sustainable business
practices. The Bhadrachalam unit is the first pulp & paper
plant and the second in the country overall, to be rated
'GreenCo Platinum+' by CII, as part of the Green Company
rating system. The Kovai unit has also been rated
GreenCo Platinum+ by CII. The Kovai unit is the
first site in India and the first paper mill in the world to
achieve the highest platinum rating under the 'Alliance
for Water Stewardship Standards'. Bhadrachalam unit

also received Alliance for Water Stewardship Platinum
certification. Bhadrachalam mill was also awarded the
'Excellent Energy Efficient unit' at National Awards for
Energy Management, 2024. The Kovai Unit was awarded
for Excellence in water Management, 2024, under the
'Beyond the Fence' category.

With structural drivers of demand in the Indian economy
remaining strong over the medium term, paperboards
demand is expected to remain robust. Enabling
factors include India's emerging demographic trends,
urbanisation, rising middle class, continued substitution
of plastic with greener alternatives and India emerging as
the Global manufacturing hub. End-user segments such
as Pharmaceuticals, Apparel, QSR, FMCG, consumer
durables and e-Commerce are projected to register strong
growth. Writing & Printing paper demand is also expected
to remain firm on the back of demand from the publishing
and notebooks industries driven by the Government's
thrust on primary and secondary education.

While cheap imports from China as well as from ASEAN
countries remain a potential threat in the short run, the
Business remains confident of leveraging its competitive
strengths to mitigate the impact thereof. Representations
continue to be made at appropriate forums for suitable
measures to safeguard domestic industry. Directorate
General of Trade Remedies (DGTR), Ministry of
Commerce and Industry, India has also initiated an
Anti-Dumping investigation on Virgin Paperboard
originating from China and Chile. Indian Paper
Manufacturers Association (IPMA), National Industry
body has also approached Ministry of Commerce for
considering imposition of Minimum Import Price (MIP) on
import of paperboards into India.

Your Company continues to engage with policy makers
to address key industry challenges including increasing
wood availability through collaborative public-private
plantation models to strengthen the competitiveness of
domestic industry and arrest the rapid increase of low
priced imports of paper & paperboard into the country.

Over the years, your Company has continued to lay
thrust on structural interventions to provide sustainable
competitive advantage across the value chain with
significant structural cost savings and enhanced
productivity across all key operating nodes to enhance the
margin profile of its portfolio.

The integrated nature of your Company's business
model - comprising access to high-quality, cost competitive
and renewable fibre supply chain, continued development
of high yielding and disease-resistant clonal saplings,
enhancing energy efficiency, continuous improvement
through product & process innovation, in-house pulp
manufacturing capability, imported pulp substitution,
world-class product quality, state-of-the-art manufacturing
facilities, increasing usage of data analytics and
Industry 4.0 technologies along with robust forward
linkages with the Education and Stationery Products
Business and the Packaging and Printing Business - is a
key source of competitive advantage for your Company's
Paperboards & Specialty Papers Business. Your Company
is confident of further consolidating its leadership position
in the Indian Paper and Paperboards industry leveraging
recent investments in innovation platforms anchored on
the development of sustainable products and cutting-edge
digital technologies to set new benchmarks in customer
satisfaction, operational excellence, and sustainability.

Packaging and Printing

Your Company’s Packaging and Printing Business
is a leading provider of value-added, differentiated
and innovative packaging solutions leveraging its
comprehensive capability-set spanning multiple
technology platforms for cartons and laminates,
supported by in-house cylinder making and blown film
manufacturing lines. The recent capacity addition at
Nadiad, Gujarat, with state-of-the-art equipment to cater
to markets in the Western region, has further augmented
the Business’ capabilities in Cartons packaging. Capacity

utilisation at the facility was progressively ramped up
during the year.

The Business caters to the packaging requirements of
leading players across several industry segments viz.
Food & Beverage, Personal Care, Home Care, Footwear,
Consumer Electronics & Electricals, QSR, Pharma,
Liquor and Tobacco. The Business continues to be
acknowledged as a 'first choice packaging partner' by
several reputed FMCG companies in the country for
providing superior and cost-effective packaging solutions.
The Business also provides strategic support to your
Company's FMCG Businesses and Cigarettes Business
by facilitating faster turnaround for new launches,
innovative & sustainable packaging solutions, design
changes and ensuring security of supplies.

Amidst sluggish consumer demand and heightened
competitive intensity in the packaging and printing industry,
the Business continues to aggressively pursue new
business development across various segments. During
the year, the Business acquired several key accounts,
creating a sound base for robust growth going forward.

The Business continues to craft innovative packaging
solutions leveraging its deep understanding of
end-user needs and the capabilities of your Company's
Life Sciences and Technology Centre. The Business
further scaled up the flagship 'InnovPack' campaign
targeting specific end-use segments with potential for
rapid adoption of sustainable packaging and plastic
substitution solutions. Along with a pipeline of solutions
developed through molecular science research, such as
'Bioseal' (compostable coating to replace plastics),
'Oxyblock' (recyclable coating solution to enhance barrier
properties in packaging) and 'Germ free coating' (solution
for microbial free packaging surface addressing the
consumer consciousness towards hygiene and safety),
the Business continued to focus on developing several
innovative solutions towards 'Reducing, Reusing and
Recycling' of plastic substrates; these are under various
stages of commercialisation.

The Business has consistently demonstrated execution
excellence vis-a-vis key operational parameters by
implementing various operational excellence tools and
projects. These initiatives focus on improving efficiency,
reducing waste, and enhancing quality, supported by
employee skill development. The Business amplified
and sustained these benefits through deployment of
new-age Industry 4.0 technologies and digital facilitation
by establishing a core foundation of IT-OT integration
across all units.

During the year, the Business received the prestigious
WorldStar and AsiaStar awards in the categories of
pack premiumisation and sustainability. The Business
also received several national level awards such as the
IFCA Star Award and SIES SOP Star Award for
its excellence in Packaging. The Business was
also recognised as the Packaging Company of the
Year 2024 - Folding Cartons (Large Volumes) & Packaging
Convertor of the Year 2024 (Foods & Beverages)
by PrintWeek.

All four units of the Business are certified under
the Integrated Management System, consisting of
ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018.
Cartons Packaging lines at Tiruvottiyur and Haridwar
units received the 'Grade A' and the Nadiad unit received
'Grade AA' - Brand Reputation Compliance Global
Standards (BRCGS) certifications for global standards in
packaging materials, a key accreditation for supplies to
the packaged foods industry. All key units of the Business
have Sedex certifications for social ethical compliances;
with the Business also receiving the Ecovadis Bronze
certification for sustainability performance.

Notwithstanding the recent headwinds in the sector, the
Indian packaging industry is positioned for significant
growth in the near term, considering the low per capita
packaging consumption of appx. 10 kgs per annum
in India as against per capita consumption of
60 to 100 kgs per annum in Advanced Economies.
Demand for consumer linked packaging in India is
expected to be further benefited by rising affluence,

favourable demographics and growing share of
Modern Trade and e-Commerce. Growing awareness
of decarbonisation and heightened regulatory attention
on plastic packaging are expected to drive growth
in sustainable packaging, including recyclable and
circular solutions.

With world-class technology across a diverse range of
platforms, leadership in sustainable packaging solutions
and best-in-class quality management systems, the
Packaging and Printing Business has established itself
as a one-stop packaging solutions provider to several
industry segments viz. Food & Beverage, Personal Care,
Home Care, QSR, Footwear, Consumer Electronics,
Pharma and Tobacco. With focused investments in
skill development and a distributed manufacturing
footprint, the Business is well positioned to grow its
marquee customer base while continuing to service the
requirements of your Company's FMCG Businesses.

AGRI BUSINESS
Leaf Tobacco

Global demand for leaf tobacco exceeded supply during the
year, due to supply disruptions in major sourcing regions
caused by adverse weather events and international
manufacturers rebuilding depleted inventory levels from
previous years' crop shortages. Despite growth in Indian
Flue Cured Virginia (FCV) tobacco crop production during
the year, the surge in global demand caused heightened
competitive intensity amongst leaf exporters resulting
in sharp rise in FCV procurement prices for the third
consecutive year.

The Business continued to leverage its deep customer
relationships, crop development expertise, superior
product quality, world-class processing facilities and strong
sustainability credentials to strengthen its position as a
reliable supply chain partner for global customers besides
accessing new customers/markets. During the year, the
Business continued to increase its share of business

with international buyers of Indian Burley tobacco by
facilitating increased crop production, adopting Weather
Resilient Tobacco Production Systems and strengthening
crop competitiveness leveraging its sustainable tobacco
programme. Deeper farmer & customer engagement,
operational agility and supply chain efficiency enabled
the Business to deliver enhanced value to customers and
consolidate its pre-eminent position as the largest Indian
exporter of unmanufactured tobacco.

The Business has enhanced focus across the tobacco
value chain on the key vectors of Quality, Consistency,
Compliance, Climate risk mitigation and Sustainability.
To deliver on these parameters, sustained investments
are being made in your Company's Green Leaf Threshing
plants (GLT) at Anaparthi, Chirala and Mysuru towards
capacity enhancement, delivering world-class quality and
upgrading processing technology. Crop & region-specific
agronomic practices are being implemented at scale to
meet new and emerging customer needs.

The Business continues to set benchmarks in leaf
threshing operations through focused initiatives and
innovative technological & digital solutions such as real
time chemistry measurement & analysis (chemosensory
evaluation) for finished goods, Historian AI/ML engine for
advanced data analytics, AI based NTRM (Non-Tobacco
Related Matter) removal system, automation of material
handling, etc.

Strategic cost management remains a key focus area
for the Business. Digital tools such as AI/ML powered
real-time price discovery system continue to be scaled
up facilitating efficient leaf tobacco buying across auction
platforms. Several other digital initiatives, implemented
across the value chain in recent years, have led to improved
operating efficiencies in areas of crop development,
leaf procurement and supply chain.

Synergistic R&D initiatives with focus on varietal
development, climate smart farming techniques, farm
level digital interventions and usage of water efficient

technologies are being scaled up towards enhancing
productivity & product quality, reducing cultivation costs,
strengthening resilience and capacity building of the farm
value chain to increase crop security and enhance farmer
incomes.

The Business has stepped up its engagement with farmers
to implement integrated energy management initiatives
spanning energy conservation, increasing alternative
fuel usage and energy plantations towards achieving fuel
self-sufficiency in the curing process of FCV tobacco.
The Business implemented several decarbonisation
measures for farms, GLTs, and supply chain operations
throughout the year. The electrical energy needs of all
three GLTs are substantially met from renewable sources
in line with your Company's philosophy of adopting a
low-carbon growth path. In addition to these initiatives,
your Company is taking up integrated watershed
management programmes to ensure availability of water
for irrigation during critical phases of the crop cycle.

In recognition of its commitment to the highest
standards of Sustainability, EHS & Quality, the Business
received several awards during the year including the
'SEEM National Energy Management award' with
Platinum rating for Excellence in Energy Conservation
for Chirala GLT, 'Silver Category in Industrial Safety
Leadership Award' from Confederation of Indian Industry
(CII) for Anaparthi GLT, 'Excellence Energy Efficient Unit'
for Mysuru GLT from CII, as well as various awards from
the Quality Circle Forum of India and CII for operational
excellence, etc.

While the recent stability in taxes on cigarettes and supply
shortages in global markets has led to an increase in
the demand for Indian leaf tobacco during the year, it is
imperative to address certain structural factors to facilitate
sustained growth and competitiveness of leaf tobacco
exports from India. Punitive taxation on the legal cigarette
industry has over the years resulted in rapid increase in
illicit cigarette trade which has in turn adversely impacted
demand for Indian leaf tobacco as illicit products do not
use leaf tobacco grown in India. Lower export incentives in

India and high import duty/tariffs levied in several markets,
including the USA and Europe, also continue to weigh on
the competitiveness of Indian leaf tobacco exports.

As stated in earlier years, a more balanced regulatory
and taxation regime that cognises for the unique tobacco
consumption pattern prevalent in India and the economic
realities of the country remains critical to support the
Indian tobacco farmer and the 46 million livelihoods
dependent on tobacco. It is also imperative that the Indian
leaf tobacco sector receives necessary policy support,
including restoring export incentives to earlier levels, to
enhance the competitiveness of unmanufactured tobacco
exports from India and contribute to increase in farmer
incomes. According to an ASSOCHAM TARI ⁸ Study,
the tobacco sector in India contributes substantial
socio-economic benefits in terms of agricultural
employment, farm incomes, revenue generation and
foreign exchange earnings. Your Company continues to
engage with policy makers on these matters.

The Business will continue to provide strategic sourcing
support to your Company's Cigarettes Business and
fortify its leadership position as a major exporter of quality
Indian tobacco, thereby catalysing the multiplier impact
of increased farmer incomes on the rural economy.
With its strong R&D capability, unique crop development
& extension expertise, sustainability leadership,
digital expertise, state-of-the-art processing facilities
and deep understanding of customer & farmer needs,
your Company is well positioned to meet the current and
emerging requirements of global customers and sustain
its position as a world-class leaf tobacco organisation.

Other Agri Commodities

Amidst persistent geopolitical tensions, climate
uncertainties and macroeconomic challenges, concerns
over global food security and inflation have intensified.
Various policy measures implemented by the Government
of India, including stock limits and export restrictions,

continued to pose myriad challenges to your Company's
Agri Business during the year.

The Business continued to map risks and opportunities
arising out of the unfolding global trade dynamics and
build adaptive capacity to enhance resilience of its
business models. In spite of the challenging operating
environment, your Company leveraged its strong
farm linkages, extensive sourcing expertise, enabling
traceable, attribute-based and identity-preserved sourcing
of commodities, multi-modal logistics capability, agile
supply chain operations, deep customer relationships,
and focus on scaling up the Value-Added Agri Products
(VAAP) portfolio, to drive robust growth during the year.
Easing food inflationary pressures and higher inventories
of food grains have enabled partial lifting of certain trade
restrictions towards the end of the year, which augurs well
for the year ahead.

As reported in earlier years, the scope and scale of
operations of your Company's Agri Business have grown
manifold over the years and currently encompasses
over 3.5 million tonnes of annual throughput in 22 states
and over 20 agri-value chains. The strategic focus of
the Business continues to be on accelerating growth by
rapidly scaling up its Value-Added Agri Products (VAAP)
portfolio, straddling multiple value chains comprising
Spices, Coffee, Frozen Marine Products and Processed
Fruits, amongst others.

- Your Company further consolidated its position as
a preferred supply chain partner to buyers in spices
such as Chilli, Cumin, Turmeric, and Coriander.
The Business enhanced its presence in 'food safe'
markets, viz., the USA, EU, and UK, by leveraging
its institutional strengths, such as identity-preserved
sourcing expertise, strong backward integration,
supply chain control, and customer-centric strategies.

The Business continues to scale up its Organic and
Integrated Crop Management (ICM) programmes,
expanding organic cultivation across multiple
states to meet the growing demand for certified

organic products. Committed to sustainable farm
management practices backed by Rainforest Alliance
and Global GAP accreditation, your Company has
successfully leveraged ITCMAARS to strengthen
farmer connections, improve traceability, and drive
sustainable agricultural practices. During the year,
the Business significantly expanded its value-added
portfolio, achieving substantial growth in organic,
steam-sterilised, and processed powder segments.
The Business remains committed to execution
excellence - capacity utilisation at the state-of-the-art
spices processing facility in Andhra Pradesh has been
further scaled up; the Business continues to maintain
its unblemished track record in terms of complying
with stringent food safety parameters. The proportion
of custom-made products in the overall portfolio has
increased considerably, underscoring your Company's
strategic focus on premium offerings. The Business
has successfully broadened its customer base
across various markets, showcasing strong customer
acquisition capabilities and a commitment to building
lasting relationships. Additionally, the Business has
gained market share in the export market, reinforcing
its position as the leading Indian exporter of whole
and value-added spices.

- During the year, international coffee prices surged
primarily due to lower supply in global markets by
leading coffee producers viz. Brazil and Vietnam.
Driven by strong demand, Indian coffee exports
witnessed robust growth.

Your Company leveraged its strategic sourcing
presence in major coffee-growing regions of India
and deepened its focus on certified and sustainably
sourced coffees to expand its market share in exports.
The Business strengthened its footprint across key
international markets, particularly in Europe and the
Middle East, by leveraging its long-standing customer
relationships, strong sustainability credentials and
agile execution. Continued expansion of certified

acreage and investments in traceable and sustainable
supply chains demonstrate the Business' commitment
to responsible sourcing and future-readiness.

Your Company continues to be one of India's leading
exporters of value-added frozen marine products,
with strong capabilities in processing individually
quick-frozen (IQF), raw, and cooked products,
adhering to the highest safety and hygiene standards
demanded by discerning markets such as the US, EU,
and Japan. The Business strengthened its position
in the 'Aquaculture Stewardship Council (ASC)
certified shrimp' segment, reinforcing its leadership
in sustainable seafood and aligning with customers'
responsible procurement goals.

During the year, the Indian shrimp industry faced a
challenging environment marked by volatile farm
gate prices and supply chain headwinds. Despite
these challenges, your Company expanded its reach
through market development in countries such as
Greece, Israel, and Malaysia, and by launching
strategic product extensions, in line with its portfolio
diversification goals.

- Your Company continues to enhance its capabilities
in the Medicinal and Aromatic Plant Extracts (MAPE)
segment by strengthening backward integration,
cultivation programmes, and its portfolio of plant-based
extracts. Focusing on Ayurvedic ingredients like
ashwagandha, turmeric, and marigold, the Business
deepened farmer engagement to ensure traceability
and quality compliance. Your Company's MAPE farm
in Madhya Pradesh continues to play a pivotal role
in varietal selection trials, seed production, and
establishing standardised package of practices,
enhancing the Business' technical capabilities.
The Business also initiated organic cultivation to meet
the growing demand for certified organic extracts in
premium export markets and is developing unique
value-added products leveraging the research
platforms of the Life Sciences and Technology Centre
of your Company.

Your Company continues    to drive    agricultural

transformation at scale    through    ITCMAARS

(Metamarket for Advanced Agriculture and Rural Services),
a pioneering 'Phygital' platform that integrates digital
capabilities with on-ground engagement. ITCMAARS is a
crop-agnostic full-stack AgriTech platform, that has been
steadily enhancing procurement efficiency, optimising
supply chains, and creating new avenues for value
generation while delivering meaningful benefits to the
farming community. Using Farmer Producer Organisations
(FPOs) for physical engagement and a super app for
digital services, ITCMAARS is catalysing farmer impact
at scale.

The ITCMAARS super app, which farmers can download
on their phones, acts as a single point resource for farmers,
providing personalised agricultural services through a plug
and play model. This digital platform provides AI/ML driven
personalised climate-smart crop advisories, intelligent
nudges, customised soil nutrition, vernacular and voice
enabled Generative AI, satellite sensing and real-time
image recognition tools for the farming community.
The physical layer enables access to cutting edge
agricultural techniques such as biological agri inputs,
nano fertilizers, drones, precision farming technologies,
scientific quality assaying, market linkages and
seamless access to formal credit at villages through
FPOs and partners.

This initiative now spans across more than 2,050 FPOs
encompassing over 2.1 million connected farmers
across 11 states. Operating across more than
10 crop value chains, the platform partners with
over 100 leading institutions, including banks, agri-input
companies, Indian Council of Agricultural Research (ICAR),
and agri-tech startups. The ITCMAARS super app,
available in 8 regional languages, has emerged as
India's highest-rated agriTech app. The 'KrishiMitra'
voice assistant, the world's first Gen AI-based chatbot for
farmers, has significantly boosted digital adoption through
vernacular and voice-based interactions.

As India's regulatory and consumer landscape increasingly
demands traceability and sustainability, ITCMAARS is
laying the foundation for 'Trust Systems at Scale', enabling
the farming community to meet evolving standards
such as the EU Deforestation Regulation (EUDR) and
sustainably produced certification requirements. With a
vision to empower millions of farmers and unlock new
value pools across the agri-inputs, outputs, and services
domains, your Company remains deeply committed to
leveraging ITCMAARS to deliver enhanced productivity,
improved market access, and resilient incomes for India's
farming communities.

Over the years, your Company has invested significantly
in building competitively superior agri-commodity
sourcing expertise comprising multiple business models,
wide geographical spread and customised infrastructure.
Your company is rapidly building expertise in data-science
led decision support systems to deepen its sourcing
capability. AI/ML models dynamically respond to evolving
conditions across multiple sourcing dimensions and
support the sourcing experts in making optimal decisions
around temporal and spatial vectors. These capabilities
and infrastructure have created structural advantages by
facilitating competitive sourcing of agri raw materials for
your Company’s Branded Packaged Foods Businesses.

- The Business continued to play a pivotal role in
securing benchmark-quality wheat to support the
growing requirements of the 'Aashirvaad' atta portfolio.
Leveraging a wide sourcing network, robust crop
development initiatives, and digital tools, the Business
ensured timely and cost-efficient procurement of
critical grades of wheat. During the year, procurement
was scaled through direct farm linkages and FPOs,
with a significant share of wheat sourced via digitally
enabled platforms. Crop development efforts were
intensified to improve climate resilience, enhance
yields, and secure premium varieties to provide
consumers with best-in-class product quality and
experience.

-    During the year, farmer-driven milk procurement
network in Bihar, West Bengal, and Jharkhand
was strengthened to meet the growing demands
of your Company's Fresh Dairy portfolio under the
'Aashirvaad Svasti’ brand and the 'Sunfeast'
Dairy Beverages in Punjab. The Business expanded
the use of digital tools, including automated collection
systems, GPS-enabled logistics, and direct farmer
payments, to bring greater transparency across the
value chain. Tailored dairy extension services covering
animal nutrition, health, and productivity enhancement
were scaled up, improving yields and reinforcing
farmer loyalty. These efforts have enhanced farmer
profitability while ensuring sustained delivery of
superior-quality milk aligned with brand requirements.
The capability to source superior attribute-specific
milk has enabled your Company to expand its
Fresh Dairy portfolio with several innovative offerings.

-    The Business continues to scale-up sourcing
of spices to meet the growing requirements of
Sunrise and Aashirvaad brands.

-    Going forward, the organic sourcing capabilities, farm
linkages and traceability would also become a source
of competitive advantage for the organic portfolio of
your Company's FMCG Businesses.

The Business strengthened its collaborations with
leading research institutions across India to build
cost-effective, high-yielding, and resilient Agri-value
chains. By mapping climate hotspots and focusing on
regenerative agriculture, your Company introduced
location-specific seed varieties and tailored agricultural
practices in key states. This approach is aimed at
enhancing crop intelligence, reducing GHG emissions,
and improving soil health. Additionally, efforts to increase
farm income were supported through the development
of customised Agri-inputs, laying the foundation for
sustainable, future-ready food products. Your Company
continued developing the millets value chain, promoting
climate-resilient, nutrient-dense crops through public-private

partnerships in Maharashtra and Andhra Pradesh with
Indian Institute of Millets Research (IIMR).

Driving the transformation towards NextGen Agriculture,
your Company has significantly accelerated digital
adoption across the Agri landscape, empowering farmers
with advanced, tech-enabled solutions. At the forefront is
your Company's 'phygital' innovation ITCMAARS which
delivers hyperlocal, personalised recommendations at
scale through predictive advisory models powered by
IoT and data analytics. This integrated ecosystem has the
potential to unlock several evolving opportunities that can
help reimagine the future of the agri sector and propel the
Business to create new and scalable revenue streams,
whilst also benefitting farmers.

To further enhance rural livelihoods, your Company's
focus on Value-Added Agri Products (VAAP) and crop
diversification is catalysing a shift from conventional
production-centric models to demand-driven, value-rich
agri-value chains. Strategic investments in state-of-the-art
export infrastructure are linking Indian farmers to global
markets, driving growth and inclusivity.

Through a wide spectrum of initiatives including
climate-resilient farming, natural resource management,
competitive value chain development, cutting-edge
digital interventions and robust market linkages,
your Company is enabling Indian agriculture to scale new
horizons while advancing national priorities and delivering
sustainable impact.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the
Consolidated Financial Statements of your Company
prepared in accordance with Indian Accounting Standard 110.
Shareholders desirous of obtaining the Report and
Accounts of your Company's subsidiaries may obtain the
same upon request. Further, the Report and Accounts
of the subsidiary companies is also available under the
'Investor Relations' section of your Company's website,
www.itcportal.com, in a downloadable format. Your
Company's Policy for determination of a material subsidiary,
as adopted by your Board, in conformity with Regulation 16
of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations 2015,
can be accessed on your Company's corporate website at

https://www.itcportal.com/material-subsidiary-policy.

Presently, your Company does not have any material
subsidiary.

Surya Nepal Private Limited

Nepal's GDP grew by 3.7% during the fiscal year ended
July 2024, on a low base of 2% in the previous year, led
mainly by uptick in agriculture, hydro power and tourism
sectors. However, growth in the Nepalese economy
continues to be challenging amidst subdued economic
activities resulting from weak consumer demand and
sluggish private and public sector investments.

The economy saw a modest recovery this fiscal year with
an accommodative monetary policy and consumer price
inflation moderating to 4.6% for the first 9 months of the
fiscal year as compared to 5.9% in the previous year.
Inward remittances, which significantly contribute to
economic growth, stand at appx. 25% of the national GDP,
grew by 10.0% in the first 9 months, albeit at a slower
pace than the previous year. Strong inward remittances,
low interest rates and moderate inflation are expected
to lead to gradual recovery in private consumption and
consumer demand.

The Government of Nepal has recently introduced several
reforms to enhance investments, strengthen governance,
public service delivery, ease of doing business etc.,
which are steps in the right direction. Further measures
aimed at encouraging domestic and foreign investments,
incentivising the manufacturing sector to enable import
substitution and job creation, supporting the hospitality
sector with its large economic multiplier effect, on-ground
implementation of reforms and promulgation of
industry-friendly policies remain key imperatives for
achieving sustained economic growth.

The legal cigarette industry provides livelihoods to over
five lakh individuals involved in tobacco cultivation,
manufacturing & trade and makes a significant contribution
to the revenue collection of the Government of Nepal.
Despite its far-reaching economic impact, the legal
cigarette industry continues to face significant challenges
from an increasingly punitive and discriminatory taxation
and regulatory regime. The company continues to
engage with policy makers for equitable, pragmatic,
evidence-based regulations and taxation policies that
balance the economic imperatives of the country and
tobacco control objectives.

The company demonstrated resilient performance
during the year despite subdued consumer demand.
The Cigarettes business reinforced its market standing by
leveraging its robust portfolio, superior product quality and
wide distribution network. A differentiated and innovative
offering under 'Surya Fusion' brand was launched
during the year, which further fortified the company's
product portfolio.

The company's manufacturing systems continued to
set new benchmarks in responsiveness, quality and
productivity. Various initiatives, such as the manufacture
of new product formats, and process automation were
implemented during the year. Relentless focus on
developing world-class products anchored on innovation
and benchmarked to international quality standards
remain the key sources of sustainable competitive
advantage for the company.

During the year, the company leveraged its distribution
reach to scale up availability of 'Sunfeast Dark Fantasy
Choco Fills' biscuits, which had been launched in the
previous year. Focused investments towards brand
building supplemented the distribution scale up and
enabled the brand to achieve premium positioning in the
market. 'Sunfeast Dark Fantasy Mocha Fills', launched
during the year, also elicited positive consumer response.

In the Confectionery business, the company augmented
its product range through new launches such as
'Sunfeast Dark Fantasy Choco Rolls', Toffichoo Coffee Delite'
and 'Minto Honey Lemon Ginger'. Focused investments
continue to be made towards enhancing market
standing. Capacity utilisation at the company's
state-of-the-art manufacturing facility in Biratnagar is also
being progressively ramped up.

The company's wholly owned subsidiary,
Surya Nepal Ventures Private Limited, engaged in
manufacturing and sales of agarbattis, continued to
strengthen its market standing leveraging its differentiated
product portfolio, sharply focused marketing investments
and best-in-class product availability across target
markets. The company entered the dhoop segment under
the 'Mangaldeep' brand during the year. The product
range has received encouraging consumer response.

The company continues to make multi-dimensional
contributions towards building the societal and economic
capital of Nepal. In line with applicable regulations and

CSR policy, the company carried out initiatives under
four distinct CSR Platforms, namely, Surya Nepal Asha,
Surya Nepal Prakriti, Surya Nepal Adharshila and
Surya Nepal Gatha during the year. Key interventions
include:

-    providing assistance to farmers in areas proximal to
the company's operations,

-    creation of agri-infrastructure such as vermicompost
pits, harvesting sheds etc.,

-    providing training to improve productivity and
enhance income generation for farmers through
animal husbandry,

-    improvement in the quality of education in public
schools in the vicinity of the company's operating
locations,

-    development of public infrastructure in the catchment
areas of operating locations,

-    assistance in various environment preservation
measures like urban plantation and preservation of
biodiversity,

-    support in organising the largest Nepali literature
festival and assistance in promotion and revival of
the local Nepali folk musical instrument - 'Sarangi'
through various training programs and workshops.

During the year, the company recorded Revenue
from Operations of NRs. 5293 crores (previous year
NRs. 4979 crores) and Net Profit of NRs. 1172 crores
(previous year NRs. 1118 crores) on a consolidated basis.

The company declared a dividend of NRs. 273 per equity
share of NRs. 50 ⁹ each for the year ended 15th July, 2024
(31st Asadh, 2081), amounting to NRs. 1101 crores
(previous year NRs. 563 per equity share of NRs. 100 each
amounting to NRs. 1135 crores).

The company continues to be one of the largest contributors
to the exchequer in Nepal and is well-positioned
to consolidate its leadership position by leveraging its
robust portfolio of products, deep & wide distribution
network, best-in-class manufacturing facilities and

execution excellence. The company continues to explore
opportunities to rapidly scale-up the newer FMCG
businesses and evaluate emerging opportunities in
this space.

ITC Infotech India Limited and its subsidiaries

The global IT industry continued to be impacted
by heightened uncertainty and volatility in the
macro-economic environment, exacerbated by
geo-political dynamics. As per NASSCOM estimates, the
Indian IT Services industry grew by 4.3% in FY 2024-25
led by A I, cloud-native technologies and cybersecurity
services.

Against the backdrop of subdued industry growth,
the company delivered robust performance with
consolidated revenues growing by 13.8% over the
previous year. The company remained aligned with the
changing business priorities of its customers and achieved
strong growth in key customer accounts by collaborating
in their development and transformation initiatives.
Clients are increasingly seeking strategic partners to
streamline their portfolio of services and enhance cost
efficiencies. The company continues to effectively address
such requirements by leveraging its integrated global
service delivery structure and strengthening operational
efficiencies through a structured delivery excellence
framework, employing a metrics-driven approach.

The company continues to invest in institutionalising
delivery excellence and building future-ready capabilities
in key focus areas. During the year, the company formed
a Technology Center of Excellence (CoE) in Bengaluru to
serve as an incubation centre to build capabilities in next
generation technologies, and a state-of-the-art Global AI
Centre of Excellence in Kolkata to develop cutting-edge
solutions. The company has also invested in building its
AI capabilities and created GenAI powered platforms &
accelerators, offering unique proposition to clients.

In recent years the company has focused on building
offerings and creating assets around capabilities like
'CIO 360 - Run the Business' platform, Hotels-in-a-Box
and Digital Manufacturing, S4/HANA, Digital Workplace,
Hyper Automation, Adobe D2C, ServiceNow and
Cybersecurity.

Towards enhancing its Cloud service capabilities,
the company acquired Blazeclan Technologies Private
Limited (Blazeclan), a leading Cloud consulting firm,
during the year. Blazeclan has well-established
capabilities in Cloud transformation, with expertise
in Cloud Migration, Digital Services, Digital Cloud
Consulting and Data Analytics & Insights across AWS,
Azure and GCP platforms. The company has created a
new 'Cloud services' line combining cloud professionals
from both companies to provide high quality, scalable and
secure cloud solutions and assist clients in their digital
modernisation and transformation journeys.

The company's investments in building technology-led
solutions and offerings in future-focused areas were
acknowledged in global benchmarking reports by leading
analyst firms. During the year, the company was recognised
as 'Disruptor' across several Avasant RadarView™
service provider benchmarking reports, including
'Digital CX Services', 'Data Management and Advanced
Analytics', 'End-user Computing', 'Digital Workplace',
'Intelligent Automation' and 'Travel, Transportation &
Hospitality Digital Services'. The company was
recognised as 'Rising Star' in the 'Data Modernisation
Services-Midsize' and 'Advanced BI & Reporting
Modernisation-Midsize' quadrant in ISG provider lens™
research report on Advanced Analytics and AI services.

Attracting, training and retaining high-quality talent,
particularly in niche and future-focused technologies
remain a key priority for the company to succeed in the
global IT Services industry. The company continues to
foster an employee-centric and high-performance work
culture driving holistic well-being and growth as part of its
comprehensive employee value proposition. Leadership
strength continues to be built through curated leadership
development programs and strengthen employee
competencies through domain & technology-led training
and career development programs. The company has
initiated an extensive AI training programme covering over
9,000 employees to create an AI-proficient workforce.

During the year, the company's consolidated Revenue
from Operations stood at ' 4244.83 crores (previous
year ' 3730.23 crores). Net Profit for the year was
' 449.82 crores (previous year ' 463.13 crores) after
considering costs related to the Blazeclan acquisition,
and investments towards business growth and
capability building.

For the year under review:

a.    ITC Infotech India Limited recorded Revenue from
Operations of ' 3204.32 crores (previous year
' 2869.29 crores) and Net Profit of ' 466.62 crores
(previous year ' 382.21 crores). The company
paid a total dividend of ' 53.75 per Equity Share of
' 10/- each aggregating ' 488.32 crores (previous year
' 55.50 per Equity Share of ' 10/- each aggregating
' 488.40 crores).

b.    ITC Infotech Limited, UK, a wholly-owned subsidiary of
the company, recorded Revenue of GBP 28.80 million
(previous year GBP 34.11 million) and Net Profit of
GBP 1.33 million (previous year GBP 1.49 million).

c.    ITC Infotech (USA), Inc., a wholly-owned subsidiary
of the company, together with its wholly-owned
subsidiary Indivate Inc., recorded Revenue of
US$ 160.71 million (previous year US$ 158.58 million)
and Net Profit of US$ 6.53 million (previous year
US$ 6.69 million).

d.    In the recent past, ITC Infotech India Limited has
also set up subsidiary companies in Brazil, Mexico,
France, Germany, Italy, Malaysia and Saudi Arabia.
Please refer to Form AOC-1 (Statement containing
salient features of the financial statements of
Subsidiaries / Associate companies / Joint Ventures),
forming part of the Report and Accounts, for details
on financial performance of these companies.

e.    The consolidated results of the company include
Revenue of ' 98.43 crores and Net Loss of
' 3.38 crores recorded by Blazeclan Technologies
Private Limited and its wholly owned subsidiaries
post 1st October, 2024, i.e. the date of acquisition.
Consequent to the acquisition, 10 wholly owned
subsidiaries of Blazeclan across several countries
including Singapore, Australia, Malaysia, Belgium,
New Zealand, USA, Canada and Philippines have
become step down subsidiaries of the company.

Going forward, ITC Infotech seeks to augment its portfolio
of technology offerings across select industry verticals,
develop new platforms & accelerators and strengthen its
alliance ecosystem through partnerships with hyperscalers
and platform providers in identified capability areas such
as GenAI, Digital, Data & Analytics, Cloud, Infrastructure
Services and ERP Systems. Strategic interventions

are planned towards building a robust talent supply
chain with focus on employee-centricity and fostering a
high-performance culture.

The company is well poised to craft the next horizon of
growth in the years ahead driven by focused strategies
to identify go to market opportunities, building capabilities
through platforms and offerings and capacity building to
drive scale.

Technico Agri Sciences Limited

During the year under review, potato production in India
stood at 57 million MT, representing a decline of 5% over
the previous year. Lower potato production resulted in a
significant rise in potato prices during the year.

Leveraging its institutional strengths and strong brand
value, the company continued to enhance its market
standing by entering new potato growing markets and
expanding presence in existing ones. The company's
second greenhouse facility, located at Panchkula, was
commissioned during the year to augment capacity and
service the growing demand from institutional customers.

The company's leadership in production of early generation
seed potatoes and strength in agronomy continue
to support the 'Bingo!' range of potato chips of your
Company and in servicing the seed potato requirements
of the farmer base of your Company's Agri Business.

The company's Revenue from Operations stood at
' 383.68 crores (previous year ' 323.95 crores) with
Net Profit of ' 83.76 crores (previous year ' 37.81 crores).
Total Comprehensive Income for the year stood at
' 83.71 crores (previous year ' 37.82 crores).

The company continues to leverage its deep domain
expertise, strengthen relationships with global seed
breeders and farmers to introduce high yield and climate
resilient seed varieties to fortify its leadership position in
the seed potato industry.

Technico Pty Limited and its subsidiaries

The company continues to focus on upgradation
and commercialisation of its TECHNITUBER® Seed
Technology and customising the agronomy practices
for deployment across various geographies. Further,
the company is also engaged in the marketing of
TECHNITUBER® seed produced at the facilities of its

subsidiary in China and Technico Agri Sciences Limited,
India, a wholly-owned subsidiary of your Company, to
global customers. For the year under review:

a.    Technico Pty Limited, Australia registered a turnover
of Australian Dollars (A$) 2.86 million (previous year
A$ 1.69 million) and a Net Profit of A$ 1.51 million
(previous year A$ 0.81 million).

b.    Technico Technologies Inc., Canada has wound
down its seed business operations and is exploring
other business opportunities in Canada.

c.    Technico Asia Holdings Pty Limited, Australia, and
Technico Horticultural (Kunming) Co. Limited, China -
there were no significant events to report with respect
to the above companies.

Wimco Limited

The company's business activities comprise fabrication
and assembly of machinery for tube filling, cartoning,
wrapping, material handling including conveyor
solutions and engineering services for the FMCG and
Pharmaceutical industries.

During the year, the company monetised the value
of certain identified assets relating to the engineering
business thereby strengthening its Balance Sheet.

The company's Revenue from Operations for the year
stood at ' 2.60 crores (previous year: ' 3.47 crores)
with a Net Profit of ' 1.45 crores (previous year loss of
' 1.88 crores). Total Comprehensive Income for the year
stood at ' 1.45 crores (previous year (-) '1.93 crores).

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East
Nutrients Private Limited, which has set up a food
processing facility in Mangaldoi, Assam, to cater to the
biscuits market in Assam and other north-eastern states.

The company continues to focus on consistently improving
operational efficiency and productivity. In recognition of
its high standards of quality, the company received three
Gold Awards at the Convention on Quality Concepts 2024,
organised by the Quality Circle Forum of India,
Durgapur Chapter. The company also received one
Gold and one Silver Award at the National POKA-YOKE
competition and a Silver Award in the FACE Food Safety
& Quality Kaizen Competition, 2024 organised by CII.

The company's Revenue from Operations for the year
stood at ' 158.87 crores (previous year ' 154.07 crores),
while Net Profit for the year was ' 13.63 crores (previous
year ' 14.90 crores). Total Comprehensive Income
for the year stood at ' 13.60 crores (previous year
' 14.89 crores).

For FY 2024-25, the Board of Directors of the company
has recommended a final dividend of ' 2.00 per
equity share of ' 10 each, aggregating ' 14.60 crores
(previous year final dividend of ' 2.00 per equity share of
' 10 each, aggregating ' 14.60 crores).

ITC IndiVision Limited

The company is engaged in manufacture and export
of nicotine and nicotine derivative products. The
company's manufacturing facility, situated near Mysuru
has the capability to produce purest nicotine derivatives
conforming to US and EU pharmacopoeia standards.
The company undertook extensive product development
initiatives, customer trials and business development
efforts and is well poised to rapidly scale up business
going forward.

During the year, the company recorded Total Income of
' 10.51 crores (previous year ' 1.19 crores) and Net Loss
of ' 55.56 crores (previous year loss of ' 31.12 crores),
primarily on account of gestation costs and depreciation.

ITC Fibre Innovations Limited (IFIL)

The company manufactures Moulded Fibre Products
made from renewable natural fibres such as wood and
offers sustainable solutions across industries including
food service & delivery, FMCG and electronics.

Commercial production at the company's state-of-the-art
manufacturing facility at Badiyakhedi, Madhya Pradesh
commenced in March 2024.

During the year, the company obtained multiple
certifications affirming that its products are food contact
safe and environment friendly and conform with the
requirements under US Food and Drug Administration,
German Federal Institute for Risk Assessment and Indian
FSSAI regulations. These certifications enable IFIL
to differentiate its offerings with both domestic and
international customers. The commercial sales were
scaled up during the year post extensive product

development efforts and customer trials. Going forward,
IFIL will leverage the expertise of the Business in fibre
value chain, manufacturing excellence and strong
sustainability credentials to rapidly scale-up business
with continued focus on developing innovative plastic
substitution solutions. During the year ended
31st March 2025, the company recorded Total Income
of ' 4.61 crores (previous year ' 1.26 crores) with
Net Loss of ' 21.41 crores (previous year loss of
' 3.56 crores), primarily on account of gestation costs
and depreciation.

Russell Credit Limited

The company recorded Total Income of ' 71.91 crores
(previous year ' 60.91 crores) and Net Profit of
' 47.49 crores (previous year ' 39.39 crores). Growth in
Total Income was driven by higher surplus liquidity and
increase in yield of the funds deployed on account of
higher market interest rates.

During the year, the company transferred its investments
in EIH Limited and HLV Limited to your Company at their
respective cost of acquisition which led to reversal of
the mark-to-market gain on the said investments. As a
result, Total Comprehensive Income for the year stood at
(-) ' 484.29 crores (previous year ' 442.67 crores).

Temporary surplus liquidity of the company is mainly
deployed in bonds, debt mutual funds, bank fixed
deposits, certificate of deposits, etc. The company
continues to closely monitor its investments in line with
market interest rate movements and explore opportunities
to make strategic investments for the ITC Group.

For FY 2024-25, the company declared final dividend
of ' 0.36 per Equity Share of ' 10 each, aggregating
' 23.27 crores (previous year final dividend of
' 0.30 per Equity Share of ' 10 each, aggregating
' 19.39 crores).

Gold Flake Corporation Limited

The company holds 50% equity stake in ITC Filtrona Limited.

During the year, the company recorded Total Income of
' 25.11 crores (previous year ' 24.82 crores) and Net Profit of
' 23.80 crores (previous year ' 23.12 crores). The company
declared interim dividend of ' 14.10 per Equity Share of

' 10 each, aggregating ' 22.56 crores (previous year
' 14.10 per Equity Share of ' 10 each, aggregating
' 22.56 crores).

Greenacre Holdings Limited

The company provides maintenance services for
commercial office buildings, EPC (engineering,
procurement, construction) management services as well
as project management consultancy services.

During the year, the company recorded Total Income of
' 13.46 crores (previous year ' 11.61 crores) and
Net Profit of ' 7.23 crores (previous year ' 2.82 crores).

ITC Integrated Business Services Limited

The company is in the business of providing support to the
Business Shared Services operations of your Company
and its related entities.

During the year, the company recorded Total Income
of ' 21.50 crores (previous year ' 12.78 crores) and
Net Profit of ' 1.41 crores (previous year ' 0.60 crore).

MRR Trading & Investment Company Limited

The company, a wholly-owned subsidiary of
ITC Integrated Business Services Limited, holds
tenancy rights in a commercial building located in
Mumbai and also provides estate maintenance services.
During the year, the company recorded Total Income of
' 7.58 lakh (previous year ' 7.38 lakh) and Net Profit of
' 0.41 lakh (previous year ' 0.66 lakh).

Pavan Poplar Limited

The operations of the company continue to be adversely
impacted pursuant to the Order of the Honourable High Court
of Uttarakhand at Nainital in February 2014 dismissing
the Writ Petition filed by the company against the
Order of the District Magistrate authorising the
State authorities to take possession of the land leased to
the company. The company had filed an appeal against
the aforementioned order of the Honourable High Court
in 2014, which has been pending adjudication.

Considering the time and resources involved, the company
has since withdrawn the said appeal with the approval of the
Honourable High Court on 7th March 2025. During the year,
the company recorded Total Income of ' 0.18 crore

(previous year ' 0.14 crore) and Net loss of ' 0.03 crore
(previous year loss of ' 0.03 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely
impacted pursuant to the Order of the Honourable
High Court of Uttarakhand at Nainital in February 2014
dismissing the writ petition filed by the company against
the Order of the District Magistrate authorising the
State authorities to take possession of the land leased to
the company. The company had filed an appeal against
the aforementioned order of the Honourable High Court
in 2014, which has been pending adjudication.

Considering the time and resources involved, the company
has since withdrawn the said appeal with the approval of
the Honourable High Court on 7th March 2025. During the
year, the company recorded Total Income of ' 0.10 crore
(previous year ' 0.10 crore) and Net loss of ' 0.09 crore
(previous year loss of ' 0.02 crore).

NOTES ON JOINT VENTURES

ITC Filtrona Limited (formerly known as ITC Essentra
Limited) - a joint venture of Gold Flake Corporation
Limited

The company delivered resilient performance during the
year amidst continued volatility in the supply chain for
certain input materials.

The company sustained its leadership position in the
industry consolidating its status as the preferred supply
chain partner for several well-known national brands.
The company continues to leverage its core strengths
of focused innovation, best-in-class quality, consistent
delivery and strong customer relationships.

The company continues to partner with its customers and
invest in technology upgradation and capability building
towards sustaining its position as the 'innovation and
quality benchmark' in the Indian cigarette filter industry.

During the year ended 31st March, 2025, the company's
Revenue from Operations stood at ' 761.34 crores
(previous year ' 743.45 crores). Net Profit during the year
stood at ' 83.85 crores (previous year ' 80.80 crores).

The Board of Directors of the company has recommended
a dividend of ' 125 per equity share of ' 10 each
for the year ended 31st March, 2025 (previous year
' 100 per equity share).

Logix Developers Private Limited is a joint venture
between your Company and Logix Estates Private Limited
for developing a luxury hotel-cum-service apartment
complex at the company's leasehold site located at
Sector 105 in New Okhla Industrial Development Authority
(NOIDA).

Your Company presently holds 27.9% equity stake in
LDPL. As reported in prior years, your Company reiterated
its position with the JV partner that it was committed
to developing a luxury hotel-cum-service apartment
complex as envisaged under the JV Agreement and that
it was not interested in progressing with any alternative
project plans proposed by the JV partner. However, the
JV partner refused to progress the project and instead
expressed its intent to exit from the JV by selling its
stake to your Company. Subsequently, the JV partner
proposed that both parties should find a third party to
sell the entire shareholding in LDPL. In view of these
developments, your Company had filed a petition before
the erstwhile Company Law Board submitting that the
affairs of the JV entity were being conducted in a manner
that was prejudicial to the interest of your Company and
the JV entity. The matter is currently before the National
Company Law Tribunal (NCLT). The JV partner had also
filed a petition before the Honourable Delhi High Court for
winding up the JV company, which was transferred to the
NCLT by the Honourable Delhi High Court. The matter
was heard before the NCLT on several occasions in the
past but could not be concluded. On 21st January, 2020,
the matter was assigned to a new bench, post which
hearings on the matter are being held.

In July 2022, LDPL received a communication from NOIDA
authorities intimating cancellation of the sub-lease for the
land on which the project was to be constructed on account
of non-payment of lease instalments and non-fulfilment
of the conditions of the sub-lease, including forfeiture
of the amount deposited. The company is evaluating all
options to pursue its rights in the matter. Consequently,
as a matter of prudence, the company had derecognised
the leasehold land/assets as well as adjusted/reversed
the lease liabilities towards NOIDA in accordance with the
terms of the sub-lease deed, in its financial statements for
the year ended 31st March 2022.

During the year ended 31st March, 2025, the company
recorded a Net Profit of ' 0.25 crore (previous year
' 0.22 crore). The Net Worth of the company stood at
' 5.57 crores as at 31st March, 2025 (previous year
' 5.32 crores).

Your Company's total investment in LDPL was
' 41.95 crores. Your Company had made provision of the
entire investment amount as diminution in the carrying
value of investment in the previous years and consequently
the carrying value of your Company's investment in LDPL
as at 31st March, 2025, is Nil.

The financial statements of LDPL for the year ended
31st March, 2025, are yet to be approved by its
Board of Directors. In the absence of audited financial
statements of LDPL, the Consolidated Financial
Statements of your Company for the year ended
31st March, 2025, have been prepared based on the
financial statements prepared by the management
of LDPL.

NOTES ON ASSOCIATES
ITC Hotels Limited

ITC Hotels Ltd. (ITCHL) was incorporated as a
wholly-owned subsidiary of your Company in July,
2023. The Board of Directors of your Company and
ITC Hotels Limited, had on 14th August, 2023
approved, subject to necessary statutory and regulatory
approvals, the Scheme of Arrangement amongst your
Company and ITC Hotels Limited and their respective
shareholders and creditors ('Scheme') for demerger
of the Hotels Business (as defined in the Scheme)
of your Company on a going concern basis.
The Scheme was approved by the Honourable National
Company Law Tribunal, Kolkata Bench vide its
order dated 4th October, 2024.

Pursuant to the Scheme, the Hotels Business of
your Company (along with all assets and liabilities
thereof, excluding    ITC Grand Central,    Mumbai)

and the investments held in hospitality entities i.e.
Fortune Park Hotels Limited, Bay Islands Hotels Limited,
Landbase India    Limited, WelcomHotels Lanka

(Private) Limited,    Srinivasa Resorts    Limited,

International Travel House Limited, Gujarat Hotels Limited

and Maharaja Heritage Resorts Limited have been
transferred to ITCHL on a going concern basis from the
Effective Date i.e., 1st January 2025. ITCHL issued and
allotted equity shares to the shareholders of your Company
as per the share entitlement ratio provided in the Scheme
and consequently your Company holds 39.88% stake in
ITCHL as at 31st March 2025. Consequently, ITCHL has
become an Associate of your Company.

ITCHL is amongst the fastest growing hospitality
chains in the country with over 140 properties and
13,300 rooms under multiple brands catering to different
market segments. ITCHL is recognised for its portfolio of
world-class properties, iconic bouquet of brands, cuisine
expertise and service excellence. Anchored on the ethos
of 'Responsible Luxury', ITCHL is a global exemplar in
sustainable hospitality.

The company delivered robust performance during
the year clocking record high revenue and profits.
Room revenues recorded strong growth driven by
broad-based performance across segments. Occupancy
and Average Daily rate (ADR) witnessed robust growth
on the back of sustained demand across key markets and
smart revenue management.

ITCHL continues to pursue an 'asset-right' growth strategy
to drive growth while reducing capital intensity of operations
by focusing on strong partnerships with asset owners,
leveraging brand credentials and providing operational
expertise. A substantial part of incremental room
additions is expected to accrue through management and
franchising contracts going forward. The company is also
progressing investments towards scaling up its portfolio
of owned hotel rooms. A greenfield project is underway
at Puri, Odisha and a new block is under construction at
the existing Welcomhotel in Bhubaneshwar. ITCHL also
seeks to leverage its strategic land bank to enhance the
portfolio of owned hotels.

The hospitality sector in India is poised to grow rapidly
in the years ahead driven by growing per capita income,
rapid urbanisation, increasing societal aspirations and
low room supply penetration. ITCHL is well placed to
craft its next horizon of growth as a pure-play hospitality
entity leveraging your Company's institutional strengths,
strong brand equity and goodwill.

Delectable Technologies Private Limited (Delectable)
is, inter alia, engaged in the sale of FMCG products
leveraging app-based technology through vending
machines, primarily installed across office locations.

The total investment of the Company in Delectable stands at
' 11 crores for a 39.3% stake, on a fully diluted basis.

Delectable has significantly scaled down its operations
during the year. Your Company has divested its holding in
Delectable in May 2025.

Sproutlife Foods Private Limited

Sproutlife Foods Private Limited (Sproutlife) operates
in the fast growing, nutrition-led health food space with
a diversified product portfolio across multiple categories
including protein bars, breakfast cereals, nutraceuticals
etc. under the 'Yogabar' brand.

During the year, your Company invested ' 30 crores in
Sproutlife, consequent to which your Company's stake
now stands at 47.50% (previous year 44.74%) on a fully
diluted basis. Cumulative investment in Sproutlife stands
at ' 255 crores as at 31st March, 2025.

Sproutlife continues to register robust growth across its
target markets in its core categories of Bars, Muesli and
Oats; product portfolio was augmented during the year
with the launch of protein drinks and whey protein.

Mother Sparsh Baby Care Private Limited

Mother Sparsh Baby Care Private Limited (Mother Sparsh)
is a premium ayurvedic and natural baby care brand,
which is focused on baby personal care, health & hygiene
and expert baby care. With high quality products, Mother
Sparsh aims to serve the needs of informed new-age
mothers who are making conscious decisions to switch to
superior products for their babies.

The company recorded robust growth during the year
on the back of increasing consumer franchise for its
differentiated product range and entry into the quick
commerce channel.

As at 31st March 2025, your Company held 26.5% stake
in Mother Sparsh on a fully diluted basis at a cumulative
investment value of ' 45 crores.

In April 2025, your Company executed Definitive
Agreements to acquire the balance 73.5% stake in one
or more tranches over a time period of about two to
three years subject to fulfilment of prescribed terms and
conditions.

ATC Limited (an associate of Gold Flake Corporation
Limited)

The company is a contract manufacturer of cigarettes.
The company continues to deliver superior quality
products to its customers while maintaining high levels of
flexibility and agility in its manufacturing operations.

During the year, the company received the 'National
Award for Outstanding Industrial Relations 2023-24' from
All India Organisation of Employers in the MSME category
and the 'Silver Prize in Manufacturing Small Sector'
at the Federation of Indian Chambers of Commerce
and Industry (FICCI) Awards for Excellence in Quality
Systems 2024. The company was also recognised as an
'Energy Efficient Unit' by Confederation of Indian
Industry (CII) and accredited with Social Accountability
Management System Standard SA 8000:2014 by DNV.

Associates of Russell Credit Limited

Russell Investments Limited, Divya Management
Limited and Antrang Finance Limited

The above companies are associates of Russell Credit
Limited. These companies are NBFCs registered with
the Reserve Bank of India and continue to explore
opportunities for strategic investments.

For further details on performance of the above-mentioned
associate companies, please refer to Form AOC-1
(Statement containing salient features of the financial
statements of Subsidiaries / Associate companies /
Joint Ventures), forming part of the Report and Accounts.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct
of affairs of your Company and clearly delineates the
roles, responsibilities and authorities at each level of its
three-tiered governance structure and key functionaries
involved in governance. The ITC Code of Conduct commits
management to financial and accounting policies, systems
and processes. The Corporate Governance Policy and the
ITC Code of Conduct stand widely communicated across

the enterprise at all times and together with the Strategy
of Organisation, Planning & Review Processes and the
Risk Management Framework provide the foundation
for Internal Financial Controls with reference to your
Company's Financial Statements.

Such Financial Statements are prepared on the basis
of the Material Accounting Policies that are carefully
selected by management and approved by the
Audit Committee and the Board. These Policies are
supported by the Corporate Accounting and Systems
Policies that apply to the entity as a whole to implement
the tenets of Corporate Governance and Material
Accounting Policies uniformly across your Company.
The Accounting Policies are reviewed and updated from
time to time. These, in turn, are supported by a set of
Divisional policies and Standard Operating Procedures
(SOPs) that have been established for individual
Businesses.

Your Company uses Enterprise Resource Planning
(ERP) systems as a business enabler and also to
maintain its books of accounts. The SOPs, in tandem
with transactional controls built into the ERP systems,
ensure appropriate segregation of duties, tiered approval
mechanisms and maintenance of supporting records.
The Information Management Policy reinforces the
control environment. The systems, SOPs and controls
are reviewed by Divisional management and audited by
Internal Audit, whose findings and recommendations are
reviewed by the Audit Committee and tracked through till
implementation.

Your Company has in place adequate internal financial
controls with reference to the Financial Statements.
These have been designed to provide reasonable
assurance with regard to recording and providing reliable
financial information; complying with applicable statutes;
safeguarding assets from unauthorised use; ensuring that
transactions are carried out with adequate authorisation
and complying with Corporate Policies and Processes.
Such controls have been assessed during the year, after
taking into consideration the essential components of
internal controls stated in the Guidance Note on Audit
of Internal Financial Controls over Financial Reporting
issued by The Institute of Chartered Accountants of
India. Based on the results of such assessment carried
out by management, no reportable material weakness or
significant deficiency in the design or operation of internal

financial controls was observed. Nonetheless, your
Company recognises that any internal control framework,
no matter how well designed, has inherent limitations and
accordingly, regular audit and review processes ensure
that such systems are reinforced on an ongoing basis.

RISK MANAGEMENT

As a diversified enterprise, your Company continues
to focus on a system-based approach to business risk
management. The management of risk is embedded
in the corporate strategies of developing a portfolio of
world-class businesses that best match organisational
capability with opportunities in domestic and international
markets, developing capabilities and competencies for
the future in order to enhance competitiveness and win
in the markets of tomorrow. Accordingly, management of
risk has always been an integral part of your Company's
'Strategy of Organisation' and straddles its planning,
execution and reporting systems & processes.
Backed by strong internal control systems, the current
Risk Management Framework consists of the following
key elements:

-    The Corporate Governance Policy, approved
by the Board, clearly lays down the roles and
responsibilities of the various entities in relation to
risk management covering a range of responsibilities,
from the strategic to the operational. These role
definitions, inter alia, provide the foundation for
appropriate risk management procedures, their
effective implementation across your Company
and independent monitoring and reporting by
Internal Audit.

-    The Risk Management Committee, constituted
by the Board, monitors and reviews the strategic
risk management plans of your Company as a whole
and provides necessary directions on the same.

-    The Corporate Risk Management Cell, through
focused interactions with Businesses, facilitates
the identification and prioritisation of strategic and
operational risks, development of appropriate
mitigation strategies and conducts periodic reviews of
the progress on the management of identified risks.

-    A combination of centrally issued policies and
Business-specific procedures bring robustness to the
process of ensuring that business risks are effectively
addressed.

-    Appropriate structures are in place to proactively
monitor and manage the inherent risks in businesses
with unique or relatively high risk profiles.

-    Foreign currency exposures continue to be managed
within the framework of the Forex Manual.

-    A strong and independent Internal Audit function at
the Corporate level carries out risk focused audits
across all Businesses, enabling identification of areas
where risk management processes may need to be
strengthened. The Audit Committee of the Board
reviews Internal Audit findings and provides strategic
guidance on internal controls. The Audit Compliance
Review Committee closely monitors the internal
control environment within your Company including
implementation of the action plans emerging out of
internal audit findings.

-    At the Business level, Divisional Auditors continuously
verify compliance with laid down policies and
procedures and help plug control gaps by assisting
operating management in the formulation of control
procedures.

-    A robust and comprehensive framework of strategic
planning and performance management ensures
realisation of business objectives based on effective
strategy implementation. The annual planning
exercise requires all Businesses to clearly identify
their top risks and set out a mitigation plan with
agreed timelines and accountabilities. Businesses
are required to confirm periodically that all relevant
risks have been identified, assessed, evaluated and
that appropriate mitigation measures have been
implemented.

Your Company endeavours to continuously sharpen
its Risk Management systems and processes in
line with a rapidly changing business environment.
All Businesses of your Company have adopted the
ISO 31000 Risk Management Standard; risk management
systems and processes prevalent in the Businesses have
been independently assessed to be compliant with the
same. The centrally anchored initiative of conducting
independent external reviews of key business processes
with high 'value at risk' continued during the year.
These interventions continue to provide further assurance
on the robustness of risk management practices prevalent
in your Company.

Recognising Digital as a megatrend shaping the future,
your Company remains focused on building a dynamic
'Future-Tech' enterprise powered by advanced digital
technologies and infrastructure across the value chain.
Your Company's digital transformation journey is also
resulting in changes in its risk profile marked by a
heightened cyber threat environment. The cybersecurity
landscape is constantly evolving, characterised by
a diverse array of threats that target individuals,
organisations, and critical infrastructure. Cybercriminals
are employing increasingly sophisticated tactics, such as
ransomware, phishing and advanced persistent threats,
to exploit vulnerabilities and gain unauthorised access to
sensitive data.

Your Company has a multi-tiered cybersecurity defence
strategy that includes firewalls, antivirus and anti-malware
systems to prevent, detect and respond to cyber incidents.
These defence mechanisms are implemented at various
access and data processing points, including endpoints,
data centres, network perimeters and cloud instances.
To further enhance user awareness, your Company has
established a comprehensive digital cybersecurity training
program for all employees.

The Cyber Security Committee of your Company, chaired
by the Chief Digital and Information Officer (CDIO),
establishes best practices, monitors the cybersecurity
posture, and defines strategic priorities to ensure secure
and reliable services in a rapidly evolving digital landscape.
Your Company's cybersecurity practices are guided by
several international frameworks and standards, such as
NIST and ISO 27001.

During the year, your Company operationalised the
Advanced Cyber Security Operations Centre (SOC)
equipped with state-of-the-art capabilities including
AI-driven threat intelligence from multiple sources.
Tabletop exercises have been conducted to improve
incident response capabilities for the Cyber Security
Incident Response team, under the leadership of the Chief
Information Security Officer (CISO). Further, the SOC
is being augmented with behavioural anomaly detection
capabilities to enhance threat detection.

In response to the progressive migration of workloads
to the Cloud, your Company has adopted a zero trust
architecture and has established a digital-ready, cloud-
secure wide area network - ITC Digibahn. This network

ensures that all authorised users can access fast, reliable,
and secure connections from any location, on any device,
at any time. Your Company is also upgrading both endpoint
and email security by adopting best-in-class technologies
to enhance protection against external threats.

The growing integration and convergence of Information
Technology (IT) and Operational Technology (OT) within
Industrial Control Systems significantly increases the risk of
cyber-attacks. Accordingly, a comprehensive OT Security
policy has been established across all Businesses and an
assessment of IT and OT security maturity is conducted at
least once in two years.

The use of Artificial Intelligence (AI) is becoming
increasingly prevalent in various business domains. In this
regard, your Company has adopted a range of security
best practices, including an approved list of generative
AI tools and platforms, a data management framework,
mandatory proof of concept (POC) requirements, data
privacy controls, ethical AI usage guidelines, and user
awareness training.

India ranks among the most vulnerable countries in the
world in terms of climate change impact. As part of its
Sustainability 2.0 vision, your Company is pursuing a
m ulti -pronged cl i m ate strategy that entai l s extensi ve
decarbonisation and building resilience against climate
risk across the value chain.

Your Company's low carbon growth approach focuses
on increasing the share of renewable energy, improving
energy productivity, construction of green buildings,
greening logistics, optimising 'distance-to-market' and
promoting regenerative agriculture practices in agri-value
chains, thus enabling transition to a net zero economy.
Simultaneously, your Company is actively working
towards climate-proofing its operations and agricultural
value chains by using state-of-the-art climate risk
modelling techniques and developing site-specific risk
mitigation strategies. Your Company's approach towards
water stewardship is aligned with the Alliance for Water
Stewardship Standard, a globally recognised framework
for assessing the efficacy of water management across
water stressed sites. Further, your Company recognises
that the preservation and nurturing of biodiversity is

crucial for long-term sustainability of its business and is
committed to conducting its operations in a manner that
protects, conserves and enriches biodiversity in line with
the Board-approved Policies on Biodiversity Conservation
and Deforestation.

Your Company sources several commodities for use as
inputs in its Businesses and engages in agri-commodity
trading as part of its Agri Business. In respect of
commodities sourced for use as inputs in its Businesses,
your Company has well laid out strategies to manage
risks arising out of the inherent price volatility associated
with such commodities. This includes robust mechanisms
for monitoring market dynamics towards making informed
sourcing decisions, well defined inventory holding norms
based on considerations such as seasonality and the
strategic nature of the commodity concerned, long-term
contracts with suppliers and continuous diversification
of the supplier base to secure supply of critical items
at competitive costs. Multiple sourcing models, wide
geographical spread, extensive sourcing and supply
chain network and associated infrastructure in key
growing areas coupled with deep-rooted farmer linkages
and use of digital technologies ensure sourcing of high
quality agri-commodities at competitive costs.

In respect of agri-commodity trading, your Company has
a well-defined policy to manage risks associated with
sourcing of such commodities. This includes:

-    segregation of duties and robust internal controls
through a system of checks and balances embedded
in the organisation and governance structure

-    clearly defined limits for trading positions (long and
short) and net cash loss for specific commodities/
commodity groups

-    mitigation of price, liquidity and counter party risks
through hedging on commodity exchanges (mainly
NCDEX) for certain commodities, as applicable.
Correlation between prices prevailing in the physical
market and those on the commodity exchange is
analysed regularly to ensure effectiveness of hedging

-    robust monitoring and review mechanisms of net
open positions and 'value at risk'

- ECGC cover for exports (covering commercial &
political risks) and credit insurance for large domestic
customers.

The combination of policies and processes as outlined
above adequately addresses the various risks associated
with sourcing of commodities for your Company's
Businesses.

Your Company's strategy of backward integration in
sourcing of agri-commodities such as wheat, potato,
fruit pulp, spices, milk and leaf tobacco; in-house
manufacturing of paperboards, paper and packaging
(including pulp production and print cylinder making
facilities); wood procurement from the economic vicinity
of the Bhadrachalam unit, facilitates access to critical
inputs at benchmark quality and competitive cost
besides ensuring security of supplies. Further, each of
your Company's Businesses continuously focuses on
product mix enrichment and yield improvement towards
protecting margins and insulating operations from spikes
in input prices.

The Risk Management Committee met thrice during the
year and was updated on the status and effectiveness of
the risk management plans. The Audit Committee was
also updated on the effectiveness of your Company's Risk
Management systems and policies.

The risk management practices of your Company,
as reviewed through the Risk Management Cell and
Internal Audit processes, have been found to be relevant
and commensurate with the size and complexity of
its operations.

AUDIT AND SYSTEMS

Your Company believes that strong internal control
systems that are commensurate with the scale, scope
and complexity of its operations are concomitant to the
principle of governance that freedom of management
should be exercised within a framework of appropriate
checks and balances.

Your Company remains committed to ensuring a mature
and effective internal control environment that, inter alia,
provides assurance on orderly and efficient conduct of

operations, security of assets, prevention and detection of
frauds/errors, accuracy and completeness of accounting
records and compliance with various regulatory
requirements as applicable.

Your Company's independent and robust Internal Audit
processes, both at the Business and Corporate levels,
provide assurance on the adequacy and effectiveness
of internal controls, compliance with business processes
and procedures, internal policies and regulatory
requirements. The role of Internal Audit is to enhance
and protect organisational value by providing risk-based
assurance, advice and insight, while enabling continuous
improvement of your Company's internal control systems.

The Internal Audit function, comprising professionally
qualified accountants, engineers, and Information
Technology (IT) specialists, is well-equipped and
resourced to provide audit assurances at the highest
levels. Targeted learning and development programmes
on contemporary topics are periodically organised to
enhance knowledge and skill set of the audit team.

The scope and coverage of Internal Audit remains
contemporary and cognises, inter alia, for the rapid
digitalisation of your Company's business operations.
In recent years, Internal Audit has enhanced focus on
systems and controls pertaining to your Company's digital
assets including brand websites, social media handles,
mobile and cloud applications, IT-OT integration, and
protection of sensitive personal data and information.

Information security and cybersecurity have assumed
critical significance with the accelerated adoption of
digital technologies. In this context, periodical reviews
are conducted focusing on assessment of controls
pertaining to confidentiality, integrity and availability of
business information and systems covering general IT
controls and security of your Company's IT Infrastructure.
All systems and policies relating to Information
Management are regularly reviewed and benchmarked to
ensure they remain contemporary. Furthermore, all critical
IT systems undergo pre-implementation audit before being
deployed in the operating environment, thereby providing
assurance regarding the rigour of implementation and
operational readiness.

Aligned with your Company's 'Digital First' strategy,
the Internal Audit function has evolved into an agile,
multi-skilled and technology-enabled function. Processes
within Internal Audit function are continuously enhanced
for greater effectiveness and productivity by utilising
best-in-class tools for audit analytics, intelligent
automation, adoption of new open-source tools and
AI-enabled BOTs. Utilisation of the recently implemented
Digital Audit Management System, a tool for end-to-end
digitisation of audit life cycle, was scaled up during the
year; key enhancements such as 'Agile Audit' module were
introduced to improve efficiency and monitoring across
the assurance process lifecycle. An integrated advanced
data analytics tool has been adopted to enhance auditors'
capabilities with low-code/no-code scripting, automated
data extraction, and analysis of both structured and
unstructured data. In addition, several off-the-shelf tools
were introduced for IT security checks, code reviews and
vulnerability assessments of your Company's websites,
apps, and social media handles.

Qualified engineers within the Internal Audit function
review the design, planning and execution of all ongoing
projects that involve significant expenditure. This
ensures that project management controls are robust
and yield 'value for money'. The Internal Audit function
also leverages state-of-the-art industry-specific tools and
technology to conduct comprehensive project audits.

Your Company's Internal Audit processes are certified
as complying with ISO 9001:2015 Quality Standards.
Further, systems and processes are in accordance with
the Standards on Internal Audit (SIA) issued by The
Institute of Chartered Accountants of India.

The Audit Committee of your Board met twelve times
during the year. The Terms of Reference of the
Audit Committee, inter alia, include reviewing the
effectiveness of the internal control environment,
evaluating your Company's internal financial controls &
risk management systems, and monitoring the
implementation of action plans arising from significant
Internal Audit findings. Material observations, as defined
in the Terms of Reference, are reviewed at the highest
level by the Audit Compliance and Review Committee
(ACRC) and the Audit Committee.

HUMAN RESOURCE DEVELOPMENT

Your Company's thought, strategy and action are inspired
by a larger purpose of being an exemplary Indian enterprise
that not only delivers superior competitive performance,
but also embeds sustainability and inclusiveness at the
core of its Businesses. This approach enables your
Company to delight consumers and customers with a
vibrant portfolio of industry leading products and services
while generating enduring value for the Indian economy
and the larger community of stakeholders. The talent
management strategy of your Company is designed to
attract, retain and develop human capital that enables
your Company to sustain its position as one of India's
most valuable corporations, whilst continuing with its
mission of building a responsible 'Future-Tech' enterprise.
Your Company's employees relentlessly strive to deliver
world-class performance, collaborating with each other
and discharging their role as 'trustees' of all stakeholders.
Your Company is committed to perpetuating vitality -
its growth as a value generating engine and also as an
exemplary institution - so that it continues to succeed in
its relentless pursuit of creating enduring value.

Your Company's Human Resources development
approach spans four key organisational dimensions of
Architecture, Alignment, Agility and Ability which are
supported through strategies crafted in areas such as talent
acquisition, engagement, diversity & inclusion, capability
building, employee relations, performance & rewards and
employee well-being. Through its various talent initiatives
and processes, your Company strives to deliver the value
proposition of 'Building Winning Businesses, Building
Business Leaders and Creating Value for India'. The talent
development practices help create, foster and strengthen
the capability of human capital to deliver critical outcomes
on the vectors of strategic impact, operational efficiency
and capital productivity while reimagining consumer
experience, driving business model transformation and
enhancing employee experience.

Your Company's 'Strategy of Organisation' is designed
to promote agility through a culture and practice of
distributed leadership enabled by a three-tier governance
structure. This is manifested in market and consumer
facing Businesses, which are driven by empowered,
cluster-based teams and supported by shared assets

and capabilities, enabling strategic relevance, speed,
responsiveness, and operational excellence. This
approach allows Businesses, through their Management
Committees, to focus, develop and execute Business
Plans relevant to their product-market spaces while
leveraging the institutional strengths of your Company
and harvesting internal synergies.

The year under review witnessed some softening of the
employment market, reflected in lower attrition and a more
measured approach to remuneration decisions in several
industry sectors. While flexible work arrangements
are now prevalent across industry, there has been a
moderation in application, reflecting a gradual shift
towards an equilibrium. Several global organisations,
with presence in India, have also chosen to review
their Diversity agenda. The adoption and integration of
digitisation and automation tools to enhance productivity
continues. Companies remain committed to prioritising
employee well-being & mental health support.

Your Company's unique employer equity as an exemplary
Indian enterprise creating world-class brands, building
business leaders and generating economic, social and
environmental capital for the Indian economy, continues
to play a pivotal role in the attraction and retention of
high-quality talent. The management trainee programme,
augmented with recruitment of experienced talent from
the market, is an integral part of building a deep pipeline.
Your Company continues to draw the finest management,
technical and commercial talent from premier institutions
in the country and is ranked amongst the leading
companies in these institutions. Intensive engagement
with the country's premier academic institutions over the
years to communicate your Company's talent proposition
through case-study competitions, knowledge-sharing
programmes by senior managers, on-ground exposure
and factory visits for students and the annual internship
programmes have all contributed to creating a compelling
proposition for the best candidates to aspire for a
career with your Company. Your Company continues to
enthuse talent with high-impact roles, competitive and
performance driven remuneration with an emphasis on
long-term incentives, a wealth of learning opportunities,
a commitment to enhancing diversity, equity & inclusion,
an employee-centric climate, well-being focused
infrastructure and support that promotes fellowship and
commitment amongst employees.

Your Company's talent development approach is
founded on the belief that learning initiatives must remain
synergistic and aligned to business outcomes. Your
Company provides managers with contemporary and
relevant learning and development support through a
combination of self-paced e-learning modules, classroom
programmes and application projects with emphasis
on experiential learning, on-the-job assignments and
exposure to nationally and globally renowned faculty.
Deep functional expertise is fostered at early stages of
an employee's career through immersion in complex
problem-solving assignments requiring the application
of domain expertise. These interventions have
helped your Company build and sustain a culture of
application-focused continuous learning, innovation and
collaboration. Managers are assessed on your Company's
behavioural competency framework and provided with
learning and development support to address areas
identified for improvement. Key talent is provided critical
experiences in high-impact roles and mentored by senior
managers, promoting the development of a steady pool of
high-quality talent.

Your Company has identified three capability vectors
for making Businesses future-ready - Leadership
Development, Business Critical Functional Competencies,
and Organisation Identity & Pride. As a part of leadership
development initiatives, the Reflections 360 programme
provides leaders with feedback from team members,
peers and managers, enabling self-driven personal
development. This is supplemented by immersive
workshops and personalised one-on-one coaching being
made available for senior managers.

This approach ensures relevance and impact, thereby
enhancing the capability index of your Company's human
capital. Globally benchmarked curriculum are tailored
to your Company's context, especially in the domains
of Digital Fluency, Data Science, Industrial Analytics,
Brand Marketing and Manufacturing strategy. All these
interventions are delivered through subject matter experts,
domestic and international, and supplemented with
business-critical application projects. Periodic induction
programmes, anchored by senior leaders, enable new
entrants to appreciate your Company's Vision, Mission,
Culture, Values and Strategies while fostering pride in
affiliation with your Company.

Your Company continues to strengthen its performance
management system and its culture of accountability
through widespread adoption of the system of
Management-by-Objectives. Performance planning
through clearly defined goals, outcome-based assessment,
and alignment of rewards for achievement of results
have all contributed to a robust culture of ownership and
accountability. 'Career Conversations' and succession
planning processes have contributed to helping employees
realise their potential, craft their careers while recognising
their strengths and areas of development and ensuring a
sound workforce planning system.

In the spirit of continuous improvement, your Company
maintains a practice of periodically assessing employee
engagement through an entity-wide survey. The recent
survey results of 2024 continue to indicate an improving
trend, on a strong base, with scores increasing in the
range of 10 to 16 percentage points on key dimensions.
96% of employees reported a deep sense of pride and
association with your Company, 94% reported a belief
in your Company's overarching goals & leadership and
94% are optimistic of the future. These engagement
levels reflect in your Company's superior standing
on employee turnover. During the year, a range of
engagement programmes were sustained including
initiatives such as leadership outreach through extensive
communication, recognition programmes acknowledging
exceptional contributions of employees and teams, career
conversations and investments in employee wellbeing.

The year witnessed the Cigarettes Business receiving the
Platinum Award for 'Best Practices in Digitisation in HR'
among Large Manufacturing Sector Companies at the
8th CII National HR Competition 2024. The Personal
Care Business and Foods Business were conferred
FICCI's Women Empowerment Award 2024, under the
category - 'Impactful Care Ecosystem for Employees'.
The Life Sciences and Technology Centre (LSTC) won
the CII Award on 'Excellence for Women in STEM 2024'.
LSTC was the only organisation in the Life Sciences
Sector to be recognised in top 25 companies by CII in
this category.

Your Company's efforts to enhance Diversity, Equity and
Inclusion are founded on the conviction that a diverse
workforce contributes to rich discourse, promotes holistic

perspectives, fosters creative solutions and is integral
to serving customers better while creating value for
all stakeholders. Your Company's policy on Diversity,
Equity and Inclusion articulates and institutionalises
this conviction through concerted actions spanning
three vectors, i.e., Representation, Inclusion & Enablement
and Commitment & Assurance. Your Company is
committed to enhancing gender diversity and participation
of the differently abled in the workforce.

Measures to enhance diversity include ensuring
sufficient representation of women in selection pools
and deployment of the differently abled across suitable
opportunities in the value chain. Through progressive
policies offering flexible work arrangements, extended
child-care leave, travel support for infants and care-givers,
secure transport, paternity leave, same gender partner
medical benefits, infrastructure support coupled with
various sensitisation programmes, Employee Resource
Groups, development interventions tailored for women
talent, and the commitment and sponsorship of leaders;
your Company provides an enabling environment to
further its Diversity, Equity and Inclusion goals. To ensure
a safe and progressive work environment, Internal
Committees have been institutionalised as per provisions
of the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013.
The focused efforts across these dimensions have
resulted in a 72% increase in women managers in your
Company since FY 2021-22.

Your Company continued its practice of active leadership
outreach to employees. Periodic communication with
the ITC community through 'StudioOne Townhalls' led
by the Chairman, provided employees avenues to hear
from and engage with leaders about your Company's
vision, strategy and milestones. This was supplemented
by a more personalised engagement through the
'StudioOne Xchange' initiative. The Chairman and other
members of the Corporate Management Committee
interacted with managers across Businesses in small
groups, sharing your Company's vision and strategies
while also inviting suggestions and feedback. Your
Company believes that alignment of all employees to
a shared vision and purpose is vital for winning in the
marketplace. It also recognises the mutuality of interests

with key stakeholders and is committed to continue
building harmonious employee relations. Your Company
remains dedicated to an Employee Relations climate
of partnership and mutuality while ensuring operations
are competitive, flexible and responsive. The Employee
Relations philosophy of your Company, anchored in the
tenets of Scientific Management, Industrial Democracy,
Human Relations and Employee well-being, has
contributed towards building a robust platform which has
aided the conclusion of collective bargaining agreements
at several of its manufacturing units, ensuring smooth
commencement of operations at greenfield locations and
the execution of productivity improvement practices.

In its relentless pursuit of excellence and value creation,
your Company offers an abundance of opportunities for
employees to grow and thrive in an environment of trust,
empowerment and continuous learning. The access to
best-in-class resources, technology and infrastructure, the
prospect of building businesses rooted in value chains in
India, the deployment of deep consumer insights to create
and shape Indian brands are the defining hallmarks of
'The ITC Way'. This unique blend of a high-performance
culture coupled with care and respect for people remain
vital to realising your Company's vision of sustaining its
position as one of India's most valuable and admired
corporations.

WHISTLEBLOWER POLICY

Your Company's Whistleblower Policy, approved by
the Board, encourages Directors and employees to
promptly bring to the Company's attention, instances of
illegal or unethical conduct, actual or suspected incidents
of fraud, actions that affect the financial integrity of
the Company, or actual or suspected instances of leak
of unpublished price sensitive information, that could
adversely impact the Company's operations, business
performance and/or reputation. The Policy requires
the Company to investigate such incidents, when reported,
in an impartial manner and take appropriate action
to ensure that the requisite standards of professional
and ethical conduct are always upheld. Anonymous
complaints are also entertained if the same is backed by
specific allegations & verifiable facts, and is accompanied
with supporting evidence. It is your Company's Policy to

ensure that no complainant is victimised or harassed for
bringing such incidents to the attention of the Company,
and to keep the information disclosed during the
course of the investigation as confidential. The
practice of the Whistleblower Policy is overseen by the
Audit Committee and no employee was denied access to
the Committee during the year. The Whistleblower Policy
is available on the Company's corporate website at
https://www.itcportal.com/whistleblower-policy .

During the year, your Company received 24 complaints in
terms of the Whistleblower Policy, of which investigation
in respect of 15 complaints was completed; in most of the
cases, no evidence was found in support of the allegations
made. Appropriate action, where necessary, was taken.

SUSTAINABILITY 2.0

Your Company believes that when enterprises make
societal value creation an integral part of their corporate
strategy, powerful drivers of innovation emerge that make
growth more enduring for all stakeholders. This paradigm
is called ‘Responsible Competitiveness’ - an abiding
strategy that focuses on extreme competitiveness but in
a manner that replenishes the environment and supports
sustainable livelihoods.

Your Company's innovative business models synergise
the building of economic, environmental and social capital,
thus embedding sustainability at the core of its corporate
strategy. Today, this strategy has not only contributed
to building strong businesses of the future as well as a
portfolio of winning world-class brands, but also in making
your Company a global exemplar in 'Triple Bottom Line'
performance. Your Company is the only enterprise in the
world of comparable dimensions to have achieved and
sustained the three key global indices of environmental
sustainability of being 'water positive' (for 23 years),
'carbon positive' (for 20 years), and 'solid waste recycling
positive' (for 18 years).

Your Company is actively working towards Sustainability 2.0,
an agenda which reimagines sustainability under the
pressing challenges of climate change and social inequity.
Sustainability 2.0 calls for inclusive strategies that can
support sustainable livelihoods, pursue newer ways
to fight climate change, enable the transition to a net
zero economy, work towards ensuring water security
for all and create an effective circular economy for
post-consumer packaging waste. It also entails protecting
and restoring biodiversity and ecosystem services through
adoption of nature-based solutions. Your Company
believes that agility in thought and action, meaningful
public-private-people partnerships and Responsible
Competitiveness will act as core enablers of this new
agenda. Your Company has the potential to make a
large-scale impact not only from an economic standpoint,
but also from the perspective of supporting livelihoods
and social enablement because of its presence across
several critical sectors of the economy. With its bold
Sustainability 2.0 agenda, your Company is setting the
bar higher and remains committed to making meaningful
contribution to the Nation's future while retaining its status
as a sustainability exemplar. The 2030 Sustainability 2.0
ambitions include:

Climate Change

-    Enhancing the share of renewable energy usage to
50% of total energy consumption by 2030.

-    Meeting 100% of purchased grid electricity
requirements from renewable sources by 2030.

-    Reducing specific energy consumption by 30% and
specific Greenhouse Gases (GHG) emissions by 50%
by 2030 as compared to the FY 2018-19 baseline.

-    Sustain and enhance carbon sequestration by
expanding forestry projects through your Company's
Social and Farm Forestry programme and other such
initiatives covering over 1.5 million acres by 2030.

Water Stewardship

-    Achieving 40% reduction in specific water consumption
by 2030 as compared to the FY 2018-19 baseline.

-    Creation of rainwater harvesting potential equivalent
to over five times the net water consumption by 2030.

-    Certification of all sites in high water stressed areas
as per the international water stewardship standard
by Alliance for Water Stewardship (AWS) by 2035
and eight sites by 2024.

-    Improve crop water-use efficiency in agri-value chains
through demand side management interventions and
enable savings of 2,000 million kl of water by 2030.

Plastic Waste and Circular Economy

-    100% of your Company's Packaging to be Reusable,
Recyclable or Compostable/Biodegradable by 2028.

-    Sustain plastic neutrality (attained in FY 2021-22) by
enabling sustainable management of waste in excess
of the amount of packaging utilised.

Sustainable Agriculture

-    Promote climate smart agriculture approach in core
Agri Business catchments across four million acres
by 2030.

Biodiversity Conservation

-    Revive & sustain ecosystem services and products
provided by nature, through adoption of nature-based
solutions and biodiversity conservation covering over
one million acres by 2030.

Sustainable Livelihoods

-    Supporting sustainable livelihoods for 10 million
people by 2030.

Your Company's Businesses are actively working towards
achieving your Company's Sustainability 2.0 vision.
During FY 2024-25, your Company enhanced the share
of its renewable energy to nearly 52%. Commendable
progress has been made in line with 2030 targets relating
to specific energy, specific GHG emissions and specific
water consumption across Businesses as well. In line
with its commitment, your Company continued to remain
plastic neutral during FY 2024-25 by sustainably managing
more plastic packaging waste than the amount of plastic
packaging utilised. During the year, your Company's
large-scale programmes on Sustainable Agriculture were
augmented to cover 3.17 million acres. Through its deep
engagement in agriculture, manufacturing and services,
as well as its extensive distribution infrastructure and
large-scale programmes under ITC Mission Sunehra
Kal, your Company supports nearly nine million
sustainable livelihoods across its operations and
value chains. A detailed performance dashboard against
2030 commitments is included in your Company's
annual Sustainability Report, 2025 and will be available
in due course.

In addition to the 2030 targets, your Company is enhancing
its long-term climate-related goals by committing to
achieve 'Net Zero Operations' by 2050 which will entail

decarbonisation of its scope 1 and scope 2 emissions
i.e., electrical and thermal energy-related emissions in
own operations. Additionally, your Company will continue
to collaborate with its extended ecosystem for facilitating
decarbonisation of emissions across the value chain
(scope 3 emissions) as well as setting up systems for
monitoring scope 3 emissions in line with emerging
standards.

To achieve its Sustainability 2.0 vision, your Company
continues to strengthen its management approach which
is guided by a comprehensive set of sustainability policies
and is being implemented across the organisation.
Your Company has put in place robust mechanisms for
engaging with key stakeholders, identification of material
sustainability issues and progressively monitoring and
mitigating the impacts along the value chain of each
Business. Your Company will continue to update these
systems and processes in line with evolving disclosure
standards and Environmental, Social and Governance
(ESG) requirements.

Your Company's 21st Sustainability Report published
during the year detailed the progress made across all
dimensions of the 'Triple Bottom Line' for FY 2023-24.
This report was prepared in conformance with
'In Accordance - Comprehensive' criteria of the
Global Reporting Initiative (GRI) standards and is
third-party assured to 'Reasonable Level' as per
International Standard on Assurance Engagements
(ISAE) 3000. The report continues to be aligned to the
requirements of the Integrated Reporting Framework
as well. In addition to the Sustainability Report, your
Company published its first Nature Report in line with
the recommendations of Taskforce on Nature-related
Financial Disclosures (TNFD).

Your Company's Sustainability Report for FY 2024-25
is being prepared and will be made available on your
Company's corporate website in due course. In addition, the
Business Responsibility & Sustainability Report (BRSR),
as mandated by the Securities and Exchange Board of
India (SEBI) for the year under review is annexed to the
Report and Accounts. The BRSR maps the sustainability
performance of your Company against the nine principles
forming part of the National Guidelines on Responsible

Business Conduct (NGRBC) issued by the Ministry of
Corporate Affairs, Government of India.

During the year, your Company sustained its 'AA' rating
by MSCI-ESG for the seventh consecutive year, the
highest rating among global tobacco majors. Based on
its ESG score as assessed by S&P Global Corporate
Sustainability Assessment (CSA), your Company has also
been included in the Dow Jones Sustainability Emerging
Markets Index for the fifth year in a row. In FY 2023-24,
your Company entered the prestigious A List' for
CDP Water with a Leadership Level' score of A', which
is higher than the Asia and Global average of 'C'. For CDP
Climate, your Company had achieved 'Leadership Level'
score of 'A -' in FY 2023-24, which is higher than the
Asia and Global average of 'C'. Your Company's CDP
scores for FY 2024-25 are still awaited.

Contribution to the United Nations Sustainable
Development Goals (UN SDGs)

Your Company's Sustainability strategies and Social
Investment Programmes & interventions, in addition
to their alignment with national priorities, are also well
positioned to contribute to the achievement of India's
commitment under the UN SDGs. For instance, your
Company's programme on Climate Smart Agriculture
is aligned to the Government's National Mission for
Sustainable Agriculture, and also contributes to the
achievement of multiple SDGs, including SDG 13
(Climate Action), SDG 15 (Life on Land), SDG 1
(No Poverty), SDG 2 (Zero Hunger) and SDG
12 (Responsible Consumption and Production).
Your Company's multi-dimensional environmental and
social interventions which have been scaled up over
the years contribute favourably to all 17 UN SDGs.
A comprehensive statement linking your Company's
interventions to the SDGs including corresponding targets
will be available in your Company's Sustainability Report
for FY 2024-25.

Building Climate Resilience

Your Company recognises the urgent need to combat
climate change for building a more secure future and
the role it can play in enabling a net-zero economy.
To address the risks of climate change, your Company's

climate strategy places equal emphasis on transitioning to
a low carbon economy and adapting to the worst impacts
of climate change.

Your Company is pursuing a low carbon growth strategy
through extensive decarbonisation programmes across
its value chain. These include increasing the share of
renewable energy, continuous reduction of specific
energy, construction of green buildings, greening
logistics & optimising distance-to-market, and promoting
regenerative agriculture practices in agri-value chains.
Your Company is also conducting Life-Cycle Analysis (LCA)
studies for developing a portfolio of innovative and
sustainable products in line with growing consumer
preference for climate friendly products.

Additionally, in order to address short-medium term as
well as long-term physical risks of climate change, your
Company is working with climate experts to conduct
comprehensive climate risk and vulnerability assessments
using climate models across its key agri value chains and
operating locations (factories and warehouses). These
assessments utilise latest AI-enabled climate modelling
tools for projecting the extent of risk from climate hazards
related to changes in temperature, precipitation, sea
level rise, flooding and other extreme weather events
over decadal time frames covering the period till 2100
under various Shared Socioeconomic Pathways (SSPs)
scenarios (SSP1-2.6, SSP2-4.5 and SSP5-8.5). Detailed
farm-level studies have been conducted to understand
the potential adverse impacts of climate change on your
Company's key agri-value chains. These risk assessments
help further calibrate the climate resilience measures that
are being implemented across your Company's value
chains. For major crops like wheat, pulpwood and leaf
tobacco among others, there is significant and sustained
work being done by your Company on the development
of climate-tolerant varieties as well as dissemination of
climate-resilient and regenerative agronomic practices
in the growing areas. Around 140 locations across your
Company's own operations and the extended value chain
have been assessed for climate risk. Based on the
findings of these assessments, detailed site-specific
studies are being undertaken for developing contextual
location-specific adaptation plans and strategies.

Energy Conservation and Renewable Energy

As a responsible corporate citizen, your Company has
made a commitment to reduce dependence on energy
from fossil fuels. Accordingly, appropriate green features
are being incorporated in all factories, warehouses and
office complexes with many of them certified at the highest
level by either the US Green Building Council (USGBC)
or Indian Green Building Council (IGBC). During the
year, despite significant increase in scale of operations,
your Company sourced nearly 52% of its total energy
requirements from renewable sources such as biomass,
wind and solar. Your Company has been investing in
expanding renewable footprint across both thermal
and electrical energy. The recently commissioned
state-of-the-art and future-ready High Pressure
Recovery Boiler at the Bhadrachalam mill of your
Company's Paperboards & Specialty Papers Business
replaced conventional soda recovery boilers thereby
reducing carbon footprint through    lower coal

consumption. In addition to this, your Company
installed capacity of over 174 MW ¹⁰ of solar and
wind power across the country to meet its electrical
energy requirements.

Your Company continues its efforts towards meeting 100%
of purchased grid electricity requirements from renewable
sources by 2030 and sustaining 50% renewable energy
share in its total energy consumption based on a
mix of energy conservation and renewable energy
investments, despite significant enhancement in its scale
of operations going forward.

GHG and Carbon Sequestration

The GHG inventory of your Company for FY 2024-25
compiled according to the ISO 14064 Standard has been
assured by an independent third party. The GHG inventory
covers emissions from your Company's operations and
GHG removals from your Company's large-scale forestry
programmes. Your Company's Social and Farm Forestry
initiatives, besides sequestering carbon from the
atmosphere, help towards utilisation of degraded
wasteland, prevent soil erosion, enhance organic matter
content in soil and increase ground water recharge.

Towards Water Security for All

With water scarcity increasingly becoming an area of
global and national concern, your Company continues
to focus on an integrated water management approach
that includes water conservation and harvesting initiatives
at its units - while at the same time working towards
meeting the water security needs of all stakeholders at
the local watershed level. Several interventions have
been rolled out to improve water-use efficiencies such
as adopting latest technologies and increasing reuse and
recycling practices within the fence while also working
with farmers and other community members towards
improving water-use efficiencies.

Demand side management is a critical component
of your Company's Water Stewardship programme.
Recognising the critical imperative of reducing water
use, especially in agriculture, your Company continues
to work with farmers to achieve 'more crop per drop' and
improve farmer incomes. Over 18 lakh acres have been
covered during the year across 12 states through micro
irrigation technologies and crop-specific agronomical
practices. Basis parameters established earlier, there
has been potential water savings of over 1,400 million kl
during the year. These interventions are spread across
15 crops including four key agri value chains - wheat,
tobacco, pulpwood and spices, and result in water savings
up to 50% as compared to conventional practices.
The water-use efficient practices promoted also help in
reducing GHG emissions as compared to the conventional
practices followed.

The demand side measures are implemented along with
augmenting supply at the sub-catchment level through
various interventions of rainwater harvesting based on the
recommendations of hydro-geological studies. The supply
side interventions include enhancing capture and storage
of rainwater (within soil surface and storage structures)
and recharging aquifers. In the process, traditional
water bodies are restored and wetland eco-systems are
conserved. To have a long-lasting impact and balance
out the competing demands on water resources, your
Company has also extended work to river basin level
in water stressed catchments. Based on the work done
by your Company in four river basins viz. Maharashtra
(Ghod basin), Madhya Pradesh (Kolans basin),

Tamil Nadu (Upper Bhawani basin) and Telangana
(Murreru basin), water positive status was achieved in all
the basins by end of the year as against water deficit
estimated in the baseline studies. In South Pennar river
basin of Karnataka, work has been initiated in the field,
basis the recommendations from the river basin study
done by Indian Institute of Science (IlSc), Bengaluru.
This is being pursued through a Public Private Partnership
with Karnataka Government and Vyakti Vikas Kendra for
restoring the water bodies in the river basin.

Considering the increasing water stress in urban
catchments, your Company is implementing water security
programmes in Bengaluru and Chennai catchments.
These programmes focus on restoring urban water
bodies as well as tanks and their connectors, groundwater
recharge and promotion of roof water harvesting and
usage of water efficient taps. These measures are aimed
at addressing challenges of groundwater depletion
and also mitigating risks arising out of flooding during
heavy rains.

Your Company also conducts efficacy studies to assess
the impact of the watershed work carried out, and to
ensure that maximum benefits accrue in the long-term.
As on 31st March, 2025, your Company's integrated
watershed development projects covering over 1.8 million
acres of land have created a total rainwater harvesting
potential of over 59.90 million kl. In total, over
60 million kl of rainwater has been harvested, including
within the fence, which is over five times the net
water consumed by your Company's operations in
FY 2024-25. With this, your Company has achieved
its 2030 Sustainability 2.0 target of creating rainwater
harvesting potential equivalent to over five times the net
water consumption.

In addition, your Company is spearheading the
implementation of Alliance for Water Stewardship (AWS)
Standard which is a credible, globally applicable and
recognised framework for ensuring sustainable water
management within the wider water catchment context.

During the year, two units of your Company i.e., Paper
unit at Bhadrachalam and Branded Packaged Foods
unit at Kapurthala, received the AWS Platinum level
certification, the highest recognition for water stewardship

awarded by AWS. Till date, nine units of your Company
have achieved Platinum level certification under the
AWS Standard, thereby exceeding the commitment of
getting eight sites certified by 2024.

Pioneering the Green Building Movement in India

In order to continuously reduce your Company's energy
footprint, green features are being integrated in all new
and old constructions including manufacturing units,
warehouses and office complexes. Your Company is a
pioneer in the green building movement, with 17 buildings
having received Platinum certification by USGBC
(US Green Building Council)/IGBC (Indian Green
Building Council).

Several of your Company's factories and office complexes
have received the Green Building certification from IGBC
and the Leadership in Energy & Environmental Design
(LEED®) certification from USGBC. The data centre at
Bengaluru, ITC Sankhya, is the first data centre in the
world to receive the LEED Platinum® certification by
USGBC. Large infrastructure investments such as the
ITC Green Centre at Guntur and the ITC Green Centre
at Bengaluru (both LEED Platinum^® certified) continue
to demonstrate your Company's commitment to green
buildings. Virginia House, Kolkata and ITC Centre,
Kolkata - the headquarters of your Company, are
also certified at the highest 'LEED Platinum®' rated
Green Building by USGBC.

Enabling a Circular Economy

Your Company continues to make significant progress in
improving the circularity of waste generated in operations.
The focus is on reducing waste through constant monitoring,
improvement of efficiencies in material utilisation and
adequate waste segregation thereby improving recycling
rates. During the year, your Company achieved over 99%
recycling of waste generated in course of its operations.
This has prevented waste from reaching landfills, with the
associated problems of soil & groundwater contamination
and GHG emissions, all of which can adversely impact
public health. In addition, your Company's Paperboards &
Specialty Papers Business recycled nearly 85,000 tonnes
of externally sourced post-consumer waste paper, thereby
creating yet another positive environmental footprint.

Your Company aims to go beyond the requirements of
Plastic Waste Management Rules, 2022 to ensure that
over the next decade, 100% of packaging is reusable,
recyclable or compostable/biodegradable. Your Company
is working towards optimising packaging in a way
that reduces the environmental impact arising out of
post-consumer packaging waste without affecting product
integrity. This is being addressed in a comprehensive
manner by optimising packaging design, introducing
recycled content in packaging, identifying alternative
packaging material with lower environmental impact and
supporting development of suitable end-of-life solutions
for packaging waste.

Your Company has successfully implemented multiple
large-scale models of solid waste management across
the country. These models, based on principles of circular
economy, are scalable, replicable and sustainable, and
have enabled your Company to sustain its plastic neutral
status since FY 2021-22. The approach is centred around
treating waste as a resource and ensuring that minimal
waste goes to landfill, which can be achieved only when
waste is segregated at source. The initiatives focus on
educating citizens on segregating waste at source into
dry & wet streams and ensuring that value is derived from
these resources and in the process, support sustainable
livelihood for waste collectors. These models operate on a
public-private partnership basis, with active involvement of
Urban Local Bodies (ULBs), civil society and the informal
sector of waste collectors.

Your Company has exceeded its commitment on plastic
neutrality for the third consecutive year by collecting
and sustainably managing 76,000 tonnes of plastic
waste, which is more than the plastic packaging utilised
by your Company. Your Company has been obtaining
independent third-party assurance of its plastic neutrality
status since FY 2022-23.

Your Company's waste recycling programme,
‘WOW - Well-Being Out of Waste', enables the creation
of a clean & green environment and promotes sustainable
livelihoods for waste collectors. During the year, the
programme continued to be executed in Bengaluru,
Mysuru, Hyderabad, Coimbatore, Chennai, Delhi,

Dindigul, major towns of Telangana and several districts of
Andhra Pradesh. The quantum of dry waste collected during
the year was about 67,100 MT from over 1,760 wards.
The programme has covered over 2.9 crore citizens in over
72 lakh households, 71 lakh school children and around
2,240 corporates since its inception. It has promoted
sustainable livelihood for over 17,900 waste collectors by
facilitating an effective collection system in collaboration
with Municipal Corporations. The intervention has
also created over 150 social entrepreneurs who are
involved in optimising value capture from the collected
dry waste.

Your Company, in partnership with Kashtakari Panchayat
and SWaCH Pune, runs an inclusive and decentralised
waste management model in Pune to specifically focus on
collection and recycling of low value Multi-Layered Plastic
(MLP) packaging. Through a mobile collection system
operating across 12 city wards and the Pune Cantonment
Board, over 750 waste pickers collect MLP waste daily,
receiving direct payments. The initiative processes
over 130 MT of flexible plastics monthly, and has
cumulatively recycled nearly 4,100 MT since 2019.
The program not only boosts incomes for informal workers
(contributing to ~12—15% of their earnings) but also
provides formal employment to 43 individuals, showcasing
a replicable model that combines environmental
stewardship with social equity.

Further, a separate community-driven programme on
decentralised Solid Waste Management (SWM), including
closed loop Green Temple programme in collaboration
with Swachh Bharat Mission, is operational in 34 districts
across 12 states covering about 24.62 lakh additional
households during the year, taking the cumulative
coverage to nearly 75.21 lakh households. This programme
deals with both wet and dry waste and focuses on
minimising waste to landfill by managing waste at source.
Under the programme, more than 6.7 lakh MT of waste
was collected during FY 2024-25, out of which around
4.2 lakh MT of wet waste was composted, and
1.8 lakh MT of dry waste recycled, and thus 87% of the
total waste was avoided from being sent to landfills.
Further, home composting was practiced by over
1.93 lakh households (8.3 lakh households till date).

As liquid waste is emerging as a growing challenge
especially in rural areas, during the year, your Company
has also initiated pilots of different decentralised solutions
like soak pits, in line treatment, waste stabilisation ponds
and vertical filters in nine States.

Your Company's partnership with Uttar Pradesh
Urban Development Department (UDD) is enabling
implementation of SWM programme in 85 ULBs
across 75 districts of the State, reaching out to over
49 lakh households till date. Your Company's
partnership with Lohiya Swachh Bihar Abhiyan (LSBA),
Rural Development Department, Government of Bihar
continued to promote decentralised SWM in 456 villages
of Ganga region ('Ganga Gram') across 12 districts of
Bihar. During the year, refresher training and handholding
support was provided to 3,100 Panchayat officials of these
456 Ganga Gram villages through a cascade approach,
who then initiated focused waste management activities
in their villages and covered over 4.6 lakh households.

Your Company had also collaborated with Department
of Drinking Water and Sanitation (DDWS), Government
of India, and India Sanitation Coalition (ISC), FICCI, to
develop 36 Gram Panchayats (GPs) across 10 states as
Lighthouses, demonstrating best practices in sanitation
and waste management, which will be adopted by other
GPs gradually. The partnership is part of the DDWS's plan
of creating 75 Lighthouse Gram Panchayats across India.
Till March 2025, of the 36 GPs, 28 GPs were declared
Model by Government, with the balance 8 GPs on track to
become Model in the coming months.

Your Company's approach of involving Self Help Groups
(SHGs) as service providers for Gram Panchayats in
SWM and the use of Swachhata Mitra App for monitoring
waste management in partnership with Bihar Government
has got high appreciation as best practices.

Your Company's 'YiPPee! Better World programme' is
aimed at creating awareness about plastic waste and
ways to reduce, recycle and reuse it among students.
During the year, the intervention reached out to 14 lakh
children across 4,175 schools. This programme along
with Company's Social Investments Programme has
provided schools with over 1,850 benches and tables and
350 sports kits made from recycled plastic.

Preserving and Nurturing Biodiversity

Given the linkages between agriculture and the essential
ecosystem services that nature provides, your Company
recognises that the preservation and nurturing of
biodiversity is crucial for long-term sustainability of its
businesses. It is therefore committed to conducting its
operations in a manner that protects, conserves and
enriches biodiversity in line with the Board-approved
Policies on Biodiversity Conservation and Deforestation.

For both greenfield and brownfield operations, processes
are in place for assessing any actual or potential biodiversity
related risk or impact including conducting environmental
impact assessments wherever required by environmental
regulations. Moreover, location-specific exposure
including proximity to Key Biodiversity Areas is assessed
periodically. Basis these assessments, key nature-related
risks that are material to your Company's businesses/
locations are identified, and mitigation plans are developed
and implemented. Location specific risks covered in these
assessments include water stress, climate risks including
extreme weather events like droughts and floods,
land-use changes, soil quality and productivity, among
others. Your Company also recognises the potential
of nature-based solutions for carbon sequestration
and building climate resilience, and prioritises actions
to minimise impacts across ecosystems and manage
dependencies in a sustainable manner. Your Company
also has large scale programmes in place for ensuring
deforestation-free leaf tobacco and wood value chains.
For more information, refer to the Corporate Social
Responsibility section.

Sustainable Supply Chain and Responsible Sourcing

Your Company, with its diverse and expanding portfolio of
businesses, is working towards scaling up its sustainable
supply chain initiatives as part of its Sustainability 2.0
Vision. Your Company has a Board-approved Policy on
'Sustainable Supply Chain and Responsible Sourcing' and
a 'Code of Conduct for Suppliers and Service Providers'
that together lay down the foundation for your Company's
engagement with its suppliers. In line with this policy,
your Company engages with its supply chain members
for building their capacity, assessing sustainability risks,
and supporting them in building resilience against such

risks. The policy also encourages suppliers to work
towards resource-use efficiency, including sustainable
natural resource management, GHG emission reduction
and sustainable waste management. For focused
engagement with key suppliers, your Company has
created a framework for identifying its critical suppliers.
Till FY 2024-25, more than 800 Tier-1 suppliers have been
trained on ESG including 100% critical Tier-1 suppliers.
Additionally, appx. 70% critical Tier-1 suppliers have been
assessed on ESG aspects by a third party.

For key agri value chains, your Company has implemented
large scale sustainable and Climate Smart Agriculture
programmes. Till date, 31.7 lakh acres and over 12 lakh
farmers including 1.87 lakh women farmers have been
covered under your Company's Climate Smart Agriculture
programme. Your Company also supports farmers with
adoption of sustainable farm certifications like Rainforest
alliance (RFA), Forest Stewardship Council® (FSC®),
Global Agricultural Practices (G.A.P) for identifying and
addressing environmental risks and human rights related
issues. For more information, refer to the Corporate Social
Responsibility section.

ITC’s Nutrition Strategy - ‘Help India Eat Better’

In the context of India's Triple burden of malnutrition, there
is an urgent need to pivot towards healthier lifestyles which
requires access to safe, sustainable and nutritious food.

Your Company's Branded Packaged Foods Businesses
have developed a 4-pillar model that uniquely combines
the strategic commitments to deliver on its nutrition
strategy - 'Help India Eat Better'. The strategy has
been developed to create an ecosystem and guide the
organisation towards supporting the dream of a healthier
nation via value-added products, sustainable food system
initiatives, empowered people and healthy communities.
This also includes focus on diet diversity, food fortification,
leveraging traditional systems of knowledge and use
of millets. The strategy is also in line with Government
of India initiatives such as Mission Poshan 2.0,
Anemia Mukt Bharat, Kuposhan Mukt Bharat, Surakshit
Matritva Abhiyan and the    Aspirational Districts

Programme. Robust science-based nutrition targets
have also been developed and are continuously tracked
and communicated to your Company's stakeholders.

The meticulous implementation of evolving scientific
principles and technological advancements by your
Company's research and development teams enables
development of 'better for you' portfolio. Your Company
also achieved the first rank in ATNI India Index 2023
amongst 20 of the largest Indian food & beverage
manufacturers as assessed by the globally recognised
Access to Nutrition Initiative (ATNI). The index is published
every 2-3 years and evaluates companies on their
governance and management, production and distribution
of healthy products, influence on consumer choices,
and policies and actions targeting priority populations at
high risk of malnutrition.

Promoting Thought Leadership in Sustainability

To ensure wider adoption of the 'Triple Bottom Line'
philosophy across the Industry, your Company established
the 'CII - ITC Centre of Excellence for Sustainable
Development' (CESD) in 2006 in collaboration with the
Confederation of Indian Industry (CII). With a vision to
drive transformation towards sustainable development,
the Centre plays a focal role in Government Industry
dialogues on national regulations, articulate stakeholder
discourses on global policies, put forth Indian industry's
stand on macro-economic issues and accentuate the
need for sustainable and inclusive transformation. Major
highlights from the year include:

Building Climate Resilience and Low Carbon Economy

•    The CII Climate Action Charter (CCAC) provides a
platform for Indian businesses to map Climate Change
as a material risk across value chains and develop
long-term actions to build resilience. The Charter
has been designed to provide impetus for collective
action by Indian businesses to drive solutions
for a just, equitable and resilient transition, and
currently, has close to 500 signatories across
industry sectors.

•    CII-led delegation participated in the 29th Conference
of the Parties (COP29), held in Baku, Azerbaijan, from
November 11-22, 2024. The report, 'CII at COP29
Negotiations: Indian Industry Expectations', launched
at the Conference, emphasises a balanced approach
that incorporates both mitigation and adaptation,
acknowledging the need for a more equitable and

effective climate finance framework to close the
climate finance gap and facilitate climate-resilient
growth.

•    The Centre in collaboration with CEEW (Council for
Energy, Environment and Water) launched the report
on 'Building Climate Resilience for Indian Industry'
at the 19th Sustainability Summit. The report has
developed a Physical Climate Risk Assessment
Framework (PCRAF) to assess and quantify climate
risks for Indian businesses and their value chains.

•    In collaboration with Ministry of Environment, Forest
and Climate Change (MoEFCC), the Centre is
actively contributing to the formulation of the National
Inventory of Greenhouse Gases related to the
Industrial Processes and Product Use (IPPU) sector
as part of India's fourth National Communications
(NATCOM) to the United Nations Framework
Convention on Climate Change (UNFCCC) and the
1st Biennial Transparency Report under the NATCOM
project, guided by the Ministry of Environment, Forest
and Climate Change.

Advancing Creation of a Circular Economy

•    The India Plastics Pact (IPP), launched in September
2021, is uniting businesses, NGOs, and citizens
behind four ambitious time-bound targets to
help realise a vision of a world where plastic is valued
and doesn't pollute the environment. The Pact is the
first in Asia and joins a global network of 13 Plastics
Pacts. 53 organisations are signatories to the Pact
and have committed to the Pact's 2030 Targets for
a circular plastics economy. Some of the key reports
launched by IPP during the year include:

-    Roadmap for managing films and flexible
packaging in India

-    Design for recycling guidance for films and
flexible packaging and Landscape assessment:
Reuse models in India.

•    The Centre partnered with the Ministry of Environment,
Forest and Climate Change (MoEFCC) for streamlining
implementation of environmental reforms, thereby
fostering circular economy, transparency and
enhancing natural resource management. During the

year the Centre partnered with Bureau of Indian
Standards (BIS) to develop standards related to
waste management, sustainability, environmental
management and ecological priorities. The Centre
also worked with the Central Pollution Control Board
to resolve challenges related to Extended Producer
Responsibility (EPR) obligations under the rules
for plastics, e-waste, battery and hazardous waste
management.

•    During the year, CII signed an MoU with the All-India
Plastics Manufacturing Association to encourage
action, knowledge sharing, and awareness between
larger businesses and MSMEs.

•    Since 2020, CII has been working across various
sectors and has successfully supported over
260 sites in achieving SuP-free (single-use
plastic-free) certification.

•    During the year, the Centre hosted the first edition of
the CII Circular Economy Conference and launched
the CII Sustainable Plastic Packaging Awards for
recognising upstream innovations and changes
in design of plastic packaging by businesses,
driving the transition towards a circular plastics
economy in India.

Nature Positive Actions

•    The India Business and Biodiversity Initiative
(IBBI) participated in consultation meetings for
updating the National Biodiversity Strategy and
Action Plan (NBSAP), and for adoption of National
Biodiversity Targets (NBTs) in alignment with the
Global Biodiversity Framework (GBF). At COP16
to the Convention on Biological Diversity (CBD) in
Cali, Colombia, India launched its updated National
Biodiversity Strategy and Action Plan (NBSAP).

•    IBBI was designated by the MoEFCC as the
responsible agency for Target 15 of India's updated
NBSAP. Target 15 focuses on sustainable production,
supply chains, and disclosure of risks, aiming to ensure
businesses manage biodiversity risks effectively.

Enhancing solutions for Clean Air

•    'India CEO Forum for Clean Air' is a dedicated
platform aiming to galvanise Indian businesses to
take forward clean air agenda in India and promote
focused actions through collective leadership of
Industry sub-sectors. The Forum led by 123 business
leaders, contribute towards making the air quality in
India better through the Crop Residue Management
(CRM) and through city-level awareness activities. In
the last six years the programme has led to saving of
12 million kg fine Particulate Matter (PM2.5).

•    To enhance the ecosystem for Electric Vehicle (EV),
CII facilitated industry inputs for 3 key Working Groups
under the newly formed National EV Task Force of
the Ministry of Heavy Industries (MHI).

Facilitating an Enabling Ecosystem for ESG Reporting

•    As part of SEBI's Industry Standards Forum (ISF),
CII formed a Core Group and held consultations
to develop Standards for Reporting on Business
Responsibility and Sustainability Reporting (BRSR)
Core. The recommendations made by CII on the
SEBI Consultation Paper - 'Recommendations of
the Expert Committee for Facilitating Ease of Doing
Business with respect to BRSR' were accepted by the
regulatory body.

•    To help Indian organisations navigate ESG
compliances and go beyond compliance, CESD
launched SaaS based ESG Subscription Service at
the 19th Sustainability Summit.

•    The Eco Edge initiative of the Centre aims at integrating
sustainability in the value chains of companies.
The focus areas include Decarbonisation, Circularity,
Health & Safety, and Human Rights. The programme
evaluates the performance of sourcing companies and
their value chain partners. During the year, more than
200 suppliers' sustainability performance was assessed
through the Eco Edge programme for the automotive
and energy sectors. For further adoption the Eco Edge
Online Assessment Tool was also launched.

Knowledge Exchange and Excellence in Sustainability

•    The 19th Sustainability Summit, Centre's flagship
annual event, was organised with the theme of
Driving Change for a Sustainability Conscious World.
The Summit deliberated on tangible actions in
driving sustainable change and highlighted inspiring

actions that exemplify the power of innovation,
development, and cooperation in shaping a prosperous
future for all.

•    Through the CII-ITC Sustainability Awards,
35 organisations were recognised for excellence
in sustainable business practices. The Awards
are a part of the continued efforts of the Centre to
create awareness on sustainability practices and to
create capacities in business.

•    To help industry manage climate risk, leverage
market opportunities and become climate resilient,
CII instituted a CAP 2.0° (Climate Action Programme)
to build capacity of industry and recognise best
practices and innovation on climate action.
The CAP 2.0° awards are the first one in India
to recognise industry's efforts on climate change
mitigation and adaptation. The awards in its 3rd edition
recognised 21 organisations for their pioneering work
in managing climate change.

•    The Centre trained nearly 400 professionals from
300+ organisations on sustainable business practices
through 25 sessions conducted during the year.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company's overarching commitment towards
creating significant and sustainable societal value is
manifest in its CSR initiatives that embrace the most
disadvantaged sections of society, especially in rural
India, through economic and social empowerment based
on grassroots capacity building. Your Company has a
comprehensive CSR Policy outlining programmes, projects
and activities that your Company undertakes to create a
significant positive impact on identified stakeholders. All
these programmes fall within the purview of Section 135
read with Schedule VII of the Companies Act, 2013 and
the Companies (Corporate Social Responsibility Policy)
Rules, 2014.

The key tenets of your Company's CSR interventions are:

- deep engagement in identified core operational
geographies to promote holistic development and
interventions designed in order to respond to the
most significant development challenges of your
Company's stakeholder groups.

-    strengthening capabilities of Implementation
Partners / Community Based Organisations (CBOs)
in all project catchments for participatory planning,
ownership and sustenance of interventions.

-    facilitating the development agenda in a manner that
is inclusive and empowers women, the poor and
marginalised communities including persons with
disability in the vicinity of your Company's factories
and agri-catchments, thereby significantly improving
Human Development Indices (HDI).

-    ensuring    behavioural change through focus on

demand    generation for all interventions, thereby

enabling participation, contribution and asset creation
for the community.

-    pursuing    the Prototype-Pilot-Scale-Amplification

approach to incorporate innovative and differentiated
design elements in a structured manner, whilst also
striving for amplification of successful interventions by
partnering with Government and Collaboratives.

Your Company's stakeholders are confronted with
multi-dimensional and inter-related concerns, at the
core of which is the challenge of securing sustainable
livelihoods. Your Company undertakes periodic
stakeholder engagements in the form of community
need assessments, impact assessments and other
evaluations. During the year, your Company undertook
48 such community engagements across 14 states
where your Company's Social Investments Programme
is being implemented, for the purpose of understanding
grievances if any, of the community members. Further,
over 3,000 household surveys were also conducted
during the year. Accordingly, interventions under
your Company's Social Investments Programme have
been appropriately designed to build capacities and
promote sustainable livelihoods.

Your Company's Social Investments Programme follows
the Two Horizon approach that focuses on inclusive
growth and holistic development of households; with
women and poor & vulnerable communities at the core.
In addition to being beneficiaries of several programmes,
women are also influencers and active participants in
grassroot institutions. Several such women also act as
change makers in the society.

The Two Horizon approach provides an integrated and
affirmative response to development by transforming
lives and landscapes. Whilst Horizon-I focuses on
strengthening and sustaining livelihoods of communities
(primarily agriculture and allied sector livelihoods);
Horizon-II focuses on building capabilities and capacities
to empower communities for a better life for the future.

The footprint of your Company's CSR projects is
spread across 24 states/Union Territories covering over
300 districts.

Your Company's CSR interventions were conferred
with three prestigious awards and recognitions during
FY 2024-25:

-    First Prize in FICCI Sustainable Agriculture Awards
2024 in the 'Natural Resource Management and
Climate Resilient Agriculture' category for the Climate
Smart Village Programme

-    I IT Madras CSR Awards 2024 under the theme
'Technology-Driven Inclusive Social Impact' for
deployment of technology in Climate Smart Agriculture

-    'Gold' Prize in Financial Express Green Sarathi Award
2024, in the Water Stewardship category

Natural Resources Management - Water Stewardship
Programme

The Water Stewardship programme aims to facilitate water
security for all dependents in the factory catchments and
to drought-proof the agri-catchments to minimise risks to
agricultural livelihoods arising from drought and moisture
stress. The programme is aligned to Jal Shakti Abhiyan,
the flagship initiative of Government of India for water
conservation. The programme promotes the development
and management of local water resources in
moisture-stressed areas by facilitating community
participation in planning and implementing such
measures, as well as building, reviving and maintaining
water-harvesting structures and thus conserving the
wetland ecosystems. In addition to rural and agri
focus, two urban water programmes are also being
implemented in Bengaluru and Chennai aimed at
addressing the challenges associated with urban water.
These programmes facilitate revival of urban water bodies,
targeted recharge of shallow aquifers and promotion
of practices like roof water harvesting and water
efficient taps.

To address the magnitude of water stress, your Company
has also extended water stewardship work to river basin
level interventions so that the competing demands from
neighbouring areas of our catchments are addressed
and a more holistic and sustainable impact created.
Work done in four river basins till date in Maharashtra
(Ghod basin), Madhya Pradesh (Kolans basin), Tamil Nadu
(Upper Bhawani basin) and Telangana (Murreru basin)
have resulted in the basins achieving water positive status,
as against the water deficit estimated in baseline
studies. Work has started in the fifth basin in Karnataka
(South Pennar basin), based on the recommendations
from the river basin study done through Indian Institute of
Science (IISc).

The coverage of water stewardship programme currently
extends to 59 districts of 17 states. During the year,
the area under watershed increased by over 1.78 lakh
acres, taking the cumulative coverage area to 18.16 lakh
acres. Over 3,500 water-harvesting structures including
ground water recharge structures were built during the
year, creating 5.83 million kl of rainwater harvesting
potential. The total number of water-harvesting structures
reached to over 35,900 and the net water storage potential
to over 59.90 million kl. In addition, as part of demand
management intervention, your Company continues
to work with farmers to achieve 'more crop per drop'
by promoting agronomic practices and micro irrigation
techniques targeted towards saving water in cultivation
and improving farmer incomes. Over 18 lakh acres across
more than 1 5 crops in 1 2 states have been covered
during the year as part of demand management. Studies
have been conducted by ICAR's Agricultural Technology
Application Research Institute, Kanpur, Indian Institute of
Rice Research, Tamil Nadu Agricultural University and
Vasantdada Sugar Institute to estimate water savings
in rice, wheat, sugarcane, coconut and banana in
your Company's programme locations. Basis these
studies and other research documents, it is estimated
that the demand management practices promoted
by your Company have led to potential water savings
to the tune of over 1,400 million kl during the year.
To improve water use efficiency, prototypes and pilots
also have been initiated to test efficacy of technologies
like organic hydrogel, mobile drip system and smart
irrigation switches.

Additionally, your Company is continuing existing
partnerships and forging new ones with multiple state
Government departments for Water Stewardship.
Your Company has signed three new partnerships
during the year with:

•    Water Resource Department, Government of
Maharashtra for Securing Godavari, Krishna and
Tapi river basins flowing in Maharashtra by promoting
Water Literacy among the Water User Associations
in 60 irrigation projects across 20 districts in these
basins which will improve water resources.

•    Department of Rural Development & Panchayat
Raj (RDPR), Government of Karnataka and
Vyakti Vikas Kendra India, for Water Resources
Development in South Pennar river basin to work
on water stewardship programme in 12 Taluks and
238 Gram Panchayats in Bengaluru Urban,
Bengaluru Rural, Kolar & Chikkaballapur districts
of Karnataka.

•    Watershed Development and Soil Conservation
Department, Government of Rajasthan, to promote
sustainable livelihoods based on a watershed
development project in 22 Gram Panchayats of
Bundi and Jhalawar districts covering an area of

44,000 acres.

Driven by your Company's Water Stewardship
programme, three Cigarette units at Pune, Bengaluru &
Saharanpur, three Branded Packaged Foods units at
Mysuru, Pune & Kapurthala, two Paperboards units at
Kovai & Bhadrachalam and GLT unit at Mysuru have
received AWS certifications in Platinum category till date.

Natural Resources Management - Biodiversity

The focus of the programme is on reviving ecosystem
services provided to agriculture such as natural regulation
of pests, pollination, nutrient cycling, soil health retention
and genetic diversity, which have witnessed considerable
erosion over the past few decades. The said programme
is also aligned to Government of India's flagship initiatives
such as National Mission for Sustainable Habitat and
Mangrove Initiative for Shoreline Habitats & Tangible
Incomes (MISHTI). Biodiversity conservation is done
through restoration of degraded village commons and

native species tree planting in the catchments. During the
year, your Company's biodiversity conservation initiative
covered over 1.76 lakh acres in 40 districts across
10 states, taking the cumulative area under biodiversity
conservation to over 6.47 lakh acres. While the
conservation work is being carried out in village commons,
this intervention significantly benefits the agricultural
activity in the vicinity of these plots through soil moisture
retention, carbon sequestration and by acting as host to
insects and birds beneficial to agriculture. Two technical
studies done earlier by 'The Energy and Resources
Institute' (TERI) & 'IORA Ecological Solutions' have
recorded improvement in carbon stocks, i.e., carbon
sequestered by trees, as well as floral and faunal
biodiversity compared to control areas. The project on
mangroves conservation, which are important biodiversity
reservoirs in coastal areas has been further strengthened.
Initiated in Andhra Pradesh in FY 2023-24, another

1,000 acres was conserved during the year, thus taking
the cumulative area to 1,500 acres. Alongside mangroves
conservation, olive ridley turtle conservation was also
taken up, wherein the eggs laid by turtles are protected
from natural predators by moving them to hatcheries
established along the coast and then releasing the
hatchlings into sea. During the year, 9,200 turtle eggs
were successfully hatched and released into the sea.

To increase the coverage for pastureland development
and biodiversity conservation, your Company has a
partnership with AP Panchayat Raj and Rural Development
Department to improve livelihoods and conserve village
commons in nine districts. Your Company also has a
partnership with Wasteland & Pastureland Development
Board (WPDB), Rajasthan targeting coverage of
2.5 lakh acres across eight districts. Till date,
1.75 lakh acres have been covered across 6,200 villages
leveraging Government resources. In the partnership with
Forest Department of Maharashtra, efforts towards soil
and moisture conservation in the forest and fringe areas
of Pune district was progressed with Department staff
trained by your Company in planning and implementing
the watershed work. Post training, Forest Department
took up soil and moisture conservation works and
tree plantation covering over 11,000 acres.

Climate Smart Agriculture

The Climate Smart Agriculture programme attempts to
de-risk farmers from erratic weather events through the
promotion and adaptation of a climate resilient approach
premised on dissemination of relevant package of
practices, adoption of appropriate mechanisation and
provision of institutional services. The said programme
is also aligned to Government of India's flagship
initiative of The National Innovations in Climate Resilient
Agriculture (NICRA) and other schemes for the welfare
of farmers including Pradhan Mantri Kisan Samman Nidhi
(PM-KISAN) Yojana. Currently, 31.70 lakh acres spread
over 100 districts across 19 states and 12 lakh farmers
including over 1.87 lakh women farmers are covered
under the programme. As per the studies done by reputed
ICAR - Agricultural Technology Application Research
Institute, Kanpur, the CSA practices promoted in rice
and wheat crops together has demonstrated reduction of
upto 21% in costs and upto 8% and 23% improvement
in yields and incomes respectively as compared to
conventional practices followed.

In pursuit of your Company's long-term sustainability
objective of increasing Soil Organic Carbon (SOC), more
than 6,300 compost units were constructed during the
year, taking the total number till date to over 67,300 units.
In addition to promotion of Climate Smart Agri practices at
scale, in core agricultural catchments, your Company also
has a Climate Smart Village (CSV) programme, wherein
support is provided to majority of the village population
to enable adaptation to climate risks, and mitigating the
same through knowledge dissemination, natural resources
management, livelihood diversification and institutional
support. 7,000 CSVs covering major crop value chains
are currently part of the programme. To provide additional
support to farmers in dealing with climate risks, during the
year, 17.65 lakh linkages were facilitated for farmers with
six major Government schemes, taking the cumulative to
over 42 lakhs.

Details of Climate Smart Agriculture interventions are also
provided in the section on 'Socio-Economic Environment'.

Your Company continued work on two partnerships, one
with Rajiv Gandhi Mission for Watershed Management
covering 35 districts of Madhya Pradesh for Climate

Smart Watersheds, and the other with Farmer Welfare
and Agriculture Development,    Department of

Madhya Pradesh covering 6 districts. During the year,
training was conducted by ITC for the officials, post which
they have initiated work in 8,200 villages.

During the year, knowledge was disseminated
through 13,500 Farmer Field Schools and over
17,600 Choupal Pradarshan    Khets (CPKs).

1,850 Agri Business Centres    (ABC) including

620 exclusive women ABCs delivered extension services,
arranged agri-credit linkages, established collective
input procurement and provided agricultural equipment
for hire.

Your Company, with its presence across multiple
commodities and geographies including the e-Choupal
network and agri extension programmes network,
undertook an initiative to facilitate formation of new Farmer
Producer Organisations (FPOs) and/or strengthening
existing FPOs, thus enhancing farm incomes, rural
livelihood and partnering in other relevant rural
development initiatives. During the year, your Company
supported additional 390 FPOs taking the cumulative
number to 2,050 FPOs.

The 'Adarsh Gram Programme' pioneered by your
Company's Agri Business presently covers 484 model
villages in the states of Andhra Pradesh and Karnataka.
Under this initiative, your Company supports villages
to become economically, ecologically and socially
sustainable. Your Company is also addressing the human
rights and farm safety challenges in these villages by
educating the farmers, labour & community, providing
access to Personal Protective Equipment (PPE) kits and
adopting smart technologies like drones for spraying
activities on the farms.

Off-farm Livelihood Diversification - Livestock
Development

The purpose of the programme is to improve income and
de-risk livelihoods of rural households by strengthening
animal dependant livelihood options. Capability building
on improved package of practices, breed improvement,
provision of extension services and creation of rural
entrepreneurs to provide doorstep services are the key

components. Programme is aligned to Government of
India's National Livestock Mission (NLM). The programme
covered l ivel i hoods l i n ked to l arge rum i nants (cow & buffalo),
small ruminants (goat & sheep), piggery, fishery, poultry
and apiary in 16 states and 42 districts. During the
year, about 1.34 lakh artificial inseminations (Als) were
carried out which led to the birth of over 0.47 lakh high
yielding progeny and indigenous breeds. Cumulatively,
the figures for AIs and calving stand at over 30.90 lakhs
and 10.90 lakhs respectively. Under the programme,
1,870 women trained as 'Pashu Sakhis' have provided
extension services to animal owners of the villages.

Your Company is also working with dairy farmers in Bihar,
Jharkhand and West Bengal to improve productivity of
animals through several extension services and to facilitate
higher milk production. Qualified teams comprising
veterinarians and para-veterinarians have been deployed
to facilitate animal nutrition, animal health services, training
and capacity building towards improving productivity,
clean milk production and promoting commercial
dairy farming among farmers. During the year, about

38,000 animals of over 19,000 dairy farmers across
416 villages in nine districts of Bihar, three districts of
West Bengal and two districts in Jharkhand were supported
through cattle feed distribution, training programmes on
clean milk production, mastitis control and animal husbandry
services like deworming, ectoparasite control, etc.

On-farm Livelihood Diversification - Tree plantations

Your Company's pioneering initiative through the
Social Forestry programme covered over 37,300 acres
during the year. The said programme is also aligned
to Government of India's    National Afforestation

Programme objectives. It is currently spread across
16 districts in six states cumulatively covering
5.28 lakh acres in over 7,400 villages and 1.90 lakh poor
households. Integral to the Social Forestry programme
are the Agro-Forestry and Bund plantation models
that help small and marginal farmers to cultivate field
crops and trees together in the same field and realise
benefits of both annual income from crops and lumpsum
income from trees once in four years. These two models
cumulatively extended to over 2.68 lakh acres (part of
total Social Forestry area) and enabled food, fodder and

wood security. To create an additional income source
and improve resilience towards climate change, fruit
and other commercial species tree plantations have also
been initiated with farmers, which have covered over

40,000 acres till date.

Together with your Company's Farm Forestry programme,
this initiative has covered around 13.2 lakh acres till date
and generated over 240 million-person days of livelihood
for rural households, including women, poor tribal and
marginal farmers. Further, fast growing, high yielding
and disease resistant hybrid clones and saplings of
eucalyptus pulpwood developed by your Company
deliver significantly higher productivity vis-a-vis earlier
clones. The clones have been developed to grow under
varying ecological conditions, thereby building resilience
and contributing towards increasing income for the
farming community.

Besides enhancing farm level employment, generating
incomes and increasing green cover, these large-scale
initiatives also contribute meaningfully to the nation's
endeavour to create additional carbon sinks for tackling
climate change.

In addition to the above, the Social and Farm Forestry
initiative of your Company, through a multiplier effect, has
led to improvement in pulpwood and fuelwood availability
in Andhra Pradesh, Telangana, Karnataka and Odisha.

Women Empowerment

During the year, this initiative in catchment geographies
provided a range of gainful livelihood opportunities to
over 2.67 lakh poor women, taking the cumulative coverage
to over 4.51 lakhs through livelihood interventions for
Self Help Groups (SHGs), women in agriculture and allied
services, cadre of service providers in the community
and ultra-poor women. This initiative is also aligned to
National Rural Livelihoods Mission's objective of
empowering and creating Lakhpati Didis.

Targeting Hardcore Poor programme focusing on
empowering ultra-poor women through mentoring,
skilling to run enterprises and asset support for the same
has covered about 40,680 women in your Company's
core catchments through a two-year graduation
intervention. Studies have shown that the income of these

ultra-poor women has increased by more than five-fold.
Aided by the programme, there is also a substantial
improvement in Human Development Indicators.
Currently, the programme is operational in 10 districts in
eight states.

As an amplification strategy, the financial literacy and
inclusion project, in partnership with Madhya Pradesh
State Rural Livelihood Mission (MPSRLM) and
CRISIL Foundation continued in its second phase of
partnership covering all 52 districts of Madhya Pradesh.
Basis the learnings in MP, the programme continued
to expand to other states also, now covering over
98,900 existing SHGs with 10 lakh members.
The Financial Literacy programme has cumulatively covered
over 3.9 lakh SHGs benefiting over 38.50 lakh women
spread across 80 districts in 15 states. Over 31 lakh scheme
linkages for trained women have also been facilitated with
access to bank accounts and Government social security
schemes till date with the support of self-sustaining cadre of
Yojana Sakhis, who also earn by charging fees from women
for creating these linkages.

Your Company's 'Aashirvaad Raho 4 Kadam Aage'
programme is encouraging women empowerment by
providing skills related to food processing sector as
well as on other livelihood opportunities. Spread across
four states, the programme has covered over
30,700 women beneficiaries.

Education

The Primary Education programme aligned with National
Education Policy 2020, aims to provide children from
weaker sections of society access to education with
focus on learning outcomes and retention. Operational
in 50 districts of 15 states, the programme covered
over 6.57 lakh children during the year, taking the
cumulative coverage to over 21.80 lakh children. Further,
125 Supplementary Learning Centres (SLCs) has
remained operational during the year, mainstreaming
more than 4,000 out-of-school children into the formal
education system, taking the cumulative number to
over 16,800.

Considering importance of Early Childhood Care and
Education (ECCE) as per National Education Policy 2020,

building capabilities of Anganwadi Sevikas on ECCE has
also been one of the focus areas. Your Company has
partnered with Women Development and Child Welfare
Department in Andhra Pradesh to strengthen capacity of
over 55,600 Anganwadi Sevikas across all the 26 districts.
Through a cascade approach, the Sevikas have reached
out to 4.16 lakh children during the year. Your Company
is also having a similar partnership in Saharanpur,
Uttar Pradesh, for improving ECCE (Poshan Bhi,
Padhai Bhi) of children by combining nutrition and
education interventions and has covered 50,000 children
in the district.

Over 640 Government primary schools and Anganwadis
were provided infrastructure support comprising
boundary walls, additional classrooms including
operationalising smart classrooms, solarisation,
sanitation units and furniture, taking the total number
of Government primary schools and Anganwadis
covered till date to over 4,100. Infrastructure support to
Government schools has helped in increasing enrolment,
particularly of girls, in schools. To ensure sustainable
operations and maintenance of infrastructure provided,
more than 1,480 School Management Committees and
1,370 Child Cabinets & Water and Sanitation (WATSAN)
Committees were operational in various schools
during the year with active involvement of students
and teachers.

To address the issue of drop out, especially of girls in
secondary and senior secondary level, a pilot intervention
continued in Pudukkottai, Munger and Kolkata covering
2,500 girl students. Mentoring for career intentionality,
building 21st century skilling and mainstreaming out of
school girls through National Open Schooling System
are the major aspects of this intervention.

Your Company's 'Bounce of Joy' programme is aimed to
foster holistic development and create a positive impact on
children's lives through physical fitness including sports.
Execution of the programme is done by collaborating with
schools for training of Physical Education (PE) teachers to
help them foster holistic development amongst students
through sports like football. Through the trained teachers,
the programme has reached out to 43,450 students across
140 schools in two states.

Your Company's 'Sunfeast Bigger Fantasies' programme
has covered 55,970 children from 60 schools across two
states encouraging and nurturing their innate curiosity
and ability to think laterally. 1,500 Young instructors
were trained, who in turn engaged with these children
to encourage creative thinking & expression, and peer
learning & collaboration. 60 creativity fairs were also
conducted with active participation from students.

Skilling & Vocational Training

This programme, aligned to Pradhan Mantri Kaushal
Vikas Yojana provides training in market linked skills to
youth from marginalised sections including differently
abled, to enable them to engage in decent livelihoods.
15,600 youth across 34 districts in 16 states were trained
under different courses during the year, of which nearly
52% were female. Cumulatively, around 1.27 lakh youth
have been trained under the skilling programme. To scale
up the skilling programme, your Company has also initiated
pilots for potential pathways of skilling in the community
itself (1,700 trained in the year) and leveraging other skill
training partners in the ecosystem (893 in the year).

Further, the programme for skilling differently abled youth
running in Karnataka and West Bengal last year, was
expanded to Maharashtra, Uttar Pradesh and Odisha by
establishing new centres and also leveraging the existing
centres of implementing partners. During the year,
850 youth (cumulatively over 1,000) were trained and over
530 have already been placed. Further, your Company's
Sixth Sense programme, focused on making an impact
on the lives of visually challenged, covered 150 such
individuals across five cities.

Sanitation

Your Company continues to adopt a multi-pronged
approach towards improving public health and hygiene
across 30 districts and 13 states. The programme focuses
on ensuring sustainability of Open Defecation Free (ODF)
habitations and then making them ODF+ through improved
hygiene, sanitation and waste management practices
which is aligned with Swachh Bharat Mission 2.0.

Water, Sanitation and Hygiene (WASH) programme
was implemented in schools that included construction
of sanitation units in schools, separate for girls and

boys, and also focused on driving behaviour change
among over 1.13 lakh school students through
2,300 WASH campaigns.

Your Company's 'Savlon Swasth India Mission'
programme has been a front runner in driving behavioural
change in hand hygiene through innovative experiential
training in primary schools. The Mission rooted in the
belief of 'Swasth Bacche, Mazboot Desh' drove a range of
initiatives to aid and enable the country in its fight against
preventable infections that create huge economic burden
on the country.

The programme, focused on spreading awareness for
habit building of hand hygiene through interactive sessions
across India, covered 16,770 schools and reached out to
about 32 lakh children during the year.

Waste Management

Your Company's initiatives focus on creating replicable,
scalable and sustainable models of municipal and rural
waste management that can be implemented across the
country to ensure that minimal waste goes to landfills.
Details of these models are provided in the section
on 'Building a Circular Economy for Post-Consumer
Packaging' above.

Health & Nutrition

Your Company is adopting a holistic approach towards
Community Healthcare, focusing on two major components
- preventive health care and curative services. Community
healthcare is initiated to address the challenges of
awareness, availability, accessibility and affordability. The
objective of the initiative is to improve health and nutrition
by strengthening institutional capacity, supplementing
existing infrastructure, promoting greater convergence
with existing Government schemes like National Health
Mission, leveraging technology and increasing access to
basic primary and secondary healthcare services.

A two-pronged approach aligned to Government's
POSHAN Abhiyan was adopted under Maternal and Child
Health and Nutrition (MCHN) programme:

• Focusing on first '1,000 days of life' in high malnutrition
catchments covering mothers and children, and

• Addressing anaemia at scale among all age groups
through screening under Anaemia Mukt Bharat
(AMB), Rashtriya Bal Suraksha Karyakaram (RBSK)
and thereafter, loop closure through awareness
creation and linkages with Government schemes.

Capacity building of frontline resources like Anganwadi
Sevikas and ASHA workers is an integral part of the
intervention and 16,000 were trained during the year
on engagement with community, making effective
'six home visits' and localised nutrition promotion.

Screening of over two lakh women and children for anaemia
was done in partnership with Government for baselining
and identifying priority areas for interventions. A 4E
approach of identifying hotspots (Exploration); awareness
on dietary diversity and hygiene (Education); promoting
nutrition gardens and consumption of locally grown
'5 Food Groups' through nutri-groups (Encouraging); and
building capabilities of ASHA and Anganwadi Sevikas on
identification and management of anaemia (Empower)
was adopted to address the issue.

Around 15.24 lakh people spread across 21 districts
in nine states were covered during the year, under
your Company's MCHN initiative aimed at improving the
health-nutrition status of women, adolescents and children.
This included the partnerships with the Directorate of
Women and Child Development, Assam for eight districts
including seven aspirational districts, and another with
the Child Development Services and Nutrition Department
Saharanpur, Uttar Pradesh.

Project Samposhan was undertaken during the year to
sensitise the community on nutritional value of fruits and
vegetables, leveraging their existing agriculture expertise to
cultivate sustainable and healthy food. 40 youth trained as
Poshan Sathis engaged with over 1,000 rural households
and trained them on farming system for nutrition and setting
up nutrition gardens. SHGs and farmer collectives were
also strengthened to create local ecosystem for nutrition
products. Iodine deficiency is considered as one of the
most common causes of preventable mental impairment
and constitutes a significant public health problem.
Under the 'Aashirvaad Smart India' intervention, over
seven lakh people were reached out through awareness
on iodine deficiency disorders and healthy eating.

As part of the community healthcare programme
'ITC Swaasth Kiran' initiative was launched during
FY 2021-22 in Saharanpur and Munger districts. Under
the initiative, during the year, thirteen Mobile Medical
Units (MMU) were functional (seven in Saharanpur &
six in Munger). These MMUs have provided free medical
consultation and medicines to the rural community at their
doorstep. During the year, nearly 2.22 lakh individual
engagements were done with community members
across 796 villages, 58% of which were with women.
Further, 43,400 diagnostic tests were conducted and
1,130 referrals made during the year. With the
involvement of the Rogi Kalyan Samitis, upgradation of
23 Primary Health Centres (PHCs) based on Indian Public
Health Standard was also done, taking the cumulative to
37 in five states. This has helped in increased footfall of
patients, including higher number of institutional deliveries.

Understanding the need for high-quality doorstep
eye care for the community, your Company also
continued its innovative layered eyecare intervention
in Saharanpur in Uttar Pradesh, as part of which
four Mobile Vision Units (MVU) were operational in
services in rural Saharanpur. These MVUs equipped with
high end ophthalmic equipment can screen and diagnose
eye ailments such as Cataract, Diabetic Retinopathy,
Glaucoma and other diseases. During the year, more
than 1.76 lakh community members have been screened,
of which 16,589 cases were referred to the MVUs,
and thereafter 1,082 cataract surgeries done at
Dr. Shroff's Charity Eye Hospital in Saharanpur, who are
the partner for this intervention.

Your Company continued to enhance awareness on
various health related issues like menstrual & personal
hygiene, reproductive health and diarrhoea through a
network of 366 women Village Health Champions (VHCs).
These VHCs engaged with the community for promoting
behaviour change and selling relevant health products
to the community, thereby also earning a livelihood. The
programme was operational in two districts of Madhya
Pradesh and six districts of Uttar Pradesh, covering nearly
1.45 lakh women during the year.

To make potable water available to local communities in
Andhra Pradesh and Karnataka, Reverse Osmosis (RO)
water purification plants were set up in villages where

the water quality was poor. With the establishment of
36 new RO plants during the year, a total of 205 RO plants
are operational providing safe drinking water to over
2.5 lakh rural population.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA),
established in 1977, is an embodiment of your Company's
sustained commitment to a priceless national heritage.
Your Company's pledge towards ensuring enduring
excellence in Classical music education continues to
drive ITC SRA in furthering its objective of preserving
and propagating Hindustani Classical Music based on the
age-old principle of 'Guru Shishya Parampara'.

The Academy is modelled as a professionally run institution
that epitomises the teaching of Hindustani Raga Music.
Through its eminent Gurus, it imparts intensive training
and quality education in Hindustani Classical music
to its scholars. The present Gurus of the Academy are
Padma Bhushan Pandit Ajoy Chakrabarty,
Padmashri    Pandit    Ulhas    Kashalkar,

Pandit Partha Chatterjee, Vidushi Subhra Guha,
Pandit Uday Bhawalkar, Shri Omkar Dadarkar,
Shri Abir Hossain and Shri Brajeswar Mukherjee.
Pandit Uday Bhawalkar was conferred the
Rashtriya Kalidas Samman by Government of
Madhya Pradesh in November 2024 for the year 2022-23.

The Academy's focus continues to be on nurturing
exceptionally gifted students selected from across
the country through a system of multi-level auditions.
Several scholars of the Academy have performed at
various music festivals and have also been recipient
of prestigious awards and accolades. Additionally,
the Academy has presented its scholars and young
musicians in ITC Mini Sangeet Sammelans, concerts
and Baithaks in locations such as Jabalpur, Hubli,
Dharwad, Sirsi, Lucknow, Jodhpur, Dehradun, Goa, Pune
and Bangalore enabling the Academy to fulfil its
avowed objective of preserving and propagating
Hindustani Classical Music.

On the occasion of India's 78th Independence Day,
ITC SRA composed a special piece of music as a tribute
to the nation, which was presented on 15th August.

The video 'Desh Ek Raag' was based on Raag Desh
and featured scholars of the Academy. The year also
marked its first Thumb Festival in March 2025 featuring
renowned artists of the genre as well as scholars of the
Academy. Creation of the next generation of masters of
Hindustani Classical music for the propagation of a
precious legacy continues to be the Academy's objective.

Forging Multi-Stakeholder Partnerships

Your Company's Social Investments Programme lays
continuous emphasis on building partnerships of value
for driving innovation & gaining contemporary knowledge
while effectively amplifying and executing programmes.

Your Company has over the years formed Knowledge
Partnerships with several national & international
organisations/agencies to maintain contemporariness
and leverage latest knowledge/technical know-how to
continuously improve the quality of programmes.

Public-Private Partnerships (PPP), aimed at pooling
resources, and partnership with Governments are
effectively leveraged to scale-up and amplify programmes
implemented in your Company's catchment areas.
During the year, three new PPPs were signed.

The meaningful contribution made by your Company's
Social Investments Programme to address some of
the country's key development challenges, has been
possible in significant measure, due to your Company's
partnerships with implementation partners such as
AFPRO, Anudip Foundation, Bandhan Konnagar,
Cheshire Disability Trust, DHAN Foundation,
Don Bosco Tech Society, DSC, Dr. Reddy's Foundation,
Educate Girls, FES, FINISH, IGD, KHPT, MYKAPS,
MYRADA, Makkala Jagriti, Manav Vikas Sansthan,
NCHSE, Pratham, SEWA Bharat, SMGVS, Umang,
WASH Institute, Water for People, Youth4Jobs and
Youth Invest amongst others. These partnerships, which
bring together the best-in-class management practices
of your Company and the development experience
and mobilisation skills of implementation partners, will
continue to provide innovative grassroot solutions to some
of India's most challenging problems of development
in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility
activities, as required under Sections 134 and 135 of the
Companies Act, 2013 read with Rule 8 of the Companies
(Corporate Social Responsibility Policy) Rules, 2014
and Rule 9 of the Companies (Accounts) Rules, 2014, is
provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company's Environment, Health & Safety (EHS)
strategies are directed towards achieving the greenest
and safest operations across all your Company's units
by optimising natural resource usage and providing a
safe and healthy workplace. Systemic efforts continue
to be made towards natural resource conservation by
continuously improving resource-use efficiencies.

Your Company believes that a safe and healthy work
environment is a pre-requisite for ensuring employee
well-being and adopting best practices in occupational
health & safety bears a direct impact on overall
performance. With an aim to percolate safety deeper
into your Company's operational practices and achieve
the 'Zero Accident' goal, your Company has adopted a
comprehensive EHS strategy founded on two pillars:
'Safety by Design' and 'Safety by Culture'.

Safety

Your Company sustained focus on 'Safety by Design'
by continuously striving to improve safety performance
and incorporating best-in-class engineering standards
for all investments in the built environment. Designs for
all new greenfield & brownfield project investments are
scrutinised to ensure compliance with relevant standards
and codes on safety. Periodic Environment, Health &
Safety audits continue to be carried out in operational
units to verify compliance with relevant standards.

To drive a culture of safety, your Company, in addition
to comprehensive focus on training, continues to hold
structured conversations with workers on 'Safe and
Unsafe' Acts. These are supplemented by adoption of
keystone behaviours that inculcates individual ownership
for safe behaviour. Your Company has also made use
of Design Thinking principles for seamless integration

of safety in business operations. These initiatives are
bringing in positive behavioural changes.

Several national awards and certifications received by
various units reaffirm your Company's commitment to
provide safe and healthy workplace to all.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company's state-of-the-art Life Sciences and
Technology Centre (LSTC) in Bengaluru is at the core
of driving science-led product innovation to build and
support your Company's portfolio of world-class products
and brands. Over the years, LSTC has emerged as
a robust innovation engine that is a key enabler of the
'ITC Next' growth strategy. Reinforced with world-class
infrastructure, resourced with a diverse team of over
400 highly qualified scientists, LSTC continues to drive
various initiatives to provide differentiation and competitive
edge to your Company's brands and products.

Driving purposeful innovations that fulfil the needs of the
Indian consumer through superior offerings remains the
key objective of LSTC. Centres of Excellence across
domains viz. Biosciences, Agri-sciences & Materials
sciences enabled building capabilities over the years
to cater to the constantly evolving needs of consumers.
Focused research across identified domains viz. Health
& Wellness, Formulation Design, Sustainable Materials &
Packaging, Agro-forestry and Crop Science has enabled
the teams to harness contemporary advances in relevant
core areas to translate 'proofs of concept' to novel product
opportunities. Bearing testimony to LSTC's innovation
capabilities while building the intellectual assets for your
Company, over 800 patent applications have been filed
till date. Robust risk management practices are in place
to ensure that your Company's intellectual properties
remain adequately protected and to ensure mitigation of
information and infrastructure risk.

Research programmes and projects are structured
through close alignment with the various Businesses of
your Company resulting in a robust innovation pipeline.
Additionally, in line with your Company's relentless focus
on operational excellence and quality, each Business
is mandated to continuously innovate on materials,
processes and systems to enhance their competitiveness.

Your Company has been a forerunner in introducing
first-to-market innovative products for Indian consumers.
In today's operating scenario of geopolitical tensions
and inflationary pressures, LSTC scientists and
product development teams continue to enable various
ITC businesses to deliver a range of differentiated,
superior quality products at competitive costs. Innovative
science-based Platform projects have been developed
to solve a range of consumer and technical product
challenges. Novel technologies are continuously being
leveraged to drive creation of healthier foods through
systematic reduction in salt, sugar and fat without
compromising on sensory attributes. Leading edge
technology platforms in Personal Health & Hygiene,
Health & Wellness continue to power innovation and
develop next generation product offerings to serve
emerging consumer needs. LSTC's unique competencies
in Sustainable Materials and Packaging have enabled
development of packaging options with high degree
of recycled plastics content and novel barrier coating
solutions to create next generation environmentally
friendly packaging solutions.

In Agro-Forestry and Crop Science, your Company's
scientists have established different cutting-edge tools &
technology platforms for improving tree & crop species of
your Company's interests (like yield, quality, abiotic & biotic
stress) for securing the raw material. Ongoing research
has major emphasis on developing climate resilient crops
and pulp wood species in order to address the security
of raw material supplies across your Company's value
chains and also ensuring enhanced farmer profitability.
Research on wheat and potato varietal securitisation are
at advanced stages of deployment to achieve flexibility
in sourcing of raw material, create region-specific blends
and ensure robust agro-climatic adaptability for growing
and sourcing raw materials closer to the factories at
competitive costs, in addition to reducing the carbon
footprint. Future-ready, alternate value chains that
mitigate risks arising out of disruptions to existing sourcing
models continue to be explored. LSTC has deployed
various digital transformation tools at farm level to
bring in predictive capability with agility. LSTC, in
collaboration with the Agri and Branded Packaged Foods
Businesses, endeavours to ensure that science-based

ideas are fully integrated across the value chain from
farm to fork.

Infrastructure and capabilities are strengthened
continuously keeping in pace with the global developments
in science and technology. Expanding capabilities include
spreading the acreage of new tree clones with superior
properties, developing modern instrumentation for testing
very low levels of actives or contaminants, measuring
barrier properties (air and water permeability) of coated
paper substrate, etc.

Rigorous systems, processes and industry best practices
are continuously upgraded to secure quality certifications
of the highest levels - a key enabler in delivering products
that follow the highest standards in quality, safety and
efficacy to the Indian consumer. All branded packaged
foods manufacturing units of your Company not only
have ISO quality certification but also follow the highest
standards under the integrated food quality management
system-FSSC 22000; these systems ensure adherence
to internationally accepted quality standards in producing
safe and high-quality food. All manufacturing units of
the Branded Packaged Foods Businesses (including
contract manufacturing units) operate in compliance
with stringent food safety and quality standards.
Your Company's food quality assurance laboratories
are accredited by the National Accreditation Board for
Testing and Calibration Laboratories (NABL) under ISO
17025, a global standard for testing and calibrating labs,
which guarantees quality. Additionally, the quality of all
FMCG products of your Company is monitored through
best-in-class customer-centric 'Quality Control and
Quality Assurance Processes' and 'Product Quality
Ratings Systems' (PQRS) enhancing competitive
superiority of your Company's product offerings.

In its quest to continuously enhance efficiency and
be future-ready, LSTC is developing and deploying
cutting-edge digital tools for quality performance analytics,
benchmarking and strengthen quality management
systems. Going forward, LSTC will continue to identify
growth opportunities leveraging your Company's
diverse core competencies and R&D insights emerging
from close consumer interactions and contemporary
science & technology.

PROCEEDINGS INITIATED BY THE ENFORCEMENT
DIRECTORATE

In the proceedings initiated by the Enforcement Directorate
in 1997, the appropriate authority after hearing arguments
on behalf of your Company has passed several orders
in favour of your Company and dropped some of the
show cause notices issued by the Directorate. In respect
of some of the remaining notices, your Company filed
writ petitions challenging their validity. The Honourable
Calcutta High Court heard some of these writ petitions
to completion, and the proceedings in respect of these
notices were quashed. The remaining writ petitions and
notices are pending adjudication/hearing.

Meanwhile, some of the prosecutions launched by the
Enforcement Directorate have been quashed by the
Honourable Calcutta High Court; while the remaining have
been challenged before the High Court and are pending.

TREASURY OPERATIONS

Your Company's treasury operations continued to focus
on deployment of surplus liquidity and management of
foreign exchange exposures within a well-defined risk
management framework.

During the year market interest rates declined sharply
across both short and long term maturities. The Reserve
Bank of India (RBI) adopted an accommodative monetary
policy stance, cutting the repo rate by a cumulative
50 basis points since April 2024 on the back of easing
inflation and to boost economic activity. In addition,
the RBI deployed several liquidity management tools,
which pushed the banking system liquidity from a deficit
position between November 2024 and February 2025 to
a surplus by the end of the financial year. The decline in
interest rates for longer maturities was further aided by
robust demand from Foreign Portfolio Investors following
the inclusion of Indian Government Securities in the
JP Morgan Emerging Markets Bond Index and an
improving fiscal position.

Investment decisions relating to deployment of surplus
liquidity continued to be guided by the tenets of Safety,
Liquidity and Return. Treasury operations focused on
proactive rebalancing of portfolio duration and mix, in
line with the evolving interest rate environment. Further,
continuous review and monitoring of credit worthiness,

including engagement with market participants, ensured
that the investment portfolio was not exposed to undue
credit risks.

In the currency market, the Indian Rupee (INR) witnessed
significant volatility during the year. While the INR
remained relatively stable during the first half of the
year supported by strong domestic fundamentals and
healthy capital inflows, the second half saw considerable
two-way movements. The weakness in the INR was
primarily attributed to the strengthening of the USD
relative to all major currencies, driven by concerns over
potential tariff hikes by the US Government. Additionally,
higher capital outflows during this period weighed on the
INR. However, the INR witnessed a rebound towards the
end of the year on the back of a narrowing trade deficit
and a weakening USD amidst heightened global trade
uncertainties. Robust foreign exchange reserves and
strategic interventions in the currency markets by the RBI
also provided support to the INR.

As in earlier years, commensurate with the size of the
temporary surplus liquidity under management, treasury
operations continue to be supported by appropriate
internal control systems, and independent check of
100% of transactions by your Company's Internal
Audit Department.

Your Company adopted proactive risk management
approach and actively managed foreign currency
exposures through appropriate hedging strategies and
market instruments to protect business margins.

DEPOSITS

Your Company's erstwhile Public Deposit Scheme closed
in the year 2000. As at 31st March, 2025, there were
no deposits due for repayment except in respect of two
deposit holders aggregating ' 20000 which have been
withheld on the basis of directives received from the
government agencies.

There was no failure to make repayments of Fixed
Deposits on maturity and the interest due thereon in terms
of the conditions of your Company's erstwhile Schemes.

Your Company has not accepted any deposit from the
public/members under Section 73 of the Companies Act,
2013 read with the Companies (Acceptance of Deposits)
Rules, 2014 during the year.

DIRECTORS
Changes in Directors

During the year, Ms. Pushpa Subrahmanyam and
Mr. Chandra Kishore Mishra were appointed, with your
approval, as Independent Directors of the Company for
a period of five years with effect from 2nd April, 2024 and
14th September, 2024, respectively. In the opinion of
the Board, Ms. Subrahmanyam and Mr. Mishra possess
the required integrity, expertise and experience for
appointment as Independent Directors of your Company.

Mr. Atul Singh representing Tobacco Manufacturers (India)
Limited ('TMI'), a subsidiary of British America Tobacco
p.l.c., Dr. Alok Pande representing the Specified
Undertaking of the Unit Trust of India ('SUUTI') and
Mr. Siddhartha Mohanty representing the Life Insurance
Corporation of India ('LIC') were appointed, with your
approval, as Non-Executive Directors of your Company
for a period of three years with effect from 2nd April, 2024,
27th July, 2024 and 1st January, 2025, respectively.

Mr. Sunil Panray, who is representing TMI, was
re-appointed, with your approval, as a Non-Executive
Director for a period of five years with effect from
20th December, 2024. Further, Messrs. Sumant
Bhargavan and Supratim Dutta were re-appointed, with
your approval, as Wholetime Directors of the Company
for a period of two years from 12th July, 2025 and
three years from 22nd July, 2025, respectively.

Mr. Shyamal Mukherjee will complete his present
term as an Independent Director of your Company on
10th August, 2026. The Board of Directors of your Company
('the Board'), on the recommendation of the Nomination
& Compensation Committee, has recommended for
the approval of the Members, the re-appointment of
Mr. Mukherjee as an Independent Director of your
Company for a period of five years with effect from
11th August, 2026. Appropriate resolution seeking
your approval to the above is appearing in the Notice
convening the 114th Annual General Meeting ('AGM')
of your Company.

Mr. Shilabhadra Banerjee completed his term as an
Independent Director of your Company with effect from
close of work on 29th July, 2024, and Mr. Arun Duggal
and Ms. Meera Shankar completed their respective terms
as Independent Directors with effect from close of work

on 14th September, 2024. Mr. Rahul Jain, representing
SUUTI, and Mr. Mukesh Gupta, representing LIC, stepped
down from the Board with effect from 31st May, 2024 and
27th October, 2024, respectively. Your Directors place
on record their appreciation for the contribution made by
Messrs. Banerjee, Duggal, Jain, Gupta and Ms. Shankar
during their respective tenure with your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of
the Companies Act, 2013 ('the Act') read with Articles 94
and 95 of the Articles of Association of your Company,
Messrs. Hemant Malik and Atul Singh will retire by
rotation at the ensuing AGM and being eligible, offer
themselves for re-election. Your Board has recommended
their re-election.

Number of Board Meetings

Six meetings of the Board were held during the year
ended 31st March, 2025.

Attributes, Qualifications & Independence of Directors
and their Appointment

The Corporate Governance Policy of your Company
requires that the Non-Executive Directors be drawn
from amongst eminent professionals, with experience
in business / finance / law / public administration and
enterprises. The Nomination & Compensation Committee
has laid down the criteria for determining qualifications,
positive attributes and independence of Directors
(including Independent Directors). In case of appointment
of Independent Directors, the Nomination & Compensation
Committee evaluates the balance of skills, knowledge and
experience on the Board, and also the role and capabilities
of an Independent Director of the Company.

Further, in terms of the Policy on Board Diversity, the
Board is required to have balance of skills, competencies,
experience and diversity of perspectives appropriate to
the Company. Diversity for this purpose is considered
from a number of aspects including, but not limited to,
educational & cultural background, nature of professional,
administrative & industry experience, skills, knowledge
and gender representation. The skills, expertise and
competencies of the Directors as identified by the
Board, along with those available in the present mix of

the Directors of the Company, are provided in the
'Report on Corporate Governance' forming part of the
Report and Accounts.

In terms of the applicable regulatory requirements
read with the Articles of Association of your Company,
the strength of the Board shall not be fewer than six nor
more than eighteen. Directors are appointed / re-appointed
with the approval of the Members for a period of three to
five years or a shorter duration, in accordance with
retirement guidelines and as may be determined by
the Board from time to time. All Directors, other than
Independent Directors, are liable to retire by rotation, unless
otherwise approved by the Members. One-third of the
Directors who are liable to retire by rotation, retire every
year and are eligible for re-election.

The Independent Directors of your Company have
confirmed that (a) they meet the criteria of independence
prescribed under Section 149 of the Act and Regulation
16 of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements)
Regulations, 2015 ('Listing Regulations'), (b) they are
independent of the management of the Company,
and (c) they are not aware of any circumstance or
situation which could impair or impact their ability to
discharge duties with an objective independent judgement
and without any external influence. In the opinion of the
Board, the Independent Directors fulfil the conditions
prescribed under the Act and the Listing Regulations, and
are independent of the management of the Company.

Remuneration Policy

Details of the Company's Policy on remuneration of
Directors, Key Managerial Personnel and other employees
are provided in the 'Report on Corporate Governance'
forming part of the Report and Accounts.

Evaluation of Board, Board Committees and individual
Directors

Your Company has a structured process for performance
evaluation of the Board, Board Committees and individual
Directors. The Nomination & Compensation Committee,
as reported in earlier years, has formulated the Policy
on Board evaluation, evaluation of Board Committees'
functioning and individual Director evaluation,

and also specified that such evaluation will be done
by the Board.

In keeping with ITC's belief that it is the collective
effectiveness of the Board that impacts Company's
performance, the primary evaluation platform is that of
collective performance of the Board as a whole. Board
performance is assessed, inter alia, against the roles and
responsibilities of the Board as provided under the Act,
the Listing Regulations and the Company's Governance
Policy. The parameters for Board performance evaluation
have been derived from the Board's core role of
trusteeship to protect and enhance shareholder value as
well as to fulfil expectations of other stakeholders through
strategic supervision of the Company; such parameters
include securing alignment of the Company's goals with
the nation's economic, ecological and social priorities,
ensuring that the Company has a clearly defined strategic
direction for realisation of its vision, and supporting the
Company's management to meet challenges arising
from the operating & policy environment in the country.
Evaluation of functioning of Board Committees is based
on discussions amongst Committee members and shared
by the respective Committee Chairmen with the Board.
Individual Directors are evaluated in the context of the
role played by each Director as a member of the Board
at its meetings, in assisting the Board in realising its role
of strategic supervision of the functioning of the Company
in pursuit of its purpose and goals. The peer group ratings
of the individual Directors are collated by the Chairman
of the Nomination & Compensation Committee and made
available to the Chairman of the Company.

While the Board evaluated its performance against
the parameters laid down by the Nomination &
Compensation Committee, the evaluation of individual
Directors was carried out against the laid down
parameters in order to ensure objectivity. The parameters
for performance evaluation of individual Directors, inter
alia, include ability to provide thought leadership across
the role spectrum and contribution to Board cohesion,
governance & organisational processes. Reports on
the functioning and performance of Board Committees
during the year were placed before the Board.
The Independent Directors Committee of the Board

also reviewed the performance of the Chairman, other
non-Independent Directors and the Board, pursuant
to Schedule IV to the Act and Regulation 25 of the
Listing Regulations.

KEY MANAGERIAL PERSONNEL

During the year, there were no changes in the
Key Managerial Personnel of your Company.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under
the section 'Board of Directors and Committees' in the
Report and Accounts.

Statutory Auditors

Messrs. S R B C & CO LLP, Chartered Accountants
('SRBC'), were re-appointed with your approval as
the Auditors of your Company for a period of five
years till the conclusion of the 118th AGM. The Board,
on the recommendation of the Audit Committee,
has recommended for the approval of the Members,
the remuneration of SRBC for the financial year
2025-26. Appropriate resolution seeking your approval
to the remuneration of SRBC is appearing in the
Notice convening the 114th AGM of your Company.

Cost Auditors

Your Board, as recommended by the Audit Committee,
appointed the following Cost Auditors for the
financial year 2025-26:

(i)    Messrs. ABK & Associates, Cost Accountants, for
audit of Cost Records maintained by your Company
in respect of 'Wood Pulp' and 'Paper and Paperboard'
products.

(ii)    Messrs. S. Mahadevan & Co., Cost Accountants,
for audit of Cost Records maintained in respect of
all applicable products of your Company, other than
'Wood Pulp' and 'Paper and Paperboard' products.

Pursuant to Section 148 of the Act read with the
Companies (Audit and Auditors) Rules, 2014, appropriate
resolutions seeking your ratification to the remuneration
of the aforesaid Cost Auditors are appearing in the
Notice convening the 114th AGM of your Company.

The Company maintains necessary cost records
as specified by the Central Government under
Section 148(1) of the Act read with the Companies
(Cost Records and Audit) Rules, 2014.

Secretarial Auditors

Messrs. S. N. Ananthasubramanian & Co., Company
Secretaries ('SNA'), were appointed by the Board
as the Secretarial Auditors of your Company to
conduct secretarial audit for the financial year ended
31st March, 2025.

The Report of the Secretarial Auditors, pursuant to
Section 204 of the Act, is provided in the Annexure
forming part of this Report. The Secretarial Auditors
have confirmed that the Company has complied with the
applicable laws and that there are adequate systems and
processes in the Company commensurate with its size
and scale of operations to monitor and ensure compliance
with the applicable laws.

The Board has approved, on the recommendation of
the Audit Committee and subject to the approval of the
Members, appointment of SNA as the Secretarial Auditors
of your Company to conduct secretarial audit for a period
of five financial years commencing from the financial year
2025-26. Appropriate resolution seeking your approval
to the appointment of SNA is appearing in the Notice
convening the 114th AGM of your Company.

CHANGES IN SHARE CAPITAL

During the year, 2,93,98,310 Ordinary Shares of ' 1/-
each, fully paid-up, were issued and allotted upon exercise
of 29,39,831 Options under the Company's Employee
Stock Option Schemes. Consequently, the Issued and
Subscribed Share Capital of your Company, as on
31st March, 2025, stands increased to ' 1251,41,19,781/-
divided into 1251,41,19,781 Ordinary Shares of
' 1/- each. The Ordinary Shares issued during the
year rank pari passu with the existing Ordinary Shares
of the Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options, as required
under Regulation 14 of the Securities and Exchange
Board of India (Share Based Employee Benefits and

Sweat Equity) Regulations, 2021 ('the Regulations'),
are available in the Notes to the Financial Statements
of the Company. The said disclosures forming part of
the Financial Statements can also be accessed on the
Company's corporate website http://www.itcportal.com
under the section 'Investor Relations'. During the year,
there has been no change in the Company's Employee
Stock Option Schemes.

The Secretarial Auditors have certified that the Employee
Stock Option Schemes of the Company have been
implemented in accordance with the Regulations and the
resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of the Company ('ISC')
provides in-house share registration and related services
to the shareholders and investors. By consistently
adapting to emerging trends and leveraging digital
technologies, ISC remains steadfast in its commitment
to delivering best-in-class services to the shareholders
and investors, while ensuring compliance with the
applicable statutory requirements. ISC is accredited with
ISO 9001:2015 certification and is also registered with the
Securities and Exchange Board of India as a Category II
Share Transfer Agent.

The 'Investor Relations' section on the Company's
corporate website http://www.itcportal.com serves
as a user-friendly online resource for shareholders
and investors, offering comprehensive guidance on
share-related matters. Additionally, shareholders
at their convenience can access a range of share-
related services through the dedicated service portal at
https://eform.itcportal.com .

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by your
Company with its related parties during the financial year
were in accordance with the provisions of the Companies
Act, 2013 and the Listing Regulations. All such contracts
or arrangements were approved by the Audit Committee.
No material contracts or arrangements with related
parties within the purview of Section 188(1) of the Act
were entered into during the year under review. Further,
the prescribed details of related party transactions of your
Company in Form No. AOC - 2, in terms of Section 134
of the Act read with Rule 8 of the Companies (Accounts)
Rules, 2014 are given in the Annexure to this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act,
2013, your Directors confirm having:

a)    followed in the preparation of the Annual Accounts,
the applicable accounting standards with proper
explanation relating to material departures, if any;

b)    selected such accounting policies and applied them
consistently and made judgements and estimates
that are reasonable and prudent so as to give a true
and fair view of the state of affairs of your Company
at the end of the financial year and of the profit of
your Company for that period;

c)    taken proper and sufficient care for the maintenance
of adequate accounting records in accordance
with the provisions of the Companies Act, 2013
for safeguarding the assets of your Company
and for preventing and detecting fraud and other
irregularities;

d)    prepared the Annual Accounts on a going concern
basis;

e)    laid down internal financial controls to be followed
by your Company and that such internal financial
controls were adequate and were operating
effectively; and

f)    devised proper systems to ensure compliance with
the provisions of all applicable laws and that such
systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company's Board of Directors is responsible for the
preparation of the consolidated financial statements of your
Company and its Subsidiaries ('the Group'), Associates
and Joint Venture entities, in terms of the requirements
of the Companies Act, 2013 (the Act) and in accordance
with the accounting principles generally accepted in India,
including the Indian Accounting Standards specified under
Section 133 of the Act.

The respective Boards of Directors of the companies
included in the Group and of its associates and joint venture
entities are responsible for maintenance of adequate
accounting records in accordance with the provisions of
the Act for safeguarding the assets of each company and
for preventing and detecting frauds and other irregularities;
the selection and application of appropriate accounting
policies; making judgements and estimates that are
reasonable and prudent; and the design, implementation
and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant
to the preparation and presentation of the financial
statements that give a true and fair view and are free
from material misstatement, whether due to fraud or error.
Such financial statements have been used for the purpose
of preparation of the consolidated financial statements by
the Board of Directors of your Company, as aforestated.

OTHER INFORMATION

Compliance with the conditions of Corporate
Governance

The certificate from the Company's Statutory Auditors,
Messrs. S R B C & CO LLP, confirming compliance with
the conditions of Corporate Governance as stipulated
under the Listing Regulations, is annexed.

Going Concern status

There was no significant or material order passed during
the year by any regulator, court or tribunal impacting
the going concern status of your Company or its future
operations.

Annual Return

The Annual Return of your Company is available on its corporate
website at https://www.itcportal.com/investor/disclosures-
under-SEBI.aspx .

Particulars of loans, guarantees or investments

Details of loans and investments covered under the
provisions of Section 186 of the Companies Act, 2013 are
provided in Notes 4, 5, and 9 to the Financial Statements.
No guarantees were outstanding as at the year end.

Particulars relating to Conservation of Energy and
Technology Absorption

Particulars as required under Section 134 of the
Companies Act, 2013 relating to Conservation of Energy
and Technology Absorption are also provided in the
Annexure to this Report.

Compliance with Secretarial Standards

The Company is in compliance with the applicable
Secretarial Standards issued by the Institute of Company
Secretaries of India and approved by the Central
Government under Section 118(10) of the Act.

Employees

The total number of employees as on 31st March, 2025
stood at 22,041.

The information required under Section 197(12) of the
Companies Act, 2013 read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel)
Rules, 2014 is provided in the Annexure forming
part of this Report.

The statement containing particulars of employees
as required under Section 197(12) of the Companies
Act, 2013 read with Rule 5(2) of the Companies
(Appointment and Remuneration of Managerial
Personnel) Rules, 2014, forming part of this Report,
is available on the Company's corporate website
www.itcportal.com .

Dividend Distribution Policy

The Dividend Distribution Policy of your Company
may be accessed on its corporate website at
https://www.itcportal.com/about-itc/policies/dividend-
distribution-policy.pdf .

Key Financial Ratios

Key Financial Ratios for the financial year ended
31st March, 2025, are provided in the Annexure forming
part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that
involve risks and uncertainties. When used in this
Report, the words 'anticipate', 'believe', 'estimate',
'expect', 'intend', 'will' and other similar expressions

as they relate to your Company and/or its Businesses
are intended    to identify such forward-looking

statements. Your Company undertakes no obligation to
publicly update or revise any forward-looking statements,
whether as a result of new information, future events,
or otherwise.    Actual results, performances or

achievements could differ materially from those expressed
or implied in such forward-looking statements. Readers
are cautioned not to place undue reliance on these
forward-looking statements that speak only as of
their dates. This Report should be read in conjunction
with the financial statements included herein and
the notes thereto.

CONCLUSION

Your Company's 'Triple Bottom Line' philosophy has
over the years spurred the creation of innovative
business models that synergise the building of economic,
environmental and social capital. It is now universally
evident that enterprises of the future will not only have
to be agile, consumer-centric, innovative and digital-first
but also purpose-driven and responsibly competitive.
In line with its superordinate goal of serving larger national
priorities and creating value for all stakeholders, your
Company's paradigm of 'Responsible Competitiveness'
focuses on building extreme competitiveness in a
manner that replenishes the environment and supports
sustainable livelihoods.

The strategic Vision of creating multiple drivers of growth
through the pursuit of market opportunities that best match
institutional strengths, has resulted in the development of
strong Businesses of the future anchored on a portfolio
of purpose-led brands, future-ready products and
world-class quality. Today, your Company is the leading
FMCG marketer in India, a pioneering trailblazer in farmer
and rural empowerment through its Agri Business, the
clear market leader in the Indian Paperboards and
Packaging industry, and a global exemplar in sustainability.
ITC Hotels Ltd.-a group entity—is a pre-eminent hotel chain
and a globally acclaimed icon in green hoteliering. Since
the turn of the millennium, your Company's non-cigarettes
businesses¹¹Â have grown nearly 40-fold and presently

constitute about two-thirds of Net Segment Revenue.
At the heart of this transformation lies the power of
synergy, with seamless access for your Company's newer
Businesses/initiatives to the deep and varied capabilities
resident across different parts of the enterprise, and its
world-class talent pool.

An extensive strategy reset has been undertaken in recent
years to architect the structural drivers that will power
the ITC Next strategy of building a Future-Ready,
Consumer-Centric, Climate Positive and Inclusive
organisation to drive the next horizon of growth &
competitiveness.

The FMCG Businesses have delivered strong performance
in recent years and are well poised to be rapidly scaled up
across the three growth platforms i.e., fortifying the core,
addressing value-added adjacent opportunities leveraging
mother brands and nurturing new vectors of growth.
Multi-dimensional    interventions, including strategic

acquisitions in    high-growth    and future-facing

categories, have been made to accelerate growth,
enhance competitiveness and market standing of the
FMCG Businesses.

Focused interventions made in the recent past have also
augmented your Company's multi-channel go-to-market
capability, resulting in manifold expansion in the reach
and availability of its products. Over the last five years,
market coverage has grown by more than 2x, facilitating
availability of products in nearly seven million retail
outlets of which more than one-third are serviced directly.
Sharp-focused investments have augmented capability in
new gen channels such as e-Commerce, Quick Commerce
and Modern Trade, resulting in strong growth in sales
and enhanced market standing. In addition, investments
towards accelerating agile and purposeful innovation,
optimising supply chain efficiencies, accelerated digital
adoption, and strategic partnerships have significantly
enhanced competitiveness. The impact of these
multi-dimensional interventions is evident in the
substantial margin expansion of 560 bps in Segment
EBITDA witnessed between FY 2018-19 and FY 2023-24
even in the face of heightened competitive intensity and
inflationary pressures.

The FMCG Businesses will continue to leverage your
Company's institutional strengths as a key source of
sustainable competitive advantage viz. strong backward
linkages with the Agri Business, a deep & wide
multi-channel distribution network, cuisine knowledge
resident in ITC Hotels Limited (a group entity), packaging
knowhow and the robust R&D platforms nurtured by
LSTC. Structural advantages arising out of distributed
manufacturing footprint, anchored on state-of-the-art ICMLs
strategically located proximal to large demand centres, will
be increasingly leveraged to drive rapid growth of the FMCG
Businesses. With enhanced scale and margin expansion,
the FMCG Businesses are expected to make increasingly
higher contributions to your Company's profit pool,
thereby setting the stage for further value enhancement
opportunities.

The Agri Business has been a strong backbone and a
key source of competitive advantage for your Company's
FMCG and Cigarettes Businesses. The scope and
scale of operations have grown manifold over the years
and currently encompass nearly 3.5 million tonnes
of annual volume throughput in 22 states and over
20 agri-value chains. In recent years, the Business has
pivoted its strategic focus towards rapidly scaling up its
Value-Added Agri Products portfolio to accelerate growth
and margins. With policy enablers in place, your Company
is scaling up NextGen agriculture value chains that are
digitally enabled and climate smart, and re-structuring
the back end into a robust network of FPOs. This will
further strengthen the sourcing network and facilitate the
development of customised supply chains for traceable
and identity-preserved sourcing of agri-commodities
and in augmenting the product portfolio with the
addition of value-added products such as staples for the
Food Service segment, medicinal and aromatic plant
extracts etc. Towards enhancing the competitiveness
of domestic agri-value chains, fostering new
business models and augmenting value creation
opportunities, your Company has successfully scaled up
ITCMAARS - a crop-agnostic 'phygital' full stack
AgriTech platform integrating NextGen agri-technologies
and solutions - to seamlessly deliver hyperlocal and
personalised solutions to the farming community
whilst creating new and scalable revenue streams and
strengthening sourcing efficiencies.

The Paperboards, Paper and Packaging Businesses
have made significant progress in recent years in
terms of enhanced scale and profitability improvement.
While the current year performance was impacted by
low priced Chinese & Indonesian supplies in global
markets including India, soft domestic demand conditions
and unprecedented surge in wood prices, strategic
interventions continue to be made in areas spanning
plantations, sharpening the product portfolio and thrust
on structural cost management. Representations
continue to be made at appropriate forums through
Industry associations for suitable measures to safeguard
domestic industry and development of economically
viable alternatives for plantations on degraded forest
land. Strategic investments have been stepped up
in areas such as pulp import substitution, proactive
capacity augmentation in Value-Added Paperboards
segment, decarbonisation of operations, deployment of
Industry 4.0 technologies and towards nurturing robust
innovation platforms. Your Company has also recently
entered into a Business Transfer Agreement to acquire the
Pulp and Paper Undertaking of Aditya Birla Real Estate
Limited (Century Pulp and Paper), which is expected to
add significant scale and economies to existing operations
with potential for further capacity expansion, provide
locational advantage for efficient customer servicing and
proximity to key raw material sources, mitigate operational
risks through multi-site operations and enhance resilience
across industry cycles through portfolio diversification.
The focus going forward is to fortify market leadership
in the fast-growing Value-Added Paperboards segment
by augmenting scale, driving cutting-edge innovation to
rapidly scale-up single use plastic substitutes as a new
vector of growth, building structural advantage through
product mix enrichment and scaling up the use of
emergent technologies such as Industry 4.0 to enhance
operational efficiency, reduce wastage and costs.

Your Company continues to build a dynamic
'Future-Tech' enterprise powered by state-of-the-art
digital technologies and infrastructure ('Mission DigiArc')
across the value chain adding significant impetus to digital
marketing, digital commerce, digital products and digital
operations. Your Company today, is a pioneer in adoption
of cutting-edge digital technologies across strategic

impact areas spanning Consumer Experience, Business
Model Transformation, Smart Operations and Employee
Experience.

Sustainability continues to be a critical focus area. Your
Company is actively pursuing its bold Sustainability 2.0
agenda comprising multi-dimensional interventions in
decarbonisation, building green infrastructure, scaling
up carbon sequestration, promoting climate-smart and
regenerative agriculture, restoring biodiversity through
nature-based solutions, enhancing water stewardship,
creating an effective circular economy and sustainable
packaging solutions, building climate resilience & adaptive
capacity of value chains and developing inclusive value
chains that can support 10 million livelihoods by 2030.

Disruptive business models and value propositions
anchored at the intersection of future frontiers of
Digitalisation and Sustainability form an integral part
of your Company's strategic roadmap going forward.
NextGen business models such as ITCMAARS in the
agri-ecosystem, tech-enabled cloud kitchens in the food
service space, sustainable paperboards and packaging
solutions customised for end-use with focus on single
use plastic substitutes, are being progressed to actualise
these opportunities. Value-accretive acquisitions, joint
venture and collaborations continue to be proactively
pursued towards accelerating growth and value creation.

The resilience, agility and adaptive capacity demonstrated
by your Company is a testament to the talent, determination
and untiring efforts of its pool of dedicated professionals,
associates and partners. Your Company's diverse talent
pool of professional entrepreneurs, 'proneurs', have the
unique opportunity to nurture categories, products and
brands from ideation to execution. This talent pool is
being harnessed not only to create winning products and
services for today, but also to seize larger opportunities
as they emerge from the expanding horizons of your
Company's Businesses.

Your Company's Board and employees are inspired
by the Vision of sustaining your Company's position as
one of India's most admired and valuable companies,
creating enduring value for all stakeholders, including
the shareholders and the Indian society. The vision of
enlarging your Company's contribution to the Indian
economy is driven by its 'Nation First: Sab Saath Badhein'
credo anchored on the core values of Trusteeship,
Transparency, Empowerment, Accountability and Ethical
Citizenship, which are the cornerstones of your Company's
Corporate Governance philosophy.

Inspired by this Vision, driven by Values and powered
by internal Vitality, your Directors and employees look
forward to the future with confidence and stand committed
to creating an even brighter future for all stakeholders.

On behalf of the Board

S. PURI    Chairman & Managing Director

(DIN :00280529)

Kolkata    S. DUTTA    Director & Chief Financial Officer

22nd May, 2025    (DIN : 01804345)

1

1MF WEO April ’25

2

Average Global Real GDP growth from 2010 to 2019

3

Fortune Park Hotels Limited, Bay Islands Hotels Limited, Landbase India
Limited, WelcomHotels Lanka (Private) Limited, Srinivasa Resorts Limited,
International Travel House Limited, Gujarat Hotels Limited and Maharaja
Heritage Resorts Limited

---

Mar 31, 2024

SOCIO-ECONOMIC ENVIRONMENT

The global economy witnessed another year of deceleration in growth to 3.2% in 2023 (Vs. 3.5% in 2022) with the slowdown being largely attributable to Advanced Economies, particularly the Euro Area and UK, and structural weakness in the Chinese economy. Advanced Economies grew by 1.6% with the US economy belying expectations of recession with a resilient performance in 2023, registering a growth of 2.5% (Vs. 1.9% in 2022). Emerging Markets & Developing Economies grew at a relatively faster pace of 4.3% (Vs. 4.1% in 2022), though remaining well below the long period average. The recent conflict in the Middle East, extreme weather events and the overlapping shocks of the past four years - COVID pandemic, Russia-Ukraine conflict, unprecedented inflation and subsequent sharp increase in interest rates - have rendered the global macroeconomic environment highly uncertain and volatile.

Going forward, aggregate global economic growth as per IMF estimates is expected to remain subdued at 3.2% in 2024, well below the historical (2000-19) annual average of 3.8%. In 2024, Advanced Economies are projected to grow at 1.7% while Emerging Markets and Developing Economies are estimated to grow at 4.2%. With expectations of inflation easing towards target levels, the timing of central banks pivoting towards policy easing in major economies remains a key monitorable in the near term.

India remained a relatively bright spot amidst the global slowdown, recording robust Real GDP growth of 7.6% in FY 2023-24. Growth was primarily driven by Fixed Investments led by Government’s thrust on infrastructure creation and household investments in real estate. Private Consumption, on the other hand, grew 3.0% - its slowest pace in two decades. The weakness in consumption was reflected, inter alia, in the muted volume growth of the FMCG sector (FY 2023-24 Volume growth appx. 3% Vs. 7% p.a. average in the pre-pandemic period). While Industry and Services sectors grew by 9.0% and 7.5% respectively, growth in the Agri sector slowed to 0.7%, with adverse weather events impacting harvests.

Going forward, the Indian economy is expected to sustain its high growth trajectory in FY 2024-25 driven by strong momentum in Fixed Investments and a pickup in Private Consumption on the back of moderation in inflation, improvement in agri terms of trade, a good Rabi harvest and normal monsoons. Green shoots of recovery in rural markets, improving employment conditions and sustained momentum in manufacturing and services sectors augur well for consumption demand in the near term.

India continues to be acknowledged as one of the fastest growing major economies in the world with significant headroom for growth over the medium and long-term benefiting from a slew of purposeful

interventions over several years. A favourable demographic profile, increasing affluence, rapid urbanisation and accelerated digital adoption represent some of the key structural drivers of growth of the Indian Economy. Multi-dimensional interventions undertaken by the Government of India towards expansion of physical and digital public infrastructure, enhancing the competitiveness of the manufacturing sector, indirect/direct taxation and financial sector reforms along with measures to promote ease of doing business are expected to power the economy going forward. While stepped-up capital expenditure outlay and focus on infrastructure are expected to drive growth in domestic manufacturing, focus on agri-related schemes are expected to boost farmers’ welfare and rural consumption demand, spurring a virtuous investment-employment-consumption cycle.

As the Indian economy contends with uncertainties in the external environment, policy interventions focused on supporting sustainable livelihoods and fostering inclusive growth augur well for the economy. Structural support would need to be provided to sectors with large economic multiplier impact. In this regard, the development of robust domestic agri and wood-based value chains hold special importance in the Indian context given their enormous potential to contribute to national objectives.

The agricultural sector is pivotal to the Indian economy, employing about half of the country’s workforce. India is amongst the leading producers in the world of several agri-commodities, including milk, rice, wheat, sugarcane, cotton, pulses, spices, fruits & vegetables. While India’s agri exports have grown strongly in recent years to a peak of US$ 53 billion in

FY 2022-23, it witnessed a decline to US$ 49 billion in FY 2023-24 due to restrictions imposed during the year on agri-commodity trading led by concerns over food security and inflation on the back of geopolitical tensions and climate emergencies. India’s share of global agri-trade remains low at only about 3%. Enhancing agricultural productivity and value addition to international standards, while simultaneously improving market linkages, remain critical to enhance competitiveness of the agri sector and drive significant increase in farmers’ income.

The farm sector faces enormous threats arising out of climate change as evident from the growing number of extreme weather events such as droughts and floods. Given the vulnerabilities, it is critical to strengthen climate resilience and adaptability of the agri-food sector. An exponential increase in crop production and productivity, backed by climate smart agriculture, will be critical in meeting the growing needs of an increasing population as also in mitigating potential risks. Evolving consumer preferences are also driving a shift towards nutritious and sustainably sourced food products. These developments accentuate the need to enhance the competitiveness of agri value chains to cater to the dynamic market requirements of the future. India, with its tremendous strengths in this sector, has a unique opportunity to play a leading role in this global transition and in forging an eco-system of sustainable, regenerative and climate smart agriculture.

In this regard, the Government’s focus on promoting Farmer Producer Organisations (FPOs) holds immense potential to catalyse agricultural transformation by leveraging economies of scale, enabling sustainable

agriculture, supporting market-led production and creating larger market access. Government interventions encouraging private and public investment in post-harvest activities including aggregation, modern storage, efficient supply chain, primary and secondary processing, marketing and branding are steps in the right direction and will go a long way in unlocking the full potential of the agri sector.

In this context, your Company has adopted targeted collaborative models to multiply the scale and impact of its agri and rural interventions. This collaborative approach, as opposed to a traditional transactional approach, can contribute meaningfully towards building next generation agriculture that is climate resilient and capable of supporting gainful livelihoods. Digitalisation of agriculture also offers the potential to increase productivity and foster structural changes across the value chain thereby enabling efficient use of resources. In line with its commitment to harness the power of cutting-edge digital technologies and NextGen agri practices towards unlocking the potential of India’s farmers, your Company had launched ITCMAARS (Metamarket for Advanced Agriculture and Rural Services).

The initiative continues to be scaled up rapidly and currently covers over 1.5 million farmers and over 1,650 FPOs, across 10 states and over 18,000 villages. This ‘phygital’ ecosystem continues to empower the farming community and FPOs by delivering personalised and dynamic advisory services as well as hyperlocal offerings including market linkages, agri inputs and credit enablement. Further details on this transformative initiative are provided in the Agri Business section of this report.

The Government of India had inspired the United Nations to declare 2023 as the ‘International Year of Millets’. This drew global attention to this ‘super-grain’ that has the potential to redefine agriculture with its unique value proposition.

Millets are climate resilient crops using substantially lesser water than other staples and grow in half the time as other crops, offering a comprehensive solution for sustained nutrition and food security.

Your Company has spearheaded ‘ITC Mission Millets’, leveraging its enterprise strengths in agriculture, food and hospitality to implement multi-dimensional interventions in this area. The holistic programme follows a strategic 3-fold approach - 1) developing a ‘good-for-you’ product portfolio, 2) implementing sustainable farming systems, and 3) enhancing consumer awareness through an Educate, Empower and Encourage approach. Your Company has implemented a focused strategy in crafting a millet-based products portfolio under its world-class Indian brands for every occasion, age and format.

To cater to the diverse needs of consumers, your Company has launched products across traditional and modern formats viz. ‘Gluten Free Flour’, ‘Multi-Millet Batter Mix’, ‘Atta with Millets’ and ‘Ragi Flour’, Vermicelli, Biscuits, Snacks and Noodles under the ‘Aashirvaad’,‘Sunfeast’, ‘Bingo!’ and ‘YiPPee!’ brands. These are being progressively scaled up across target markets. Your Company has also designed products that suit every meal occasion like millet idlis for breakfast, biscuits & cookies for snacking and noodles & pasta for other meals. The thrust on millets is further exemplified by the Hotels Business creating easy-to-try recipes with millets to help encourage individuals experiment with the taste and texture of millets. The first ever postal

stamp to commemorate the year of millets and your Company’s unique Mission Millets initiative was also launched by the Department of Posts during the year.

In line with your Company’s commitment to empower farmers, your Company has developed a millets agri-value chain with special thrust on enhancing value-addition and market linkages. Your Company is also promoting FPOs in millet farming anchored by ITCMAARS. The Agri Business has entered into a partnership with Indian Institute of Millets Research (IIMR), Hyderabad to promote high yielding varieties and advanced package of practices among millet farmers. Your Company remains committed to supporting the Government’s efforts to promote millets given their immense benefits in terms of nutritional properties and attributes as a planet friendly and climate resilient crop.

It is pertinent to note that a substantial quantum of food is wasted along the chain in India, depending on the season and the inherent perishability of the crop. Higher levels of food processing in the economy can create a much larger pull for quality agri-commodities, thereby reducing farm wastages and raising farm incomes. This would require focused investments in developing product-specific climate-controlled infrastructure as well as in branded products that benefit large agri-value chains.

Corporate participation is essential not only to invest in requisite infrastructure, but also to provide assured market linkages to farmers. A big thrust on India’s Food Processing sector can play a pivotal role in this regard and have a large multiplier effect which will lead to significant job creation, enhance rural incomes and help manage food inflation in a sustainable manner. In this context, the PLI Scheme for the Food

Processing sector is expected to play a critical role in boosting investments, agri exports, farmer incomes, employment generation and building Indian brands for the global market. Your Company has been included under the scheme for several of its Branded Packaged Foods Businesses and in the Agri Business, details of which are provided in the subsequent sections.

Similarly, the Agro-forestry sector, as a source of raw material for wood-based industry, is woefully constrained by policies that not only impede job creation in India but also promote avoidable imports. Recent policy interventions to enable greening of wastelands and providing financial assistance to members of marginalised communities taking up Agro-forestry is a commendable starting point to reverse this situation. Supportive policies in this area would go a long way in enhancing sustainable livelihoods, augmenting alternative sources of energy (bio-fuel) and enabling import substitution for wood-based industries while simultaneously augmenting the Nation’s environmental capital.

Your Company’s interventions across operating segments are aligned to the national priorities of enhancing competitiveness of Indian agriculture and industry, generating large-scale employment opportunities and supporting sustainable livelihoods, driving import substitution, creating national brands to maximise value capture in India, accelerating growth in tourism, increasing Indian agri exports and promoting sustainable business practices. Investments made by your Company continue to be guided by the national objectives of ‘Make in India’ and ‘Doubling Farmers’ Income’ and the overarching theme of ‘Aatma Nirbhar Bharat’ that seeks to make the country stronger, resilient and more competitive.

The collaboration with NITI Aayog, aimed at boosting agricultural and allied activities in 27 Aspirational Districts of eight states under the Aspirational Districts programme, is in its second phase. This phase focuses on internalising capability enhancement methodology for training of farmers as well as communicating the model village template amongst Government teams and agencies such as Krishi Vikas Kendras. During the year, over 12 lakh farmers were trained on package of practices for principal crops of the region as well as on livestock management, resulting in over 44 lakh cumulative farmer interactions. Similarly, Government has also initiated work on 8,000 model villages based on the activities demonstrated by your Company across 1,350 villages during the initial period of the partnership. Estimates indicate yield improvement of up to 30% for cotton, maize, paddy and soyabean in locations covered by the programme; similarly, cost of cultivation is estimated to have reduced by nearly 15%, resulting in expansion of farmer incomes by up to 60%.

Your Company is working towards developing village level institutions, promoting women agriculturists, facilitating cadre of women service providers like Pashu Sakhis, Yojana Sakhis, Krishi Sakhis and fostering micro entrepreneurship through Agri-Business Centres and Self-Help Groups. Custom hiring centres for farm mechanisation, post-harvest product management infrastructure and community managed seed banks for self-reliance in quality seed material are also being facilitated. Environmentally sustainable farm practices, including zero-till sowing of wheat, direct seeding of rice, micro-irrigation and watershed development, continue to be promoted.

Your Company’s collaboration with CGIAR’s ‘Climate Change and Food Security Programme’ to build climate smart villages was expanded to 6,755 villages across 19 states covering nearly 19 lakh acres, supporting farmers in the management of risks arising from erratic and extreme weather events. Further, according to CGIAR’s estimates, your Company’s Climate Smart Village intervention in Madhya Pradesh demonstrated average increase in yield of 38% and 15% in soyabean and wheat respectively, over the baseline. Reduction in cost of cultivation along with yield improvement led to an increase in net income by 93% in soyabean and 46% in wheat over the baseline and average Green House Gas emissions reduced by 66% for soyabean and 13% for wheat as compared to the baseline.

In villages where the intervention has been implemented for over three years, adoption rates for High-Yield and High-Resilience varieties have exceeded 70%, as against 20% in the baseline assessment.

In Kapurthala District, Punjab, your Company under its flagship programme of ‘ITC Mission Sunehra Kal’ has, over the last six years, implemented solutions that have effectively substituted the burning of paddy stubble by farmers. During the year, the programme covered nearly 2.5 lakh acres with appx. 94% of the area (2.3 lakh acres) witnessing total stoppage of stubble burning, thereby avoiding appx. 1.8 lakh tonnes of carbon release into the atmosphere.

Although India accounts for appx. 18% of the world population, its share of natural resources is disproportionately low with only 2% of global land mass, 4% of freshwater resources and 2% of forest resources. It is more critical than ever before to redouble efforts, both at the national and corporate

level, to fashion strategies that foster sustainable, equitable and inclusive growth.

It is your Company’s belief that businesses can bring about transformational change by pursuing innovative business models that synergise the creation of sustainable livelihoods and the preservation of natural capital while enhancing shareholder value.

This ‘Triple Bottom Line’ approach to creating larger ‘stakeholder value’, as opposed to merely focusing on uni-dimensional ‘shareholder value’ creation, is the driving force that defines your Company’s sustainability vision and its growth path into the future.

Your Company is a global exemplar in ‘Triple Bottom Line’ performance. The focus on creating unique business models that generate substantial livelihoods across the value chains has led to your Company’s Businesses supporting over six million sustainable livelihoods, many of whom belong to the weaker sections of society.

Your Company sustained its ‘AA’ rating by MSCI-ESG for the sixth successive year - the highest amongst global tobacco companies. Your Company has also been included in the Dow Jones Sustainability Emerging Markets Index for the fourth year in a row - a reflection of being a sustainability leader in the industry and a recognition of its continued commitment to people and planet. Your Company entered the prestigious ‘A List’ for Water by CDP achieving the highest ‘A’ rating ‘Leadership Level’ (Asia and Global average of ‘C’). For CDP Climate, your Company retained its ‘A-’ rating ‘Leadership Level’ (Asia and Global average of ‘C’).

As a testament to your Company’s ‘Triple Bottom Line’ philosophy and Responsible Luxury ethos, all major hotel properties of your Company are LEED Platinum®

certified, making your Company a trailblazer in green hoteliering globally. ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst the world’s largest LEED Platinum^® certified green hotels. In 2020, ITC Windsor’s best practices on carbon management distinguished it as the first hotel in the world to be LEED® Zero Carbon certified. Since then, 11 more ITC Hotels have been certified as LEED® Zero Carbon. ITC Mughal became the first hotel globally to be awarded the LEED® Zero Water Certification by the U.S. Green Building Council (USGBC), followed by ITC Sonar, ITC Rajputana and ITC Maurya which are the only other hotels globally to have been awarded the certification. Your Company’s ‘Sankhya’ data centre in Bengaluru had earlier become the first data centre in the world to be awarded the LEED^® Zero Carbon certification.

In addition, your Company is spearheading the implementation of Alliance for Water Stewardship (AWS) Standard which is a credible, globally-applicable and recognised framework for ensuring sustainable water management within the wider water catchment context. The Kovai unit of your Company is the first site in India and the first paper mill in the world to achieve the highest Platinum rating under the ‘Alliance for Water Stewardship Standards’. During the year, five of your Company’s units received the AWS Platinum level certification. Till date, seven units of your Company have achieved Platinum level certification under the AWS Standard. Your Company is in the process of implementing the AWS Standard at other units in high water stress areas and will progressively obtain AWS certification for these sites.

Your Company has been championing the urgent need to combat climate change for building a more secure future and the role it can play in enabling

a net-zero economy. Your Company continues to pursue a low carbon growth strategy through extensive decarbonisation programmes across its value chains whilst also developing adaptation plans across its sites. Your Company is the only enterprise in the world of comparable dimensions to have achieved and sustained the three key global indices of environmental sustainability of being ‘water positive’ (for 22 years), ‘carbon positive’ (for 19 years), and ‘solid waste recycling positive’ (for 17 years). With its bold Sustainability 2.0 agenda, your Company is setting the bar even higher, and remains committed to making a meaningful contribution across all the three sectors of the economy - Agri, Manufacturing and Services, while retaining its status as a sustainability exemplar. Further details on this subject are available in the Sustainability section of this Report.

FINANCIAL PERFORMANCE

Your Company delivered a resilient performance during the year amidst a challenging macroeconomic and operating environment.

- The FMCG-Others Segment turned in a strong performance in the backdrop of weak demand conditions and significant increase in competitive intensity from regional/local players. Sustained margin expansion on the back of premiumisation, delayering operations, agile cost management and judicious pricing actions led to robust growth in operating profits. Segment Revenue for the year grew by 9.6% on a high base with Segment EBITDA growing at a significantly faster pace of 19.7% to ' 2338.50 crores. Segment EBITDA margins expanded by 94 bps to 11.2% during the year.

-    The FMCG-Cigarettes Segment witnessed consolidation on a high base after a period of sustained growth momentum. Market standing was reinforced through focused portfolio/market interventions and agile execution. Differentiated variants and premium segment performed well.

-    The Hotels Segment delivered stellar performance, clocking record highs in Revenue and Profits. Strong growth in RevPAR was driven by retail, MICE (Meetings, Incentives, Conferencing, Exhibition) and marquee events hosted in the country. Segment Revenue at

' 2989.50 crores and Segment EBITDA at ' 1049.88 crores grew by 15.6% and 26.2% respectively, on a high base. Segment EBITDA margin stood at 35.1% representing an expansion of 295 bps over the previous year.

-    With the Government having to impose stock limits and restrictions on agri-commodity exports to ensure food security and control inflation, the Agri Business had limited business opportunities during the year in the bulk commodities space. However, the strategic portfolio of value-added agri products recorded strong growth while the overall leaf tobacco business continued to perform well.

-    The Paperboards, Paper & Packaging Segment had to contend with soft domestic and export demand conditions which significantly depressed net realisations, cheap Chinese supplies in international markets, unprecedented escalation in domestic wood costs and high base effect.

Structural advantages arising out of an integrated business model, Industry 4.0 initiatives, strategic investments in High Pressure Recovery Boiler and proactive capacity augmentation in Value-Added Paperboards aided in partly mitigating pressure on margins.

Overall for FY 2023-24, Gross Revenue and EBITDA stood at ' 69446.20 crores and ' 24478.61 crores respectively. Profit Before Tax and Exceptional items at ' 26323.34 crores, grew by 6.7% over previous year. Your Company reassessed its provisions relating to uncertain tax positions for earlier years based on a favourable order of the Honourable Supreme Court received during the year which resulted in a credit of ' 468.44 crores in the Current Tax expense for the year. Profit After Tax grew by 8.9% to ' 20421.97 crores (previous year ' 18753.31 crores). Total Comprehensive Income for the year stood at ' 22703.03 crores (previous year ' 18782.57 crores). Earnings Per Share for the year stood at ' 16.39 (previous year ' 15.15).

The Directors of your Company are pleased to recommend a Final Dividend of ' 7.50 per share for the financial year ended 31st March, 2024. Together with the Interim Dividend of ' 6.25 per share paid on 27th February, 2024, the total Dividend for the financial year ended 31st March, 2024 amounts to ' 13.75 per share (previous year Ordinary Dividend of ' 12.75 per share and Special Dividend of ' 2.75 per share). Total cash outflow on account of Dividend (including Interim Dividend of ' 7799.45 crores paid in February 2024) will be ' 17162.99 crores.

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

Over the last five years, the Value-Added by your Company, i.e. the value created by the economic activities of your Company and its employees, aggregated over ' 292000 crores, of which over ' 194000 crores accrued to the Exchequer.

Including the share of dividends paid and retained earnings attributable to government owned institutions, your Company’s contribution to the Central and State Governments represented appx. 74% of its Value-Added during the year.

Your Company has, over the years, consistently ranked amongst the Top 3 Indian corporates in the private sector in terms of Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in your Company’s portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth.

Foreign exchange earnings of the ITC Group over the last ten years aggregated nearly US$ 9.3 billion, of which agri exports constituted appx. 60%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company’s contribution to the rural economy.

During FY 2023-24, your Company and its subsidiaries earned ' 9512 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to ' 7213 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency amounted to ' 2790 crores,

comprising purchase of raw materials, spares and other expenses of ' 2355 crores and import of capital goods of ' 435 crores.

PROFITS, DIVIDENDS AND RETAINED EARNINGS

(' in crores)
PROFITS	2023 - 24	2022 - 23
a) Profit Before Exceptional Items and Tax	26323.34	24677.54
b) Exceptional Items (refer note 28 (i) of Notes to the Standalone Financial Statements)	(7.57)	72.87
c) Profit Before Tax	26315.77	24750.41
d) Tax Expense	Â	Â
- Current Tax	5661.21	6025.32
- Deferred Tax	232.59	(28.22)
e) Profit for the year	20421.97	18753.31
f) Other Comprehensive Income	2281.06	29.26
g) Total Comprehensive Income	22703.03	18782.57
STATEMENT OF RETAINED EARNINGS	Â	Â
a) At the beginning of the year	33687.70	30060.39
b) Add: Profit for the year	20421.97	18753.31
c) Add: Other Comprehensive Income (net of tax)	(17.18)	(16.81)
d) Add: Transfer from Share Options Outstanding Account on exercise and lapse	1.67	20.82
e) Less: Dividends	Â	Â
- Final Dividend of ' 6.75 (2023: ' 6.25) per share	8388.91	7702.03
- Special Dividend of ' 2.75 (2023: Nil) per share	3417.70	-
- Interim Dividend of ' 6.25 (2023: ' 6.00) per share	7799.45	7448.41
- Income Tax on Dividend paid (refund)	-	(20.43)
f) At the end of the year	34488.10	33687.70

FMCG CIGARETTES

After a period of sustained growth momentum, the Business witnessed consolidation in volumes on a high base amidst subdued demand conditions in the overall consumption space, even as illicit trade remained at elevated levels. Differentiated and premium offerings saw robust traction during the year.

Your Company’s leadership position in the cigarette industry continues to be driven by its unwavering focus on nurturing a future-ready portfolio of world-class products anchored on its integrated seed to smoke value chain, superior consumer insights, robust innovation pipeline and world-class product development capabilities. Your Company continues to counter illicit trade and reinforce market standing by fortifying the product portfolio through innovation, democratising premiumisation across segments and enhancing product availability backed by superior on-ground execution. Several differentiated variants have been introduced recently under the ‘Classic’, ‘Gold Flake’, ‘American Club’, ‘Bristol’ brands amongst others. The Business also strengthened its presence in focus markets with the launch of several differentiated offerings across segments.

During the year, your Company further strengthened its direct reach in target markets and augmented the stockist network to service rural and semi-urban markets efficiently. Your Company’s investments towards building a differentiated portfolio coupled with agile and micro market focused last mile execution capabilities augur well for the future.

Globally, cigarettes constitute the dominant form of tobacco use. In the Indian context, tobacco use comprises a diverse range of chewing and smoking formats that are available at multiple price points consequent to punitive and discriminatory taxation on

cigarettes. While India is the world’s second largest consumer of tobacco, legal cigarettes constitute only 9% of overall tobacco consumption in India, as against a global average of 90%. It is pertinent to note that India accounts for less than 2% of global cigarette consumption despite having 18% of the world’s population - making India’s per capita cigarette consumption amongst the lowest in the world.

Over the years, discriminatory and punitive taxation on cigarettes has led to progressive migration of consumption from duty-paid cigarettes to other lightly taxed/tax-evaded forms of tobacco products, comprising illicit cigarettes, bidi, chewing tobacco, gutkha, zarda, snuff, etc. It is pertinent to note that while the share of legal cigarettes in total tobacco consumption has declined from 21% in 1981-82 to a mere 9%, aggregate tobacco consumption in the country has increased over the same period. As a result, despite accounting for less than 1/10th of the tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5th of the revenue generated from the tobacco sector.

Taxes on cigarettes in India are multiple times higher than in developed countries viz. 14x of USA,

7x of Japan, 6x of Germany and so on. Further, the same is also substantially higher than that in neighbouring countries.

It is pertinent to note that India’s per capita cigarette consumption is amongst the lowest in the world and is significantly lower compared to that of China, Japan, USA, UK and even neighbouring countries such as Bangladesh and Pakistan.

Historically, steep increases in taxation have adversely impacted tax collections and legal cigarette volumes, while a stable tax regime has led to buoyancy in tax collections as evidenced in the table below:

 

Period	Increase in Tax Incidence	Increase in Revenue Collections
FY 2012-13 to FY 2016-17 (CAGR)	15.7%	4.7%
Apr 2018 to Jan 2020 over Jul 2017 to Mar 2018	_	10.2%
Oct 2020 to Mar 2021 over Aug 2019 to Jan 2020	13.0%	1.8%
Apr 2022 to Jan 2023 over Oct 2021 to Mar 2022	_	11.1%

 

Punitive taxes on the legal cigarette industry in earlier years have resulted in rapid growth of illicit cigarette trade - making India the 4th largest illicit cigarette market globally according to Euromonitor estimates. Over the years this has created attractive tax arbitrage opportunities for unscrupulous players indulging in illicit cigarette trade. While legitimate cigarette industry volumes have declined consistently over the last decade, illicit cigarette volumes, in contrast, have grown rapidly during the same period, accounting for about 1/3rd of the legal industry. It is pertinent to note that the legal industry has been able to partially claw back volumes from illicit trade during periods of tax stability, backed by deterrent actions by enforcement agencies.

During the year, there were extensive media reports on the multitude of cases of evasion of taxes/duties by dealers in illicit cigarettes which were unearthed by raids conducted by Directorate of Revenue Intelligence (DRI) and other enforcement agencies. ‘Illicit markets: A Threat to Our National Interests’, a study published by FICCI-TARI in September 2022, noted that “The consumption of illegal cigarettes in India has increased, signalling a shift from legal products to cheaper substitutes or illicit products, which have no or little tax element in them. When taxes are raised beyond a certain optimum level, consumers gravitate towards cheaper alternatives or illicit supplies, which are normally smuggled or tax evaded goods”. It is estimated that illicit trade causes an annual revenue loss of appx. ' 21000 crores to the Exchequer. With respect to other tobacco products as well, the revenue losses are significant since about 68%¹Â of the total tobacco consumed in the country remains outside the tax net.

The Directorate of Revenue Intelligence (DRI), in its report “Smuggling in India 2021-22” acknowledges the high incidence of taxes in India providing opportunities for illicit trade of cigarettes. The report states: “High Incidence of tax on cigarettes in India results in a tax arbitrage in favour of smuggled cigarettes on which no taxes are paid and there is no statutory requirement of pictorial warning covering at least 85 percent of the packaging space. More importantly, the smuggled cigarettes are, on an average, 50 percent cheaper in the Indian Market, compared to the price of any similar cigarette brand. From a public health perspective, the smuggling of cigarettes also poses a very serious challenge since a part of the smuggled cigarettes are counterfeits and the quality of tobacco and other ingredients used in the said cigarettes, is inferior.”

Tobacco control measures in India have ranked amongst the most stringent in the world from the time of enactment of the Cigarettes (Regulation of Production, Supply and Distribution) Act, 1975, to the present. India is also one of the few countries where tobacco products are regulated across the value chain - from their manufacture to sale to consumers. The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) requires cigarette packages to display the statutorily mandated pictorial and textual warnings covering 85% of the surface area of the packet - one of the largest in the world.

It may be observed that smuggled international brands of cigarettes do not bear any of the pictorial or textual warnings mandated by Indian laws or, bear much smaller pictorial/textual warnings as per the tobacco laws of the countries from where

these cigarettes originate. As reported in prior years, findings from research conducted by IMRB International, an independent market research organisation, show that the lack of pictorial warnings on packets of smuggled international brands of cigarettes or their diminutive size creates a perception in the consumers’ mind that these illicit cigarettes are ‘safer’ than domestic duty-paid cigarettes that carry the 85% pictorial warnings. The combination of low prices to consumers due to tax evasion and the misleading perception created by the absence of statutory pictorial warnings provides significant buoyancy to illicit cigarette volumes.

India is among the top three tobacco growing countries in the world. Tobacco plays a significant role in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors². Illicit cigarette trade also has a deleterious impact on farmers and farm workers engaged in the tobacco value chain. In India, cigarettes are manufactured largely using Flue Cured Virginia (FCV) tobacco grown in the states of Andhra Pradesh, Telangana and Karnataka. As smuggled international brands of cigarettes do not use Indian tobaccos, in addition to revenue losses, the growth of illicit cigarette trade has also resulted in a sharp drop in demand for Indian FCV tobaccos in the domestic market. FCV tobacco production has dropped by ~40% between 2013-14 and 2021-22, resulting in shrinkage in earnings and loss of an estimated 35 million man-days of employment in tobacco growing areas.

It is pertinent to note that several other major tobacco producing countries, including the USA, have established regulatory frameworks taking into consideration the economic interests of their tobacco farmers. The punitive and discriminatory taxation & regulatory regime on cigarettes in India over the years, has adversely affected the livelihood of Indian tobacco farmers with corresponding gains to those countries that have opted for moderate and equitable tobacco regulations. These developments, coupled with lower availability of Indian crop, lower export incentives in India and relative weakness of currencies in certain competing geographies have, in the past, had a debilitating impact on millions of livelihoods, dependent on the tobacco value chain in India. This has been exacerbated by global crop shortages due to extreme weather events and supply chain disruptions on account of geopolitical developments. However, recent stability in taxes on cigarettes backed by deterrent actions of enforcement agencies has enabled the legal cigarette industry to combat illicit trade and claw back volumes, thereby generating domestic and export demand for Indian tobaccos.

As reported in earlier years, your Company and several other stakeholders had challenged the validity of the pictorial and textual warning covering 85% of the surface area of the packet prescribed under COTPA. The Honourable Karnataka High Court, by its judgement in December, 2017, held the 85% pictorial warnings to be factually incorrect and unconstitutional. Upon Special Leave Petitions filed by the Government and others, the Honourable Supreme Court has stayed the judgment of the High Court. The cases are pending before the Honourable Supreme Court.

The extremely stringent regulations along with the discriminatory and steep taxation on cigarettes

have had numerous negative, albeit unintended repercussions. These include:

-    rapid growth in illicit cigarette volumes, which resulted in sub-optimisation of the revenue potential of the tobacco sector and significant loss to the Exchequer. It is estimated that on account of illicit cigarettes alone, revenue loss to the Government is appx. ' 21000 crores per annum.

-    widespread availability of illicit cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices. As a result, despite accounting for less than 1/10th of the tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5th of the revenue generated from the tobacco sector.

-    a large component of tobacco consumption in the country, aggregating around 68%, remaining outside the tax net.

-    persistent negative impact on the livelihood of tobacco farmers and others dependent on tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicate that on account of agro-climatic conditions, there is no equally remunerative alternate crop that can be grown in the FCV tobacco growing regions of the country.

Your Company continues to engage with policy makers for a framework of pragmatic, equitable, non-discriminatory, evidence-based regulations and taxation policies that balance the economic imperatives of the country and tobacco control objectives, cognising for the unique tobacco consumption pattern in India. Stability in taxes is

critical to address the interests of all stakeholders of this industry, including tobacco farmers, consumers and the Exchequer.

Manufacturing facilities of the Business continue to be modernised by inducting contemporary technologies to drive innovation and secure higher levels of productivity and product excellence. New benchmarks continue to be set in areas of quality, sustainability, supply chain responsiveness and productivity. Cutting-edge technologies such as Industry 4.0 and Data Sciences are being leveraged to build a smart manufacturing environment of connected systems. These initiatives, coupled with innovative capabilities, in-house design and development expertise, have further improved the speed-to-market for launch of differentiated products and augmented the innovation pipeline of the Business.

It is extremely satisfying to report that your Company continued to be recognised for its commitment towards operational excellence. The Kidderpore unit won the ‘Apex Prize for Operational Excellence’ at the Integrated Manufacturing Excellence Initiative (IMexI) Awards organised by Kaizen Hansei Institute, a wing of Kaizen Institute of India.

In line with your Company’s commitment to the ‘Triple Bottom Line’ philosophy, the Business continued to focus its efforts for resource conservation and adoption of best-in-class technologies and processes. During the year, two offsite solar power plants in Karnataka (14.5 MW) and Uttar Pradesh (13.5 MW) have been commissioned to augment the renewable energy footprint. Nearly 55% of the total energy used by the Business is generated from renewable sources. Sustainability initiatives of the

Business continued to be recognised with Bengaluru, Saharanpur and Pune units being awarded the prestigious Alliance for Water Stewardship (AWS) Platinum Certification, thereby securing three of the four certifications awarded globally to tobacco factories. Further, the Kidderpore unit received the ‘National Energy Leader Award’ at the CII National Award for Excellence in Energy Management. The 21 MW wind farm in Karnataka and 12.3 MW wind farm in Maharashtra received the ‘Best Performing Wind Farm Award’ from Indian Wind Power Association for FY 2022-23 in their respective regions.

Additionally, Bengaluru and Pune units secured ‘Five Golden Stars’ rating & ‘Safety Shield’ apex level award from National Safety Council of India for excellence in Occupational Health and Safety systems, with Pune unit also being awarded with the prestigious ‘Sarvashreshtha Suraksha Puraskar’. As a testimony to the success of initiatives taken on strengthening the HR practices, your Company was honoured with The Economic Times - Human Capital Award (Gold) for ‘Excellence in Communication Strategy’ for overall employee communication strategy.

Your Company remains well positioned to fortify its market standing in the legal cigarette industry, leveraging its superior strategies, integrated seed to smoke value chain, future-ready portfolio, robust innovation pipeline, cutting-edge manufacturing & digital technologies and best-in-class execution capabilities. A stable taxation and regulatory regime remains critical to enable the legal cigarette industry to claw back volumes from illicit trade, as also borne out by recent experience.

FMCG - OTHERS

Amidst a challenging macro-economic and operating environment and on the back of significant inflationary pressures in the previous year, consumption demand remained subdued during the year, especially in rural markets and in the value segments.

Overall, input costs remained elevated compared to pre-pandemic levels with several commodities witnessing sequential uptick in prices; while certain commodities witnessed moderation in prices on a high base. Notwithstanding the challenging conditions and heightened competitive intensity, your Company’s FMCG Businesses grew ahead of the industry in both urban and rural markets driven by deep consumer insights, purposeful innovation, portfolio premiumisation, strategic portfolio augmentation, sharp execution of channel-specific business plans, enhanced distribution footprint and superior last mile execution.

Your Company’s FMCG Businesses recorded Segment Revenue of ' 20966.83 crores representing an increase of 9.6% over the previous year. Segment EBITDA for the year registered a robust growth of 19.7% to ' 2338.50 crores with margins improving by 94 bps to 11.2% on the back of premiumisation, supply chain efficiency, agile cost management and judicious pricing actions in spite of the gestation costs of new initiatives.

A consumer-centric approach, driven by purpose led brands, a future-ready portfolio including value-added adjacencies backed by agility in execution, remains at the core of your Company’s strategy to rapidly scale-up the FMCG Businesses.

The Businesses continue to leverage the power of digital to drive superior consumer insights & innovation, deepen consumer engagement and enhance brand loyalty. Strategic interventions continue to be made towards delivering delightful brand experiences seamlessly across touchpoints through personalised journeys mapped to individual needs, preferences and context.

Your Company continues to leverage deep consumer insights and cutting-edge R&D capability to address present and emergent consumer need spaces.

Over 100 new products anchored on the vectors of Health & Nutrition, Hygiene, Protection & Care, Convenience & On-the-Go, Indulgence etc., were launched across target markets during the year, leveraging the R&D platforms of your Company’s Life Sciences and Technology Centre (LSTC) and agile product development teams across Businesses.

Cutting-edge digital technologies including Industry 4.0, Advanced Analytics, Big Data and industrial Internet of Things (loT) continue to be deployed towards strengthening your Company’s real time operations and execution platform, enhancing productivity, driving efficiency and cost agility. These initiatives are anchored on the key pillars of synchronised planning and forecasting, agile, resilient & efficient supply chain, smart buying & value engineering, smart manufacturing and smart demand capture & fulfilment. Strategic investments have been stepped up to build platforms of insights by harmonising and integrating large and isolated datasets powered by AI/ML technologies and ‘human-centred design’ & visualisation tools.

The FMCG Businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years.

Your Company’s vibrant portfolio of over 25 world-class Indian brands, largely built through an organic growth strategy leveraging institutional synergies in a relatively short period of time, represents an annual consumer spend of nearly ' 32500 crores and reach over 250 million households in India. These home-grown, purpose-led Indian brands, powered by agile innovation, support the competitiveness of domestic value chains, especially in the agri space, thereby ensuring creation and retention of value within the country.

Your Company’s FMCG brands have achieved impressive market standing³Â in a relatively short span of time in their respective categories viz. Aashirvaad is No. 1 in Branded Atta, Bingo! is No. 1 in the Bridges segment of Snack Foods, Sunfeast is No. 1 in the Cream Biscuits segment, Classmate is No. 1 in

Notebooks, YiPPee! is No. 2 in Noodles, Fiama is No. 2 in Bodywash and Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment).

Your Company remains focused on rapidly scaling up the FMCG Businesses anchored on strong growth platforms and a future-ready portfolio. It is pertinent to note that the chosen categories, which are largely characterised by low household penetration levels and/or low per capita consumption, offer significant headroom for long-term growth. This is borne out by several reports which highlight that your Company’s total addressable market expansion potential is amongst the highest in the Indian FMCG space.

In this context, it is noteworthy that a key element of your Company’s growth strategy is to foray into value-added adjacencies and categories of the future by leveraging the 25+ powerful mother brands it has established over the years. Recent examples of such brand extensions include Aashirvaad to Dairy, Ready-to-Eat, Vermicelli, Rava, Besan, Indian breads, Salt and Spices; Sunfeast to Dairy Beverages and Cakes; Bingo! to Namkeens; ITC Master Chef to Frozen Snacks and Cooking pastes; Classmate to Writing instruments; Savlon to Sanitisers, Wipes and Disinfectant sprays etc. Simultaneously, the FMCG Businesses continue to make strategic investments in building categories of the future and establishing your Company’s ‘right to win’ by progressively scaling up nascent categories where beachheads have been created. Your Company is also proactively pursuing value accretive acquisition, joint venture and collaboration opportunities towards accelerating growth and value creation.

The FMCG Businesses continue to expand their export footprint leveraging the equity of their world-class brands - with a reach now spanning

over 70 countries. The PLI scheme continues to be leveraged to scale-up exports across Biscuits & Cakes, Snacks, Dairy and Ready-to-Eat categories.

Your Company is also exploring strategic opportunities in proximal markets as a potential vector of growth going forward.

The FMCG Businesses continue to create structural competitive advantages and enhance profitability by leveraging world-class distributed manufacturing and logistics infrastructure, multi-channel distribution network and newer routes to market, smart buying & value engineering and smart manufacturing. Investments over the years in several state-of-the-art Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) have laid a strong foundation to drive structural advantages such as ensuring product freshness, enhancing agility and responsiveness of the supply chain, reducing cost of servicing proximal markets through lower distance-to-market, etc. Capacity utilisation at the 11 operational ICMLs continues to be ramped up along with focused smart manufacturing interventions leveraging automation and Industry 4.0 technologies to drive operational efficiencies, yield and energy management and further enhance safety and quality. With growing scale, supply chain operations are being increasingly delayered through direct-to-market shipments thereby reducing freight costs and eliminating multiple handling. Your Company is confident that these strategic interventions which are already delivering substantial benefits will realise their full potential over the medium term and continue to create long-term value.

Your Company remains confident of rapidly scaling up its FMCG Businesses on the back of a strong

future-ready portfolio powered by purpose-led brands, world-class quality, deep consumer insights, cutting-edge innovation and an agile, resilient and efficient supply chain. The Businesses will continue to leverage your Company’s institutional strengths viz. strong backward linkages with the Agri Business, deep and wide multi-channel distribution network, cuisine knowledge resident in the Hotels Business, industry-leading packaging knowhow and access to robust R&D platforms nurtured by LSTC.

Branded Packaged Foods

Your Company sustained its position as one of the largest and fastest growing branded packaged foods businesses in the country, leveraging a robust portfolio of brands, a slew of first-to-market offerings, a range of distinctive products customised to address regional tastes and preferences, supported by an efficient supply chain and distribution network. This was achieved against the backdrop of subdued demand conditions and heightened competitive intensity across product categories.

The Branded Packaged Foods Businesses remain focused on addressing emerging consumer needs with innovations anchored on the vectors of health, nutrition, wellness, immunity, naturals, indulgence and convenience. Several innovative and first-to-market products were launched during the year, leveraging your Company’s institutional strengths including superior consumer insights, capabilities of your Company’s Life Sciences and Technology Centre (LSTC) and the cuisine expertise resident in your Company’s Hotels Business. While strengthening their core portfolios, the Businesses continue to scale-up presence in value-added

adjacencies leveraging powerful mother brands and invest in categories of the future.

With the overarching vision to ‘Help India Eat Better’, your Company’s Nutrition strategy seeks to create a sustainable ecosystem anchored on a portfolio of healthier, affordable & accessible ‘Good For You/Free From’ value-added products, supported by responsible policies in line with national priorities on nutrition. Your Company’s institutional strengths, as aforestated, are being leveraged to develop products providing consumers wholesome and enjoyable food experiences.

Encouraged by the Government of India’s initiative of promoting millets, your Company continued to further augment its range of millet-based products comprising ‘Ragi Flour’, ‘Gluten Free Flour’, ‘Multi-Millet Mix’, ‘Ragi Vermicelli’ under the ‘Aashirvaad’ brand, ‘Sunfeast Farmlite Super Millets’, with two variants - ‘Chocochip Millet’ and ‘Multi Millet’ cookies and millet-based ‘Fantastik Choco Sticks’. During the year, your Company introduced millet-based finger snacks under ‘Bingo! Tedhe Medhe’ and millet noodles under ‘YiPPee!’. Your Company is focused on developing and promoting a comprehensive millets-based portfolio under its popular brands and in familiar formats to enable easier consumer adoption.

The Businesses continue to use a data driven approach to make sharp targeted brand investments, clutter-breaking communication and deepen consumer engagements across all touch points, along with focused market development efforts leading to reinforcement of market standing across operating categories. Several campaigns launched during the year received wide recognition and won

prestigious awards across leading platforms, including a Gold from ‘IAMAI - India Digital Awards’ in ‘Tech Enabled Campaign’ and a Bronze EMVIES from The Advertising Club in ‘Best Media Innovation :

Digital - Social Media’ for ‘Dark Fantasy - Fulfilling over a million fantasies’ campaign; a Gold in Health and Wellness Marketing Award for ‘New product launch’ for ‘Launch of Easy Digest Milk- Aashirvaad Svasti Milk’ and a Silver IDMA Maddies Award in Promotion for ‘Score Goals with Bingo! Tedhe Medhe’ campaign, a Silver from Exchange4Media for ‘Best Use of Influencer Marketing’ for ‘Aashirvaad Superior MP Atta -Try my recipe’ campaign; and a Bronze from ET Brand Equity in ‘Use of Data Analytics/Consumer Insights’ for ‘ITC B Natural - Amazon Super Value Days Campaign’.

During the year, the Businesses rolled out several unique interventions in brand marketing across the portfolio. Sufficiency based media planning, full funnel marketing, first party data usage, curated content for individual platforms and holistic social media strategy enabled strengthening of brand equity. AI and Gen AI were adopted at scale to bring efficiency in the core areas of content creation and media deployment. The Sunfeast Dark Fantasy #hardilkifantasy, an immersive personalised creative content campaign and Bingo! Tedhe Medhe Snack Attack, that used Gen AI extensively were well received across forums.

The Businesses also revamped brand websites into personalised destinations, which are modular with quick go-to-market timelines and tailor-made to create immersive consumer experiences. Culture Centric Marketing has been successfully deployed by brands like Sunrise in Bihar, Sunfeast Supermilk in Tamil Nadu and Marie Light in Odisha.

Relentless focus on delivering superior quality products to consumers continues to be a key source of sustainable competitive advantage for the Branded Packaged Foods Businesses. In this context, the Businesses continue to leverage the agri-commodity sourcing expertise resident in your Company’s Agri Business to procure high quality raw materials, thereby ensuring the highest level of quality, consistency and safety in its products.

In addition, each of your Company’s branded packaged food products is manufactured in HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms.

- In the Staples Business, ‘Aashirvaad’ delivered robust growth on a high base. The value-added Atta portfolio, consisting of Multigrain, Select and Sugar Release Control Atta posted healthy growth driven by superior value proposition; the range was further augmented with the launch of ‘Atta with Millets’. Millet products viz., (‘Gluten Free Flour’, ‘Ragi Flour’, ‘Multi-Millet Batter Mix’), Organic portfolio (‘Organic Atta’ and ‘Organic Dals’), ‘Aashirvaad Vermicelli’, ‘Aashirvaad Rava’ (Suji Rava, Bansi Rava, Samba Rava) continued to witness strong growth. ‘Aashirvaad Besan’, made from the finest 100% Bikaneri chana dal which mixes easily with water to provide smooth & lump-free batter, was extended across markets during the year and received excellent consumer feedback. The Organic portfolio was also augmented with the launch of ‘Organic Rajma’ and ‘Organic Kabuli Chana’. With a focused approach towards product development, purposeful marketing inputs, consumer activations and region-specific interventions supported by

manufacturing excellence and sharply targeted media investments, especially across digital platforms, your Company is confident of further strengthening Aashirvaad’s market leadership position, catering to all ‘staple’ needs of consumers in the future.

‘Aashirvaad Salt’ posted robust growth in focus markets during the year, supported by its distinctive positioning - ‘Created by Sun and Sea - pure just like nature intended it to be’.

The portfolio was further enriched with the launch of Aashirvaad Himalayan Pink Salt serving the needs of health-conscious consumers with the proposition of ‘Purity which you can see and taste’.

In the Spices category, your Company continued to deliver strong growth with its endeavour to provide consumers unique and personalised experiences that meet their taste preferences and reflect the regional flavours of the state.

During the year, the Business grew on the back of distribution expansion in focus states, sharp region-specific communication, and an enhanced portfolio with innovative new products. The ‘Sunrise’ brand strengthened its market leadership position in the core market of West Bengal and also made significant gains in newer launch markets of the Northeast region and Bihar. The brand continued to delight consumers by introducing unique and differentiated products catering to regional tastes and preferences, such as Sunrise ‘Haah Salkumura’ - a first-to-market product for duck curry, the ‘Swaad Bihar ka’ range of spices including ‘Sunrise Chicken Masala’, ‘Sunrise Meat Masala’, ‘Sunrise Kitchen King Masala’

and ‘Sunrise Rajshahi Garam Masala’ in limited-edition packs featuring ‘Madhubani’ artwork, etc. ‘Aashirvaad Spices’ continues to enhance its presence in emerging channels and core markets to enable full portfolio play along with expansion of the blended portfolio. Together, the two brands are well positioned to leverage your Company’s institutional strengths to progressively enhance their market standing in the Spices category.

- The Biscuits category witnessed resilient performance during the year on an elevated base. The Business continues to strengthen its core portfolio with investments behind powerful brand ideas, superior products, cultural marketing with local insights and unique innovations to drive higher growth. The ‘Sunfeast Dark Fantasy’ range of differentiated cookies sustained its leadership position in the premium segment. ‘Mom’s Magic’ range of cookies also witnessed strong growth during the year. The recently re-launched ‘Sunfeast Supermilk’ biscuit harnessing the goodness of ‘Naatu Maatu Paal’ has received excellent consumer response and is being scaled up in target markets. The portfolio mix was further enriched with the launch of ‘Bounce Day & Night’, a delicious dark choco biscuit with soft vanilla cream and ‘Sunfeast All Rounder Sweet and Salty’ in the Differentiated Crackers category in select markets. Towards further deepening consumer engagement, the brand launched several innovative campaigns during the year.

The highly innovative ‘MyFantasyAdWithSRK’ campaign, leveraging Gen AI technology, enabling consumers to live their #fantasy of starring in a personalised advertisement opposite the

iconic Shah Rukh Khan received overwhelming consumer response with more than 9 lakh engagements within a short span of time.

-    The Snacks portfolio was augmented with an innovative first-of-its-kind millet-based offering, ‘Bingo! Tedhe Medhe Chatpata Twist’ in line with ITC’s Mission Millets, along with a slew of new launches including ‘Bingo! Nachos Chilli Limon’ and ‘Bingo! Tedhe Medhe Cream & Onion Style’ which have been well received by consumers and are being scaled up. The portfolio was further strengthened with the launch of ‘Bingo! 2X Hot and Spicy Korean-Style chips’ in three sizzling variants - Original, Hot & Spicy and Hashtag, blending the essence of fiery Korean spices

with Bingo!’s classic crunch. Having forayed into traditional snacks in select markets through Bingo! Tedhe Medhe Namkeens last year, the Business continues to register robust growth in the segment. ‘Bingo!’ continued to be the market leader in the Bridges segment across the country, and in the potato chips segment in South India.

-    ‘YiPPee!’ continues to strengthen its market standing leveraging a differentiated product portfolio and clutter-breaking marketing initiatives to generate consumer buzz. The product portfolio was augmented with the launch of millet-based noodles and a new line of ‘Wow Masala’ noodles, which is a ‘more masaledaar’ offering. During the year, the brand also entered into a collaborative arrangement with the Argentine Football Association to create excitement amongst consumers. In line with the purpose of creating ‘A better world’, the brand

continues to promote sustainability through plastic waste management and recycling. During the year, more than 30 lakh school children were educated on plastic waste recycling with an initiative to collect plastic equivalent to 2.83 crores YiPPee! Noodles wrappers across 6,000 schools. The Business also partnered with The Times of India in a unique plastic waste upcycling drive to deploy playground equipment in 16 parks across Delhi, Bengaluru, Mumbai and Kolkata.

The Ready-to-Eat (RTE) category operates across domestic, export and institutional channels through a range of products in varied segments including gravies, instant meals & mixes, sauces & condiments etc. The exports business continued to remain focussed on key markets of USA, Canada and other select countries under the brand ‘Kitchens of India’. During the year, single serve Halwas (Moong Dal and Badam) were launched in Metro cities leveraging the e-Commerce and Modern Trade channels.

The Frozen Foods Business operating under the ‘ITC Master Chef’ and ‘Farmland’ brands in Snacks, Prawns and Vegetables categories continued to grow at an accelerated pace, powered by a range of innovative and differentiated offerings in both veg and non-veg segments. A range of first-to-market products such as ‘ITC Master Chef Paneer Pakoda’ and ‘ITC Master Chef Crispy Onion Rings’ were launched in both Retail and Food Service channels. Over 60 high quality and differentiated products across both traditional and emerging channels are rapidly gaining consumer franchise. The portfolio offers a delectable range of Indian &

Western snacks, Frozen Prawns and Frozen Vegetables. The Business strengthened its go-to-market strategy in both Food Service and Retail channels by implementing an industry-first sales force automation technology.

-    ‘Aashirvaad Svasti’ fresh dairy portfolio continued its strong growth trajectory during the year, led by strengthening of its premium milk variant ‘Select’ and driving exponential growth in value-added products (curd, lassi and paneer) through superior and differentiated offerings and scaling up distribution. The fresh dairy portfolio, available across Bihar and West Bengal markets was also extended to the larger markets of Jharkhand during the year and gained strong consumer traction. Innovative offerings such as Paneer Slices, that received encouraging consumer response were extended to select e-Commerce and Modern Trade chains. The value-added portfolio continues to be enriched with launch of differentiated offerings such as ‘Shahi Lassi’ in East.

-    The Beverages industry remained impacted by muted demand environment and irregular weather conditions across large parts of the country. Against a challenging operating environment, your Company’s Beverages portfolio demonstrated resilient performance. The Business continued

to invest in the ‘Fruit and Fibre’ proposition of ‘B Natural’ to deepen consumer connect and increase brand affinity. Recent launches such as ‘B Natural Tender Coconut Water’ and ‘B Natural Masala Range’ have performed well and continue to be scaled up in target markets. The Dairy Beverages portfolio leveraged the strong equity of ‘Sunfeast’ and ‘Dark Fantasy’ to

provide differentiated offerings - with ‘smoothies’ containing fruit, milk and seeds. The Business also strengthened its presence in alternate trade channels including Canteen Stores Department, Travel (Hotels, Railways, Airlines & Airports) & Quick Service Restaurants leveraging several strategic partnerships and collaborations.

-    The Confectionery Business continued to nurture its range of premium portfolio by leveraging ‘Fantastik Chocostick’, ‘Jelimals’ and ‘Candyman Fruitee Fun 3 in 1 chews’. The Business augmented its portfolio with the launch of ‘Candyman Paan’ candy and has received encouraging consumer feedback. Leveraging the buzz around the International Year of Millets, the range of ‘Fantastik Chocostick’ was fortified with the goodness of millets. ‘Fabelle’ chocolates continue to receive excellent response from discerning consumers, setting new benchmarks in the luxury and premium chocolate segments. The category continued to tap into e-Commerce platforms, food delivery aggregators and premium travel retail outlets to improve the availability of Fabelle range of chocolates beyond the luxury boutiques at ITC Hotels. During the year, the portfolio was further augmented with the launch of ‘Sunfeast Fantastik’ range of chocolates in select markets in two variants, viz. Choco Almond and Fruit & Nut at convenient price points. These have received excellent consumer response and are being scaled up across additional markets.

-    Exports remain a key focus area for the Branded Packaged Foods Businesses; during the year, exports witnessed rapid growth across several categories. Having built a robust distribution

network overseas, your Company’s brands now reach more than 70 countries. The Business is confident of scaling up exports at an accelerated pace in focus markets by leveraging the equity of its core brands such as Aashirvaad, Sunfeast,

ITC Master chef and Kitchens of India.

Over the years, your Company has made significant investments in setting up state-of-the-art Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) proximal to large demand centres. These facilities are at the heart of your Company’s strategy to create structural advantage by enhancing product freshness, elevating market agility, minimising the cost of servicing proximal markets, enabling scalability besides setting new benchmarks in safety and superior product quality. Your Company continues to leverage the benefits of the state-of-the-art Ancillary Manufacturing cum Logistics Facilities (AMLFs) at Pudukkottai and Kapurthala. These automated facilities are co-located with the ICMLs and provide several structural advantages including inventory optimisation, delayering operations and lowering cost of market servicing.

11 ICMLs are operational in locations proximal to large demand centres enabling delivery of fresher products, reduction in distance to market and delayering of operations. The capacity utilisation at ICMLs continues to be ramped up. With every successive ICML coming on-stream, the representation of diversity and inclusions in the workforce has progressively increased.

With its relentless focus on quality and manufacturing excellence, your Company became the first Indian company to win the prestigious Global Kaizen Award at the 5th Edition of Global KAIZEN™ Awards held in

November 2023 at Lisbon, Portugal. During the year, your Company received over 100 prestigious external awards & accolades in the areas of Safety, Sustainability, Quality & Food Safety, Manufacturing Excellence, Cost competitiveness, Manufacturing & Supply Chain and HR from prestigious institutions such as the Confederation of Indian Industry (CII), Integrated Manufacturing Excellence Initiative (IMexI) etc. The Ranjangaon ICML became the second food processing facility of your Company to have been awarded a Platinum level Certification under the Alliance for Water Stewardship Standards (AWS). These accolades are testament to your Company’s unwavering commitment to providing products with the highest levels of quality while reducing the environmental impact of the same.

The Business has implemented several strategic cost management initiatives in areas such as supply chain optimisation, smart procurement and productivity improvement through automation leveraging new-age technologies such as Industry 4.0, Artificial Intelligence/Machine Learning, advanced visual analytics and smart utilities. These measures are instrumental in countering the significant input cost volatility witnessed during the year, as well as offsetting the gestation costs of new initiatives and strategic brand development investments in emerging categories.

With the growing importance of processed food products in the consumer basket, the food processing industry has significant potential to transform the agriculture sector through increased market linkages, improvement in the efficiency of resource use, enhancement in farmer incomes, expansion of exports and generation of employment opportunities.

Development of the food processing sector will aid in addressing issues of food security and inflation, improved nutrition availability and prevention of wastage, amongst others.

Recognising this potential and headroom for growth in the Indian market, your Company has made significant investments in food processing and remains focused on establishing itself as the leading player in the branded packaged foods industry.

The Government’s Production Linked Incentives (PLI) Scheme for the food processing industry will incentivise fresh investments, enable building Indian brands for the global market, promote exports and boost farmer incomes. Your Company has been included under the PLI Scheme towards sales-based incentives in the Ready to Eat, Fruits & Vegetables and Marine categories respectively as well as for incentives towards expenditure incurred for branding and marketing in export markets. In line with the Government’s initiatives towards promoting millets, a PLI scheme for millet-based products has also been introduced during the year. Your Company has been included under the PLI Scheme for millet-based products as well.

Your Company’s strong farm linkages, procurement efficiencies, world-class brands and deep & wide multi-channel distribution network, with growing presence in emerging channels such as e-Commerce, Modern Trade, On-the-go and Institutional sales, continues to deliver competitive advantage through superior product availability, visibility and freshness. Recent investments in establishing a world-class distributed manufacturing footprint have created a solid foundation to secure structural advantage over time. Cutting-edge R&D platforms of your Company’s

LSTC are driving agile innovation and faster turnaround times for introduction of differentiated & first-to-market products catering to constantly evolving consumer needs. Investments in leading-edge digital technologies and platforms continue to be stepped up across the value chain to drive competitive advantage.

Personal Care Products

The Personal Care industry remained under pressure during the year with consumer demand remaining muted across both urban and rural centres of consumption. Input prices, which had witnessed significant surge in the previous year, moderated in course of the year. Industry players stepped up marketing investments and also passed on the benefit of input cost moderation in a bid to spur demand. Your Company’s Personal Care Products Business continued to strengthen its core strategic levers of building brands with purpose, introducing first-in-category innovations, focusing on categories of the future and rapidly scaling up presence in emerging channels. The Business continues to focus on identifying emerging trends and reinforcing its strategic pillars of distinctive brand positioning, innovative offerings, expansion into emerging channels and amplification of the premium portfolio. During the year, the Business witnessed acceleration in its premium portfolio, which grew significantly ahead of the overall portfolio.

The Business continued to leverage your Company’s state-of-the-art LSTC facility to develop innovative and differentiated products backed by robust science-based claims, to meet emerging consumer needs.

In the Personal Wash segment, premiumisation continues to remain a key vector of growth.

During the year, ‘Fiama’ registered strong growth and remained ahead of Industry largely fuelled by investments in brand building, wider distribution and channel-tailored assortments. Fiama gel bars range registered significant gains during the year, driven by innovative and differentiated offerings appealing to evolving consumer preferences; the range was further augmented with the launch of ‘Fiama Golden Sandalwood Oil & Patchouli’ and ‘Fiama Men’s Charcoal’. The brand partnered with Filmfare for a first-in-industry ‘Best Portrayal of Mental Health in Cinema’ at the Filmfare OTT Awards 2023 and also released a Mental Wellbeing Survey in association with MINDS Foundation, re-enforcing its commitment to the brand purpose of promoting mental wellness while improving access to mental health experts.

The ‘Vivel’ range of soaps and bodywash continued to build momentum and posted healthy growth during the year with strategic focus on alternate channels, superior formulation and competitive pricing. The core of Vivel’s product portfolio remains rooted in its strong association with Aloe Vera and other natural ingredients, aligning with increasing consumer preference for naturals. The brand continued to strengthen its association with Women Empowerment with its collaboration with Azad Foundation, through ‘Parvaz’, a year-long leadership training programme that fosters women’s empowerment and enables young women leaders to be catalysts of change in their communities.

The Fragrance category under the ‘Engage’ brand exhibited resilient performance in the face of heightened competitive intensity, especially at the value end. The premium perfume segment

witnessed strong growth fuelled by launch of disruptive gifting options and small pack variants reinforcing the brand vision of meeting a variety of consumer needs. The Business launched a premium EDP range with best-in-class fragrances for occasion-based use including a differentiated ‘gender neutral’ variant ‘One Soul’. In the popular segment, Deo sprays were also launched in the mini-can format. Strong performance in Modern Trade and e-Commerce channels, along with new initiatives in the gifting space, reflects the Business’ innovative approach to market expansion and consumer engagement. Leveraging robust R&D capabilities and in-house manufacturing capabilities, the Business will continue to deliver high-quality fragrances that resonate with discerning consumers.

The value proposition of ‘Savlon’ brand on the ‘Skin Friendly germ protection’ proposition in line with evolving needs of consumers, helped the brand’s core categories of soaps and handwash scale-up during the year. Savlon powder handwash, in a convenient low unit pack format, witnessed strong traction amongst target consumers.

The Business continued to expand its presence in the Home Care segment by leveraging the ‘Nimyle’ brand’s proposition of “Naturally safe floors and happy homes”. Strong growth in Modern Trade and e-Commerce channels, refreshed & premium packaging along with improved penetration led to double digit revenue growth. The brand collaborated with ‘Pet Fed’, a convention for pets and pet lovers, to engage with pet parents to educate and raise awareness on eco-friendly floor cleaners which are safe for pets. Further, Nimyle maintained its leadership position in its core markets despite resurgence of regional brands and private labels.

In the Skincare portfolio, ‘Dermafique’ continues to leverage AI powered smart skin advisor introduced last year to provide personalised skin health analysis, empowering individuals to know their skin better and adopt solutions suited to unique skin needs of Indian consumers. The brand also strengthened its equity through relevant product benefit communications, leveraging influencers to drive buzz and engagement, running digital campaigns etc., leading to strong conversions and repeat rates on digital platforms.

During the year, D2C platforms for Dermafique,

Fiama and Engage continued to gain traction while deepening consumer engagement based on sharp consumer insights. A combination of Creatives, Performance Marketing and Data Analytics is being leveraged to scale-up these platforms with a wide range of innovative products.

Modern Trade and e-Commerce channels demonstrated robust performance led by strategic partnerships and right assortments tailored to consumer needs. Quick-Commerce emerged as a fast-growing platform demonstrating significant traction across categories and now accounts for a significant share of e-Commerce sales.

In order to meet the growing requirements in East markets and create capacities for the future, a state-of-the-art manufacturing unit in Uluberia,

West Bengal is set to be operational shortly.

The establishment of the facility is also in line with the strategic objective of reducing distance to market, enhancing supply chain agility and responsiveness, as well as optimising costs.

Fiama, Vivel and Savlon have been frontrunners in adopting sustainable packaging for the soap portfolio. PET bottles of Fiama Showergel and Handwash

contain 50% recycled plastic; Vivel and Fiama Soaps packaging is 100% recyclable; Engage perfume sprays are now made with 50% Post-Consumer Recycled (PCR) material. Further, plastic free cartons are being used for Engage Cologne and sustainable materials are being used for point-of-sale promotions across several brands.

In recognition of its clutter-breaking marketing and communication initiatives, the Business received several accolades in the field of Digital and Marketing excellence. Leveraging the power of PR and digital storytelling, Fiama’s ‘Talking Memes’ campaign achieved significant traction and was awarded a Gold at the London International Advertising Awards, a Silver at Fulcrum Awards for ‘Best use of Digital’, eight trophies at the Kyoorius Creative Awards 2023 and was also shortlisted in Cannes Lions 2023.

Savlon was recognised as the ‘Top Resurgent Brand of the Year’ by Exchange4Media’s Pitch Top 50 Brands 2023 and Savlon’s Swasth India Mission -Hand Ambassador campaign won seven trophies at the Kyoorius Creative Awards 2023.

Your Company’s strategic focus continues to be on expanding the core categories of Personal Wash, Fragrance and Homecare through innovative, differentiated and consumer centric products, highest levels of product quality and impactful communication. Your Company’s Personal Care Products Business, with its future-ready portfolio and purpose-led brands, is well positioned to seize growth opportunities and emerge as a significant player in this space.

Education and Stationery Products

The Education and Stationery Products industry witnessed strong growth during the year driven by increased household penetration on the back of

higher enrolment ratios and growing literacy.

The year also witnessed heightened competitive intensity with a resurgence of regional players on the back of moderation in input prices.

During the year, the Business further strengthened its market leadership position in the industry, delivering a robust performance by fortifying its core categories and scaling up adjacencies through portfolio premiumisation, innovative product launches, and judicious pricing actions. The Business continued to leverage your Company’s institutional strengths comprising paper manufacturing expertise, brand building capabilities and multi-channel distribution infrastructure. The Business also continued to leverage the capabilities of your Company’s Life Sciences and Technology Centre to craft differentiated products of superior quality.

Premiumisation and product innovation continue to be key growth drivers for the Business. The ‘Classmate Interaktiv’ Notebook portfolio continued to witness strong consumer traction driven by a wide range of differentiated offerings. These included products that enable ‘Do It Yourself’ activities with a view to ‘Enjoy Learning’, immersive technologies such as augmented reality and interchangeable covers.

The Business also accelerated the adoption of ‘Classmate Pulse’ spiral format through targeted activations and driving franchise of new customer segments such as high school students, in addition to college goers and the youth segment. The ‘Paperkraft’ portfolio was also strengthened with the launch of a new range of notebooks with differentiated design themes catering to both personal and professional usage. The Writing Instruments portfolio delivered a strong performance on the back of recent launches

with differentiated forms and features which received encouraging consumer response.

‘Classmate All Rounder’, an inter school initiative which was launched last year to promote holistic learning in line with the National Education Policy 2020, provides students with a platform to nurture and showcase their varied skills. The initiative continued to gain strong momentum in its second edition, with participation of over 4.5 lakh students from 2700+ schools.

The multi-channel capability of your Company’s strong distribution network was leveraged to enhance availability and drive sales. The Business sustained its leadership position on e-Commerce platforms through consistent availability of a wide assortment of products, backed by focused interventions to enhance consumer traction. Consumer engagement was augmented through Classmateshop.com, a D2C platform, which provides consumers the opportunity to ‘Personalise & Capture’ memories on Classmate notebooks. Digital adoption through industry-first propositions such as personalised videos and AI (Artificial Intelligence) generated cover designs further enhanced consumer engagement. During the year, the Business re-launched myClassmate app, a gamified app focused on developing co-curricular skills, to make learning engaging and enjoyable; the app has garnered over two million downloads.

During the year, the Business enhanced its manufacturing capacity of spiral notebooks at its dedicated manufacturing facility at Vijayawada. Equipped with state-of-the-art technology, the facility enables the Business to develop differentiated notebook formats, drive cost reduction and address opportunities in overseas markets. During the year,

the Business expanded its footprint to newer geographies and introduced new product variants leveraging the aforestated facility.

The Classmate and Paperkraft range of notebooks leverage your Company’s world-class fibre line at Bhadrachalam - India’s first ozone treated elemental chlorine free facility - and embody the environmental capital built by your Company in its paper business. The Business continued to scale-up the Paperkraft range of notebooks using Forest Stewardship Council (FSC) certified paper, made at your Company’s paper mill.

With over 250 million school going students, India has one of the largest education systems in the world.

The Indian Education and Stationery Products industry holds immense potential driven by growing literacy, increasing enrolment ratios, the Government’s continued thrust on the education sector and a favourable demographic profile of the country’s population. Your Company’s Education and Stationery Products Business, with its strong brands, robust product portfolio, collaborative linkages with small & medium enterprises and superior distribution network, is well poised to sustain its leadership position in the industry.

Incense Sticks (Agarbattis) and Safety Matches

The Incense Sticks (Agarbattis) category continued to witness robust growth during the year. Your Company’s flagship brand ‘Mangaldeep’ effectively leveraged market opportunities and continued to enhance its standing in the category. With its presence across multiple formats viz. Agarbattis, Dhoop and Sambrani, Mangaldeep provides discerning consumers a differentiated and superior

product experience with a strong devotional connect. The Business continued to drive brand salience through sharply focused marketing interventions. Product mix enrichment, cost optimisation initiatives and stability in prices of key ingredients enabled the Business to further improve operating margins during the year.

Based on superior consumer insighting, a number of new product offerings were launched by the Business during the year including, inter alia, a new sub-brand ‘Scent’ in the Popular segment. Built on the unique proposition ‘Inspired by Fine Fragrances’, Mangaldeep Scent offers three unique, modern and long lasting fragrances with superior sensorials.

The brand also refreshed its core portfolio of Floral and Sandal fragrances with improved product experience and pack semiotics.

In the Dhoop segment, staying in tune with today’s consumer’s need for convenience and variety, the Business introduced multiple fragrances in the same pack through ‘Dhoop 3in1’ in North and East markets. A ‘bamboo less’ incense format was also launched for e-Commerce and Modern Trade channels in line with emergent consumer needs in these channels.

Mangaldeep aims to be an enabler of devotion and wellbeing through its fragrances. Over the last two years the brand has built a range of products on a differentiated consumer proposition of long lasting fragrances. The Business has co-created these superior fragrances with the help of 150 visually impaired fragrance evaluators as part of its ‘Mangaldeep Sixth Sense’ panel. It supports them with livelihood opportunities and empowers them with dignity and pride.

Over the years, the Business has implemented several measures to enhance the competitiveness of the agarbatti value chain in India. These include import substitution and backward integration of sourcing raw materials and manufacturing raw battis using indigenous inputs. The Business has been a pioneer in developing domestic manufacturing capabilities for raw battis and is also working closely with manufacturers and nodal agencies of respective State Governments for sourcing Indian Bamboo sticks and for cultivating Bamboo plantations in the country.

The proactive measures implemented by your Company, as highlighted above, sub-serve the national priorities of employment generation and provide a source of competitive advantage to the Business while contributing towards enhancing income in the agarbatti stick and raw batti manufacturing value chain.

In the Safety Matches industry, the Business strengthened its market leadership position by leveraging the brand ‘Homelites’ - built on differentiated positioning of stronger, longer and karborised sticks. The Business continues to focus on scaling up the share of value-added products in its portfolio and enhancing supply chain efficiency by sourcing products manufactured closer to markets.

In order to build higher degree of interest in this category, the brand is also progressing on limited edition launches and matchbox collectibles, especially targeted at modern consumers.

TRADE MARKETING & DISTRIBUTION

Your Company’s Trade Marketing & Distribution (TM&D) vertical continued to leverage emerging market trends such as premiumisation, growth of

Modern Trade & e-Commerce channels and rapid urbanisation ensuring effective market servicing and product availability addressing a wide range of consumer and trade needs. TM&D adopted a comprehensive approach encompassing the realignment of distribution infrastructure, deployment of innovative delivery models, forging strategic partnerships and leveraging digital technologies to accelerate growth across channels.

The dynamic interplay of varied and evolving consumer preferences, multiplicity of channels including rapid acceleration in new channels, diverse demographic profiles & socio-economic factors, and a vast geographical landscape pose a high degree of complexity for distribution of FMCG products in India. Recognising the multifaceted nature of these challenges, TM&D continues to sharpen channel-specific strategies to efficiently service consumer demand across the country. Valuable insights into consumer behaviour and channel/region specific trends gained over the years continue to be leveraged to deliver superior performance in terms of product availability, visibility and freshness.

The rapid growth of Modern Trade and e-Commerce channels, coupled with the emergence of several new players, has necessitated the deployment of tailored market/outlet specific strategies to seize the emerging opportunities. The Modern Trade channel continued to witness strong growth, driven by store expansions primarily in Tier 2 & Tier 3 cities. Omni-channel presence in urban markets enabled accelerated growth while shopper marketing insights and agile supply chain capabilities were leveraged to enhance operational and execution efficiencies.

The surge in internet usage particularly through smartphones, widespread adoption of digital payments, wide assortment of products and faster deliveries continue to drive the rising salience of e-Commerce channel. Your Company’s collaborations with leading e-Commerce platforms on all aspects of operations viz. category development, supply chain, consumer offerings and customer acquisition has enabled it to significantly scale-up sales in this channel. This was augmented by development of exclusive pack assortments, channel-specific business plans and ‘Digital First’ brands. Joint Business Plans executed in coordination with e-Commerce platforms coupled with agile supply chain initiatives have further fortified your Company’s market standing in this channel. Growth in the premium portfolio was accelerated through increased visibility, focus on target cohorts and jointly curated campaigning, including collaborating on topical events across accounts. Digitally enabled sales have grown rapidly in recent years and, together with Modern Trade, now account for 31% of your Company’s FMCG⁴ portfolio (Vs. 17% in FY 2019-20).

Your Company’s multi-channel distribution network, which facilitates availability of its products in nearly seven million retail outlets of which more than one-third are serviced directly, was further strengthened during the year with the addition of new markets and outlets to its direct servicing base. Market coverage was stepped up to appx. 2x of pre-pandemic levels.

During the year, urban markets witnessed heightened competitive intensity from regional/local players and accelerated channel shift with the increasing salience

of Modern Trade and e-Commerce. Automation, data-led insighting and machine-learning enabled solutions continue to be increasingly leveraged to drive field-force productivity and performance across urban markets. Further, emerging technologies like Generative AI are being leveraged to automate operations and increase efficiency. Customised servicing based on outlet potential and retail engagement programmes have been deployed to stimulate demand for your Company’s products with enhanced focus on premium grocery outlets. Specific interventions were undertaken to drive premiumisation in General Trade outlets with store level missions led by sharper data analytics.

In rural markets, your Company continued to deploy market-specific interventions to enhance direct coverage on the basis of socio-economic indicators and market potential. This has been supported through a hub and spoke distribution model with the continued expansion of rural stockists network to 1.3x over the last two years. Leveraging the synergies arising out of the deep rural connect of your Company’s Agri Business, extensive consumer activations continued to be undertaken in high potential rural areas during the year through concerted market development activities and further enhancements to the digital ecosystem for the stockist channel. These initiatives have substantially enhanced distribution reach of your Company’s range of products in rural markets leading to sales growth significantly ahead of industry.

The Food Service and Institutional channels continued to witness robust growth during the year leveraging existing partnerships and your Company’s wide product range. Strategic partnerships unlocked new

routes-to-market, catering to specialised segments including ‘on-the-go’ consumption, direct marketing and QSRs. Customised product portfolios were deployed for identified high potential segments of railways, airports and airlines to strengthen presence in this channel.

The Quick Commerce platform, offering ultrafast delivery, aligns seamlessly with the needs of convenience-seeking consumers and is rapidly gaining prominence within the overall e-Commerce channel. Your Company, leveraging its strategic partnerships, continues to scale-up its presence in the rapidly growing emerging channels and has further expanded availability of its products with existing and new trade partners on Quick Commerce and Social Commerce platforms.

TM&D continues to remain at the forefront of leveraging cutting-edge digital technologies and building a digital ecosystem to drive productivity, improve market servicing, draw actionable insights for sharp-focused interventions, augment sales force capability and deepen connect with retailers. Technology enablement in the form of customised mobility and routing solutions, machine learning algorithms, data science models, data analytics comprising insightful visualisation tools and predictive analysis are being increasingly leveraged to enable speedy and accurate data capture, enable real-time informed decisions and aid in optimisation of trade & marketing inputs to enhance sales. During the year, the machine learning models were augmented with several inputs including demographics, socio-economic indicators etc. to sharpen outlet level SKU recommendations. Use cases for self-service analytics tools have increased to analyse data and

present insights which are digitally integrated into business decisions, resulting in intelligent digitalisation of business processes.

The digitally powered eB2B platform of your Company, UNNATI, has been rapidly scaled up during the year, covering nearly seven lakh outlets with a large number of retailers placing orders directly on the platform. UNNATI facilitates sharp and direct engagement with retailers, superior analytics, personalised recommendations of hyperlocal baskets based on consumer purchase insights, and deeper brand engagement.

Your Company’s strategic collaboration with banks and Fintech partners caters to the digital payments and financing needs of customers and retailers. These solutions have been seamlessly integrated with the UNNATI platform to digitally empower and unlock business growth for your Company’s trade partners.

In line with your Company’s credo of ‘Nation First:

Sab Saath Badhein’, TM&D has partnered with Open Network for Digital Commerce (ONDC) to facilitate the digital transformation of small retailers.

As a part of this industry-first initiative, your Company continues to assist traditional retailers to on-board the ONDC network enabling them to have an omni-channel presence. This intervention is expected to enhance ecosystem competitiveness in the growing digital marketplace as also enable such retailers to effectively cater to evolving consumer buying behaviour.

Your Company’s Trade Marketing & Distribution highway has transformed into a smart omni-channel network. ‘ITC e-Store’, your Company’s exclusive D2C platform, continues to receive excellent

consumer response. Powered by state-of-the-art digital technology and robust fulfilment infrastructure, the platform offers consumers on-demand access to a wide range of your Company’s FMCG products across 45+ categories and over 800 products. Category specific D2C platforms such as Classmateshop.com, Dermafique.com, Aashirvaadchakki.com, Fiama.in etc. enable obtaining valuable consumer insights and augmenting franchise for your Company’s products.

The scale and diversity of your Company’s distribution network remains pivotal in enhancing market presence, gaining valuable insights into consumer & trade behaviour and facilitating the execution of product launches across geographies. In order to effectively leverage new routes-to-markets and meet the assortment needs of emerging channels, your Company executed over 100 new product launches across target markets besides extending distribution reach of several existing products in the portfolio.

Several interventions were undertaken by TM&D during the year to further improve operational effectiveness and productivity to strengthen competitive advantage in a structural manner. These include supply chain & network optimisation, smart buying including efficient freight procurement and delayering of operations through direct shipments to customers. During the year, your Company continued to leverage the integrated planning and supply chain tool, powered by best-in-class algorithms for inventory optimisation and productivity enhancement to significantly improve supply chain agility and market servicing through enhanced forecast accuracy.

The supply chain network was redesigned to enhance the premium portfolio availability both in existing and target markets across urban and rural landscapes.

An loT based solution, which monitors stock movements on a real time basis, was leveraged to further improve vehicle turnaround time and enhance customer service through data analytics.

In line with your Company’s commitment to the ‘Triple Bottom Line’, TM&D continued to focus its efforts for adoption of renewable sources in its operations.

As part of your Company’s Sustainability 2.0 agenda, TM&D is rapidly expanding its Green Logistics efforts for mid mile and last mile deliveries in key cities across the country. Collaborations with multiple Original Equipment Manufacturers (OEMs) and fleet aggregators facilitated adoption of Electrical Vehicles (EV) in TM&D operations. The number of EV trips increased by 2.7x over the previous year.

TM&D’s distribution highway is a source of sustainable competitive advantage for your Company’s FMCG Businesses and is well-positioned to support the rapid scale-up of operations in the ensuing years leveraging its best-in-class systems and processes, an agile and responsive supply chain, and a synergistic relationship with its channel partners.

HOTELS

The global Travel & Tourism industry, which had been severely impacted during the pandemic, has witnessed strong rebound in the last two years. According to estimates of the World Travel and Tourism Council (WTTC), the Travel & Tourism sector is expected to contribute US$ 9.9 trillion to the global economy in 2023 (about 96% of pre-pandemic levels). The Indian Travel & Tourism sector also witnessed robust growth during the year, with domestic air travel exceeding 2019 (pre-pandemic) levels by 5%. The year also witnessed renewed focus on promoting

in-bound travel with the Ministry of Tourism declaring 2023 as ‘Visit India Year’, hosting of the G20 Presidency and celebrations of ‘India@75 Azadi ka Amrit Mahotsav’. Foreign tourist arrivals improved over the previous year, while remaining below pre-pandemic levels (about 85% of 2019 levels), indicating significant headroom for growth.

The Travel & Tourism sector plays a vital role in the Indian economy and holds immense potential for growth. The extensive tourism value chain spanning hotels, travel agents, airlines, tour operators, restaurants, tourist transporters and guides, etc. results in a huge economic multiplier impact, ranking it amongst the highest across industries on this count. With growing per capita income, rapid urbanisation, increasing societal aspirations and low room supply penetration levels, the sector is poised to witness a long runway of growth. The Government’s thrust on infrastructure and tourism including, inter alia, development of airports, upgradation of urban infrastructure, promotion of integrated tourist destinations, world-class convention facilities etc. is also providing support to the sector’s accelerated growth trajectory.

The Hotels Business delivered stellar performance driven by strong growth in RevPAR across customer segments (Retail, Contracted, MICE, etc.) as well as leveraging marquee events hosted in the country. The Business continued to focus on its strategy of offering a host of curated propositions across accommodation, dining and banqueting services to augment revenues across properties. This included introduction of special packages offering distinct value propositions and flexibility, targeting short getaways/staycations, revamped packages for the MICE & wedding

segments and extension of exclusive privileges to members of the Club ITC Loyalty programme.

Timely renovations and refurbishments aided in leveraging high season opportunities across multiple locations and properties.

The financial performance of the Business touched record highs - Segment Revenue for the year stood at ' 2989.50 crores while Segment EBITDA at ' 1049.88 crores exceeded the ' 1000 crore mark for the first time. Segment PBIT for the year stood at ' 753.77 crores, witnessing growth of appx. 39% over the previous year.

Your Company’s Hotels Business continues to leverage its ‘asset-right’ strategy to be amongst the fastest growing hospitality chains in the country with over 130 properties and 12,000 rooms under distinctive brands - ‘ITC Hotels’ in the Luxury segment, ‘Mementos’ in the Luxury Lifestyle segment, ‘Welcomhotel’ in the Upscale segment, ‘Storii’ in the Boutique Premium segment, ‘Fortune’ in the Mid-market to Upscale segment and ‘WelcomHeritage’ in the Leisure & Heritage segment.

Over the years, your Company has expanded its footprint in the Luxury, Upper Upscale and Mid-market to Upscale segments of the Indian hospitality industry. Your Company’s ‘asset-right’ strategy envisages a substantial part of incremental room additions, going forward, to accrue through management contracts.

In the last 24 months, 25 hotels have been opened under the brand portfolio, out of which 24 are managed properties. All of these hotels have received excellent response from guests within a short span of time.

Continuing with the pursuit of its ‘asset-right’ strategy, the Business had recently launched

two new brands - ‘Mementos’ in the Luxury Lifestyle segment and ‘Storii’ in the Boutique Premium segment.

-    ‘Storii by ITC Hotels’ is positioned as a collection of handpicked properties offering unique bespoke experience-led stays and co-exists in harmony with the environment and the local community.

-    ‘Mementos by ITC Hotels’ brings together a collection of unique hotels across varied destinations ranging from modern marvels, hidden retreats to historic treasures, leaving guests with experiences & memories which become prized mementos long after their visit.

Currently, the Business manages seven hotels under these brands.

The Welcomhotel brand now consists of 25 hotels and over 2,700 keys and is well positioned to scale-up rapidly on the back of a strong pipeline of management contracts.

The ‘Fortune’ brand continues to maintain its pre-eminent position in the Mid-market to Upscale segment, with a positioning of ‘First-class, full-service hotels - an affordable alternative’, comprising 51 operating properties and over 3,800 rooms.

The ‘WelcomHeritage’ brand continues to create best-in-class authentic experiences with an operational inventory of 38 hotels comprising over

1,000 rooms.

The Business is witnessing growing interest amongst property owners to partner with its iconic brands resulting in healthy generation of leads and pipeline of management contracts. The Business is confident of rapidly scaling up revenues through this route going forward.

Your Company’s first international property ITC Ratnadipa, opened in April 2024 in Colombo,

Sri Lanka. A jewel in the Colombo skyline that promises to enrich the tourism and hospitality landscape of Sri Lanka, the luxury hotel is poised to create the ultimate luxury hospitality experience for discerning business and leisure travellers. The hotel is meticulously designed to showcase the beauty and rich culture of Sri Lanka, seamlessly blending contemporary elegance with timeless charm.

With 352 luxurious guest rooms, suites and service apartments, each adorned with private balconies with breath taking ocean views, this landmark property has already become an iconic feature of the Colombo skyline. Complementing its exquisite accommodations, the hotel also offers nine signature dining destinations that offer a repertoire of local, national and global cuisine, including marquee offerings from your Company’s award-winning culinary brands.

Further, your Company’s first hotel, Welcomhotel Chennai, was re-opened during the year after an extensive renovation in a whole new avatar. The iconic legacy hotel, with 90 well-appointed rooms, grander banquets and signature dining experiences is an embodiment of contemporary design and smart facilities. The property is certified as a LEED Platinum® and LEED® Zero Carbon hotel.

The Business has the highest number of hotels in the world to have been awarded the LEED Platinum® Certification by USGBC, with 23 of its hotels achieving this feat. Furthering your Company’s Responsible Luxury ethos, 12 of its iconic hotels have received LEED® Zero Carbon Certification, the first in the world to achieve this feat. ITC Rajputana and ITC Maurya became the third and fourth hotels respectively to be

awarded the LEED® Zero Water Certification by the USGBC, following ITC Mughal and ITC Sonar, which were the first and second hotel respectively to be awarded the certification globally.

The Business continues to evaluate avenues to further enhance the share of renewable energy in its portfolio, increase the number of LEED® Zero Carbon Certifications and reduce carbon emission levels.

ITC Hotels was recognised as the best Luxury Hotel Chain for the 5th consecutive year at ‘Travel + Leisure India’s Best Awards 2023’.

Leveraging its expertise and experience in the domain of sleep, the Business had launched its signature ‘Sleeep’ Boutiques across the country, offering a wide range of premium home bedding products with both online and offline retail options. These boutiques, present across seven ITC Hotels, have received encouraging response and plans are on the anvil to scale-up operations going forward.

The world-class ambience of your Company’s luxury hotels continues to be leveraged for gourmet luxury chocolates under the ‘Fabelle’ brand with exclusive boutiques across nine ITC Hotels and kiosks at four Welcomhotels.

Digital investments continue to be leveraged towards enhancing guest experience, facilitating guest acquisition, augmenting revenue generation and driving operational efficiency. During the year, the Business continued to promote its full stack ITC Hotels App for Food Delivery, Room & Table Reservations, Room automation and entertainment control module, Loyalty Benefits, exclusive offers and achieved a milestone of 5 lakh downloads. Bookings on the brand website of the Business,

itchotels.com, witnessed significant traction during the year. The Business has fully digitised its loyalty programmes, ‘Club ITC’ and ‘Club ITC Culinaire’ -across enrolment, redemption and other key program essentials to ensure a seamless guest experience.

ITC Hotels is recognised for its award-winning culinary excellence, with illustrious brands, dishes and concepts revolving around indigenous ingredients and signature dining experiences. From bringing alive local flavours, cultures and age-old traditions to gourmet contemporary cuisine, the Business has been at the forefront of presenting gastronomical delights to food connoisseurs for decades. Sourcing local ingredients and using time-honoured techniques, the Business continues to remain ahead of peers in creating delectable dishes from humble ingredients and ensuring every meal is a celebration par excellence.

ITC Hotels was honoured to have exclusively curated and served from the best of India’s culinary heritage at the prestigious G20 summit held in New Delhi.

ITC Maurya also had the honour of hosting the President of the United States of America and the entire US delegation to the Summit.

The Business continues to enhance its award-winning repertoire of culinary brands. In alignment with the Government’s initiative of promoting millets and in keeping with its ethos of producing sustainable cuisine, the Business has also created a range of millet-based gourmet cuisine across its signature restaurants. Further, it is also promoting easy-to-try recipes with millets depicted through short videos to encourage individuals to experiment with the taste and texture of millets.

As you are aware, the Board of Directors of your Company at the meeting held on 14th August, 2023, subject to necessary regulatory approvals, has approved a Scheme of Arrangement amongst your Company and ITC Hotels Limited and their respective shareholders and creditors (‘the Scheme’) under Sections 230 to 232 read with other applicable provisions of the Companies Act, 2013 for demerger of the Hotels Business of your Company into ITC Hotels Limited. The Scheme has since been approved by the Stock Exchanges. Further, the National Company Law Tribunal, Kolkata Bench, vide Order dated 22nd April, 2024, has convened a Meeting of the Ordinary Shareholders of your Company on 6th June, 2024 for the purpose of seeking your approval to the Scheme.

PAPERBOARDS, PAPER AND PACKAGINGPaperboards & Specialty Papers

After achieving record highs in the previous year, global pulp prices witnessed steep decline in the first half of the year on account of subdued Chinese demand, recessionary conditions in Europe and progressive normalisation in global supply chain operations. Weakness in demand conditions in the Chinese economy also led to glut of low-priced Chinese supplies in global markets. Domestic demand for paperboard, which is largely derived from end-user demand for consumer goods, pharma, Quick Service Restaurants etc., remained subdued during the year leading to lower customer offtakes. The domestic market also witnessed excess supply due to higher net imports into the country including from China, leading to subdued realisations. The year also witnessed unprecedented surge in domestic

wood costs due to increased demand from competing wood-based industries.

The cumulative impact of subdued realisations, excess supply in domestic markets and sharp surge in wood costs exerted pressure on margins during the year, which was partially mitigated by leveraging structural advantages of the integrated business model, strong end-user engagements and Digital interventions.

Despite the headwinds as aforestated, the Business further strengthened its leadership position in the Value-Added Paperboard (VAP) segment through focused innovations, development of customised solutions for end-use industries and superior end-user engagements. The Business also consolidated its leadership position in the eco-labelled products and premium recycled paperboards segments.

During the year, the Business delivered robust performance in the Specialty Papers segment.

The Business successfully completed its capacity augmentation project, increasing Decor paper production capacity by 20000 tonnes per annum. Market standing in the segment continues to be driven by product mix enrichment and diversification of the customer base. The domestic industry remained under pressure due to cheap supplies from China. The recent introduction of Anti-dumping duty on Decor paper has partially provided a level playing field for domestic industry; which is critical towards fostering domestic value chains and enabling import substitution.

The paperboards and packaging industry is poised for transformative change in the medium term. Customers are increasingly seeking solutions that are bio-degradable, substitute single use plastic

and meet stakeholder and regulatory expectations across industries including food serving & delivery, pharmaceutical, beauty and electronics. The Business has adopted a multi-tiered strategy to build solutions that will replace single use plastics and meet emergent consumer needs.

Within the sustainable products portfolio, Platform 1 comprises a range of recyclable, compostable and barrier coated boards. This range includes the ‘Filo’ series - ‘FiloBev’ (for cups), ‘FiloServe’ (for QSR, bakeries, food retail) & ‘FiloPack’ (packaging for sweets and deep freeze applications) and is witnessing strong growth momentum in both domestic and international markets. The Filo series has been certified compostable by the Central Institute of Petrochemicals Engineering & Technology (CIPET) and the manufacturing unit at Bollaram has been registered with the Central Pollution Control Board (CPCB). During the year, Flustix (Less Plastic) certification also has been received for FiloPack.

The Business is stepping up investments, including setting up a state-of-the-art coater, in this fast-evolving space which holds immense growth potential, supported by the R&D capabilities of your Company’s Life Sciences & Technology Centre, and through external collaborations with global specialists.

Platform 2 comprises a range of first-to-market Fusion boards that are fully recyclable and replace plastic ‘foam’ board. End-use applications include indoor display solutions involving replacement of plastic signboards and shelves.

Platform 3 offers futuristic packaging solutions comprising premium Moulded Fibre Products (MFP) made from renewable natural fibres such as wood, bamboo, bagasse, waste paper etc. In order to cater

to this rapidly growing segment, your Company’s wholly-owned subsidiary, ITC Fibre Innovations Limited (IFIL), forayed into the fast-growing MFP space with the commissioning of a state-of-the-art MFP manufacturing facility in Badiyakhedi,

Madhya Pradesh in March 2024. IFIL will leverage the expertise of the Business in fibre value chain, manufacturing excellence and strong sustainability credentials to rapidly scale-up business going forward.

Over the years, the Business has continued to lay thrust on structural interventions to provide sustainable competitive advantage across the value chain and to enhance the margin profile of its portfolio. Such interventions include developing high yielding and disease-resistant clonal saplings, augmenting value-added paperboard and in-house chemical & mechanical pulp manufacturing capacities, enhancing energy efficiency, continuous improvement through product & process innovation, digital interventions including Industry 4.0, etc. These interventions have led to significant structural cost savings and enhanced productivity across all key operating nodes of the Business.

During the year, production of Bleached Chemical Thermo Mechanical Pulp (BCTMP) was ramped up subsequent to the recently concluded pulp capacity augmentation project. Further, record high production of in-house chemical pulp was achieved leveraging recent capacity expansion and Industry

4.0 initiatives.

The Business continues to procure wood, a key raw material, from sustainable sources. Research on clonal development has resulted in introduction

of high-yielding and disease-resistant clones that are adaptable to a wide variety of agro-climatic conditions. This has not only aided in increasing farmer incomes but has also enabled greater consistency in farmer earnings. In this context, your Company’s Life Sciences & Technology Centre is engaged in developing higher yielding second generation clones with enhanced pest and disease resistant attributes. The Business continues to focus on scaling up wood sourcing from core areas. In addition, initiatives such as bund plantations and scaling up plantations in new catchment areas in Odisha and Chhattisgarh have enabled procurement of more than 1.73 lakh MT of wood from such new areas, with further potential for increasing cost-effective access to fibre in the future.

Your Company has the distinction of being the first in India to have obtained the Forest Stewardship Council-Forest Management (FSC®-FM) certification, which confirms compliance with the highest international benchmarks of plantation management across the dimensions of environmental responsibility, social benefit and economic viability. Till date, your Company has received FSC®-FM certification for over 1.49 lakh acres of plantations involving over 25000 farmers. During the year, nearly 4.85 lakh tonnes of FSC®-certified wood was procured from these certified plantations.

Your Company sustained its position as the leading supplier of FSC^®-certified paper and paperboards in India.

Your Company’s Paperboards & Specialty Papers Business is a pioneer in the adoption of Digital technologies. In recent years, the Business has embarked upon a comprehensive Digital

Transformation Programme across the vectors of manufacturing, supply chain and support services to achieve operational excellence, enable decarbonisation of operations, drive improvement in profitability and improve safety across the value chain. The multi-dimensional digital interventions encompass Industrial loT for Smart Operations, Integrated Data Platform, AI/ML algorithms for optimisation in the manufacturing process, AI/ML based image analytics and IoT based crop monitoring & advisory, and computer vision-based solutions to improve workforce safety. The Business continues to collaborate with partners from the start-up ecosystem, as well as established solution providers, in building scalable solutions that are custom-fit to business requirements.

The Business has been practising the principles of Total Productive Maintenance (TPM), Lean and Six Sigma for over a decade and continues to reap substantial benefits through its Business Excellence initiatives.

All manufacturing units of the Business continue to recycle nearly 100% of the solid waste generated during operations by converting the same into lime, fly ash bricks, cement, grey boards, egg trays etc.

In addition, the Business recycled around

1.1 lakh tonnes of waste paper during the year, thereby sustaining positive solid waste recycling footprint of the Business.

In line with the objective of enhancing the share of renewable energy in its operations, the Business has implemented several initiatives including investments in a green boiler, high efficiency circulating fluidised bed boiler, solar & wind energy and increased usage

of bio-fuel. The recently commissioned state-of-the-art and future-ready High Pressure Recovery Boiler at the Bhadrachalam mill is progressively enhancing energy efficiency and reducing the carbon footprint of the unit’s operations by significantly lowering coal consumption by appx. 25%. These investments are a testament to your Company’s commitment towards embedding sustainability in its operations and supporting the ‘Make in India’ initiative. With these initiatives, renewable sources presently account for more than 50% of total energy consumed at the four manufacturing units of the Business.

The Business continues to strengthen its safety management processes, adopt globally recognised best practices and ensure that facilities are designed, constructed, operated and maintained in an inherently safe manner. Business continues to deploy various measures including the use of Data Analytics Tools to identify risk prone areas for proactive mitigation of incidents, video analytics etc.

The manufacturing facilities at Bhadrachalam, Kovai, Tribeni and Bollaram continue to receive industry recognition for their green credentials and safety standards in line with the focus on sustainable business practices. The Bhadrachalam unit is the first pulp & paper plant and the second in the country overall, to be rated ‘GreenCo Platinum+’ by CII, as part of the Green Company rating system. The Kovai unit has also been rated GreenCo Platinum+ by CII. The unit is the first site in India and the first paper mill in the world to achieve the highest platinum rating under the ‘Alliance for Water Stewardship Standards’. The Business was also recognised as

the Asia-Pacific winner of the Special Award for Sustainability at the IDC Future Enterprise Awards 2023 for exemplary digital business models.

With structural drivers of demand in the Indian economy remaining strong over the medium term, paperboards demand is expected to remain firm in spite of near-term industry headwinds.

Going forward, end-user segments such as Pharmaceuticals, Apparels, QSR, FMCG, consumer durables and e-Commerce are projected to register strong growth. Writing & Printing paper demand is also expected to remain firm on the back of demand from the publishing and notebooks industries driven by the Government’s thrust on primary and secondary education. While cheap imports from China as well as from ASEAN countries remain a potential threat in the short run, the Business remains confident of leveraging its competitive strengths to mitigate the impact thereof. Representations continue to be made at appropriate forums for suitable measures to safeguard domestic industry.

The integrated nature of your Company’s business model - comprising access to high-quality, cost competitive and renewable fibre supply chain, in-house pulp manufacturing capability, imported pulp substitution, world-class product quality, state-of-the-art manufacturing facilities, increasing usage of data analytics and Industry 4.0 technologies along with robust forward linkages with the Education and Stationery Products Business and the Packaging and Printing Business - is a key source of competitive advantage for your Company’s Paperboards & Specialty Papers Business.

Your Company is confident of further consolidating its leadership position in the Indian Paper and Paperboards industry leveraging recent investments in innovation platforms anchored on the development of sustainable products and cutting-edge digital technologies to set new benchmarks in customer satisfaction, operational excellence and sustainability.

Packaging and Printing

Your Company’s Packaging and Printing Business is a leading provider of superior, differentiated and innovative packaging solutions catering to a variety of functional and aesthetic requirements. The Business derives competitive advantage by leveraging world-class manufacturing infrastructure, including in-house cylinder making and blown film manufacturing lines, and a comprehensive capability-set spanning multiple technology platforms for high-end applications both for cartons and flexibles packaging. The recent capacity addition at Nadiad, Gujarat, with state-of-the-art equipment to cater to markets in Western region, has further augmented the Business’ capabilities in Cartons packaging. Capacity utilisation at the facility was progressively ramped up during the year.

The Business caters to the packaging requirements of leading players across several industry segments viz. Food & Beverage, Personal Care, Home Care, Footwear, Consumer Electronics & Electricals, QSR, Pharma, Liquor and Tobacco. The Business also provides strategic support to your Company’s FMCG Businesses and Cigarettes Business by facilitating faster turnaround for new launches, innovative packaging solutions, design changes, ensuring

security of supplies and delivering benchmarked international quality at competitive cost.

During the year under review, the packaging and printing industry witnessed several headwinds. Subdued demand in certain key end user industry segments, progressive de-cartonisation in the liquor industry and volatility in input costs rendered the operating environment extremely challenging.

The Business continued to aggressively pursue new business development opportunities across segments and acquired several key accounts during the year which have significant potential to scale-up going forward.

Recognising the growing need for sustainable packaging, the Business continued to craft innovative packaging solutions leveraging its deep understanding of end-user needs and the capabilities of your Company’s Life Sciences and Technology Centre. During the year, the flagship ‘InnovPack’ campaign was further scaled up. Collaborations with several end-use customers aided accelerated adoption of sustainable packaging and plastic substitution solutions. A pipeline of products developed through proprietary solutions such as ‘Bioseal’ (compostable coating to replace plastics), ‘Oxyblock’ (recyclable coating solution to enhance barrier properties in packaging) and ‘Germ free coating’ (solution for microbial free packaging surface addressing the consumer consciousness towards hygiene and safety) have been introduced, with increasing adoption levels across end use segments. The Business continues to focus on developing/scaling up several innovative solutions towards ‘Reducing, Reusing and Recycling’ of plastics; these are under various stages of commercialisation.

The Business continues to be acknowledged as a ‘first choice packaging partner’ by several reputed FMCG companies in the country for providing superior and cost-effective packaging solutions incorporating superior structural design, print embellishments, enhanced security features and design-for-recyclability.

The Business augmented cigarette packaging capacity by adding a gravure line in Nadiad. The Business has also invested in a custom-built line which will help expand offerings for sustainable packaging structures using barrier coatings.

The Business continues to deploy several operational excellence tools along with focused interventions in the areas of efficiency improvement, waste reduction, quality improvement and employee skill building.

All four units of the Business are certified as per the Integrated Management System, consisting of ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018. Cartons Packaging lines at Tiruvottiyur and Haridwar units received the ‘Grade A’ and the Nadiad unit received Grade AA - Brand Reputation Compliance Global Standards (BRCGS) certification, for achieving global standards in packaging materials - a key enabler for supplies to the packaged foods industry.

During the year, the Business won the prestigious WorldStar awards in several categories of pack premiumisation, structural innovation & sustainability. The Business also won several national level awards such as the IFCA Star awards and SIES SOP Star Awards for excellence in Packaging. The Business was also awarded the Innovative Printer of the year 2023 & Packaging Convertor of the Year 2023 (Foods & Beverages) awards by PrintWeek.

Notwithstanding the recent headwinds in the sector, the Indian packaging industry is poised for significant growth considering the low per capita packaging consumption of appx. 10 kgs per annum as against per capita consumption of 60 to 100 kgs per annum in Advanced Economies. Demand for consumer linked packaging in India is expected to be further benefited by rising affluence, favourable demographics and growing share of Modern Trade and e-Commerce. Additionally, increasing consumer awareness coupled with higher regulatory focus on plastic packaging is set to catalyse growth in sustainable packaging encompassing recyclable and circular solutions.

With world-class technology across a diverse range of platforms, leadership in sustainable packaging solutions and best-in-class quality management systems, the Packaging and Printing Business has established itself as a one-stop packaging solutions provider to several industry segments viz. Food & Beverage, Personal Care, Home Care, QSR, Footwear, Consumer Electronics, Pharma and Tobacco. With focused investments in skill development and a distributed manufacturing footprint, the Business is well positioned to grow its marquee customer base while continuing to service the requirements of your Company’s FMCG Businesses.

AGRI BUSINESSLeaf Tobacco

Global demand for leaf tobacco surpassed supply during the year, in view of international manufacturers rebuilding inventory levels which had reduced due to crop shortages in previous years due to

pandemic-led disruptions and adverse weather events. Despite growth in Indian Flue Cured Virginia (FCV) tobacco crop production during the year, the surge in global demand caused heightened competitive intensity amongst leaf exporters resulting in sharp rise in FCV procurement prices for the second consecutive year.

The Business continued to leverage its crop development expertise, superior product quality, world-class processing facilities and strong sustainability credentials to strengthen its position as a reliable supply chain partner for global customers. During the year, the Business also increased its share of business with international buyers of Indian Burley tobacco by growing the crop size through geographic expansion leveraging its sustainable tobacco programme. Deeper farmer & customer engagement, operational agility and supply chain efficiency enabled the Business to deliver enhanced value to its customers and consolidate its pre-eminent position as the largest Indian exporter of unmanufactured tobacco.

The Business continues to make focused investments across the tobacco value chain anchored on the key vectors of Quality, Consistency, Compliance, Climate risk mitigation and Sustainability. Crop and region-specific agronomic practices continue to be deployed to cater to emerging customer requirements.

The Business continues to set benchmarks in leaf threshing operations through focused initiatives and innovative technological & digital solutions. Investments continue to be made in your Company’s Green Leaf Threshing plants (GLT) at Anaparti, Chirala and Mysuru towards delivering world-class quality and upgrading processing technology.

Strategic cost management across the value chain continues to be a key focus area for the Business. Utilisation of the AI/ML powered real-time price discovery system continues to be scaled up facilitating efficient leaf tobacco buying across auction platforms. Several initiatives implemented across the value chain in recent years have led to improved operating efficiencies in areas of leaf procurement, capacity utilisation and supply chain.

Synergistic R&D initiatives with focus on varietal development, climate smart farming techniques, farm level digital interventions and usage of water efficient technologies are being scaled up towards enhancing productivity & product quality, reducing cultivation costs and strengthening resilience of the value chain in order to increase crop security and enhance farmer incomes.

The Business enabled farmers to successfully implement integrated energy management initiatives spanning energy conservation, increasing alternative fuel usage and energy plantations, towards achieving fuel self-sufficiency in the curing process of FCV tobacco. During the year, the Business also developed a comprehensive decarbonisation strategy covering Farms, GLTs & Supply Chain operations.

The electrical energy needs of all three GLTs are substantially met from renewable sources in line with your Company’s philosophy of adopting a low-carbon growth path. In addition to these initiatives, your Company is taking up integrated watershed management programmes to ensure availability of water for irrigation during critical phases of the crop cycle.

In recognition of its relentless commitment to the highest standards of Sustainability, EHS (Environment, Health, Safety) & Quality, the Business received several awards during the year including the award for ‘Most Innovative Best Practices’ from Confederation of Indian Industry (CII), ‘AWS’ Certification of its Mysuru GLT with Platinum rating from Alliance for Water Stewardship, various awards at events organised by the Quality Circle Forum of India and CII for operational excellence, etc.

During the year, Indian leaf tobacco crop witnessed growth in export demand, driven by post-pandemic consumption recovery, supply chain disruptions coupled with pipeline build-up by international manufacturers and lower global inventories due to extreme weather events in prior years. Domestic demand also increased during the year, with the recent stability in taxes on cigarettes, which enabled the legal cigarette industry in India to combat illicit trade, leading to higher domestic demand for Indian tobacco crop.

It is imperative to address certain structural factors to facilitate sustained growth and competitiveness of leaf tobacco exports from India. Punitive taxes on the legal cigarette industry in earlier years have resulted in elevated levels of illicit cigarette trade -impacting demand for Indian leaf tobacco as illicit products do not use significant levels of leaf tobacco grown in India. Lower export incentives in India and high import duty levied in several markets, including the USA and Europe, also continue to weigh on the competitiveness of Indian leaf tobacco exports.

As stated in earlier years, a more balanced regulatory and taxation regime that cognises for the unique tobacco consumption pattern prevalent in India and the economic realities of the country is the need of the

hour to support the Indian tobacco farmer and the 46 million livelihoods dependent on tobacco.

It is also imperative that the Indian leaf tobacco sector receives necessary policy support, including restoring export incentives to earlier levels, to enhance the competitiveness of unmanufactured tobacco exports from India and contribute to increase in farmer incomes. Your Company continues to engage with policy makers on these matters.

The Business will continue to provide strategic sourcing support to your Company’s Cigarettes Business and consolidate its leadership position as a major exporter of quality Indian tobacco thereby catalysing the multiplier impact of increased farmer incomes on the rural economy. With its strong R&D capability, sustainability leadership, digital expertise, unique crop development & extension expertise, state-of-the-art processing facilities and deep understanding of customer & farmer needs, your Company is well positioned to meet the current and emerging requirements of global customers and sustain its position as a world-class leaf tobacco organisation.

Other Agri Commodities

Geopolitical tensions and climate emergencies have led to significant concerns over food security and food inflation globally as well as in India. To ensure India remains food secure, the Government has had to impose trade restrictions on agri commodities; consequently limiting business opportunities for your Company’s Agri Business during the year.

As reported in earlier years, the scope and scale of operations of your Company’s Agri Business have grown manifold over the years and currently

encompasses nearly 3 million tonnes of annual volume throughput in 22 states and over 20 agri-value chains. The strategic focus of the Business in recent years has been to accelerate growth by rapidly developing and scaling up Value-Added Agri Products (VAAP), straddling multiple value chains comprising Spices, Coffee, Frozen Marine Products and Processed Fruits amongst others. Amidst the extremely challenging operating environment as aforestated, your Company leveraged its strong farm linkages, extensive sourcing expertise enabling traceable, attribute based and identity-preserved sourcing of agri-commodities, multi-modal logistics capability, agile supply chain operations, deep customer relationships and focus on scale-up of the VAAP portfolio to sustain business operations during the year.

- Your Company is a leading player in spices such as Chilli, Turmeric, Coriander and Cumin. In line with its strategy of enhancing value addition and ‘producing the buy’, the Business has, in recent years, scaled up its presence in ‘food safe’ markets viz. USA, EU and Japan, leveraging its key strengths such as identity-preserved sourcing expertise, strong backward integration, custody of supply chain and customer focused strategies. During the year, the Business consolidated its position as a preferred supplier in ‘food safe’ markets (private labels, steam sterilised, organic products etc.) leveraging deep customer relationships, portfolio augmentation and agile execution. The Business scaled up its Organic and Integrated Crop Management (ICM) programmes, thereby enhancing its ability to produce ‘food safe’ spices in a sustainable

manner. The Business continues to partner with various State Governments for production of ‘food safe’ spices and has maintained an unblemished track record over the years in terms of compliance with stringent food safety parameters. The Business continues to pursue sustainable farm management practices anchored on Rainforest Alliance and Global GAP accreditation.

Capacity utilisation of the state-of-the-art Spices processing facility in Andhra Pradesh has been ramped up to enable your Company to expand its customer base in food safe export markets, besides promoting inclusive spices value chains benefiting thousands of Indian farmers.

-    During the year, Coffee prices witnessed sharp increase in the international markets primarily due to lower crop output in Vietnam. The tightness in supply, in anticipation of further price increases, resulted in lower export volumes of Indian Coffee. Notwithstanding these challenges, the Business registered strong growth in exports leveraging

its strategic presence in key coffee producing regions of India, deep understanding of estate and region-specific varieties and focus on premium grades of Arabica, Certified Coffees, Specialty and Monsooned Coffee.

-    Your Company is one of the leading exporters of value-added frozen marine products from India with expertise in processing individually quick-frozen (IQF), raw and cooked products, adhering to the highest standards of safety and hygiene prevalent in developed markets such as the US, EU and Japan. During the year, your

Company has emerged as one of the top 3 exporters of frozen shrimps from India to the EU market by expanding its footprint in sustainably sourced shrimps leveraging the Aquaculture Stewardship Council (ASC) programme. The Business also provides sourcing support to the ‘ITC Master Chef’ range of ‘Super Safe’ frozen prawns in the domestic market and supplies high-quality shrimps to your Company’s Hotels Business.

-    In the Processed Fruits & Vegetables segment, the Business continues to expand its footprint in the fruit pulp and tomato paste categories through a robust network comprising a large number of small and marginal farmers in four states.

-    The Business continues to focus on its strategy of moving up the value chain by scaling up its customised crop development and cultivation programme in Madhya Pradesh to further enhance its expertise in Medicinal and Aromatic Plant Extracts (MAPE). Collaborations with farmers are being strengthened with the Business providing necessary inputs, advisory, on-field support and enabling farmers to ‘produce the buy’.

The Business remains focused on expanding its scope of operations across identified agri-commodities, including both fresh and processed products.

The Business is also scaling up end-to-end presence across the value chain, supported by the R&D capabilities of your Company’s Life Sciences and Technology Centre, ITCMAARS network and external collaborations.

Towards enhancing the competitiveness of domestic agri-value chains, strengthening market linkages and building traceable & climate smart value chains,

your Company has successfully scaled up ITCMAARS - a crop-agnostic full stack AgriTech digital platform, together with a physical ecosystem, across ten states. The ITCMAARS ‘Phygital’ platform now spans more than 1,650 Farmer Producer Organisations (FPOs) encompassing more than 1.5 million connected farmers and several industry partners including agri input manufacturers, banks, financial institutions and agri-tech startups.

By synergistically integrating NextGen agri technologies, ITCMAARS is developing a robust ecosystem to seamlessly deliver hyperlocal and personalised solutions to the Indian farming community leveraging world-class digital tools (including IoT) to develop new and scalable revenue streams, strengthen sourcing efficiencies and power your Company’s world-class Indian brands.

The ITCMAARS platform provides hyperlocal e-market services for agri inputs and farm outputs, enables access to credit and provides a wide range of predictive and prescriptive advisory services covering weather forecasts, agronomy, best practices for improved productivity, quality assurance, etc.

The integration of these package of practices enables the agri ecosystem to make a transformational shift towards superior value creation for all stakeholders. The ecosystem also provides access to sustainable Agri-inputs such as biologicals and nano-nutrients to farmers. New age functionalities such as ‘KrishiMitra’ - the world’s first Gen AI based voice chatbot for farmers, enables innovative user-interface in vernacular languages deploying voice to text technology, thereby easing the adoption of digital technology by farming communities.

Over the years, your Company has invested significantly in building competitively superior agri-commodity sourcing expertise comprising multiple business models, wide geographical spread and customised infrastructure. Your Company is rapidly building expertise in data-science led decision support systems to deepen its sourcing capability. These include development of AI/ML models that dynamically respond to evolving conditions across multiple sourcing dimensions and aid in optimal sourcing decisions. These capabilities and infrastructure have created structural advantages by facilitating competitive sourcing of agri commodities for your Company’s Branded Packaged Foods Businesses

-    The Business continues to leverage its strong farm linkages and wide sourcing network across geographies to secure supplies of critical grades of wheat of benchmark quality towards meeting the growing requirements of ‘Aashirvaad’ atta. During the year, the Business further scaled up its strategic sourcing and supply chain interventions. These include focused crop development towards securing the right varieties for ‘Aashirvaad’ atta to provide consumers best-in-class product quality and experience, use of multi-modal transportation, cost optimisation through geographical and varietal arbitrage as also enabling supply of attribute based/identity preserved grades.

-    Similarly, such capabilities are also being leveraged to source high-quality fruit pulp and frozen vegetables for your Company’s ‘B Natural’ and ‘Farmland’ brands.

-    Milk procurement network in Bihar and

West Bengal was strengthened towards meeting the growing requirements of your Company’s Fresh Dairy portfolio under the ‘Aashirvaad Svasti’ brand, and in Punjab for ‘Sunfeast’ Dairy Beverages. The network was expanded during the year to support the launch of the fresh dairy portfolio in Jharkhand. The Business continues to empower farmers by providing infrastructure such as automated milk collection units, milk chillers

and imparting best animal husbandry practices to improve operational efficiency, maintain high quality of milk, while ensuring traceability.

- The Business continues to scale-up sourcing of spices to meet the growing requirements of Sunrise and Aashirvaad brands.

In recognition of the various initiatives undertaken by the Business to enable an agile, resilient and responsive sourcing and supply chain, your Company was recognised for its excellence under the Food, Perishables, Beverages & FMCG category at the CII SCALE Awards, 2023. Your Company also secured first position in FICCI Sustainable Agriculture Awards 2023 for its programmes in Natural Resource Management and Climate Resilient Agriculture.

The Business continues to collaborate with reputed research organisations such as the Indian Agricultural Research Institute, Indian Institute of Wheat & Barley Research, Indian Institute of Rice Research, Indian Institute of Soybean Research, Indian Institute of Vegetable Research, Punjab Agricultural University and Agharkar Research Institute towards building an efficient and cost competitive agri-value chain. During the year, the Business further scaled up its crop development programmes and introduced location-specific, new and superior seed varieties along with appropriate package of practices in Rajasthan, Uttar Pradesh, Bihar, West Bengal,

Punjab, Madhya Pradesh and Maharashtra. Sharp focus on deepening capabilities in proprietary crop intelligence, scaling up the sourcing & delivery network and developing customised blends will support your Company’s Branded Packaged Foods Businesses in the years to come.

Your Company remains committed to supporting the Government’s efforts to promote millets given their immense benefits in terms of nutritional properties and attributes as a planet friendly and climate resilient crop. Your Company has extended the ITCMAARS ecosystem to promote FPOs engaged in millets farming and has also partnered with the Indian Institute of Millets Research (IIMR), Hyderabad to

promote high yielding varieties and advanced package of practices among millet farmers.

Recognising that the agriculture sector faces colossal challenges of ensuring food security, addressing climate change and enhancing productivity & farm incomes, your Company has pioneered several interventions to strengthen the competitiveness and build resilience of agri value chains. A comprehensive Climate Smart Agriculture programme has been launched across 19 states to enable a transformation journey from Low Yield Low Resilient areas to High Yield and High Resilient villages through a package of agronomy practices, climate resilient varieties, precision farming, water management and appropriate mechanisation. Powering NextGen Agriculture, your Company has accelerated digital adoption in agriculture enabling farmers to benefit from its advanced solutions. Regenerative agri-practices, farm mechanisation and adoption of climate smart agriculture is bolstered by the efficient aggregation of farmers to future-ready FPOs.

Your Company’s focus on exports has led to strategic investments in world-class facilities that help link farmers to global markets. The wide range of interventions of your Company in empowering farmers through climate resilient agriculture, natural resource augmentation, development of competitive agri-value chains, focus on VAAP, leveraging advanced digital technology and strong market linkages reflect your Company’s commitment to catalyse a transformational shift of the agri eco system from the conventional production-centric to demand-responsive value chains, while also serving national priorities.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements of your Company prepared in accordance with Indian Accounting Standard 110. Shareholders desirous of obtaining the Report and Accounts of your Company’s subsidiaries may obtain the same upon request. Further, the Report and Accounts of the subsidiary companies is also available under the ‘Investor Relations’ section

of your Company’s website, www.itcportal.com , in a downloadable format. Your Company’s Policy for determination of a material subsidiary, as adopted by your Board, in conformity with Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, can be accessed on your Company’s corporate website at https://www.itcportal.com/material-subsidiary-policy . Presently, your Company does not have any material subsidiary.

Surya Nepal Private Limited

The Nepalese economy witnessed a slowdown in GDP growth to 1.9% during the fiscal year ended July 2023 as against the 5.6% growth in the previous year. The operating environment remained challenging with high inflation, low credit growth and high interest rates leading to subdued economic activity reflecting in muted performance across sectors.

The Central Bank’s intervention through the new Monetary Policy, aimed at fostering economic growth, aided in progressive moderation of interest rates during the current fiscal year. Consumer price inflation eased to 4.8% in mid-March 2024 Vs. 7.4% in mid-July 2023, largely on account of moderation in commodity prices. Remittance inflows continue to be robust, growing at 18.8% during the period from July, 2023 to March, 2024 over the previous year.

The tourism sector also continues to strengthen with tourist arrivals recovering to pre-COVID levels.

While the economy is on the path of gradual recovery from the macroeconomic stress witnessed since 2022, overall economic activity remains subdued and domestic demand, especially in the FMCG sector, remains weak. Private investment remained muted as evidenced by lower imports of capital and intermediate goods. Public consumption and investments also contracted, on the back of lower revenue collections. Measures towards encouraging domestic and foreign investments, incentivising the manufacturing sector to enable import substitution and job creation, supporting the hospitality sector with its large economic multiplier effect, on-ground implementation of reforms and

promulgation of industry-friendly policies remain the key imperatives for sustained revival of the economy.

The legal cigarette industry provides livelihoods to over five lakh individuals involved in tobacco cultivation, manufacturing & trade and makes a significant contribution to the revenue collection of the Government of Nepal. Despite its far-reaching economic impact, the legal cigarette industry continues to face significant challenges from an increasingly punitive and discriminatory taxation and regulatory regime. The company continues to engage with policy makers for equitable, non-discriminatory, pragmatic, evidence-based regulations and taxation policies that balance the economic imperatives of the country and tobacco control objectives.

Amidst a challenging economic environment as aforestated, the company reinforced its market standing in the Cigarettes business by leveraging its robust portfolio, superior product quality and wide distribution network. Differentiated and innovative offerings under ‘Striker’ and ‘Surya’ brands were launched during the year, further fortifying the portfolio.

The company’s manufacturing systems continue to set new benchmarks in responsiveness, quality and productivity. Various initiatives such as installation of state-of-the-art technologies and process automation were implemented during the year, which further strengthened the manufacturing capability of the company. Relentless focus on developing world-class products anchored on innovation and benchmarked against international quality standards remains a key source of sustainable competitive advantage for the company.

During the year, the company continued to strengthen its market standing in the Agarbatti business, leveraging its differentiated product portfolio, sharply focused marketing investments and best-in-class product availability across target markets. New ‘Marigold’ offering introduced during the year, strengthened its presence in the premium segment.

During the year, the company forayed into the Biscuits category with the launch of premium biscuits under the trademark ‘Sunfeast Dark Fantasy Choco Fills’ licensed from your Company. A state-of-the-art biscuits manufacturing line has been commissioned at the company’s facility near Biratnagar in eastern Nepal with commercial production commencing in August 2023. The brand has received encouraging consumer response.

In the Confectionery business, the company further augmented its portfolio through new launches such as ‘Toffichoo Eclairs’ and ‘Toffichoo Cola Fun’ and continues to make focused investments towards strengthening its market standing.

During the year, Surya Nepal Ventures Private Limited, a wholly-owned subsidiary of the company was incorporated to carry out manufacturing and distribution of FMCG products, commencing with Agarbattis. The company commenced operations in March 2024.

The company continues to make multi-dimensional contributions towards building the societal and economic capital of Nepal. In line with the applicable regulations and CSR policy, the company carried out initiatives under four distinct CSR Platforms, namely, Surya Nepal Asha, Surya Nepal Prakriti, Surya Nepal Adharshila and Surya Nepal Gatha during the year. Key interventions include:

-    providing assistance to farmers in areas proximal to the company’s operations,

-    creation of agri-infrastructure such as vermicompost pits, harvesting sheds etc.,

-    providing training to improve productivity and enhance income generation for farmers through animal husbandry,

-    improvement in the quality of education in public schools in the vicinity of the company’s operating locations,

-    development of public infrastructure in the catchment areas of operating locations,

-    assistance in various environment preservation measures like urban plantation and preservation of biodiversity,

-    support in organising the largest Nepali literature festival and assistance in promotion and revival of the local Nepali folk musical instrument - ‘Sarangi’ through various training programs and workshops,

-    supported the Nepal Army in its ‘Safa Himal Abhiyan’ initiative aimed at minimising the impact of environmental pollution by collecting degradable and non-degradable wastes strewn in the Himalayas.

During the year, the company recorded Revenue from Operations of NRs. 4979 crores (previous year NRs. 4953 crores) and Net Profit of NRs. 1118 crores (previous year NRs. 1088 crores).

The company declared a dividend of NRs. 563 per equity share of NRs. 100 each for the year ended 16th July, 2023 (31st Asadh, 2080), amounting to NRs. 1135 crores (previous year NRs. 516 per equity share amounting to NRs. 1040 crores).

The company continues to be the largest contributor to the exchequer in Nepal and is well-positioned to consolidate its leadership position by leveraging its robust portfolio of products, deep & wide distribution network, best-in-class manufacturing facilities and execution excellence. The company continues to explore opportunities to rapidly scale-up the newer FMCG businesses and evaluate emerging opportunities in this space.

ITC Infotech India Limited and its subsidiaries

The global technology industry witnessed a slowdown in growth in FY 2023-24 on the back of macro-economic and geo-political uncertainties. According to NASSCOM, the Indian IT Services Industry grew at only 2% in FY 2023-24, compared to 8.3% in the previous year. With companies rationalising their discretionary IT spend, cost-optimisation strategies continue to drive global technology spending.

In the backdrop of muted growth in the IT Services Industry, the company recorded robust revenue growth during the year driven by an expanded global footprint and capability-led partnerships across key clients. The business strategy remains centred around sustaining the organisational growth momentum

leveraging the core pillars of ‘Customer Centricity’, ‘Employee Centricity’ and ‘Operational Excellence’, augmented by inorganic growth levers aligning to strategic priorities of the Business. The company stayed relevant to the evolving business needs of its clients and co-invested in the growth and transformation agendas of key customers. With technology clients increasingly looking for strategic partners to streamline distributed portfolio of services and drive efficiencies, the company leveraged an integrated global service delivery structure and strengthened operational efficiencies through a structured delivery excellence framework.

The company continued to invest in institutionalising best-in-class delivery excellence and building focused capabilities to drive client relevance, scale and differentiation. The company’s portfolio of client and industry-focused capabilities include Data & Analytics, Direct to Consumer (D2C), Open Hospitality (Hotels-in-a-Box), PLM-led Digital Thread Solutions, Digital Manufacturing, SAP S/4 HANA, and Cloud amongst others. The company’s focus on large deals enabled it to strengthen its portfolio of capabilities, bolster its mid-term revenue growth prospects and expand globally. The company started a new Service Line - ‘DxP Services’ - pursuant to the Strategic Partner Agreement with PTC Inc. in FY 2022-23. The company has also won two multi-year, large strategic deals in FY 2023-24 from existing marquee clients.

Attracting, training and retaining high-quality talent, particularly in niche and future-focused technologies remains a top priority to succeed in the global technology landscape and support Business’ growth imperative. The company continues to foster an employee-centric, high-performance work culture, driving holistic well-being and growth as part of its comprehensive employee value proposition. The company continues to strengthen leadership through curated leadership development programs and employee competencies through domain & technology-led training and career development programs.

During the year, the company’s consolidated Total Income stood at ' 3784.17 crores (previous year

' 3363.06 crores), clocking a resilient growth of 12.5% driven by its expanded global presence and the increasing traction in the company’s strategic accounts. Profit Before Tax stood at ' 628.61 crores (previous year ' 529.66 crores) and Net Profit stood at ' 463.13 crores (previous year ' 405.25 crores).

The aforestated financial metrics are after considering certain costs associated with the Strategic Partner Agreement with PTC Inc., resource augmentation and accelerated investments in capability building in strategic focus areas and infrastructure.

For the year under review:

a.    ITC Infotech India Limited recorded Revenue from Operations of ' 2869.29 crores (previous year

' 2632.30 crores) and Net Profit of ' 382.21 crores (previous year ' 353.38 crores). The company paid a total dividend of ' 55.50 per Equity Share of ' 10/- each aggregating ' 488.40 crores (previous year ' 17.00 per Equity Share of ' 10/-each aggregating ' 149.60 crores).

b.    ITC Infotech Limited, UK, a wholly-owned subsidiary of the company, recorded Revenue of GBP 34.11 million (previous year GBP 30.30 million) and Net Profit of GBP 1.49 million (previous year GBP 1.45 million).

c.    ITC Infotech (USA), Inc., a wholly-owned subsidiary of the company, together with its wholly-owned subsidiary Indivate Inc., recorded Revenue of US$ 158.58 million (previous year US$ 149.28 million) and Net Profit of

US$ 6.69 million (previous year US$ 4.68 million).

d.    ITC Infotech Do Brasil LTDA., a wholly-owned subsidiary of the company incorporated in October 2022, recorded Revenue of BRL 7.59 million (previous year BRL 1.37 million) and Net Profit of BRL 0.60 million (previous year BRL 0.12 million).

e.    ITC Infotech de Mexico, S.A. de C.V., a wholly-owned subsidiary of the company incorporated in April 2023, recorded Revenue of MXN 5.90 million and Net Profit of MXN 0.75 million.

f.    ITC Infotech France SAS, a wholly-owned subsidiary of the company incorporated in February 2023, recorded Revenue of EUR 6.05 million and

Net Profit of EUR 0.43 million.

g.    ITC Infotech GmbH, a wholly-owned subsidiary of the company incorporated in March 2023, recorded Revenue of EUR 14.25 million and Net Profit of EUR 2.80 million.

h.    ITC Infotech Malaysia SDN. BHD., a wholly-owned subsidiary of the company incorporated in February 2023, recorded Revenue of MYR 7.95 million and Net Profit of MYR 0.37 million.

i.    ITC Infotech Arabia Limited, a wholly-owned subsidiary of the company incorporated in December 2023 is expected to be fully operational in FY 2024-25.

The company’s investments in building technology-led solutions and offerings in future-focused capabilities were acknowledged in global benchmarking reports across analyst firms. In FY 2023-24, the company was recognised as ‘Disruptor’ across several Avasant RadarView^TM service provider benchmarking reports, including ‘Digital CX Services’, ‘Data Management and Advanced Analytics’, ‘Manufacturing Smart Industry’, ‘Internet of Things’, ‘End-user Computing’, ‘Digital Workplace’, and ‘Intelligent Automation’. The company was recognised as ‘Disruptor’ by HFS in ‘Horizons: Retail and CPG Service Providers, 2023’. The company received two ISG ‘Star of Excellence™’ Awards in the categories of ‘Universal ISV/Cloud Vendor Ecosystem’ and ‘Industry Award for CPG + Retail’.

In April 2024, the company signed a definitive agreement to acquire 100% shareholding of Blazeclan Technologies Private Limited - a born-in-the-cloud consulting company providing Cloud services on AWS, Azure and GCP. The acquisition reiterates the company’s commitment to help clients steer their digital transformation journey and deliver business outcomes built on the foundation of strong Cloud capabilities.

Going forward, the company will continue to invest in strengthening key client relationships to accelerate

their journey of growth and differentiation. The company will also expand its portfolio of technology-focused capabilities across select industry verticals and sharpen its alliance ecosystem with future-ready Software Vendors in identified capability areas such as Digital, Data & Analytics, Cloud, and Infrastructure Services amongst others. Investments in hiring and training the right talent would also be sustained, with a focus on strengthening the company’s employee-centric, high-performance culture, driven by continuous learning. The company is poised to fulfil its vision of being a leading technology provider to global enterprises for building business friendly solutions.

Technico Agri Sciences Limited

During the year under review, potato production in India stood at 60.1 million MT, which was higher by 7% compared to the previous year. Availability of seed potatoes with farmers was also higher due to favourable weather conditions during the crop year 2022-23, leading to surplus stocks in cold stores and lower potato prices.

Leveraging its institutional strengths, the company continued to take proactive measures to consolidate its relationship with farmers, enter new potato growing markets and expand distribution in existing markets to achieve record high levels of seed sales during the year.

The company’s leadership in production of early generation seed potatoes and strength in agronomy continue to support the ‘Bingo!’ range of potato chips of your Company and in servicing the seed potato requirements of the farmer base of your Company’s Agri Business.

The company’s Revenue from Operations stood at ' 323.95 crores (previous year ' 257.77 crores) with Net Profit of ' 37.81 crores (previous year ' 41.38 crores). Total Comprehensive Income for the year stood at ' 37.82 crores (previous year ' 41.42 crores).

The company continues to build on a strong foundation for the future and remains confident of effectively leveraging its deep domain expertise to fortify its market standing in the seed potato industry.

The company continues to focus on upgradation and commercialisation of its TECHNITUBER® Seed Technology and customising the agronomy practices for deployment across various geographies. Further, the company is also engaged in the marketing of TECHNITUBER® seed produced at the facilities of its subsidiary in China and Technico Agri Sciences Limited, India, a wholly-owned subsidiary of your Company, to global customers. For the year under review:

a.    Technico Pty Limited, Australia registered a turnover of Australian Dollars (A$) 1.69 million (previous year A$ 1.83 million) and a Net Profit of A$ 0.81 million (previous year A$ 1.04 million).

b.    Technico Technologies Inc., Canada has wound down its Seed Potato business operations and sol the assets related to the business during the year.

c.    Technico Asia Holdings Pty Limited, Australia, and Technico Horticultural (Kunming) Co. Limited, China - there were no significant events to report with respect to the above companies.

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company, was incorporated in Sri Lanka in April 2012 with the objective of developing and operating a mixed-use development project (‘Project’) comprising a luxury hotel and a super-premium residential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded the status of a ‘Strategic Development Project’ entitling the company to various fiscal benefits in Sri Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.

Consequent to the IMF bailout programme and the various measures undertaken by the Government of Sri Lanka including restructuring and divestment of state-owned enterprises, tax reforms to boost government revenues etc., the Sri Lankan economy

continues to be on the recovery path with tourist arrivals, worker remittances and forex reserves showing healthy growth with stability in the currency exchange rate and moderation in inflation. Discussions on restructuring of foreign debt are currently underway and the Government of Sri Lanka expects the same to be concluded shortly.

The company’s hotel at Colombo, ‘ITC Ratnadipa’, situated along the shores of the Indian Ocean on one side and Beira Lake on the other, was inaugurated on 25th April, 2024 by the President of Sri Lanka in the presence of other dignitaries including the Prime Minister of Sri Lanka and the Indian High Commissioner to Sri Lanka. The hotel, a magnificent icon of responsible luxury with guest rooms, suites and service apartments each offering breathtaking views of the Indian ocean from private balconies, elegantly portrays Sri Lankan architecture and draws inspiration from the national flower of Sri Lanka, the floating water lily. Complementing its exquisite accommodations, ITC Ratnadipa shall also present nine signature dining destinations that offer a repertoire of local, national and global cuisine. The hotel is being operationalised in a phased manner.

Construction of the residential apartment complex is in the final stages and is expected to be completed in the first half of FY 2024-25. While the recent increase in tax rates on real estate has impacted the sales velocity of ‘The Sapphire Residences’ luxury apartments, the company expects the same to gain momentum given its unique positioning in the market and superior value proposition coupled with improved stability in the macro-economic environment and the launch of ITC Ratnadipa, in line with the trend in other mixed-use projects in Colombo.

Your Company’s investment in WLPL stood at ' 3480 crores as at 31st March, 2024.

Landbase India Limited

The company owns and operates the Classic Golf & Country Club, a 27-hole Jack Nicklaus Signature Golf Course - which continues to enjoy strong brand equity with its members, guests and the golfing fraternity.

During the year, the Club reaffirmed its position as one of the leading golf courses in Asia and hosted various prestigious tournaments & events ranging from Junior, Professional and Corporate tournaments. The Club continues to be a member of the ‘Asian Tour Destinations’, which is an exclusive network of world-class golf venues with direct ties to the Asian Tour. The Club also hosted the European Challenge Tour Event, drawing participation from over 100 international players.

The Club registered robust increase in footfalls driving revenue growth during the year, with several initiatives to widen the membership base. These include initiatives to promote Junior Golf for young golfers as well as measures for promotion of the sport amongst corporates and communities in Delhi and NCR.

The company also owns ‘ITC Grand Bharat’, a 104-key all-suite luxury retreat at Gurugram, which has been licensed to your Company. The retreat, an oasis of unhurried luxury, is co-located with the Classic Golf & Country Club. During the year, ‘ITC Grand Bharat’ strengthened its position as one of the leading luxury wedding destinations in the country and was also the destination of choice for several milestone celebrations among leading corporates. The retreat was also chosen for the G20 Sherpa meet and proudly hosted diplomats from all G20 nations, an acknowledgement of the exceptional quality of hospitality offered by the hotel.

During the year ended 31st March, 2024, the company recorded Total Income of ' 44.01 crores (previous year ' 37.21 crores) and Net Profit of ' 10.00 crores (Previous year ' 9.68 crores).

Total Comprehensive Income for the year stood at ' 10.00 crores (Previous Year ' 9.60 crores).

Srinivasa Resorts Limited

The company owns ‘ITC Kakatiya’ - a 188-key luxury hotel located in Hyderabad, which is operated and marketed by your Company. ITC Kakatiya is a USGBC LEED Platinum® Certified Hotel and is one of the finest luxury hotel and F&B destination in the

city. ‘Dakshin’ was adjudged the ‘Best South Indian Premium Dining Restaurant’ at the Times Food Guide Nightlife Awards 2024 for the 14th consecutive year.

The travel and tourism industry continues to remain buoyant on the back of rising demand and robust economic growth. The company is well-positioned to capitalise on the expected growth momentum leveraging its iconic cuisine brands and best-in-class service levels.

During the year, the company experienced a strong resurgence in demand, which led to consistent increase in average room rates and occupancy levels. The company invested in enhancing guest experience by upgrading its rooms to best-in class luxury levels.

During the year ended 31st March, 2024, the company recorded Total Income of ' 74.72 crores (previous year ' 72.46 crores) with Net Profit of ' 8.10 crores (previous year ' 7.55 crores). Total Comprehensive Income for the year stood at ' 8.15 crores (previous year ' 7.51 crores).

Fortune Park Hotels Limited

The company, which caters to the ‘Mid-market to Upscale’ segment through a chain of hotels under the brand ‘Fortune’, continues to forge new alliances and expand its footprint. During the year, eight new hotels with 500+ rooms commenced operations across the country and cater to both the business and leisure segments. The company has also signed up 12 new properties during the year, taking the total property count to 66 hotels with over 5,000 rooms across 55 cities in India. Of these, 51 hotels (with over 3,800 rooms) are in operation while the remaining 15 hotels (over 1,200 rooms) are in various stages of development, and are slated to be commissioned in the near term.

The company has been awarded multiple recognitions during the year including SATTE Award 2024 for ‘Hotel chain of the year - Mid-market segment’, Today’s Traveller Awards 2023 for ‘Premier Upscale Hotel chain’ and India Travel Awards North 2023 for ‘Best Upscale Hotel chain in India’.

During the year ended 31st March, 2024, the company recorded Total Income of ' 54.92 crores (previous year: ' 44.35 crores) and Net Profit of ' 11.22 crores (previous year: ' 5.34 crores). Total Comprehensive Income for the year stood at ' 11.09 crores (previous year ' 5.20 crores).

The Board of Directors of the company has recommended a dividend of ' 15.00 per Equity Share of ' 10 each for the year ended 31st March, 2024 (previous year ' 12.50 per Equity Share).

Bay Islands Hotels Limited

The company’s hotel in Port Blair, licensed to your Company, continues to offer a unique gateway to the Andamans with its strategic location, excellent architectural design and superior product & service quality.

Tourism in the Andamans received impetus from completion of airport renovation and launch of a new terminal during the year. Increase in tourist footfalls has led to improvement in occupancy and increase in average room rates during the year.

During the year ended 31st March, 2024, the company recorded Total Income of ' 3.79 crores (previous year ' 2.75 crores) and Net Profit and Total Comprehensive Income of ' 2.70 crores (previous year ' 1.92 crores).

The Board of Directors of the company has recommended a dividend of ' 100.00 per Equity Share of ' 100 each for the year ended 31st March, 2024 (previous year ' 80.00 per Equity Share).

ITC Hotels Limited

ITC Hotels Limited was incorporated as a wholly-owned subsidiary of your Company in July, 2023 with its main object being hotels and hospitality business.

The company has been incorporated to carry on the Hotels Business of your Company post its demerger, pursuant to a Scheme of Arrangement amongst your Company and ITC Hotels Limited and their respective shareholders and creditors under Sections 230 to 232 read with other applicable provisions of the

Companies Act, 2013 (‘the Scheme’). The Scheme was approved by the Board of Directors of your Company and ITC Hotels Limited at their respective meetings held on 14th August, 2023, subject to necessary approvals. As stated above, pursuant to Order of the Honourable National Company Law Tribunal, Kolkata Bench, a meeting of the Ordinary Shareholders of your Company has been convened on 6th June, 2024 for the purpose of considering, and if thought fit, approving the Scheme.

Wimco Limited

The company’s business activities comprise fabrication and assembly of machinery for tube filling, cartoning, wrapping, material handling including conveyor solutions and engineering services for the FMCG and Pharmaceutical industries.

During the year, the company’s order book remained muted amidst a challenging operating environment. The company’s Revenue from Operations for the year stood at ' 3.47 crores (previous year ' 11.46 crores) with a Net Loss of ' 1.88 crores (previous year Net Profit of ' 0.16 crore). Total Comprehensive Income for the year stood at (-) ' 1.93 crores (previous year ' 0.21 crore).

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East Nutrients Private Limited, which has set up a food processing facility in Mangaldoi, Assam, to cater to the biscuits market in Assam and other north-eastern states.

The company continues to focus on consistently improving operational efficiency and productivity.

In recognition of its high standards of quality, the company received three Gold Awards at the ‘Convention on Quality Concepts’, 2023 organised by the Quality Circle Forum of India, Kolkata Chapter.

The company’s Revenue from Operations for the year stood at ' 154.07 crores (previous year ' 160.69 crores), while Net Profit for the year was ' 14.90 crores (previous year ' 15.98 crores).

Total Comprehensive Income for the year stood at ' 14.89 crores (previous year ' 16.14 crores).

For FY 2023-24, the Board of Directors of the company has recommended a final dividend of ' 2 per equity share of ' 10 each, aggregating ' 14.60 crores (previous year final dividend of ' 1.31 per equity share of ' 10 each, aggregating ' 9.56 crores).

ITC IndiVision Limited

ITC IndiVision Limited (IIVL) was incorporated as a wholly-owned subsidiary of your Company on 9th July, 2020. Construction of the company’s facility situated near Mysuru, Karnataka, was completed during the year and the plant was commissioned in March 2024. The facility, set up primarily for manufacture and export of nicotine and nicotine derivative products, has the capability to produce purest nicotine derivatives conforming to US and EU pharmacopoeia standards. Customer trials and approval of product samples are currently underway.

During the year, the company recorded Total Income of ' 1.19 crores (previous year ' 0.01 crore) and Net Loss of ' 31.12 crores (previous year ' 1.68 crores), primarily on account of pre-operating revenue expenditure.

Your Company’s investment in IIVL stood at ' 340 crores as at 31st March, 2024.

ITC Fibre Innovations Limited

The company was incorporated as a wholly-owned subsidiary of your Company in March 2023 with the objective of foraying into the Moulded Fibre Products space. Moulded Fibre Products, made from renewable natural fibres such as wood, bamboo, bagasse and waste paper, offer sustainable packaging solutions across industries including food service & delivery, pharmaceutical, beauty and electronics.

The company has set up a state-of-the-art manufacturing facility at Badiyakhedi, Madhya Pradesh, to pursue opportunities in this rapidly evolving space. The facility commenced commercial production in March 2024. For the period ended 31st March 2024, the company recorded Total Income of ' 1.26 crores with Net Loss of ' 3.56 crores. Your Company’s investment in IFIL stood at ' 200 crores as at 31st March, 2024.

The company recorded Total Income of ' 60.91 crores (previous year ' 48.61 crores) and Net Profit of ' 39.39 crores (previous year ' 38.30 crores).

Growth in Total Income was driven by increase in yield of the company’s investments due to higher market interest rates during the year.

Total Comprehensive Income for the year stood at ' 442.67 crores (previous year ' 55.24 crores), reflecting higher mark-to-market gains from long-term strategic investments vis-a-vis the previous year.

The company continues to closely monitor its investments in line with market interest rate movements and explore opportunities to make strategic investments for the ITC Group.

Temporary surplus liquidity of the company is mainly deployed in bonds, government securities, debt mutual funds, bank fixed deposits, certificate of deposits, etc. For FY 2023-24, the company declared final dividend of ' 0.30 per Equity Share of ' 10 each, aggregating ' 19.39 crores (previous year final dividend of ' 0.29 per Equity Share of ' 10 each, aggregating ' 18.75 crores).

Gold Flake Corporation Limited

The company holds 50% equity stake in ITC Filtrona Limited (Formerly known as ITC Essentra Limited).

During the year, the company recorded Total Income of ' 24.82 crores (previous year ' 19.97 crores) and Net Profit of ' 23.12 crores (previous year ' 18.42 crores). The company declared interim dividend of ' 14.10 per Equity Share of ' 10 each, aggregating ' 22.56 crores (previous year ' 11.30 per Equity Share of ' 10 each, aggregating ' 18.08 crores).

Greenacre Holdings Limited

The company provides maintenance services for commercial office buildings, engineering, procurement and construction management services, and project management consultancy services.

During the year, the company recorded Total Income of ' 11.61 crores (previous year ' 8.30 crores) and Net Profit of ' 2.82 crores (previous year ' 1.99 crores).

ITC Integrated Business Services Limited (formerly known as ITC Investments &

Holdings Limited)

The company is in the business of providing support to the Business Shared Services operations of your Company.

During the year, the company recorded Total Income of ' 12.78 crores (previous year ' 0.65 crore) and Net Profit of ' 0.60 crore (previous year ' 0.04 crore).

MRR Trading & Investment Company Limited

The company, a wholly-owned subsidiary of ITC Integrated Business Services Limited, holds tenancy rights in a commercial building located in Mumbai and also provides estate maintenance services. During the year, the company recorded Total Income of ' 7.38 lakh (previous year ' 7.25 lakh) and Net Profit of ' 0.66 lakh (previous year ' 0.28 lakh).

Pavan Poplar Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the Writ Petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court. During the year, the company recorded Total Income of ' 0.14 crore (previous year ' 0.12 crore) and Net loss of ' 0.03 crore (previous year loss of ' 0.03 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession

of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court. During the year, the company recorded Total Income of ' 0.10 crore (previous year ' 0.11 crore) and Net loss of ' 0.02 crore (previous year net loss of ' 0.05 crore).

NOTES ON JOINT VENTURES

ITC Filtrona Limited (formerly known as ITC Essentra Limited) - a joint venture of Gold Flake Corporation Limited

The company registered strong growth during the year aided by agility in execution and effective customer service, despite significant volatility in the supply chain for certain input materials.

The company retained its leadership position in the industry and remain the preferred supply chain partner for several well-known national brands. The company continues to leverage its core strengths of focused innovation, best-in-class quality, consistent delivery and strong customer relationships.

The company continues to partner with its customers and invest in technology upgradation and capability building towards sustaining its position as the ‘innovation and quality benchmark’ in the Indian cigarette filter industry. The company expanded its specialty filters manufacturing capacity during the year in line with its strategy of offering a wide range of innovative products to its customers.

During the year ended 31st March, 2024, the company’s Revenue from Operations stood at ' 743.45 crores (previous year ' 545.66 crores).

Net Profit during the year stood at ' 80.80 crores (previous year ' 64.77 crores).

The Board of Directors of the company has recommended a dividend of ' 100 per equity share of ' 10 each for the year ended 31st March, 2024 (previous year ' 100 per equity share).

Maharaja Heritage Resorts Limited (MHRL), a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 38 properties across 14 States/Union Territories in India under the ‘WelcomHeritage’ brand. During the year, the company has added three new hotels.

The company’s portfolio consists of palaces, forts and resorts in popular historical, nature and wildlife destinations, providing guests with distinct and differentiated experiences.

During the year, your Company purchased the entire investment in MHRL held by Russell Credit Limited, a wholly-owned subsidiary, consequent to which your Company’s shareholding in MHRL aggregated 50% of its paid-up share capital.

During the year ended 31st March, 2024, the company recorded Total Income of ' 8.12 crores (previous year ' 7.20 crores) and Net Profit of ' 0.93 crores (previous year ' 0.51 crores).

Total Comprehensive Income for the year stood at ' 0.90 crores (previous year ' 0.49 crores).

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) was set up as a joint venture between your Company and the Ambience Group, Hyderabad, for developing a luxury hotel complex at Begumpet, Hyderabad. Your Company held 26% equity stake in EHPL with a total investment of ' 46.51 crores as at 31st March, 2023.

As reported in prior years, the JV partner had been citing concerns about the viability of the project and expressed inability to make further financial commitments, pursuant to which, your Company had been exploring options regarding its investment in the Joint Venture.

On 7th April, 2023, your Company divested its entire shareholding i.e. 26% of the paid-up share capital, held in EHPL, consequent to which EHPL ceased to be a joint venture of your Company with effect from the said date.

Logix Developers Private Limited (LDPL) is a joint venture between your Company and Logix Estates Private Limited for developing a luxury hotel-cum-service apartment complex at the company’s leasehold site located at Sector 105 in New Okhla Industrial Development Authority (NOIDA). Your Company presently holds 27.9% equity stake in LDPL.

As reported in prior years, your Company reiterated its position with the JV partner that it was committed to developing a luxury hotel-cum-service apartment complex as envisaged under the JV Agreement and that it was not interested in progressing with any alternative project plans proposed by the JV partner.

However, the JV partner refused to progress the project and instead expressed its intent to exit from the JV by selling its stake to your Company. Subsequently, the JV partner proposed that both parties should find a third party to sell the entire shareholding in LDPL. In view of these developments, your Company had filed a petition before the erstwhile Company Law Board submitting that the affairs of the JV entity were being conducted in a manner that was prejudicial to the interest of your Company and the JV entity. The matter is currently before the National Company Law Tribunal (NCLT). The JV partner had also filed a petition before the Honourable Delhi High Court for winding up the JV company, which was transferred to the NCLT by the Honourable Delhi High Court. The matter was heard before the NCLT on several occasions in the past but could not be concluded. On 21st January, 2020, the matter was assigned to a new bench, post which hearings on the matter are being held.

In July 2022, LDPL received a communication from NOIDA authorities intimating cancellation of the sub-lease for the land on which the project was to be constructed on account of non-payment of lease instalments and non-fulfilment of the conditions of the sub-lease, including forfeiture of the amount deposited. The company is evaluating all options to pursue its rights in the matter. Consequently, as a matter of prudence, the company had derecognised the leasehold land/assets as well as adjusted/reversed the lease liabilities towards NOIDA in accordance with the terms of the sub-lease deed, in its financial statements for the year ended 31st March 2022.

During the year ended 31st March, 2024, the company recorded a Net Profit of ' 0.21 crore (previous year ' 0.16 crore). The Net Worth of the company stood at ' 5.31 crores as at 31st March,

2024 (previous year ' 5.10 crores).

Your Company’s total investment in LDPL was ' 41.95 crores. Your Company had made provision of the entire investment amount as diminution in the carrying value of investment in the previous years and consequently the carrying value of your Company’s investment in LDPL as at 31st March, 2024, is Nil.

The financial statements of LDPL for the year ended 31st March, 2024, are yet to be approved by its Board of Directors. In the absence of audited financial statements of LDPL, the Consolidated Financial Statements of your Company for the year ended 31st March, 2024, have been prepared based on the financial statements prepared by the management of LDPL.

NOTES ON ASSOCIATESATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. The company has continued to maintain high levels of operational efficiency and benchmark quality in its manufacturing operations to service its customers. During the year, the company received ‘FICCI Gold Award for Excellence in Safety Systems’, ‘Star Award of Occupational Health, Safety and Environment Excellence from National Safety Council’, Tamil Nadu

and ‘IGBC Green Factory Building - Platinum’ Recertification.

International Travel House Limited (ITHL)

The company provides complete business travel management solutions including air ticketing, car rental services, hotel arrangements, meetings & events as well as leisure travel and foreign exchange. The sector witnessed robust growth during the year with domestic air travel exceeding pre-pandemic levels. The company’s revenue also surpassed pre-COVID levels driven by higher business volumes and improved yields. Further, focused interventions in recent years to optimise the cost structure have enabled improvement in margins.

The company continues to provide mobility services with exemplary standards of safety and hygiene and is expanding its fleet of electric vehicles in line with its initiatives towards embedding sustainability in operations. Multiple digitalisation projects were implemented across mobility & travel related services to enhance productivity, efficiency and improve customer experience.

During the year, your Company purchased the entire investment in ITHL held by Russell Credit Limited, a wholly-owned subsidiary, consequent to which your Company’s shareholding in ITHL aggregated 48.96% of its paid-up share capital.

The Board of Directors of the company has recommended a dividend of ' 5.00 per Equity Share of ' 10 each for the year ended 31st March, 2024 (previous year ' 3.50 per equity Share).

Gujarat Hotels Limited

The company’s hotel, ‘Welcomhotel Vadodara’, is operated by your Company under an Operating License Agreement.

The Board of Directors of the company has recommended a dividend of ' 2.50 per Equity Share of ' 10/- each for the year ended 31st March, 2024 (previous year ' 2.00 per Equity Share).

Delectable Technologies Private Limited (Delectable) is, inter alia, engaged in the sale of FMCG products leveraging app-based technology through vending machines, primarily installed across office locations. During the year, your Company invested ' 3.50 crores in the Equity capital of Delectable. Consequently, your Company’s shareholding in Delectable increased to 39.32% (previous year 33.42%) on a fully diluted basis. The company continues to expand its footprint through installation of new vending machines.

Sproutlife Foods Private Limited

Your Company fortified its presence in the fast growing, nutrition-led health food space with a strategic investment in Sproutlife Foods Private Limited (Sproutlife), which owns the ‘Yogabar’ brand. During the year, investment in Sproutlife was made in two tranches aggregating ' 225 crores taking the overall stake of your Company in Sproutlife to 44.74% on a fully diluted basis.

The brand continues to garner robust traction across its target markets and customer segments. Apart from growing its core categories of Muesli and Bars, the company also expanded its healthy snacking portfolio with launch of several differentiated offerings including an oats range, corn flakes, dry fruits and ‘no-maida’ choco cereal. Additionally, the company also launched Yoga Baby - a range crafted to meet the nutritional needs of children with recipes inspired by the traditional knowledge and wisdom of grandmothers.

Mother Sparsh Baby Care Private Limited

Mother Sparsh Baby Care Private Limited (Mother Sparsh), is a premium ayurvedic and natural personal care brand in the D2C space offering a wide range of personal care products inspired by a blend of traditional values, practices and products with focus on baby and mother care segments.

During the year, your Company invested ' 11.54 crores in Mother Sparsh; consequently your Company’s stake

now stands at 26.5% (previous year 22%) on a fully diluted basis. Cumulative investment in Mother Sparsh stood at ' 45 crores as at 31st March, 2024.

Associates of Russell Credit LimitedRussell Investments Limited, Divya Management Limited and Antrang Finance Limited

The above companies are associates of Russell Credit Limited. These companies are Non-Banking Financial Companies (NBFCs) registered with the Reserve Bank of India and continue to explore opportunities for strategic investments.

For further details on performance of the above-mentioned associate companies, please refer to Form AOC-1 (Statement containing salient features of the financial statements of Subsidiaries / Associate companies / Joint Ventures), forming part of the Report and Accounts.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The ITC Code of Conduct commits management to financial and accounting policies, systems and processes.

The Corporate Governance Policy and the ITC Code of Conduct stand widely communicated across the enterprise at all times and together with the Strategy of Organisation, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Company’s Financial Statements.

Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance

and Significant Accounting Policies uniformly across your Company. The Accounting Policies are reviewed and updated from time to time. These, in turn, are supported by a set of Divisional policies and Standard Operating Procedures (SOPs) that have been established for individual Businesses.

Your Company uses Enterprise Resource Planning (ERP) systems as a business enabler and also to maintain its books of accounts. The SOPs, in tandem with transactional controls built into the ERP systems, ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by Divisional management and audited by Internal Audit, whose findings and recommendations are reviewed by the Audit Committee and tracked through till implementation.

Your Company has in place adequate internal financial controls with reference to the Financial Statements. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial information; complying with applicable statutes; safeguarding assets from unauthorised use; ensuring that transactions are carried out with adequate authorisation and complying with Corporate Policies and Processes. Such controls have been assessed during the year, after taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by The Institute of Chartered Accountants of India. Based on the results of such assessment carried out by management, no reportable material weakness or significant deficiency in the design or operation of internal financial controls was observed. Nonetheless, your Company recognises that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis.

RISK MANAGEMENT

As a diversified enterprise, your Company continues to focus on a system-based approach to business risk management. The management of risk is embedded in the corporate strategies of developing a portfolio of world-class businesses that best match organisational capability with opportunities in domestic and international markets, developing capabilities and competencies for the future in order to enhance competitiveness and win in the markets of tomorrow. Accordingly, management of risk has always been an integral part of your Company’s ‘Strategy of Organisation’ and straddles its planning, execution and reporting processes & systems. Backed by strong internal control systems, the current Risk Management Framework consists of the following key elements:

-    The Corporate Governance Policy, approved by the Board, clearly lays down the roles and responsibilities of the various entities

in relation to risk management covering a range of responsibilities, from the strategic to the operational. These role definitions, inter alia, provide the foundation for appropriate risk management procedures, their effective implementation across your Company and independent monitoring and reporting by Internal Audit.

-    The Risk Management Committee, constituted by the Board, monitors and reviews the strategic risk management plans of your Company as a whole and provides necessary directions on the same.

-    The Corporate Risk Management Cell, through focused interactions with Businesses, facilitates the identification and prioritisation of strategic and operational risks, development of appropriate mitigation strategies and conducts periodic reviews of the progress on the management of identified risks.

-    A combination of centrally issued policies and Divisionally-evolved procedures brings robustness to the process of ensuring that business risks are effectively addressed.

-    Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with unique/relatively high risk profiles.

-    Foreign currency exposures continue to be managed within the framework of the Forex Manual.

-    A strong and independent Internal Audit function at the Corporate level carries out risk focused audits across all Businesses, enabling identification of areas where risk management processes may need to be strengthened. The Audit Committee of the Board reviews Internal Audit findings and provides strategic guidance on internal controls. The Audit Compliance Review Committee closely monitors the internal control environment within your Company including implementation of the action plans emerging out of internal audit findings.

-    At the Business level, Divisional Auditors continuously verify compliance with laid down policies and procedures and help plug control gaps by assisting operating management in the formulation of control procedures.

-    A robust and comprehensive framework of strategic planning and performance management ensures realisation of business objectives based on effective strategy implementation.

The annual planning exercise requires all Businesses to clearly identify their top risks and set out a mitigation plan with agreed timelines and accountabilities. Businesses are required to confirm periodically that all relevant risks have been identified, assessed, evaluated and that appropriate mitigation plans have been implemented.

Your Company endeavours to continuously sharpen its Risk Management systems and processes in line with a rapidly changing business environment. In this regard, it is pertinent to note that some of the

key Businesses of your Company have adopted the ISO 31000 Risk Management Standard and accordingly, the Risk Management systems and processes prevalent in these Businesses have been independently assessed to be compliant with the said global Standard. During the year, the large categories within the Branded Packaged Foods Businesses were assessed for compliance with ISO 31000 Risk Management Standard. With this, most Businesses of your Company have been assessed for such compliance. The centrally anchored initiative of conducting independent external reviews of key business processes with high ‘value at risk’ continued during the year. These interventions continue to provide further assurance on the robustness of risk management practices prevalent in your Company.

Recognising Digital as a megatrend shaping the future, your Company remains focused on building a dynamic ‘Future-Tech’ enterprise powered by state-of-the-art digital technologies and infrastructure across the value chain adding significant impetus to digital marketing, digital commerce and digital operations. Your Company has made several interventions straddling strategic impact areas such as Intelligent new-age insights that reimagine Consumer Experience, Business Model Transformation, Smart Operations and Employee Experience, which continue to be scaled up across your Company. Cutting-edge digital technologies such as Internet of Things (IoT), Cloud, Data Analytics, Artificial Intelligence, Machine Learning, Augmented/Virtual Reality, Robotic Process Automation, mobile applications etc., are being embraced by your Company’s Businesses. Cumulatively, these are resulting in changes in the risk profile of your Company in a heightened cyber threat environment. The ever-evolving nature of cyber threats and the increasing sophistication of attackers make cyber security risk management a critical focus area for the organisation.

A Cyber Security Committee, chaired by the Chief Information Officer, is in place to provide specific focus on cyber security related risks, with the primary responsibility of tracking emerging practices & technologies and providing suitable recommendations for enhancing security of the IT systems and infrastructure.

A multi-tier cyber defence architecture comprising firewalls, anti-virus and anti-malware systems is in place to detect, protect and respond to cyber incidents at various access and data processing points across the organisation. The security policies and practices of the organisation are built on industry standard frameworks such as NIST Cyber Security Framework and ISO 27001. The robustness of the security posture is also premised on end user awareness of safe and secure practices.

In the previous year, a maturity assessment of your Company’s cyber security architecture was undertaken by a global network and security solutions provider. The study found that your Company’s cyber security systems and processes are on par with global leaders and outperformed local peers.

Further interventions are underway to enhance surveillance and response capabilities with augmentation of cutting-edge technologies and skills of a NextGen Cyber Security Operations Centre (SOC). With progressive transitioning of mission-critical data and transaction processing workloads to the Cloud, the network infrastructure of the organisation is also being transformed using contemporary network and security technologies into a Digital-Ready, Cloud-Secure wide area network, to provide all authorised users fast, reliable and safe connections from anywhere through any device and at any time.

Information Technology-Operational Technology (IT-OT) integration for Industrial Control Systems has been identified as a focus area as the convergence and integration between IT and OT is increasing exponentially. Related guidelines have been formulated towards ensuring that your Company’s systems & processes remain contemporary and have best-in-class capabilities. In this regard, a Continuous Threat Detection and Response (CTDR) platform is in the process of being progressively rolled out across

your Company that will provide real-time monitoring and analysis of network traffic, system logs and other data sources to detect and respond to cyber threats.

The use of Artificial Intelligence (AI) is becoming increasingly prevalent in various business domains.

As the technology and its applications continue to evolve, guidelines for AI security governance are being implemented to ensure that its usage is secure and adheres to emerging safety, privacy and regulatory standards.

India ranks amongst the most vulnerable countries in the world in terms of climate change impact. Accordingly, to mitigate the impact of climate change on the operations of your Company, as part of its Sustainability 2.0 vision, your Company is pursuing a multi-pronged climate strategy that entails extensive decarbonisation and building resilience against climate risk across the value chain. Your Company’s low carbon growth approach focuses on increasing the share of renewable energy, improving energy productivity, construction of green buildings, greening logistics, optimising ‘distance-to-market’ and promoting regenerative agriculture practices in agri-value chains, thus enabling transition to a net zero economy. At the same time, your Company is actively working towards climate proofing its operations and agri-value chains by using latest climate risk modelling techniques, and developing site-specific adaptation strategies.

Water stress - a critical fallout of climate change - is being systematically managed by your Company’s integrated water stewardship approach. This approach addresses water risk at the catchment level by focusing on demand side management (i.e. improving water use efficiency in operations and promoting water-efficient agronomical practices) as well as supply side measures (including managed aquifer recharge and soil & moisture conservation measures). Interventions in this regard have been implemented across your Company’s Units in water stressed areas and key agri catchments.

Your Company sources several commodities for use as inputs in its Businesses and engages in

agri-commodity trading as part of its Agri Business.

In respect of commodities sourced for use as inputs in its Businesses, your Company has well laid out policies to manage risks arising out of the inherent price volatility associated with such commodities.

This includes robust mechanisms for monitoring market dynamics towards making informed sourcing decisions, well defined inventory holding norms based on considerations such as seasonality and the strategic nature of the commodity concerned, long-term contracts with suppliers and continuous diversification of the supplier base to secure supply of critical items at competitive costs. Multiple sourcing models, wide geographical spread, extensive sourcing and supply chain network and associated infrastructure in key growing areas coupled with deep-rooted farmer linkages and use of digital technologies ensure sourcing of high quality agri-commodities at competitive costs.

In respect of Agri-commodity trading, your Company has a well defined policy to manage risks associated with sourcing of such commodities. This includes:

-    segregation of duties and robust internal controls through a system of checks and balances embedded in the organisation and governance structure;

-    clearly defined limits for trading positions (long and short) and net cash loss for specific commodities/commodity groups;

-    mitigation of price, liquidity and counter party risks through hedging on commodity exchanges (mainly NCDEX) for certain commodities,

as applicable. Correlation between prices prevailing in the physical market and those on the commodity exchange is analysed regularly to ensure effectiveness of hedging;

-    robust monitoring and review mechanisms of net open positions and ‘value at risk’;

-    ECGC cover for exports (covering commercial & political risks) and credit insurance for large domestic customers.

The combination of policies and processes as outlined above adequately addresses the various risks associated with sourcing of commodities for you Company’s Businesses.

Your Company’s strategy of backward integration in sourcing of agri-commodities such as wheat, potato, fruit pulp, spices, milk and leaf tobacco; in-house manufacturing of paperboards, paper and packaging (including pulp production and print cylinder making facilities); wood procurement from the economic vicinity of the Bhadrachalam unit, facilitates access to critical inputs at benchmark quality and competitive cost besides ensuring security of supplies. Further, each of your Company’s Businesses continuously focuses on product mix enrichment and yield improvement towards protecting margins and insulating operations from spikes in input prices.

The Risk Management Committee met thrice during the year and was updated on the status and effectiveness of the risk management plans. The Audit Committee was also updated on the effectiveness of your Company’s Risk Management systems and policies.

The risk management practices of your Company, as reviewed through the Risk Management Cell and Internal Audit processes, have been found to be relevant and commensurate with the size and complexity of its operations.

AUDIT AND SYSTEMS

Your Company believes that strong internal control systems that are commensurate with the scale, scope and complexity of its operations are concomitant to the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances.

Your Company remains committed to ensuring a mature and effective internal control environment that, inter alia, provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records and Management Information Systems, timely preparation of reliable financial information, adherence with relevant statutes and compliance with related party transactions.

Your Company’s internal control systems include documented policies and procedures, segregation of duties and careful selection and development of employees.

Your Company’s independent and robust Internal Audit processes, both at the Business and Corporate level, provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements. The role of Internal Audit is to enhance and protect organisational value by providing risk-based assurance, advice and insight while enabling continuous improvement of your Company’s control systems.

The Internal Audit function, consisting of professionally qualified accountants, engineers and Information Technology (IT) specialists, is adequately skilled and resourced to deliver audit assurances at highest levels. Targeted Learning and Development programmes on contemporary topics are periodically organised to enhance knowledge and skill sets.

In the context of your Company’s IT environment, systems and policies relating to Information Management are periodically reviewed and benchmarked for contemporariness. Compliance with the Information Management policies receives focused attention of the Internal Audit function.

With the increased importance of information security, cyber security and adoption of emerging technologies, focused reviews are carried out for IT applications and processes across Businesses. These primarily focus on assessment of controls pertaining to confidentiality, integrity and availability of business information and systems covering General IT Controls and security of your Company’s IT Infrastructure. All critical Business-led Information Technology systems undergo pre-implementation audit before being deployed in the operating environment, thereby delivering assurance with respect to the rigour of implementation and operational readiness of the proposed systems.

The scope and coverage of Internal Audit remains contemporary and cognises, inter alia, for the rapid digitalisation of your Company’s business operations. In recent years, Internal Audit has enhanced focus on systems and controls pertaining to your Company’s digital assets including brand websites, social media

handles, mobile and cloud applications, IT-OT integration, and protection of sensitive personal data and information.

Qualified engineers in the Internal Audit function review the quality of design, planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield ‘value for money’. Internal Audit continues to use state-of-the-art tools and technology for conducting project audits.

In line with your Company’s ‘Digital First’ Strategy, the Internal Audit function has evolved into an agile, multi-skilled and technology enabled function to provide assurance at the highest levels along with valuable insights towards strengthening systems and controls. Processes in the Internal Audit function continue to be strengthened for enhanced effectiveness and productivity by leveraging best-in-class tools for audit analytics, intelligent automation and AI-enabled BOTs. A Digital Audit Management System was implemented during the year for end-to-end digitalisation of audit life cycle management, thereby enhancing the efficiency and productivity of the function.

Your Company’s Internal Audit processes are certified as complying with ISO 9001:2015 Quality Standards. Further, systems and processes are in accordance with the Standards on Internal Audit (SIA) issued by The Institute of Chartered Accountants of India.

The Audit Committee of your Board met eight times during the year. The Terms of Reference of the Audit Committee, inter alia, include reviewing the effectiveness of the internal control environment, evaluation of your Company’s internal financial controls and risk management systems, monitoring implementation of the action plans emerging out of review of significant Internal Audit findings including those relating to strengthening of your Company’s risk management systems and discharging of statutory mandates. Material observations (as defined in Terms of Reference) are reviewed at the highest level by the Audit Compliance and Review Committee (ACRC) and the Audit Committee.

HUMAN RESOURCE DEVELOPMENT

The talent management strategy of your Company is to attract, retain and develop human capital that enables your Company to sustain its position as one of India’s most valuable corporations, remaining customer-centric, nimble and performance driven whilst continuing with its mission of building a responsible ‘Future-Tech’ enterprise. Your Company’s thought, strategy and action are inspired by a larger purpose of being an exemplary Indian enterprise that not only delivers superior competitive performance, but also embeds sustainability and inclusiveness at the core of its Businesses. This approach enables your Company to delight consumers and customers with a vibrant portfolio of industry leading products and services while generating enduring value for the Indian economy and the larger community of stakeholders. Your Company’s employees relentlessly strive to deliver world-class performance, collaborating with each other and discharging their role as ‘trustees’ of all stakeholders. Your Company is committed to perpetuating this vitality - its growth as a value generating engine and also as an exemplary institution - so that it continues to succeed in its relentless pursuit of creating enduring value.

Your Company’s Human Resources development approach spans four key organisational dimensions of Agility, Alignment, Ability and Architecture which are supported through strategies crafted in areas of impact such as talent acquisition, engagement, diversity & inclusion, capability building, employee relations, performance & rewards and employee well-being.

The initiatives and processes of your Company strive to deliver the unique talent promise of ‘Building Winning Businesses, Building Business Leaders and Creating Value for India’. The talent development practices help create, foster and strengthen the capability of human capital to deliver critical outcomes on the vectors of strategic impact, operational efficiency and capital productivity while reimagining consumer experience, driving business model transformation and enhancing employee experience.

Your Company’s ‘Strategy of Organisation’ is designed to promote agility through a culture and

practice of distributed leadership enabled by a three-tier governance structure. This is manifested in market and consumer facing Businesses, which are driven by empowered, cluster-based teams and supported by shared assets and capabilities, enabling strategic relevance, speed, responsiveness, and operational excellence. This approach allows Businesses, through their Management Committees, to focus, develop and execute Business Plans relevant to their product-market spaces while leveraging the institutional strengths of your Company and harvesting internal synergies.

The year under review witnessed a significant shift towards a more agile, tech-savvy and people-centric approach to talent management. Key talent trends include a continued focus on hybrid work arrangements, an increased emphasis on Diversity, Equity & Inclusion initiatives, the adoption and integration of digitisation and automation tools to enhance productivity and application of AI tools across workstreams including talent acquisition, employee sentiment analysis and employee query resolution. Companies are also prioritising employee well-being & mental health support, and designing an inclusive & flexible work environment to attract and retain top talent. Industry attrition levels decreased during the year and are expected to continue to be low in most sectors.

Your Company’s unique employer equity as an exemplary Indian enterprise creating world-class brands, building business leaders and generating economic, social and environmental capital for the Indian economy, continues to play a pivotal role in the attraction and retention of high-quality talent. The management trainee programme, augmented with recruitment of experienced talent from the market, is an integral part of building a deep pipeline.

Your Company continues to draw the finest management, technical and commercial talent from premier institutions in the country and is ranked amongst the leading companies in these institutions. Intensive engagement with the country’s premier academic institutions over the years to communicate your Company’s talent proposition through

case-study competitions, knowledge-sharing programmes by senior managers, on-ground exposure and factory visits for students and the annual internship programmes have all contributed to creating a compelling proposition for the best candidates to aspire for a career with your Company. Your Company continues to enthuse talent with high-impact roles, competitive and performance driven remuneration with an emphasis on long-term incentives, a wealth of learning opportunities, a commitment to enhancing diversity, equity & inclusion, an employee-centric climate, well-being focused infrastructure and support that promotes fellowship and commitment amongst employees.

Your Company’s talent development approach is founded on the belief that learning initiatives must remain synergistic and aligned to business outcomes. Towards this end, your Company has built a culture of application-focused continuous learning, innovation and collaboration. Your Company provides managers with contemporary and relevant learning and development support through a combination of self-paced e-learning modules, classroom programmes and application projects with emphasis on experiential learning, on-the-job assignments and exposure to nationally and globally renowned faculty. Deep functional expertise is fostered early in one’s career through immersion in complex problem-solving assignments requiring the application of domain expertise. Managers are assessed on your Company’s behavioural competency framework and provided with learning and development support to address areas identified for improvement. Key talent is provided critical experiences in high-impact roles and mentored by senior managers, promoting the development of a steady pool of high-quality talent.

Your Company has identified three capability vectors for making Businesses future-ready - Business Critical Functional Competencies, Leadership Development and Organisation Identity & Pride. Globally benchmarked curriculum is made available in domains of digitalisation, data science and analytics, contemporary and best-in-class marketing

practices, manufacturing strategy with a focus on the emerging digital landscape, business strategy and commercial acumen. All of these interventions are delivered through subject matter experts, domestic and international, and supplemented with business-critical application projects. As a part of leadership development initiatives, the Reflections 360 programme provides leaders with feedback from team members, peers and managers, enabling self-driven personal development. This is supplemented by immersive workshops and personalised one-on-one coaching being made available for senior managers. This approach, ensures relevance and impact, thereby enhancing the capability index of your Company’s human capital. Periodic induction programmes, anchored by senior leaders, enable new entrants to appreciate your Company’s Vision, Mission, Culture, Values and Strategies while fostering pride in affiliation with your Company.

Your Company continues to strengthen its performance management system and its culture of accountability through the widespread adoption of the system of Management-by-Objectives. Performance planning through clearly defined goals, outcome-based assessment, and alignment of rewards for achievement of results have all contributed to a robust culture of ownership and accountability. ‘Career Conversations’ and succession planning processes have contributed to helping employees realise their potential, craft their careers while recognising their strengths and areas of development and ensuring a sound workforce planning system.

In the spirit of continuous improvement, your Company maintains a practice of periodically assessing employee engagement through a Company-wide survey. The recent survey in 2024 affirms high levels of employee engagement and reflects significant consolidation of gains achieved over recent years. The employee engagement, managerial effectiveness and performance enablement indices have all improved, ranging from 10 to 16 percentage points since the survey’s inception in 2016. Employees have expressed overwhelming appreciation on several dimensions

with over 96% of employees reporting a deep sense of pride and association with your Company, 94% of employees reporting a belief in your Company’s overarching goals & leadership and 94% of employees reporting optimism for the future. These sentiments are reflected in your Company’s superior standing in terms of voluntary attrition across Businesses. During the year, a range of engagement programmes were undertaken including initiatives such as leadership outreach through extensive communication, recognition programmes acknowledging exceptional contributions of employees and teams, career conversations and development planning for robust positioning and progression decisions and investments in employee wellbeing. The year witnessed the Cigarettes Business winning the Economic Times -Human Capital Award (Gold) for ‘Excellence in Communication Strategy’ and the Hotels Business winning the ‘Skill India Industry Partner Award - 2024’ and ‘Golden Peacock National Training Award - 2024’.

Your Company’s efforts to enhance Diversity, Equity and Inclusion are founded on the conviction that a diverse workforce contributes to rich discourse, promotes holistic perspectives, fosters creative solutions and is integral to serving customers better while creating value for all stakeholders. Your Company’s policy on Diversity, Equity and Inclusion articulates and institutionalises this conviction. Your Company is committed to enhancing gender diversity and participation of the differently abled in the workforce. Such concerted actions span three vectors, i.e. Representation, Inclusion & Enablement and Commitment & Assurance

Measures to enhance diversity include ensuring sufficient representation of women in selection pools and deployment of the differently abled across suitable opportunities in the value chain. Through progressive policies offering flexible work arrangements, extended child-care leave, travel support for infants and care-givers, secure transport, paternity leave, same gender partner medical benefits, infrastructure support coupled with various sensitisation programmes, Employee Resource Groups, development interventions tailored for

women talent, and the commitment and sponsorship of leaders; your Company provides an enabling environment to further its Diversity, Equity and Inclusion goals. To ensure a safe and progressive work environment, Internal Committees have been institutionalised as per provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The focused efforts across these dimensions have resulted in a 25% increase of women managers in your Company since FY 2021-22.

Your Company continued its practice of active leadership outreach to employees. Periodic communication with the ITC community through ‘StudioOne Townhalls’ led by the Chairman, provided employees avenues to hear from and engage with leaders about your Company’s vision, strategy and milestones. This was supplemented by a more personalised engagement through the ‘StudioOne Xchange’ initiative. The Chairman and other members of the Corporate Management Committee interacted with managers across Businesses in small groups, sharing your Company’s vision and strategies while also inviting suggestions and feedback. Your Company believes that alignment of all employees to a shared vision and purpose is vital for winning in the marketplace. It also recognises the mutuality of interests with key stakeholders and is committed to continue building harmonious employee relations.

Your Company remains dedicated to an Employee Relations climate of partnership and mutuality while ensuring operations are competitive, flexible and responsive. The Employee Relations philosophy of your Company, anchored in the tenets of Scientific Management, Industrial Democracy, Human Relations and Employee well-being, has contributed towards building a robust platform which has aided the conclusion of collective bargaining agreements at several of its manufacturing units and hotel properties, ensuring smooth commencement of operations at greenfield locations and the execution of productivity improvement practices.

In its relentless pursuit of excellence and value creation, your Company offers an abundance of

opportunities for employees to grow and thrive in an environment of trust, empowerment and continuous learning. The access to best-in-class resources, technology and infrastructure, the prospect of building businesses rooted in value chains in India, the deployment of deep consumer insights to create and shape Indian brands are the defining hallmarks of ‘The ITC Way’. This unique blend of a high-performance culture coupled with care and respect for people remain vital to realizing your Company’s vision of sustaining its position as one of India’s most valuable and admired corporations.

WHISTLEBLOWER POLICY

Your Company’s Whistleblower Policy encourages Directors and employees to bring to your Company’s attention, instances of illegal or unethical conduct, actual or suspected incidents of fraud, actions that affect the financial integrity of your Company, or actual or suspected instances of leak of unpublished price sensitive information, that could adversely impact your Company’s operations, business performance and/or reputation. The Policy requires your Company to investigate such incidents, when reported, in an impartial manner and take appropriate action to ensure that the requisite standards of professional and ethical conduct are always upheld. Anonymous complaints are also entertained if the same is backed by specific allegations & verifiable facts and is accompanied with supporting evidence. It is your Company’s Policy to ensure that no complainant is victimised or harassed for bringing such incidents to the attention of your Company, and to keep the information disclosed during the course of the investigation as confidential. The practice of the Whistleblower Policy is overseen by the Audit Committee and no employee was denied access to the Committee during the year. The Whistleblower Policy is available on your Company’s corporate website at https://www.itcportal.com/whistleblower-policy .

During the year, your Company received five complaints in terms of the Whistleblower Policy, out of which four complaints were investigated and

appropriate action(s) were taken. Investigation is underway for the remaining complaint.

SUSTAINABILITY 2.0

Your Company believes that when enterprises make societal value creation an integral part of their corporate strategy, powerful drivers of innovation emerge that make growth more enduring for all stakeholders. This paradigm is called ‘Responsible Competitiveness’ - an abiding strategy that focuses on extreme competitiveness but in a manner that replenishes the environment and supports sustainable livelihoods.

Your Company’s innovative business models synergise the building of economic, environmental and social capital, thus embedding sustainability at the core of its corporate strategy. Today, this strategy has not only contributed to building strong businesses of the future as well as a portfolio of winning world-class brands, but also in making your Company a global exemplar in ‘Triple Bottom Line’ performance. Your Company is the only enterprise in the world of comparable dimensions to have achieved and sustained the three key global indices of environmental sustainability of being ‘water positive’ (for 22 years), ‘carbon positive’ (for 19 years), and ‘solid waste recycling positive’ (for 17 years).

This approach has enabled your Company and its businesses to support sustainable livelihoods for more than six million people.

Your Company is actively working towards Sustainability2.0, an agenda which reimagines sustainability under the pressing challenges of climate change and social inequity. Sustainability 2.0 calls for inclusive strategies that can support sustainable livelihoods, pursue newer ways to fight climate change, enable the transition to a net zero economy, work towards ensuring water security for all and create an effective circular economy for post-consumer packaging waste. It also entails protecting and restoring biodiversity and ecosystem services through adoption of nature-based solutions. Your Company believes that agility in thought and action, meaningful public-private-people partnerships

and Responsible Competitiveness will act as core enablers of this new agenda. Your Company has the potential to make a large-scale impact not only from an economic standpoint, but also from the perspective of supporting livelihoods and social enablement because of its presence across several critical sectors of the economy. With its bold Sustainability 2.0 agenda, your Company is setting the bar higher and remains committed to making meaningful contribution to the Nation’s future while retaining its status as a sustainability exemplar. The Sustainability 2.0 ambitions include:

Climate Change

-    Enhancing the share of renewable energy usage to 50% of total energy consumption by 2030.

-    Meeting 100% of purchased grid electricity requirements from renewable sources by 2030.

-    Reducing specific energy consumption by 30% and specific Greenhouse Gases (GHG) emissions by 50% by 2030 as compared to the FY 2018-19 baseline.

-    Sustain and enhance carbon sequestration by expanding forestry projects through your Company’s Social and Farm Forestry programme and other such initiatives covering over 1.5 million acres by 2030.

Water Stewardship

-    Achieving 40% reduction in specific water consumption by 2030 as compared to the FY 2018-19 baseline.

-    Creation of rainwater harvesting potential equivalent to over five times the net water consumption by 2030.

-    Certification of all sites in high water stressed areas as per the international water stewardship standard by Alliance for Water Stewardship (AWS) by 2035.

-    Improve crop water-use efficiency in agri-value chains through demand side management interventions and enable savings of 2,000 million kl of water by 2030.

-    100% of your Company’s Packaging to be Reusable, Recyclable or Compostable/ Biodegradable by 2028.

-    Sustain plastic neutrality (attained in FY 2021-22) by enabling sustainable management of waste in excess of the amount of packaging utilised.

Sustainable Agriculture

-    Promote climate smart village approach in core Agri Business catchments covering over 3 million acres by 2030 to build climate resilience across agri value chains.

Biodiversity Conservation

-    Revive & sustain ecosystem services and products provided by nature, through adoption of nature-based solutions and biodiversity conservation covering over one million acres by 2030.

Sustainable Livelihoods

-    Supporting sustainable livelihoods for 10 million people by 2030.

Your Company’s Businesses are actively working towards achieving your Company’s Sustainability 2.0 vision. During the year, over 50% of your Company’s total energy requirements were met from renewable sources. With this, your Company has already met its 2030 commitment of achieving 50% renewable energy share in FY 2023-24 itself i.e., seven years in advance. Commendable progress has been made in line with 2030 targets relating to specific energy, specific GHG emissions and specific water consumption across Businesses as well. In line with its commitment, your Company continued to remain plastic neutral during FY 2023-24 by sustainably managing more plastic packaging waste than the amount of plastic packaging utilised. During the year, your Company’s large-scale programmes on Sustainable Agriculture were augmented to cover 2.7 million acres. A detailed performance dashboard against 2030 commitments is available in your Company’s Sustainability Report, 2024.

To achieve its Sustainability 2.0 vision, your Company continues to strengthen its management approach which is guided by a comprehensive set of sustainability policies and is being implemented across the organisation. Your Company has put in place robust mechanisms for engaging with key stakeholders, identification of material sustainability issues and progressively monitoring and mitigating the impacts along the value chain of each Business. Your Company will continue to update these systems and processes in line with evolving disclosure standards and Environmental, Social and Governance (ESG) requirements.

Your Company’s 20th Sustainability Report published during the year detailed the progress made across all dimensions of the ‘Triple Bottom Line’ for FY 2022-23. This report was prepared in conformance with ‘In Accordance - Comprehensive’ criteria of the Global Reporting Initiative (GRI) standards and is third-party assured to ‘Reasonable Level’ as per International Standard on Assurance Engagements (ISAE) 3000. The report continues to be aligned to the requirements of the Integrated Reporting Framework as well.

Your Company’s Sustainability Report for FY 2023-24 is being prepared and will be made available on your Company’s corporate website in due course.

In addition, the Business Responsibility & Sustainability Report (BRSR), as mandated by the Securities and Exchange Board of India (SEBI) for the year under review is annexed to the Report and Accounts. The BRSR maps the sustainability performance of your Company against the nine principles forming part of the National Guidelines on Responsible Business Conduct (NGRBC) issued by the Ministry of Corporate Affairs, Government of India.

During the year, your Company sustained its ‘AA’ rating by MSCI-ESG for the sixth consecutive year, the highest rating among global tobacco majors, and has also been included in the Dow Jones Sustainability Emerging Markets Index for the fourth year in a row. Additionally, your Company entered the prestigious ‘A List’ for CDP Water by achieving the highest ‘A’ rating (Leadership Level),

which is higher than the Asia and Global average of ‘C’. For CDP Climate, your Company retained its ‘A -’ (Leadership Level) rating, which is higher than the Asia and Global average of ‘C’.

Contribution to the United Nations Sustainable Development Goals (UN SDGs)

Your Company’s Sustainability strategies and Social Investment Programmes & interventions, in addition to their alignment with national priorities, are also well positioned to contribute to the achievement of India’s commitment under the UN SDGs. Your Company’s multi-dimensional environmental and social interventions which have been scaled up over the years contribute favourably to all 17 UN SDGs.

For instance, your Company’s programme on Climate Smart Agriculture is aligned to the Government’s National Mission for Sustainable Agriculture, and also contributes to the achievement of multiple SDGs, including SDG 13 (Climate Action), SDG 15 (Life on Land), SDG 1 (No Poverty), SDG 2 (Zero Hunger) and SDG 12 (Responsible Consumption and Production).

A comprehensive statement linking your Company’s interventions to the SDGs including corresponding targets will be available in your Company’s Sustainability Report for FY 2023-24.

Building Climate Resilience

Your Company recognises the urgent need to combat climate change for building a more secure future and the role it can play in enabling a net-zero economy.

To address the risks of climate change, your Company’s climate strategy places equal emphasis on transitioning to a low carbon economy and adapting to the worst impacts of climate change.

Your Company is pursuing a low carbon growth strategy through extensive decarbonisation programmes across its value chain. These include increasing the share of renewable energy, continuous reduction of specific energy, construction of green buildings, greening logistics & optimising distance-to-market, and promoting regenerative agriculture practices in agri-value chains. Your Company is also conducting life-cycle analysis (LCA) studies for developing a portfolio of innovative and

sustainable products in line with growing consumer preference for climate friendly products.

Additionally, in order to address short-medium term as well as long-term physical risks of climate change, your Company is working with climate experts to conduct comprehensive climate risk and vulnerability assessments using climate models across its key agri value chains and operating locations (factories, hotels and warehouses). These assessments utilise latest Al-enabled climate modelling tools for projecting the extent of risk from climate hazards related to changes in temperature, precipitation, sea level rise, flooding and other extreme weather events over decadal time frames covering the period till 2100 under various Shared Socioeconomic Pathways (SSPs) scenarios (SSP1-2.6, SSP2-4.5 and SSP5-8.5). Detailed farm-level studies have been conducted to understand the potential adverse impacts of climate change on your Company’s key agri-value chains. These risk assessments help further calibrate the climate resilience measures that are being implemented across your Company’s value chains. For major crops like wheat, pulpwood and leaf tobacco among others, there is significant and sustained work being done by your Company on the development of climate-tolerant varieties as well as dissemination of climate-resilient and regenerative agronomic practices in the growing areas. Over 140 locations of your Company, encompassing both owned as well as key value chain facilities have been assessed for climate risk. Based on the findings of these assessments, detailed site-specific studies are undertaken for developing contextual location-specific adaptation plans and strategies.

Energy Conservation and Renewable Energy

As a responsible corporate citizen, your Company has made a commitment to reduce dependence on energy from fossil fuels. Accordingly, all factories incorporate appropriate green features and premium luxury hotels, and office complexes continue to be certified at the highest level by either the US Green Building Council (USGBC) or Indian Green Building Council (IGBC). During the year, despite significant increase in scale

of operations, over 50% (previous year: 43%) of your Company’s total energy requirements were met from renewable sources such as biomass, wind and solar. In line with your Company’s continuous thrust on expanding renewable footprint across both thermal and electrical energy, this achievement was driven by the commissioning of state-of-the-art and future-ready High Pressure Recovery Boiler at the Bhadrachalam mill of your Company’s Paperboards & Specialty Papers Business in the previous year which replaced conventional soda recovery boilers thereby reducing carbon footprint through lower coal consumption. In addition to this, your Company has installed and commissioned 205 MW of solar and wind power capacity across the country to meet its electrical energy requirements.

Your Company continues its efforts towards meeting 100% of purchased grid electricity requirements from renewable sources by 2030 and sustaining 50% renewable energy share in its total energy consumption based on a mix of energy conservation and renewable energy investments, despite significant enhancement in its scale of operations going forward.

GHG and Carbon Sequestration

The GHG inventory of your Company for FY 2023-24 compiled according to the ISO 14064 Standard has been assured, as in the earlier years, at the ‘Reasonable Level’ by an independent third party.

The GHG inventory covers emissions from your Company’s operations and GHG removals from your Company’s large-scale forestry programmes. Your Company’s Social and Farm Forestry initiatives, besides sequestering carbon from the atmosphere, help towards greening of degraded wasteland, prevent soil erosion, enhance organic matter content in soil and increase ground water recharge.

Towards Water Security for All

With water scarcity increasingly becoming an area of global and national concern, your Company continues to focus on an integrated water management approach that includes water conservation and

harvesting initiatives at its units - while at the same time working towards meeting the water security needs of all stakeholders at the local watershed level. Several interventions have been rolled out to improve water-use efficiencies such as adopting latest technologies and increasing reuse and recycling practices within the fence while also working with farmers and other community members towards improving water-use efficiencies.

Demand side management is a critical component of your Company’s Water Stewardship programme. Recognising the critical imperative of reducing water use, especially in agriculture, your Company continues to work with farmers to achieve ‘more crop per drop’ and improve farmer incomes. Over 15 lakh acres have been covered during the year across 12 states through micro irrigation technologies and crop-specific agronomical practices. Basis parameters established earlier, there has been potential water savings to the tune of 1,090 million kl during the year. These interventions are spread across 15 crops including four key agri value chains - wheat, tobacco, pulpwood and spices, and result in water savings in the range of 15-50% as compared to conventional practices.

The water-use efficient practices promoted also help in reducing GHG emissions as compared to the conventional practices followed.

The demand side measures are implemented along with augmenting supply at the sub-catchment level through various interventions focused on harvesting rainwater based on the recommendations of hydro-geological studies. The supply side interventions include enhancing capture and storage of rainwater (within soil surface and storage structures) and recharging aquifers. In the process, traditional water bodies are restored, and wetland eco-systems are conserved. To have a long-lasting impact and balance out the competing demands on water resources, your Company has also extended work to river basin level as per requirements. During the year, work has been done in four river basins viz. Maharashtra (Ghod basin), Madhya Pradesh (Kolans basin),

Tamil Nadu (Upper Bhawani basin) and Telangana (Murreru basin) and recently work has been initiated in Karnataka (South Pennar basin).

Considering the increasing water stress in urban catchments, your Company is implementing water security programmes in Bengaluru and Chennai catchments. These programmes focus on restoring urban water bodies, roof water harvesting, groundwater recharge and piloting technologies like ‘Bore Charger systems’ to recharge shallow aquifers and are aimed at addressing major water related challenges such as groundwater depletion and flooding during heavy rains.

Your Company also conducts efficacy studies to assess the impact of the watershed work carried out, and to ensure that maximum benefits accrue in the long-term. As on 31st March, 2024, your Company’s integrated watershed development projects covering over 1.6 million acres of land have created a total rainwater harvesting potential (RWH) of over 54 million kl. In total, nearly 55 million kl of rainwater has been harvested, including within the fence, which is over four times the net water consumed by your Company’s operations in FY 2023-24.

In addition, your Company is spearheading the implementation of Alliance for Water Stewardship (AWS) Standard which is a credible, globally-applicable and recognised framework for ensuring sustainable water management within the wider water catchment context.

During the year, five units of your Company i.e. Branded Packaged Foods unit at Ranjangaon; Cigarette units at Ranjangaon, Bengaluru and Saharanpur and Green Leaf Threshing unit at Mysuru, received the AWS Platinum level certification, the highest recognition for water stewardship awarded by AWS. Till date, seven units of your Company have achieved Platinum level certification under the AWS Standard. Your Company is in the process of implementing the AWS Standards at other units in high water stress areas and will progressively obtain AWS certification for these sites.

In addition to AWS certification, four ITC Hotels -ITC Mughal, ITC Sonar, ITC Rajputana and ITC Maurya have the distinction of being the first four LEED® Zero Water certified hotels in the world.

Pioneering the Green Building Movement in India

In order to continuously reduce your Company’s energy footprint, green features are being integrated in all new and old constructions including hotels, manufacturing units, warehouses and office complexes. Your Company is a pioneer in the green building movement, with 40 buildings having received Platinum certification by USGBC/IGBC.

Several of your Company’s factories and office complexes have received the Green Building certification from IGBC and the Leadership in Energy & Environmental Design (LEED®) certification from USGBC. In 2004, the ITC Green Centre at Gurugram received LEED Platinum^® certification by USGBC, making it the largest Platinum rated building in the world at that point in time. The data centre at Bengaluru, ITC Sankhya, is the first data centre in the world to receive the LEED Platinum^® certification by USGBC. Large infrastructure investments such as the ITC Green Centre at Guntur and the ITC Green Centre at Bengaluru (both LEED Platinum^® certified) continue to demonstrate your Company’s commitment to green buildings. Virginia House, Kolkata and ITC Centre, Kolkata - the headquarters of your Company, are also certified at the highest ‘LEED Platinum®’ rated Green Building by USGBC.

Reaffirming your Company’s commitment to the ethos of ‘Responsible Luxury’, 23 of its hotels have been awarded the LEED Platinum^® Certification by USGBC, the highest number of hotels in the world to have achieved this feat, making your Company a trailblazer in green hoteliering globally. ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst the world’s largest LEED Platinum^® certified green hotels.

Furthering your Company’s Responsible Luxury ethos, 12 of its iconic hotels have received LEED^® Zero Carbon Certification, the first in the world to

achieve this feat. Further, your Company’s Sankhya data centre in Bengaluru became the first data centre in the world to be awarded the LEED® Zero Carbon certification.

Enabling a Circular Economy

Your Company continues to make significant progress in improving the circularity of waste generated in operations. The focus is on reducing waste through constant monitoring, improvement of efficiencies in material utilisation and adequate waste segregation thereby improving recycling rates. During the year, your Company achieved over 99% recycling of waste generated in course of its operations. This has prevented waste from reaching landfills, with the associated problems of soil & groundwater contamination and GHG emissions, all of which can adversely impact public health. In addition, your Company’s Paperboards & Specialty Papers Business recycled nearly 89,000 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Your Company aims to go beyond the requirements of Plastic Waste Management Rules, 2022 to ensure that over the next decade, 100% of packaging is reusable, recyclable or compostable/biodegradable. Your Company is working towards optimising packaging in a way that reduces the environmental impact arising out of post-consumer packaging waste without affecting product integrity. This is being addressed in a comprehensive manner by optimising packaging design, introducing recycled content in packaging, identifying alternative packaging material with lower environmental impact and supporting development of suitable end-of-life solutions for packaging waste.

Your Company has successfully implemented multiple large-scale models of solid waste management across the country. These models, based on principles of circular economy, are scalable, replicable and sustainable, and have enabled your Company to sustain its plastic neutral status since FY 2021-22.

The approach is centred around treating waste as a resource and ensuring that minimal waste goes to landfill, which can be achieved only when waste

is segregated at source. The initiatives focus on educating citizens on segregating waste at source into dry & wet streams and ensuring that value is derived from these resources and in the process support sustainable livelihood for waste collectors. These models operate on a public-private partnership basis with active involvement of urban local bodies, civil society and the informal sector of waste collectors.

Your Company has exceeded its commitment on plastic neutrality for the third consecutive year by collecting and sustainably managing around 70,000 tonnes of plastic waste, which is more than the plastic packaging utilised by your Company. Your Company has also obtained independent third-party assurance for its plastic neutrality status since FY 2022-23.

Your Company’s waste recycling programme,

‘WOW - Well Being Out of Waste’, enables the creation of a clean & green environment and promotes sustainable livelihoods for waste collectors. During the year, the programme continued to be executed in Bengaluru, Mysuru, Hyderabad, Coimbatore, Chennai, Delhi, major towns of Telangana and several districts of Andhra Pradesh. The quantum of dry waste collected during the year was about 63,700 MT from over 1,500 wards. The programme has covered over 2.5 crore citizens in over 64 lakh households, 67 lakh school children and around 2,200 corporates since its inception. It has promoted sustainable livelihood for over 17,800 waste collectors by facilitating an effective collection system in collaboration with Municipal Corporations. The intervention has also created over 150 social entrepreneurs who are involved in optimising value capture from the collected dry waste.

Your Company’s ‘YiPPee! Better World programme’ is aimed at creating awareness about plastic waste and ways to reduce, recycle and reuse it among students. During the year, more than 30 lakh school children were educated on plastic waste recycling with an initiative to collect plastic equivalent to 2.83 crores YiPPee! Noodles wrappers across 6,000 schools.

This programme along with Company’s Social Investments Programme has provided schools with over 3,950 benches and tables made from recycled plastic.

In addition to WOW, a separate community-driven programme on decentralised Solid Waste Management (SWM), including closed loop Green Temple programme in collaboration with Swachh Bharat Mission, is operational in 33 districts across 10 states covering over 25 lakh additional households, taking the cumulative coverage to over 50 lakh households. This programme deals with both wet and dry waste and focuses on minimising waste to landfill by managing waste at source. Under the programme, more than 4 lakh MT of waste was collected during FY 2023-24, out of which around 2.5 lakh MT of wet waste was composted, and 90,000 MT of dry waste recycled, and thus 87% of the total waste was avoided from being sent to landfills. Further, home composting was practiced by over 6.4 lakh households cumulatively.

In Uttar Pradesh, your Company entered into the second phase of partnership with the Urban Development Department for 85 Urban Local Bodies (ULBs) including 25 new ULBs, after successfully completing first phase by training over 3,300 Government officials from 62 municipalities on decentralised SWM, thus enabling the extension of coverage of decentralised waste management to over 28.54 lakh households. Your Company had also signed an MoU with Lohiya Swachh Bihar Abhiyan (LSBA), Rural Development Department, Government of Bihar to train officials on implementation of decentralised SWM in 456 villages of Ganga region (‘Ganga Gram’) across 12 districts of Bihar. During the year, refresher training and handholding support was provided to 1,881 Panchayat officials of 456 Ganga Gram villages through a cascade approach, who then initiated focused waste management activities in their villages and covered over 4.6 lakh households.

Your Company had also collaborated with Department of Drinking Water and Sanitation (DDWS),

Government of India, and India Sanitation Coalition (ISC), FICCI, to develop 36 Gram Panchayats (GPs) across 10 states as Lighthouses, demonstrating best practices in sanitation and waste management, which will be adopted by other GPs gradually. The partnership is part of the DDWS’s plan of creating

75 Lighthouse Gram Panchayats across India.

During the year, of the 36 GPs, 22 GPs were declared Model by Government, with the balance 14 GPs on track to become Model in the coming months.

Your Company’s approach of involving SHGs as service provider for GPs for SWM and the use of Swachhata Mitra App for monitoring waste management in partnership with Bihar Government has got high appreciation as best practices.

Biodiversity Management

Given the linkages between agriculture and the essential ecosystem services that nature provides, your Company recognises that the preservation and nurturing of biodiversity is crucial for long-term sustainability of its business and is committed to conducting its operations in a manner that protects, conserves and enriches biodiversity in line with the Board-approved Policies on Biodiversity Conservation and Deforestation.

For both greenfield and brownfield operations, processes are in place for assessing any actual or potential biodiversity related risk or impact including conducting environmental impact assessments wherever required by environmental regulations. Moreover, location-specific exposure including proximity to Key Biodiversity Areas is assessed periodically. Basis these assessments, key nature-related risks that are material to your Company’s businesses/locations are identified, and mitigation plans are developed and implemented. Location specific risks covered in these assessments include water stress, climate risks including extreme weather events like droughts and floods, land-use changes, soil quality and productivity, among others. Your Company also recognises the potential of nature-based solutions for carbon sequestration and building climate resilience, and prioritises actions to minimise impacts across ecosystems and manage dependencies in a sustainable manner.

Your Company also has large scale programmes in place for ensuring deforestation-free leaf tobacco and wood value chains. For more information, refer to the Corporate Social Responsibility section.

Sustainable Supply Chain and Responsible Sourcing

Your Company, with its diverse and expanding portfolio of businesses, is working towards scaling up its sustainable supply chain initiatives as part of its Sustainability 2.0 Vision. Your Company has a Board-approved Policy on ‘Sustainable Supply Chain and Responsible Sourcing’ and a ‘Code of Conduct for Suppliers and Service Providers’ that together lay down the foundation for your Company’s engagement with its suppliers. In line with this policy, your Company engages with its supply chain members for building their capacity, assessing sustainability risks, and supporting them in building resilience against such risks. The policy also encourages suppliers to work towards resource-use efficiency, including sustainable natural resource management, GHG emission reduction and sustainable waste management. For focused engagement with key suppliers, your Company has created a framework for identifying its critical suppliers based on multiple criteria like value of the business with these suppliers, ESG risk exposure and substitutability of the supplier, among others. Till FY 2023-24, 100% of your Company’s Critical Tier-I suppliers have been trained on ESG related aspects and 40% have undergone an ESG assessment by a third party.

For key agri value chains, your Company has implemented large scale sustainable and Climate Smart Agriculture programmes. Till date, 27.94 lakh acres and over 10.5 lakh farmers including 1.95 lakh women farmers have been covered under your Company’s Climate Smart Agriculture programme. Your Company also supports farmers with adoption of sustainable farm certifications like Rainforest alliance (RFA),

Forest Stewardship Council® (FSC®), Global Agricultural Practices (G.A.P) for identifying and addressing environmental risks and human rights related issues. For more information, refer to the Corporate Social Responsibility section.

Nutrition

Your Company’s Branded Packaged Foods Businesses have developed a 4-pillar model that uniquely combines the strategic commitments to

deliver on its nutrition strategy - ‘Help India Eat Better’. The strategy has been developed to create an ecosystem and guide the organisation towards supporting the dream of a healthier nation via value-added products, sustainable food system initiatives, empowered people and healthy communities. This also includes focus on diet diversity, food fortification, leveraging traditional systems of knowledge and use of millets. The strategy is also in line with Government of India initiatives such as Mission Poshan 2.0, Anemia Mukt Bharat, Kuposhan Mukt Bharat, Surakshit Matritva Abhiyan and the Aspirational Districts Programme. Robust science-based nutrition targets have also been developed and are continuously tracked and communicated to your Company’s stakeholders. Your Company also achieved the first rank in ATNI India Index 2023 amongst 20 of the largest Indian food & beverage manufacturers as assessed by the globally recognised Access to Nutrition Initiative (ATNI). The index is published every 2-3 years and evaluates companies on their governance and management, production and distribution of healthy products, influence on consumer choices, and policies and actions targeting priority populations at high risk of malnutrition.

Promoting Thought Leadership in Sustainability

To ensure wider adoption of the ‘Triple Bottom Line’ philosophy across the Industry, your Company established the ‘CII - ITC Centre of Excellence for Sustainable Development’ (CESD) in 2006 in collaboration with the Confederation of Indian Industry (CII). The Centre continues to focus on its endeavour to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the following:

Climate Change

- The CII Climate Action Charter (CCAC) provides a platform for Indian businesses to map Climate Change as a material risk across value chains and develop long-term actions to build resilience. Currently, the Charter has more than 300 signatories across industry sectors.

-    The Centre launched the ‘Industry’s Priorities for COP28, Dubai: Indian Industry Perspective Report’ during the Round Table on ‘Decentralised Renewable Energy (DRE) for SDG7: Powering livelihoods with clean energy’ in December 2023, organised by the Centre, Ministry of New and Renewable Energy (MNRE) and International Solar Alliance (ISA).

-    In collaboration with Ministry of Environment,

Forest and Climate Change of India (MoEFCC), the Centre actively contributed to the formulation of the National Inventory of Greenhouse Gases related to the Industrial Processes and Product Use (IPPU) sector. This collaborative effort was part of India’s Third National Communications (NATCOM) to the United Nations Framework Convention on Climate Change (UNFCCC).

-    The Centre led efforts to frame a policy paper under the B20 Taskforce on Energy, Climate Change, and Resource Efficiency. The paper was finalised through consultations and shared with the G20 representatives for consideration. 160+ members shared their suggestions for the policy paper. The Taskforce also developed a policy brief on Decarbonisation of Emerging G20 Countries.

-    During the B20 Summit 2023, two sessions on Environment, Social and Governance (ESG) were organised by the Centre including a session on ‘Sustainability & Development Imperatives and the Role of Standards’. The session highlighted the need for sustainability reporting for companies with a simple, clearly defined sustainability standard, ensuring that standards, KPIs, thresholds and ratings consider applicability, relevance, and prioritisation of the Global South. The Centre also released the Policy Paper under B20 India Action Council on ESG in Business emphasising the imperative for convergence on ESG standards and underscoring the role of private sector in driving these transformations.

Circular Economy

-    The India Plastics Pact (IPP), launched in September 2021, is uniting businesses, NGOs,

and citizens behind four ambitious time-bound targets to help realise a vision of a world where plastic is valued and doesn’t pollute the environment. The Pact is the first in Asia and joins a global network of 13 Plastics Pacts. 53 organisations are signatories to the Pact. The first Annual Report providing a baseline to measure the actions of the Pact was launched in June 2023.

-    The Pact’s Second Annual Conference was held on the side-lines of the 18th Sustainability Summit. 60 participants from across the plastics value chain attended the Conference.

-    138 sites of 18 organisations were certified with Single-use Plastic (SuP) Free Certification.

-    Five facilities were verified to ensure that the waste generated by the facility is being diverted from landfill disposal. Zero Waste to Landfill Certification was awarded to three organisations.

Biodiversity

-    The Convention on Biological Diversity’s Global Biodiversity Framework (GBF) has been integrated into the development of India Business & Biodiversity Initiative (IBBI) members’ roadmap for addressing biodiversity risk. 20 business members have developed a biodiversity-based GBF and set measurable targets for addressing nature-related risks by 2030.

-    In 2023, a National Consultation Group on the Taskforce on Nature-related Financial Disclosure (TNFD) Framework was established in India to provide inputs for the global TNFD Framework development. 50 business members contributed by providing inputs, and seven companies have piloted the TNFD Framework.

-    About 100 Business representatives have been trained on GBF to mainstream biodiversity in business planning.

Air Pollution

-    ‘India CEO Forum for Clean Air’ is a dedicated platform aiming to galvanise Indian businesses to take forward clean air agenda in India and promote

focused actions through collective leadership of Industry sub-sectors. The Forum started in 2019 with 17 founding members and is now 105 members strong with signed ‘Clean Air Declaration’ by top leaders of member companies.

-    In 2023-24 cropping season, the Crop Residue Management (CRM) Programme scaled to 432 villages in Punjab and Haryana covering

appx. 4,83,196 acres, engaging with 86,000 farmers to promote sustainable crop residue management practices.

Excellence in Sustainability

-    The 18th Sustainability Summit, with the theme of Strengthening Global Partnerships for Sustainable, Equitable and Inclusive Development was organised with the support of 25 partner organisations.

-    The Summit witnessed over 150 eminent national and international speakers who shared their perspectives, representing diverse sectors from across the globe. It was attended by around

400 participants and over 160 B2B meetings took place during the Summit.

-    During the 18th Sustainability Summit, the CCI Climate Action Charter (CCAC) Insights Report with key findings from the seven clusters was also released.

ESG Intelligence & Analytics

-    The Centre has helped companies understand their status in the ESG space, identify key ESG gaps and areas for improvement. Leveraging the Centre’s in-house SaaS-based tools, 10 organisations across industry sectors have undertaken ESG gap assessments.

-    The Eco Edge initiative of the Centre aims at integrating sustainability in the value chains of companies. The focus areas include Decarbonisation, Circularity, Health & Safety, and Human Rights. The programme evaluates the performance of sourcing companies and their value chain partners. The programme was piloted with two automobile companies.

-    The Centre conducted over 35 ESG awareness sessions with value chain partners.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company’s overarching commitment towards creating significant and sustainable societal value is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Your Company has a comprehensive CSR Policy outlining programmes, projects and activities that your Company undertakes to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Section 135 read with Schedule VII of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The key elements of your Company’s CSR interventions are to:

-    deepen engagement in identified core operational geographies to promote holistic development and design interventions in order to respond to the most significant development challenges of your Company’s stakeholder groups.

-    strengthen capabilities of Non-Government Organisations (NGOs)/Community Based Organisations (CBOs) in all project catchments for participatory planning, ownership and sustenance of interventions.

-    drive the development agenda in a manner that is inclusive and empowers women and the poor & marginalised communities in the vicinity of your Company’s factories and agri-catchments, thereby significantly improving Human Development Indices (HDI).

-    ensure behavioural change through focus on demand generation for all interventions, thereby enabling participation, contribution and asset creation for the community.

-    strive for scale with impact by leveraging Government partnerships & collaboratives and also accessing the most contemporary knowledge/technical know-how.

Your Company’s stakeholders are confronted with multi-dimensional and inter-related concerns, at the core of which is the challenge of securing sustainable livelihoods. Your Company undertakes periodic stakeholder engagements in the form of community need assessments, impact assessments and other evaluations. During the year, your Company undertook 42 community engagements across 13 states where your Company’s Social Investments Programme is being implemented, for the purpose of understanding grievances if any, of the community members. Further, over 6,000 household surveys were also conducted during the year. Accordingly, interventions under your Company’s Social Investments Programme have been appropriately designed to build capacities and promote sustainable livelihoods.

Your Company’s Social Investments Programme follows the Two Horizon approach that focuses on inclusive growth and holistic development of households; with women and poor & vulnerable communities at the core. In addition to being beneficiaries of several programmes, women are also influencers and active participants in grassroot institutions. Several progressive women beneficiaries also act as change makers in the society.

The Two Horizon approach provides an integrated and affirmative response to development with Horizon-I focusing on strengthening and sustaining livelihoods of communities (primarily agriculture and allied sector livelihoods) and Horizon-II focusing on building capabilities and capacities to empower beneficiaries for a better life for the future.

The footprint of your Company’s CSR projects is spread across 26 States/Union Territories covering over 300 districts.

Your Company’s CSR interventions were conferred with two prestigious awards and recognitions during FY 2023-24:

-    Winner of 1st UNDP-Mahatma Biodiversity Award for ‘Human Centric Approaches to Biodiversity’

-    ‘Winner’ under ‘Empowerment (large corporate) category’ for its Targeting Hardcore Poor (THP) Programme in the Second edition of Social

Leadership Awards organised by Bengal Chamber of Commerce & Industry.

Natural Resources Management - Water Stewardship Programme

The Water Stewardship programme aims to facilitate water security for all dependents in the factory catchments and to drought-proof the agri-catchments to minimise risks to agricultural livelihoods arising from drought and moisture stress. The programme promotes the development and management of local water resources in moisture-stressed areas by facilitating community participation in planning and implementing such measures, as well as building, reviving and maintaining water-harvesting structures and thus conserving the wetland ecosystems.

In addition to rural and agri focus, two urban water programmes are also being implemented in Bengaluru and Chennai aimed at addressing the challenges associated with urban water. These programmes facilitate revival of urban water bodies, roof water harvesting and target recharge of shallow aquifers.

To address the magnitude of water stress, your Company has also extended water stewardship work to river basin level interventions so that the competing demands from neighbouring areas of our catchments are addressed and a more holistic and sustainable impact created. Work has been done in four river basins till date in Maharashtra (Ghod basin), Madhya Pradesh (Kolans basin), Tamil Nadu (Upper Bhawani basin) and Telangana (Murreru basin) and work initiated in the fifth basin in Karnataka (South Pennar basin).

The coverage of water stewardship programme currently extends to 55 districts of 17 states. During the year, the area under watershed increased by over 1.68 lakh acres, taking the cumulative coverage area to over 16.38 lakh acres. Over 4,100 water-harvesting structures including ground water recharge structures were built during the year, creating nearly 5.5 million kl of rainwater harvesting potential. The total number of water-harvesting structures reached to over 32,400 and the net water storage to over 54 million kl. In addition, as part of demand management intervention, your Company

continues to work with farmers to achieve ‘more crop per drop’ by promoting agronomic practices and micro irrigation techniques targeted towards saving water in cultivation and improving farmer incomes. Over 15 lakh acres across 15 crops have been covered across 12 states during the year as part of demand management. Studies had been conducted by Indian Institute of Rice Research,

Tamil Nadu Agricultural University and Vasantdada Sugar Institute to estimate water savings in rice, sugarcane, coconut and banana in your Company’s programme locations. Basis these studies and other research documents, it is estimated that the demand management practices promoted by your Company have led to potential water savings to the tune of nearly 1,090 million cubic metres during the year.

Additionally, your Company is continuing partnerships with multiple State Government departments for Water Stewardship. Under the partnership with Watershed Development Department, Government of Karnataka, the Government is now implementing drought proofing plans using your Company’s Water Stewardship approach for which capacities were created. The Government has initiated work on 142 watersheds covering three lakh acres and has already constructed 1,050 water harvesting and ground water recharge structures based on the training provided by your Company.

Driven by your Company’s Water Stewardship programme, three Cigarette units at Pune, Bengaluru and Saharanpur, two Branded Packaged Foods units at Mysuru and Pune, Paperboards unit at Kovai and GLT unit at Mysuru have received AWS certifications in Platinum category till date.

Natural Resources Management - Biodiversity

The focus of the programme is on reviving ecosystem services provided to agriculture such as natural regulation of pests, pollination, nutrient cycling, soil health retention and genetic diversity, which have witnessed considerable erosion over the past few decades. Biodiversity conservation is done through restoration of degraded village commons and native species tree planting in the catchments. During the

year, your Company’s biodiversity conservation initiative covered over 1.8 lakh acres in over 38 districts across 10 states, taking the cumulative area under biodiversity conservation to over 4.7 lakh acres. While the conservation work is being carried out in village commons, this intervention significantly benefits agricultural activity in the vicinity of these plots through soil moisture retention, carbon sequestration and by acting as hosts to insects and birds beneficial to agriculture. Two technical studies done earlier by ‘The Energy and Resources Institute’ (TERI) & ‘IORA Ecological Solutions’ have recorded improvement in carbon stocks, i.e., carbon sequestered by trees, as well as floral and faunal biodiversity compared to control areas. A project has also been taken up for mangroves conservation as they are important biodiversity reservoirs in coastal areas.

To increase the coverage for pastureland development and biodiversity conservation, during the year, your Company partnered with AP Panchayat Raj and Rural Development Department to improve livelihoods and conserve village commons in 9 districts.

In this context, your Company had earlier partnered with Wasteland & Pastureland Development Board (WPDB), Rajasthan targeting coverage of 2.5 lakh acres across 8 districts. Till date, 1.32 lakh acres have been covered across 5,800 villages leveraging Government resources. In the partnership with Forest Department of Maharashtra, efforts towards soil and moisture conservation in the forest and fringe areas of Pune district was progressed with Department staff trained by your Company implementing the work.

Post training, Forest Department took up soil and moisture conservation works and tree plantation, covering over 9,000 acres.

Climate Smart Agriculture

The Climate Smart Agriculture programme attempts to de-risk farmers from erratic weather events through the promotion and adaptation of climate-smart agriculture premised on dissemination of relevant package of practices, adoption of appropriate

mechanisation and provision of institutional services. Currently, 27.94 lakh acres spread over 85 districts across 19 states and 10.5 lakh farmers including 1.95 lakh women farmers are covered under the programme. In pursuit of your Company’s long-term sustainability objective of increasing Soil Organic Carbon (SOC), more than 6,400 compost units were constructed during the year, taking the total number till date to over 61,000 units. In addition to promotion of Climate Smart Agri practices at scale, in core agricultural catchments, your Company also has a Climate Smart Village (CSV) programme, wherein support is provided to majority of village population to enable adaptation to climate risks, mitigating the same through knowledge, livelihood diversification, natural resources management and institutional support.

6,755 CSVs covering major crop value chains are currently part of the programme. To provide additional support to farmers in dealing with climate risks, 15.24 lakh linkages were facilitated for farmers with six major Government schemes.

Details of Climate Smart Agriculture interventions are also provided in the section on ‘Socio-Economic Environment’.

During the year, your Company has signed two new partnerships, one with Rajiv Gandhi Mission for Watershed Management covering 35 districts of Madhya Pradesh for Climate Smart Watersheds and the other with Farmer Welfare and Agriculture Development, Department of Madhya Pradesh covering six districts for Climate Smart Villages in a phased manner.

During the year, knowledge was disseminated through more than 13,500 Farmer Field Schools and over 11,750 Choupal Pradarshan Khets (CPKs).

Over 1,150 Agri Business Centres (ABC) including 349 exclusive women ABCs delivered extension services, arranged agri-credit linkages, established collective input procurement and provided agricultural equipment for hire.

Your Company, with its presence across multiple commodities and geographies including e-Choupal network and agri extension programmes network, undertook an initiative to facilitate formation of new

FPOs and/or strengthening existing FPOs, thus enhancing farm incomes, rural livelihood and partnering in other relevant rural development initiatives. During the year, your Company supported additional 510 FPOs taking the cumulative number to 1,660 FPOs.

The ‘Adarsh Gram Programme’ pioneered by your Company’s Agri Business presently covers 361 model villages in the states of Andhra Pradesh and Karnataka. Under this initiative, your Company supports villages to become economically, ecologically and socially sustainable. Your Company is also addressing the human rights and farm safety challenges in these villages by educating the farmers, labour & community, providing access to Personal Protective Equipment (PPE) kits and adopting smart technologies like drones for spraying activities on the farms.

The ‘Baareh Mahine Hariyali’ programme in select districts of Uttar Pradesh (Chandauli, Ghazipur, Prayagraj and Varanasi) is a pioneering initiative to facilitate farmers to enhance their incomes. This programme is founded on a 360-degree, multipronged approach with interventions such as increased cropping intensity with a third crop during summer, enhancement of productivity through context-specific agronomic practices demonstrated through Choupal Pradarshan Khets (on-farm demonstrations) and provision of market linkages with transparency in assessment of quality, price and weighment.

In some regions, taking a holistic approach to income diversification as an adjacency, livestock development, women empowerment and agro-forestry are also included. Over 50,000 farmers have direct linkages and another 5,00,000 farmers have benefited from the interventions under this programme. Farmers have reported increase in their incomes and also resilience to weather vagaries.

Off-farm Livelihood Diversification -Livestock Development

The purpose of the programme was to improve income and de-risk livelihoods of rural households by strengthening animal dependant livelihood options. Capability building on improved package of

practices, breed improvement, provision of extension services and creation of rural entrepreneurs to provide doorstep services are the key components. The programme covered livelihoods linked to large ruminants (cow & buffalo), small ruminants (goat & sheep), piggery, fishery, poultry and apiary in 14 states and 53 districts. During the year, appx.

1.2 lakh artificial inseminations (AIs) were carried out which led to the birth of 0.45 lakh high yielding progeny and indigenous breeds. Cumulatively, the figures for AIs and calving stand over 29.6 lakh and 10.4 lakh respectively. Under the programme, over 1,040 women trained as ‘Pashu Sakhis’ have provided extension services to animal owners of the villages.

As per field studies, the average monthly income of goat owners improved from a baseline of ' 6,000/- to ' 13,000/-. The services provided by Pashu Sakhis helped in reduction in mortality, increase in animal weight and increase in herd size, thereby resulting in significant increase in income for goat owners, mostly women.

Your Company is also working with dairy farmers in Bihar, Jharkhand and West Bengal to improve productivity of animals through several extension services and to facilitate higher milk production. Qualified teams comprising veterinarians and para-veterinarians have been deployed to facilitate animal nutrition, animal health services, training and capacity building towards improving productivity, clean milk production and promoting commercial dairy farming among farmers. During the year, about 66,495 cattle of over 43,212 dairy farmers across 483 villages in nine districts of Bihar, three districts of West Bengal and one district in Jharkhand were supported through cattle feed distribution, training programmes on clean milk production, mastitis control and animal husbandry services like deworming, ectoparasite control, etc.

On-farm Livelihood Diversification -Tree plantations

Your Company’s pioneering afforestation initiative through the Social Forestry programme greened over 33,900 acres during the year. It is currently spread across 16 districts in 6 states covering

over 4.9 lakh acres in 7,400 villages, impacting over 1.87 lakh poor households. Together with your Company’s Farm Forestry programme, this initiative has greened over 11.66 lakh acres till date and generated about 212 million-person days of employment for rural households, including women, poor tribal and marginal farmers. Further, fast growing, high yielding and disease resistant hybrid clones and saplings of eucalyptus pulpwood developed by your Company deliver significantly higher productivity vis-a-vis earlier clones. The clones have been developed to grow under varying ecological conditions, thereby building resilience and contributing towards increasing income for the farming community. Integral to the Social Forestry programme are the Agro-Forestry and bund plantation models that help small and marginal farmers to cultivate field crops and trees together in the same field and realise both benefits. These two models cumulatively extend to over 2.36 lakh acres and enable food, fodder and wood security.

To create an additional income source and improve resilience towards climate change, fruit and other commercial species tree plantations have also been initiated with farmers, which has covered over 16,200 acres till date.

Besides enhancing farm level employment, generating incomes and increasing green cover, these large-scale initiatives also contribute meaningfully to the nation’s endeavour to create additional carbon sinks for tackling climate change.

In addition to the above, the Social and Farm Forestry initiative of your Company, through a multiplier effect, has led to improvement in pulpwood and fuelwood availability in Andhra Pradesh, Telangana, Karnataka and Odisha.

Women Empowerment

During the year, this initiative provided a range of gainful livelihood opportunities to appx. 71,000 poor women, taking the cumulative coverage to over 1.92 lakh. Of the beneficiaries till date, about 36,900 ultra-poor women in your Company’s core catchments were provided with assets and supported to initiate enterprises of their choice as part of a

two-year intervention, and who now have access to sustainable sources of income through various livelihood opportunities. Studies have shown that the income of these ultra-poor women beneficiaries has increased by more than five-fold, aided by the programme. Currently, the programme is operational in five districts in four states.

The financial literacy and inclusion project, in partnership with Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation continued in its second phase of partnership covering all 52 districts of Madhya Pradesh. 2,013 Master Trainers were trained directly; the training was thereafter cascaded to over 63,000 Self-Help-Groups (SHGs) covering more than 6.2 lakh women during the year. Basis the learnings in MP, the programme was expanded to other states covering over 16,600 existing SHGs with 1.8 lakh members. The Financial Literacy programme has cumulatively covered over 2.90 lakh SHGs benefiting over 28.50 lakh women spread across 71 districts in 15 states. Over 24 lakh trained women have also been facilitated with access to bank accounts and Government social security schemes till date.

Your Company’s ‘Aashirvaad Raho 4 Kadam Aage’ programme is encouraging women empowerment by providing skills related to food processing sector. Spread across seven states, the programme has covered over 70,000 women beneficiaries.

Education

The Primary Education programme aims to provide children from weaker sections of society access to education with focus on learning outcomes and retention. Operational in 34 districts of 15 states, the programme covered over 4.1 lakh children during the year, taking the cumulative coverage to over 15.31 lakh children. Under the Read India Programme, the proportion of primary level children who were able to perform basic mathematical computations increased from 20% to 90%. Considering importance of Early Childhood Care and Education (ECCE) as per National Education Policy 2020, building capabilities of Anganwadi Sevikas on ECCE has also been one of the focus areas. Your Company

has successfully completed the first phase of partnership on ECCE with Women Development and Child Welfare Department in Andhra Pradesh, covering over 25,700 Anganwadis and 4.03 lakh children in 13 districts by building the capacities of Integrated Child Development Services supervisors who further train Anganwadi Sevikas.

Your Company has entered into the second phase of partnership during the year to expand the programme to the entire state across 26 districts. Additionally, your Company has also signed an MoU with the Child Development Services and Nutrition Department, Saharanpur, Uttar Pradesh, for improving ECCE (Poshan Bhi, Padhai Bhi) of children by combining nutrition and education interventions and will cover all the Anganwadi Centres of Saharanpur district.

Over 590 Government primary schools and Anganwadis were provided infrastructure support comprising boundary walls, additional classrooms including operationalising smart classrooms, solarisation, sanitation units and furniture, taking the total number of Government primary schools and Anganwadis covered till date to over 3,900. Infrastructure support to Government schools has helped in increasing enrolment, particularly of girls, in schools. To ensure sustainable operations and maintenance of infrastructure provided, more than 970 School Management Committees and more than 920 Child Cabinets and Water and Sanitation (WATSAN) Committees were operational in various schools during the year with active involvement of students and teachers. Further, 125 Supplementary Learning Centres (SLCs) were operational during the year, mainstreaming more than 2,500 out-of-school children into the formal education system taking the cumulative number to over 12,800.

Your Company’s Bounce of Joy programme is aimed to create a positive impact on children’s lives through sports. Execution of the programme is done by collaborating with schools for training of Physical Education (PE) teachers to help them foster holistic development amongst students through sports like football. Through the trained teachers, the programme has reached out to over 3 lakh students across 300 schools.

Skilling & Vocational Training

This programme provides training in market linked skills to youth from marginalised sections including differently abled, to enable them to engage in decent livelihoods. 12,500 youth across 33 districts in 16 states were trained under different courses during the year, of which 49% were female. This includes, about 1,300 youth who were trained through Government and other centres. Cumulatively, over 1.12 lakh youth have been trained under the skilling programme. Further, the pilot programme for skilling differently abled youth that was initiated in Bengaluru was also expanded in Kolkata and Howrah during the year training more than 200 such youth till date.

Sanitation

Your Company continues to adopt a multi-pronged approach towards improving public health and hygiene across 34 districts and 13 states. The programme focused on sustaining Open Defecation Free Status (ODF) by ensuring access to toilets to residual households through construction of individual toilets and community toilets for households with space constraints; and retrofitting for twin pits in households where single pit toilet was constructed earlier with Swachh Bharat Mission (SBM) support.

In addition, during the year, 62 community toilets were constructed/renovated for households without land, taking the cumulative to 219. 4,200 Individual Household Toilets (IHHTs) were constructed with the support of State Government/District sanitation departments, taking the total to over 43,800 IHHTs constructed so far in your Company’s catchment areas. Cumulatively, IHHTs and community toilets are estimated to be benefiting over 1.22 lakh community members. Tracking of Operations & Maintenance of existing community toilets was also done, along with behaviour change communication to ensure that catchment areas remain open defecation free.

Water, Sanitation and Hygiene (WASH) programme was implemented in schools that included construction of sanitation units in schools, separate for girls and boys, and also focused on driving behaviour change among over 98,400 school students through 2,145 WASH campaigns.

Health & Nutrition

Your Company’s ‘Swasth India Mission’ programme has been a front runner in driving behavioural change in hand hygiene through innovative experiential training in primary schools. The Swasth India Mission drove a range of initiatives to aid and enable the country in its fight against preventable infections that create huge economic burden on the country.

-    Swasth India mission believes in ‘Swasth Bacche, Mazboot Desh’ - healthier children are the pillars for building a strong nation. The programme deploys story-telling and jingles to teach children about where germs are, what do they do, how can we stay protected, eight steps of handwashing ending with a small quiz about the learnings of the session. The school programme covered ~12,500 schools reaching out to appx. 26 lakh students

in FY 2023-24.

-    The school programme created positive impact as measured in a pre-post study. There is high recall for the message and the compliance to handwashing with soap increased post the activity from 4.8 occasions to 6.8 occasions on an average.

-    Additionally, the programme addressed specific seasonal issues that required awareness creation for example Leptospirosis and Nipah virus. Awareness generation was done through media tools utilising print media and digital media.

-    The programme also had presence of admired public figures like Sachin Tendulkar to urge people to follow hand hygiene as a preventive health practice. The messaging on the same was deployed across various media platforms.

Around 14.61 lakh beneficiaries spread across 22 districts in eight states were covered under your Company’s Mother and Child Health and Nutrition initiative aimed at improving the health-nutrition status of women, adolescents and children in the catchments of a few of your Company’s factories with high maternal and infant mortality indices. Recognising the problem of Anaemia among women and children, focused intervention was initiated and over 36,000 women, adolescents and children screened in collaboration with Anaemia Mukt Bharat Abhiyan. After screening, awareness creation on localised nutrition and linkages with Government programmes for supplements was initiated. Your Company has collaborated with Directorate of Social Welfare, Government of Assam to help address challenges of malnutrition in eight districts including seven Aspirational Districts in the state. In this partnership, 541 Integrated Child Development Services (ICDS) supervisors were trained during the year which in turn have cascaded it to 15,883 Anganwadis. Trained Anganwadi Sevikas created awareness among 9.5 lakh pregnant women, mothers, adolescents in the area of antenatal check-ups, preventive vaccinations, timely breast feeding, nutrition management through locally available five food groups including millets. Additionally, your Company has entered into a partnership with Child Development Services and Nutrition Department in Saharanpur, Uttar Pradesh for building capability of Anganwadi Sevikas in promoting Maternal and Child Health and creating awareness on nutrition by focusing on the first 1,000 days of life.

Project Samposhan was undertaken during the year to address the issue of anaemia amongst 1.7 lakh adolescent girls, pregnant & lactating women and trained 2,500 staff from various Government departments (Community Health Officers, Accredited Social Health Activists (ASHA) facilitators, Anganwadi workers) in the districts of Chikkaballapur and Raichur in Karnataka and Gorakhpur in Uttar Pradesh. Similarly, Project Balposhan was undertaken in Valsad district of Gujarat to create awareness on child nutrition.

To bridge the gaps in primary and secondary healthcare delivery and to address the challenges of awareness, availability, accessibility and affordability, your Company has undertaken several Rural Healthcare interventions that are being implemented in a phased manner. After starting with the Mother and Child Health initiative in FY 2016-17, your Company is now adopting a holistic approach focusing on two major components - preventive health care and curative services. The objective of the initiative is to improve health and nutrition by strengthening institutional capacity, supplementing

existing infrastructure, promoting greater convergence with existing Government schemes, leveraging technology and increasing access to basic primary and secondary healthcare services.

As part of this project, ‘ITC Swaasth Kiran’ initiative was launched during FY 2021-22 in Saharanpur and Munger districts. Under the initiative, during FY 2023-24, five new Mobile Medical Units (MMU) were added (three in Saharanpur & two in Munger) thus taking the total to 13 MMUs as on date. These MMUs provided free medical consultation and medicines to the rural community at their doorstep. During the year, more than 1.74 lakh individual engagements were made with community members across 800 villages, 58% of which were with women Further, 22,500 diagnostic tests were conducted, and 5,200 referrals were made during the year. Upgradation of Public Healthcare Centres was also initiated with the involvement of the local community under the initiative.

Understanding the need of high-quality doorstep eye care for the community, your Company also initiated an innovative intervention for eye-care under which two Mobile Vision Units (MVU) were pressed into service in rural Saharanpur. These MVUs equipped with high end ophthalmic equipment can screen and diagnose eye ailments such as Cataract, Diabetic Retinopathy, Glaucoma and other diseases. During the year, more than 91,000 community members were screened, 2,685 were advised prescription eyeglasses, more than 1,500 cataracts detected and nearly 500 cataract surgeries done. The intervention also diagnosed 362 cases of Diabetic Retinopathy and 158 cases of Glaucoma, which were referred to hospitals for further management.

Your Company continued to enhance awareness on various health related issues through a network of 365 women Village Health Champions (VHCs) who covered nearly 1.54 lakh women and adolescent girls during the year. The programme is operational in six districts of Uttar Pradesh and two districts of Madhya Pradesh. The VHCs conducted door-to-door visits in the villages focusing on aspects like sanitation, menstrual and personal hygiene, family planning, diarrhoea prevention and nutrition.

To make potable water available to local communities in Andhra Pradesh, Reverse Osmosis (RO) water purification plants were set up in villages where the water quality was poor. Nine new RO plants were established in FY 2023-24 taking the total operational RO plants to 169 thus providing safe drinking water to over 2.18 lakh rural people.

Waste Management

Your Company’s initiatives focus on creating replicable, scalable and sustainable models of municipal and rural waste management that can be implemented across the country to ensure that minimal waste goes to landfills. Details of these models are provided in the section on ‘Building a Circular Economy for Post-Consumer Packaging’ above.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (SRA), established in 1977, is an embodiment of your Company’s sustained commitment to a priceless national heritage. Your Company’s pledge towards ensuring enduring excellence in Classical music education continues to drive ITC SRA in furthering its objective of preserving and propagating Hindustani Classical music based on the age-old principle of ‘Guru-Shishya Parampara’.

The Academy is modelled as a professionally run institution that epitomises the teaching of Hindustani Raga music. Through its eminent Gurus, it imparts intensive training and quality education in Hindustani Classical music to its scholars. The present Gurus of the Academy are Padma Bhushan Pandit Ajoy Chakrabarty, Padmashri Pandit Ulhas Kashalkar, Pandit Partha Chatterjee, Pandit Uday Bhawalkar, Vidushi Subhra Guha, Shri Omkar Dadarkar, Shri Abir Hossain and Shri Brajeswar Mukherjee. The Academy’s focus continues to be on nurturing exceptionally gifted students selected from across the country through a system of multi-level auditions. Several scholars of the Academy have performed at various music festivals and have also been recipients of prestigious awards and accolades. Creation of the next generation of masters of Hindustani Classical music for the

propagation of a precious legacy continues to be the Academy’s objective.

Forging Multi-Stakeholder Partnerships

Your Company’s Social Investments Programme lays continuous emphasis on building partnerships of value for driving innovation & gaining contemporary knowledge while effectively amplifying and executing programmes.

Your Company has over the years formed Knowledge Partnerships with several national & international organisations/agencies to maintain contemporariness and leverage latest knowledge/technical know-how to continuously improve the quality of programmes.

Public-Private Partnerships (PPP), aimed at pooling resources, and partnership with Governments are effectively leveraged to scale-up and amplify programmes implemented in your Company’s catchment areas. During the year, six new PPPs were signed.

The meaningful contribution made by your Company’s Social Investments Programme to address some of the country’s key development challenges, has been possible in significant measure, due to your Company’s partnerships with renowned NGOs such as AFARM, AFPRO, BAIF, Bandhan Konnagar, Cheshire Disability Trust, DHAN Foundation, DSC, FES,

FINISH, MAMTA, MYRADA, NCHSE, Pratham, SEARCH, SMGVS, SEWA Bharat, Umang, WASH Institute, Water for People and Youth Invest amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilisation skills of NGOs, will continue to provide innovative grassroot solutions to some of India’s most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities, as required under Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014, is provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company’s Environment, Health & Safety (EHS) strategies are directed towards achieving the greenest and safest operations across all your Company’s units by optimising natural resource usage and providing a safe and healthy workplace. Systemic efforts continue to be made towards natural resource conservation by continuously improving resource-use efficiencies.

Your Company believes that a safe and healthy work environment is a pre-requisite for ensuring employee well-being and adopting best practices in occupational health & safety bears a direct impact on overall performance. With an aim to percolate safety deeper into your Company’s operational practices and achieve the ‘Zero Accident’ goal, your Company has adopted a comprehensive EHS strategy founded on two pillars: ‘Safety by Design’ and ‘Safety by Culture’.

Safety

Your Company sustained focus on ‘Safety by Design’ by continuously striving to improve safety performance and incorporating best-in-class engineering standards for all investments in the built environment. Designs for all new greenfield & brownfield project investments are scrutinised to ensure compliance with relevant standards and codes on safety. Periodic Environment, Health & Safety audits continue to be carried out in operational units to verify compliance with relevant standards.

To drive a culture of safety, your Company, in addition to comprehensive focus on training, continues to hold structured conversations with workers on ‘Safe and Unsafe’ Acts. These are supplemented by adoption of keystone behaviours that inculcates individual ownership for safe behaviour. Your Company has also made use of Design Thinking principles for seamless integration of safety in business operations. These initiatives are bringing in positive behavioural changes.

Several national awards and certifications received by various units reaffirm your Company’s commitment to provide safe and healthy workplace to all.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company’s state-of-the-art Life Sciences and Technology Centre (LSTC) in Bengaluru is at the core of driving science-led product innovation to build and support your Company’s portfolio of world-class products and brands. Over the years, LSTC has emerged as a robust innovation engine that is a key enabler of the ‘ITC Next’ growth strategy. Reinforced with world-class infrastructure, resourced with a diverse team of over 400 highly qualified scientists, LSTC continues to drive various initiatives to provide differentiation and competitive edge to your Company’s brands and products. During the year, LSTC celebrated its Golden Jubilee - completing five decades of scaling new frontiers in Research & Development and innovation. Eminent scientists from India and across the world attended the celebrations, sharing rich insights on topical areas including Disruptive Innovation led Exponential Growth,

Future Foods - Role of AI & Data Science, Sustainable Materials for Packaging, Adaptation to Sustainability, etc.

Driving purposeful innovations that fulfil the needs of the Indian consumer through superior offerings remains the key objective of LSTC. Centres of Excellence across domains viz. Biosciences, Agri-sciences & Materials sciences enabled building capabilities over the years to cater to the constantly evolving needs of consumers. Focused research across identified domains viz. Health & Wellness, Formulation Design, Sustainable Materials & Packaging, Agro-forestry and Crop Science has enabled the teams to harness contemporary advances in relevant core areas to translate ‘proofs of concept’ to novel product opportunities. Bearing testimony to LSTC’s innovation capabilities while building the intellectual assets for your Company, over 800 patent applications have been filed till date. Robust risk management practices are in place to ensure that your Company’s intellectual properties remain adequately protected and to ensure mitigation of information and infrastructure risk.

Research programmes and projects are structured through close alignment with the various Businesses of your Company resulting in a robust innovation pipeline. Additionally, in line with your Company’s relentless focus on operational excellence and quality, each Business is mandated to continuously innovate on materials, processes and systems to enhance their competitiveness.

Your Company has been a forerunner in introducing first-to-market innovative products for Indian consumers. In today’s operating scenario of unprecedented volatility and hyper-inflationary pressures, LSTC scientists and product development teams continue to enable the Branded Packaged Foods, Personal and Home Care, Stationery and Agarbatti Businesses to deliver a range of differentiated, superior quality products at competitive costs. Innovative science-based Platform projects continue to be leveraged to drive creation of healthier foods through systematic reduction in salt, sugar and fat without compromising on sensory attributes. Leading edge technology platforms in Personal Health & Hygiene, Health & Wellness continue to power innovation and develop next generation product offerings to serve emerging consumer needs.

LSTC’s unique competencies in Sustainable Materials and Packaging have enabled development of packaging options with high degree of recycled plastics content and novel barrier coating solutions to create next generation environmentally friendly packaging solutions.

In Agro-Forestry and Crop Science, your Company’s scientists have established different cutting-edge tools & technology platforms for improving tree & crop species of your Company’s interests (like yield, quality, abiotic & biotic stress) for securing the raw material. Ongoing research has major emphasis on developing climate resilient crops and pulp wood species in order to address the security of raw material supplies across your Company’s value chains and also ensuring enhanced farmer profitability. Research on wheat and potato varietal securitisation are at advanced stages of deployment to achieve flexibility in sourcing of raw material, create region-specific blends and ensure robust agro-climatic

adaptability for growing and sourcing raw materials closer to the factories at competitive costs, in addition to reducing the carbon footprint. Future ready, alternate value chains that mitigate risks arising out of disruptions to existing sourcing models continue to be explored. LSTC has deployed various digital transformation tools at farm level to bring in predictive capability with agility. LSTC, in collaboration with the Agri and Branded Packaged Foods Businesses, endeavours to ensure that science-based ideas are fully integrated across the value chain from farm to fork.

Infrastructure and capabilities are strengthened continuously keeping in pace with the global developments in science and technology. Expanding capabilities include spreading the acreage of new tree clones with superior properties, developing modern instrumentation for testing very low levels of actives or contaminants, measuring barrier properties (air and water permeability) of coated paper substrate, development and scale-up of novel materials etc.

Rigorous systems, processes and industry best practices are continuously upgraded to secure quality certifications of the highest levels - a key enabler in delivering products that follow the highest standards in quality, safety and efficacy to the Indian consumer. All branded packaged foods manufacturing units of your Company not only have ISO quality certification but also follow the highest standards under the integrated food quality management system-FSSC 22000; these systems ensure adherence to internationally accepted quality standards in producing safe and high-quality food. All manufacturing units of the Branded Packaged Foods Businesses (including contract manufacturing units) and Hotels operate in compliance with stringent food safety and quality standards. Your Company’s food quality assurance laboratories are accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL) under ISO 17025, a global standard for testing and calibrating labs, which guarantees quality. Additionally, the quality of all FMCG products of your Company is monitored through best-in-class customer-centric

‘Quality Control and Quality Assurance Processes’ and ‘Product Quality Ratings Systems’ (PQRS) enhancing competitive superiority of your Company’s product offerings.

In its quest to continuously enhance efficiency and be future-ready, LSTC is developing and deploying cutting-edge digital tools for quality performance analytics, benchmarking and strengthen quality management systems. Satellite imaging-based tree plantation area mapping has been accomplished with greater than 90% accuracy for species of your Company’s interest (Eucalyptus, Subabul, casuarina, Corymbia) that will enable assessment of pulp wood availability. Going forward, LSTC will continue to identify growth opportunities leveraging your Company’s diverse core competencies and R&D insights emerging from close consumer interactions and contemporary science & technology.

PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

In the proceedings initiated by the Enforcement Directorate in 1997, the appropriate authority after hearing arguments on behalf of your Company has passed orders in favour of your Company and dropped some of the show cause notices issued by the Directorate. In respect of some of the remaining notices, your Company filed writ petitions challenging their validity. The Honourable Calcutta High Court, by its orders, allowed these writ petitions, and the proceedings in respect of these notices were quashed. The remaining notices are pending.

Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Honourable Calcutta High Court while others are pending.

TREASURY OPERATIONS

Your Company’s treasury operations continued to focus on deployment of surplus liquidity and management of foreign exchange exposures within a well-defined risk management framework.

Market interest rates remained volatile during the year largely driven by global factors such as US economy’s resilience which delayed the start of monetary easing

by the US Fed and caused interest rates in the US to trend higher. In the backdrop of global volatility, RBI towards end of September’23 took steps to tighten liquidity conditions in the Banking system which reversed the trajectory of domestic interest rates. However, interest rates at the longer end declined on back of robust demand from Foreign Portfolio Investors following the announcement of Indian G-Secs inclusion in JP Morgan’s Emerging Markets Bond Index and lower fiscal deficit target for FY 2024-25.

Investment decisions relating to deployment of surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Treasury operations focused on proactive rebalancing of portfolio duration and mix in line with the evolving interest rate environment. Further, continuous review and monitoring of credit worthiness, including engagement with market participants, ensured that the investment portfolio was not exposed to undue credit risks.

As in earlier years, commensurate with the size of the temporary surplus liquidity under management, treasury operations continue to be supported by appropriate internal control systems, and independent check of 100% of transactions by your Company’s Internal Audit Department.

In the currency market, Indian Rupee (INR) witnessed significantly lower volatility compared to the previous financial year. The Dollar Index (DXY), a key indicator of US Dollar (USD) strength registered modest gains for the financial year but witnessed large two-way movements. INR strength was aided by large surplus expected in Balance of Payments for the year vis-a-vis deficit in previous year. Periods of INR weakness was attributed mostly to global factors such as escalation of conflict in the Middle East and US Federal Reserve adopting a ‘higher for longer’ monetary policy stance to meet its mandate of lowering inflation. RBI’s strategic intervention in the forex markets which gained prominence from September’23, enabled reduction in market volatility.

To effectively navigate the volatility in currency markets, your Company adopted a proactive risk management strategy and actively managed foreign

currency exposures through appropriate hedging strategies and market instruments to protect business margins.

DEPOSITS

Your Company’s erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2024, there were no deposits due for repayment except in respect of two deposit holders aggregating ' 20000 which have been withheld on the basis of directives received from the government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company’s erstwhile Schemes.

Your Company has not accepted any deposit from the public/members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year.

DIRECTORSChanges in Directors

During the year, with your approval, Ms. Alka Marezban Bharucha and Ms. Pushpa Subrahmanyam were appointed as Independent Directors of your Company for a period of five years with effect from 12th August, 2023 and 2nd April, 2024, respectively. Further, Messrs. Anand Nayak and Ajit Kumar Seth were re-appointed, with your approval, as Independent Directors of your Company for a period of five years with effect from 13th July, 2024.

In the opinion of the Board, Ms. Bharucha,

Ms. Subrahmanyam, Mr. Nayak and Mr. Seth possess the required integrity, expertise and experience for appointment as Independent Directors of your Company.

With your approval, Mr. Rahul Jain, representing the Specified Undertaking of the Unit Trust of India (‘SUUTI’), and Mr. Atul Singh, representing Tobacco Manufacturers (India) Limited (‘TMI’), a subsidiary of British America Tobacco p.l.c., were appointed as Non-Executive Directors of your Company for a period of three years with effect from 1st January, 2024 and

2nd April, 2024, respectively. Mr. Jain has since tendered his resignation with effect from 31st May, 2024.

Further, Mr. Sanjiv Puri was re-appointed, with your approval, as the Managing Director & Chairman of your Company for a period of five years with effect from 22nd July, 2024, and Mr. Hemant Malik was appointed as a Wholetime Director for a period of three years with effect from 12th August, 2023.

The Board of Directors of your Company (‘the Board’), on the recommendation of the Nomination & Compensation Committee (‘the Committee’), has recommended for the approval of the Members, the appointment of Dr. Alok Pande, representing SUUTI, as a Non-Executive Director of your Company for a period of three years with effect from 27th July, 2024.

Mr. Sunil Panray, representing TMI, will complete his present term as a Non-Executive Director of your Company on 19th December, 2024. The Board, on the recommendation of the Committee, has recommended for the approval of the Members, the re-appointment of Mr. Panray as a Non-Executive Director of your Company for a period of five years with effect from 20th December, 2024.

Further, Messrs. Sumant Bhargavan and Supratim Dutta will complete their present terms as Wholetime Directors of your Company on 11th July, 2025 and 21st July, 2025, respectively.

On the recommendation of the Committee, the Board has recommended for the approval of the Members, the re-appointment of Messrs. Sumant and Dutta as Wholetime Directors of your Company for a period of two years with effect from 12th July, 2025 and three years with effect from 22nd July, 2025, respectively.

Appropriate resolutions seeking your approval to the above are appearing in the Notice convening the 113th Annual General Meeting (‘AGM’) of your Company.

Mr. Peter Rajatilakan Chittaranjan, representing the General Insurers’ (Public Sector) Association of India, and Mr. David Robert Simpson, representing TMI, stepped down from the Board with effect from 1st September, 2023 and 30th January, 2024, respectively. Mr. Nakul Anand completed his term as a Wholetime Director of your Company with effect from 3rd January, 2024 after being associated with the ITC Group for over 44 years, including 18 years with your Company. Your Directors place on record their appreciation for the contribution made by Messrs. Chittaranjan, Simpson and Anand during their tenure with your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Companies Act, 2013 (‘the Act’) read with Articles 94 and 95 of the Articles of Association of your Company, Messrs. Sunil Panray and Supratim Dutta will retire by rotation at the ensuing AGM and being eligible, offer themselves for re-election. Your Board has recommended their re-election.

Number of Board Meetings

Six meetings of the Board were held during the year ended 31st March, 2024.

Attributes, Qualifications & Independence of Directors and their Appointment

The Corporate Governance Policy of your Company, inter alia, requires that the Non-Executive Directors be drawn from amongst eminent professionals, with experience in business/finance/law/public administration and enterprises. The Nomination & Compensation Committee has laid down the criteria for determining qualifications, positive attributes and independence of Directors (including Independent Directors). In case of appointment of Independent Directors, the Nomination & Compensation Committee evaluates the balance of skills, knowledge and experience on the Board, and also the role and capabilities required for appointment as an Independent Director of your Company.

Further, the Board is required to have balance of skills, competencies, experience and diversity of perspectives appropriate to your Company in terms of the Policy on Board Diversity. Diversity for this purpose is considered from a number of aspects

including, but not limited to, educational & cultural background, nature of professional, administrative & industry experience, skills, knowledge, and gender representation. The skills, expertise and competencies of the Directors as identified by the Board, along with those available in the present mix of the Directors of your Company, are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

In terms of the applicable regulatory requirements read with the Articles of Association of your Company, the strength of the Board shall not be fewer than six nor more than eighteen. Directors are appointed/re-appointed with the approval of the Members for a period of three to five years or a shorter duration, in accordance with retirement guidelines and as may be determined by the Board from time to time. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the Members. One-third of the Directors who are liable to retire by rotation, retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that (a) they meet the criteria of independence prescribed under Section 149 of the Act and Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’), (b) they are independent from the management of your Company, and (c) they are not aware of any circumstance or situation which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence. In the opinion of the Board, the Independent Directors fulfil the conditions prescribed under the Act and the Listing Regulations, and are independent of the management of your Company.

Remuneration Policy

Details of your Company’s Policy on remuneration of Directors, Key Managerial Personnel and other employees are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

Evaluation of Board, Board Committees and individual Directors

Your Company has a structured process for performance evaluation of the Board,

Board Committees and individual Directors.

The Nomination & Compensation Committee, as reported in earlier years, has formulated the Policy on Board evaluation, evaluation of Board Committees’ functioning and individual Director evaluation, and also specified that such evaluation will be done by the Board.

In keeping with ITC’s belief that it is the collective effectiveness of the Board that impacts Company’s performance, the primary evaluation platform is that of collective performance of the Board as a whole. Board performance is assessed, inter alia, against the roles and responsibilities of the Board as provided in the Act, the Listing Regulations and your Company’s Governance Policy. The parameters for Board performance evaluation have been derived from the Board’s core role of trusteeship to protect and enhance shareholder value as well as to fulfil expectations of other stakeholders through strategic supervision of your Company; such parameters include securing alignment of your Company’s goals with the nation’s economic, ecological and social priorities, ensuring that your Company has a clearly defined strategic direction for realisation of its vision, and supporting your Company’s management to meet challenges arising from the operating & policy environment in the country. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by the respective Committee Chairmen with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, in assisting the Board in realising its role of strategic supervision of the functioning of your Company in pursuit of its purpose and goals. The peer group ratings of the individual Directors are collated by the Chairman of the Nomination & Compensation Committee and made available to the Chairman of your Company.

While the Board evaluated its performance against the parameters laid down by the Nomination & Compensation Committee, the evaluation of individual Directors was carried out against the laid down parameters in order to ensure objectivity.

The parameters for performance evaluation of individual Directors, inter alia, include ability to provide thought leadership across the role spectrum, and contribution to Board cohesion, governance & organisational processes. Reports on the functioning and performance of Committees during the year were placed before the Board. The Independent Directors Committee of the Board also reviewed the performance of the Chairman, other non-Independent Directors and the Board, pursuant to Schedule IV to the Act and Regulation 25 of the Listing Regulations.

KEY MANAGERIAL PERSONNEL

As stated earlier, Mr. Nakul Anand ceased to be a Wholetime Director of your Company upon completion of term, and Mr. Hemant Malik was appointed as a Wholetime Director of your Company with effect from 12th August, 2023. There were no other changes in the Key Managerial Personnel of your Company during the year.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section ‘Board of Directors and Committees’ in the Report and Accounts.

Statutory Auditors

Messrs. S R B C & CO LLP, Chartered Accountants (‘SRBC’), were appointed with your approval as the Auditors of your Company for a period of five years till the conclusion of the ensuing AGM.

The Board, on the recommendation of the Audit Committee, has recommended for the approval of the Members, the re-appointment of SRBC as the Auditors of your Company for a period of five years from the conclusion of the ensuing 113th AGM till the conclusion of the 118th AGM. On the recommendation of the Audit Committee, the Board has also recommended for the approval of the Members, the

remuneration of SRBC for the financial year 2024-25. Appropriate resolution seeking your approval for the appointment and remuneration of SRBC as the Statutory Auditors is appearing in the Notice convening the 113th AGM of your Company.

Cost Auditors

Your Board, as recommended by the Audit Committee, appointed the following Cost Auditors for the financial year 2024-25:

(i)    Messrs. ABK & Associates, Cost Accountants, for audit of Cost Records maintained by your Company in respect of ‘Wood Pulp’ and ‘Paper and Paperboard’ products.

(ii)    Messrs. S. Mahadevan & Co., Cost Accountants, for audit of Cost Records maintained in respect of all applicable products of your Company, other than ‘Wood Pulp’ and ‘Paper and Paperboard’ products.

Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolutions seeking your ratification to the remuneration of the aforesaid Cost Auditors are appearing in the Notice convening the 113th AGM of your Company.

Your Company maintains necessary cost records as specified by the Central Government under Section 148(1) of the Act read with the Companies (Cost Records and Audit) Rules, 2014.

Secretarial Auditors

Messrs. S. N. Ananthasubramanian & Co., Company Secretaries, were appointed by the Board as the Secretarial Auditors of your Company for the financial year ended 31st March, 2024. The Secretarial Auditors have confirmed that your Company has complied with the applicable laws and that there are adequate systems and processes in your Company commensurate with its size and scale of operations to monitor and ensure compliance with the applicable laws.

The Report of the Secretarial Auditors, pursuant to Section 204 of the Act, is provided in the Annexure forming part of this Report.

CHANGES IN SHARE CAPITAL

During the year, 5,67,03,730 Ordinary Shares of ' 1/- each, fully paid-up, were issued and allotted upon exercise of 56,70,373 Options under your Company’s Employee Stock Option Schemes. Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2024, stands increased to ' 1248,47,21,471/- divided into 1248,47,21,471 Ordinary Shares of ' 1/- each. The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options, as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (‘the Regulations’), are available in the Notes to the Financial Statements of the Company. The said disclosures forming part of the Financial Statements can also be accessed on your Company’s corporate website http://www.itcportal.com under the section ‘Investor Relations’. During the year, there has been no change in your Company’s Employee Stock Option Schemes.

Your Company’s Secretarial Auditors have certified that the Employee Stock Option Schemes of your Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of your Company (‘ISC’), accredited with ISO 9001:2015 certification, is registered with the Securities and Exchange Board of India as a Category II Share Transfer Agent. ISC remains committed to maintaining the highest standards of investor servicing, consistently ensuring best-in-class services for shareholders and investors, while adhering to the applicable statutory requirements. ISC continues to invest in upgradation of its infrastructure, systems and technology in order to keep them contemporary. The ‘Investor Relations’ section on your Company’s corporate website

http://www.itcportal.com serves as a user-friendly reference providing up-to-date information and guidance on share-related matters.

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by your Company with its related parties during the financial year were in accordance with the provisions of the Companies Act, 2013 and the Listing Regulations.

All such contracts or arrangements were approved by the Audit Committee. No material contracts or arrangements with related parties within the purview of Section 188(1) of the Act were entered into during the year under review. Further, the prescribed details of related party transactions of your Company in Form No. AOC - 2, in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, are given in the Annexure to this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act, 2013, your Directors confirm having:

a)    followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures, if any;

b)    selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c)    taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d)    prepared the Annual Accounts on a going concern basis;

e)    laid down internal financial controls to be followed by your Company and that such internal financial controls were adequate and were operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company’s Board of Directors is responsible for the preparation of the consolidated financial statements of your Company and its Subsidiaries (‘the Group’), Associates and Joint Venture entities, in terms of the requirements of the Companies Act, 2013 (the Act) and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act.

The respective Boards of Directors of the companies included in the Group and of its associates and joint venture entities are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of each company and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Such financial statements have been used for the purpose of preparation of the consolidated financial statements by the Board of Directors of your Company, as aforestated.

OTHER INFORMATIONCompliance with the conditions of Corporate Governance

The certificate from your Company’s Statutory Auditors, Messrs. S R B C & CO LLP, confirming compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations, is annexed.

Going Concern status

There was no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of your Company or its future operations.

Annual Return

The Annual Return of your Company is available on its corporate website at https://www.itcportal.com/investor/disclosures-under-SEBI.aspx .

Particulars of loans, guarantees or investments

Details of loans and investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Notes 4, 5, and 9 to the Financial Statements. No guarantees were outstanding as at the year end.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

Compliance with Secretarial Standards

Your Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Act.

Employees

The total number of employees as on 31st March, 2024, stood at 24,567.

There were 350 employees, who were employed throughout the year and were in receipt of remuneration aggregating ' 102 lakh or more or were employed for part of the year and were in receipt of remuneration aggregating ' 8.5 lakh per month or more during the financial year ended 31st March, 2024. The information required under Section 197(12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.

Dividend Distribution Policy

The Dividend Distribution Policy of your Company may be accessed on its corporate website at https://www.itcportal.com/about-itc/policies/dividend-distribution-policy.pdf .

Key Financial Ratios

Key Financial Ratios for the financial year ended 31st March, 2024, are provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’ and other similar expressions as they relate to your Company and/or its Businesses are intended to identify such forward-looking statements. Your Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Your Company’s ‘Triple Bottom Line’ philosophy has over the years spurred the creation of innovative business models that synergise the building of economic, environmental and social capital. It is now universally evident that enterprises of the future will not only have to be agile, consumer-centric, innovative and digital-first but also purpose-driven and responsibly competitive. Your Company’s superordinate goal of serving larger national priorities and creating value for all stakeholders has evolved into a new paradigm - ‘Responsible Competitiveness’ -that focuses on extreme competitiveness but in a manner that replenishes the environment and supports sustainable livelihoods.

The strategic Vision of creating multiple drivers of growth through the pursuit of market opportunities that best match institutional strengths, has resulted in the development of strong Businesses of the future anchored on a portfolio of purpose-led brands, future-ready products and world-class quality. Today, your Company is the leading FMCG marketer in India, a pre-eminent hotel chain and a globally acclaimed icon in green hoteliering, the clear market leader in the Indian Paperboards and Packaging industry, a pioneering trailblazer in farmer and rural empowerment through its Agri Business and a global exemplar in sustainable business practices. Since the turn of the millennium, your Company’s non-cigarettes businesses have grown over 31-fold and presently constitute about two-thirds of Net Segment Revenue. At the heart of this transformation lies the power of synergy, with seamless access for your Company’s new Businesses/initiatives to the deep and varied capabilities resident across different parts of the enterprise, and its world-class talent pool.

An extensive strategy reset has been undertaken in recent years to architect the structural drivers that will power the ITC Next strategy of building a Future-Ready, Consumer-Centric, Climate Positive and Inclusive organisation anchored on the Responsible Competitiveness paradigm.

In recent years, the FMCG Businesses have delivered strong revenue growth along with significant margin expansion and are well poised to be rapidly scaled up. Multi-dimensional interventions have been made to strengthen the FMCG Businesses for sustained profitable growth. The product portfolio of your Company has been further strengthened in alignment with new opportunities and enterprise strengths with sharper focus on fortifying the core businesses, addressing adjacent opportunities leveraging Mother Brands and building emerging businesses for the future. To accentuate consumer-centricity, agility and enable sharper focus in the context of the growing scale and complexity of operations, the Branded Packaged Foods Businesses have been reorganised into product market centric clusters with integrated and empowered teams. Focused interventions

made in the recent past have also augmented your Company’s multi-channel go-to-market capability, resulting in manifold expansion in the reach and availability of its products. Over the last five years, market and outlet coverage have grown 2.5x and 1.4x respectively while the network of stockists has expanded to 8x during the same period. Sharp-focused investments have augmented capability in emerging channels such as e-Commerce and Modern Trade, resulting in strong growth in sales and enhanced market standing. In addition, investments towards accelerating agile and purposeful innovation, optimising supply chain efficiencies, accelerated digital adoption, and strategic partnerships have significantly enhanced competitiveness. The impact of these multi-dimensional interventions is evident in the substantial margin expansion of 560 bps in Segment EBITDA over the last five years even in the face of severe inflationary headwinds.

The FMCG Businesses will continue to leverage your Company’s institutional strengths as a key source of sustainable competitive advantage viz. strong backward linkages with the Agri Business, a deep & wide multi-channel distribution network, cuisine knowledge resident in the Hotels Business, packaging knowhow and the robust R&D platforms nurtured by LSTC. Structural advantages arising out of distributed manufacturing footprint, anchored on state-of-the-art ICMLs strategically located proximal to large demand centres, will be increasingly leveraged to drive rapid growth of the FMCG Businesses. With enhanced scale and margin expansion, the FMCG Businesses are expected to make increasingly higher contributions to your Company’s profit pool, thereby setting the stage for further value enhancement opportunities.

The Agri Business has been a strong backbone and a key source of competitive advantage for your Company’s FMCG and Cigarettes Businesses.

The scope and scale of operations have grown manifold over the years and currently encompass nearly 3 million tonnes of annual volume throughput in 22 states and over 20 agri-value chains. In recent

years, the Business has pivoted its strategic focus towards rapidly scaling up its Value-Added Agri Products portfolio to accelerate growth and margins. With policy enablers in place, your Company is developing NextGen agriculture value chains that are digitally enabled and climate smart, and re-structuring the back end into a robust network of Farmer Producer Organisations. This will further strengthen the sourcing network and facilitate the development of customised supply chains for traceable and identity-preserved sourcing of agri-commodities and in augmenting the product portfolio with the addition of value-added products such as staples for the Food Service segment, fresh and frozen fruits & vegetables, medicinal and aromatic plant extracts etc. Towards enhancing the competitiveness of domestic agri-value chains, fostering new business models and augmenting value creation opportunities, your Company has successfully scaled up ITCMAARS - a crop-agnostic ‘phygital’ full stack AgriTech platform integrating NextGen agri-technologies and solutions - to seamlessly deliver hyperlocal and personalised solutions to the farming community whilst creating new and scalable revenue streams and strengthening sourcing efficiencies.

The Paperboards, Paper and Packaging Businesses have made significant progress in recent years in terms of enhanced scale and profitability improvement. Strategic investments have been stepped up in areas such as pulp import substitution, proactive capacity augmentation in Value-Added Paperboards segment, decarbonisation of operations, deployment of Industry 4.0 technologies and towards nurturing robust innovation platforms. The focus going forward is to fortify market leadership in the fast-growing Value-Added Paperboards segment by augmenting scale, driving cutting-edge innovation to rapidly scale-up single use plastic substitutes as a new vector of growth, building structural advantage through product mix enrichment and scaling up the use of emergent technologies such as Industry 4.0 to enhance operational efficiency, reduce wastage and costs.

The Hotels Business has over the years established a strong footprint of iconic properties and F&B brands on the back of an investment-led growth strategy.

In recent years, the strategy has been reset to pursue an ‘asset-right’ growth path and augment revenue streams while simultaneously leveraging your Company’s world-class properties and iconic cuisine brands to drive growth. Investments have been stepped up to harness the power of Digital to enhance guest experience, efficiency and productivity across all nodes of the value chain. As stated in earlier years, your Company had been evaluating alternate structures for the Hotels Business to enable the next horizon of growth and value creation. In furtherance of this strategy, during the year, the Board of Directors of your Company, approved a Scheme of Arrangement amongst your Company and ITC Hotels Limited providing, inter alia, for demerger of the Hotels Business of your Company into ITC Hotels Limited. While the Stock Exchanges have given their respective No-Objections, the Scheme is subject to other requisite approvals including approval of the National Company Law Tribunal, Kolkata Bench.

Your Company continues to build a dynamic ‘Future-Tech’ enterprise powered by state-of-the-art digital technologies and infrastructure (‘Mission DigiArc’) across the value chain adding significant impetus to digital marketing, digital commerce, digital products and digital operations. Your Company today, is a pioneer in adoption of cutting-edge digital technologies across strategic impact areas spanning Consumer Experience, Business Model Transformation, Smart Operations and Employee Experience. Foundational initiatives such as ‘DigiNext’ and ‘Young Digital Innovator’s Lab’ are accelerating your Company’s digital journey and inculcating a data driven and ‘digital first’ culture across the organisation.

Sustainability continues to be a critical focus area. Your Company is actively pursuing its bold Sustainability 2.0 agenda comprising multi-dimensional interventions in decarbonisation, building green infrastructure, scaling up carbon sequestration, promoting climate-smart and regenerative agriculture,

restoring biodiversity through nature-based solutions, enhancing water stewardship, creating an effective circular economy and sustainable packaging solutions, building climate resilience & adaptive capacity of value chains and developing inclusive value chains that can support 10 million livelihoods by 2030.

Disruptive business models and value propositions anchored at the intersection of future frontiers of Digitalisation and Sustainability form an integral part of your Company’s strategic roadmap going forward. NextGen business models such as ITCMAARS in the agri-ecosystem, tech-enabled cloud kitchens in the food service space, sustainable paperboards and packaging solutions customised for end-use with focus on single use plastic substitutes, are being piloted/progressed to actualise these opportunities. Value-accretive acquisitions, joint venture and collaborations continue to be proactively pursued towards accelerating growth and value creation.

The global operating environment has become increasingly complex, uncertain and volatile. In the wake of several upheavals witnessed over the last few years, there is now a spectre of ‘permacrisis’ i.e. an extended period of crisis from a series of extremely disruptive events, viz. pandemic, extreme weather events caused by climate change, geopolitical tensions, severe inflationary pressures. This is exacerbated by the phenomenon of ‘polycrisis’, signifying simultaneous occurrence of several crises.

India remains one of the few bright spots in an increasingly volatile and unpredictable world. With structural drivers of growth firmly in place, India is firmly positioned to play a larger role on the global

stage going forward. Your Company, with its robust and dynamic strategy pillars as aforestated, is well poised to rapidly scale-up and enhance its market standing across operating segments.

The resilience, agility and adaptive capacity demonstrated by your Company is a testament to the talent, determination and untiring efforts of its pool of dedicated professionals, associates and partners. Your Company’s diverse talent pool of professional entrepreneurs, ‘proneurs’, have the unique opportunity to nurture categories, products and brands from ideation to execution. This talent pool is being harnessed not only to create winning products and services for today, but also to seize larger opportunities as they emerge from the expanding horizons of your Company’s Businesses.

Your Company’s Board and employees are inspired by the Vision of sustaining your Company’s position as one of India’s most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. The vision of enlarging your Company’s contribution to the Indian economy is driven by its ‘Nation First: Sab Saath Badhein’ credo anchored on the core values of Trusteeship, Transparency, Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of your Company’s Corporate Governance philosophy.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

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Mar 31, 2021

SOCIO-ECONOMIC ENVIRONMENT

The year 2020 proved to be a tumultuous one for the global economy in the wake of the COVID-19 pandemic that unleashed unprecedented disruption to human life and economic activity the world over. The global economy, which was already decelerating prior to the pandemic, suffered a massive recessionary shock and contracted by 3.3% in 2020 - the sharpest drop since the Second World War. Most major economies, barring China, witnessed contraction. Advanced Economies were amongst the most affected by the pandemic, contracting by 4.7% in 2020, with the United States and Euro Area degrowing by 3.5% and 6.6% respectively. Emerging Markets and Developing Economies contracted for the first time in 60 years, registering a degrowth of 2.2% in 2020.

The depressed economic conditions and deterioration of business and consumer sentiment prompted a series of interventions by governments across the world. Central banks across countries responded synchronously, effecting sharp cuts in policy interest rates, boosting liquidity and undertaking large asset purchase programmes to help stimulate economic activity and alleviate tight financial conditions.

Major economies across the world announced stimulus packages in the range of 10% to 45% of their respective GDPs. However, repeated waves of virus outbreak impeded the recovery momentum necessitating the re-imposition of mobility restrictions and containment measures which stalled the normalisation process and slowed down the pace of economic recovery.

 

As per IMF estimates, aggregate global economic growth is expected to record a sharp rise of 6.0% in 2021, mainly off a low base in 2020. Advanced Economies are projected to grow by 5.1% with major economies such as United States, Euro Area, United Kingdom and Japan set for a strong rebound. Emerging Market and Developing Economies are estimated to grow by 6.7%, led by the Chinese economy which is expected to grow by 8.4%.

While many economies are on the path to recovery on the back of measures towards virus containment, vaccination drives, stimulus packages etc., the outlook remains challenging on account of divergence in the shape and pace of recovery as well as the potential for medium-to-long term economic scarring from the crisis. ‘Multispeed’ recoveries are underway across regions and income groups, marked by stark differences in the pace of vaccine rollout, extent of economic policy support, and structural factors such as reliance on contact-intensive sectors such as tourism in the case of certain countries. Amongst Advanced Economies, the United States is expected to surpass its pre-Covid GDP level in 2021, while for many others in the group, such recovery is expected only in 2022. Within Emerging Market and Developing Economies, while China has already returned to pre-Covid GDP levels in 2020, many others are not expected to do so until well into 2023.

The Government of India responded swiftly by announcing a lockdown towards the end of March, 2020 to contain the spread of the virus, protect lives and gear up the healthcare infrastructure in the interim.

There is heightened uncertainty around the timing and shape of the recovery trajectory. A rapid scale up in the pace of vaccination and gearing up of the healthcare infrastructure to mitigate the impact of possible future outbreaks would be critical going forward. On the Consumption side, urban-led recovery may be relatively muted compared to the first wave as consumers switch to precautionary savings mode and rising healthcare costs eat into household spending. Rural demand, which remained strong in FY 2020-21 on the back of robust agricultural output, government support and reverse migration, may also be blunted by the large scale spread of the virus to the hinterland in the second wave. On the other hand, less severe restrictions, a more prepared organised sector and a pick-up in vaccination coverage present some of the key mitigating factors going forward. Robust recovery in Advanced Economies and other Emerging Markets, as stated earlier, could provide the much needed tailwind from an external demand perspective.

Even as the Indian economy faces multi-dimensional challenges in the short term, it remains one of the most dynamic major economies in the world with huge potential. With structural drivers of growth firmly in place, the pace of economic growth is expected to pick up over time. Policy announcements in the Union Budget 2021 are expected to provide further impetus to build India’s competitiveness and foster inclusive growth. Higher capital expenditure outlay along with heightened spends on agriculture and rural infrastructure development augur well for the economy and will spur a virtuous consumption-investment-employment cycle. Notwithstanding the execution challenges in the near term, reforms announced in the agricultural sector hold promise to foster a new era of growth for farmers and rural India that comprise nearly half of the country’s workforce.

 

This was followed up with several steps to support livelihoods and economic activity through stimulus packages, largely in the form of liquidity boosting measures along with direct cash transfers and subsidies. Progressive easing of restrictions and improvement of mobility led to a pick-up in economic activity in the second half of the year; however, aggregate demand remained below pre-Covid levels and contact-intensive segments such as aviation and hospitality, and discretionary consumption continued to lag the rest of the economy.

The Indian economy faced its worst crisis ever, degrowing by 7.3% during the year; the first quarter of the year was particularly impacted with GDP contracting by 23.9%. Overall for the year, the Industry and Services sectors declined by 8.2% and 8.1% respectively, while Agriculture remained relatively resilient growing by 3% over the previous year.

The MSME and unorganised sectors were severely impacted. Fixed Capital Formation witnessed a steep decline of 12.4% and Private consumption (PFCE) contracted by 9.0%, reflecting dampened business sentiment and consumer confidence. Contraction in economic activity and lower tax collections contributed to a large Fiscal Deficit of 9.5% of GDP for the year.

While earlier estimates of India’s GDP growth for 2021-22 ranged between 11.0% to 13.0%, the ferocity of the second wave in India since February, 2021 has adversely impacted economic prospects. Most States have had to reimpose mobility restrictions in a bid to contain the spread of the virus which has slackened the recovery momentum significantly. High frequency indicators point to economic activity having fallen by ~25-30% from nearly pre-Covid levels in February-March 2021. This has led to sharp downward revisions to the earlier growth projections by 200 to 300 basis points.

As the Indian economy recovers from the severe impact of the pandemic, policy interventions would need to be sharply focused on supporting sustainable livelihoods and fostering inclusive growth. Structural support would need to be provided to sectors with huge economic multiplier impact and those that are still under considerable stress such as MSME, Travel & Tourism, etc. The development of robust domestic agri and wood-based value chains hold special importance in the Indian context given their enormous potential to contribute to national objectives.

Enhancing agricultural productivity and value addition to international standards, while simultaneously improving market linkages, remain critical to enhance the competitiveness of the agricultural sector and drive significant increase in farmers’ income.

India is the leading producer worldwide in several commodities, including shrimps, spices, fruits such as mango, papaya, bananas, etc.; it is also the second largest producer of rice and has the largest population of buffaloes, globally. However, India’s agri-exports aggregating appx. US$ 42 billion represent a global market share of only about 2.5%. Expert studies indicate the potential to double India’s agri-exports by strengthening the competitiveness of agri-value chains in areas that are aligned to global demand and where the country has inherent advantages. This calls for a transformational shift of the agri ecosystem from the conventional production-centric supply chains to demand-responsive value chains anchored by market players.

It is pertinent to note that a substantial quantum of food is wasted along the chain in India, depending on the inherent perishability of the crop and the season. Higher level of food processing in the economy can create a much larger pull for quality agri-commodities, thereby reducing farm wastages and raising farm incomes. This would require

focused investment in developing product-specific climate-controlled infrastructure as well as in branded products that benefit large agri-value chains.

Corporate participation is essential not only to invest in requisite infrastructure, but also to provide assured market linkages to farmers. A big thrust on India’s Food Processing sector can lead to significant job creation, enhance rural incomes and help manage food inflation. In this context, the recently announced Production Linked Incentive (PLI) scheme for the Food Processing sector, with an estimated outlay of ' 10900 crores, is expected to play a pivotal role in boosting investments, agri-exports, farmer incomes, employment generation and building Indian brands for the global market.

Similarly, the Agro-forestry sector, as a source of raw material for wood-based industry, is woefully constrained by policies that not only impede job creation in India but also promote avoidable imports. Supportive policies in this area would go a long way in supporting sustainable livelihoods while simultaneously augmenting the Nation’s environmental capital. The recent policy interventions on raw batti imports into the country augur well for enhancing the competitiveness of domestic value chains and fostering large scale employment generation.

Your Company’s interventions across its operating segments are aligned to the national priorities of enhancing competitiveness of Indian agriculture and industry, generating large-scale employment opportunities and supporting sustainable livelihoods, driving import substitution by enhancing the competitiveness of domestic agri-value chains and industry, creating national brands to maximise value capture in India, increasing Indian agri-exports and promoting sustainable business practices. Investments made by your Company continue to be guided by the national objectives of ‘Make in India’

per acre due to improved quality, farm productivity and higher share of farm gate sales.

Your Company is also working towards developing village level institutions and fostering microentrepreneurship by promoting custom hiring centres for farm mechanisation, post-harvest product management infrastructure and community managed seed banks for self-reliance in quality seed material. Environmentally sustainable farm practices including zero-till sowing, micro-irrigation and watershed development continue to be promoted.

The farm sector faces enormous threats arising out of climate change as evident from the growing number of extreme weather events of both droughts and floods. Given the vulnerabilities, it is critical to strengthen climate resilience and adaptability of the agri-food sector. In this context, your Company’s interventions in collaboration with CGIAR’s ‘Climate Change and Food Security Programme’ to build climate smart villages was expanded to over 1600 villages across 14 states and supported farmers in the management of risks arising from erratic and extreme weather events. Your Company’s Climate Smart Village intervention in Rajasthan demonstrated yield improvement of 10% for soyabean crop (Kharif 2020) and 15% in the case of wheat crop (April 2020 harvest). Reduction in cost of cultivation along with yield improvement led to increase in net income by 87% in soyabean and 41% in wheat. According to CGIAR estimates, average Greenhouse gas (GHG) emissions in soyabean reduced by up to 37% as compared to the baseline.

Demand side management is another critical component of your Company’s Water Stewardship Programme. Recognising the critical imperative of reducing water use, especially in agriculture, your Company continues to work with farmers to achieve

 

and ‘Doubling Farmers’ Income’ and the overarching theme of ‘Atmanirbhar Bharat’ that seeks to make the country stronger, resilient and more competitive.

As reported in earlier years, your Company piloted an integrated ‘Baareh Mahine Hariyali’ programme in four districts of Uttar Pradesh (Prayagraj, Chandauli, Ghazipur and Varanasi) to give a new dimension to the complex task of multiplying farmer incomes. Over 200,000 farmers in UP have already been covered and the programme is planned to be rolled out to over 10 lakh farmers, progressively. Around 35,000 farmers who adopted all initiatives reported doubling of incomes, while those who implemented the programme partially have reported 30% to 75% growth in income. The collaboration with NITI Aayog, aimed at boosting agricultural and allied activities in 27 backward districts of 8 states under the Aspirational Districts programme, enhanced its scale of operations. Over 25 lakh farmers have so far been trained in the package of practices appropriate for the dominant crop of the region. These interventions have led to improvement in yields and reduction in cultivation cost thereby augmenting farmer incomes by appx. 60% for both paddy and soyabean cultivated in Kharif 2020 season.

Your Company is also partnering with the State Government of Andhra Pradesh towards improving the quality of chilli production in the country to meet global standards. A Public Private Producer Partnership programme, ‘Integrated Agri-Extension Platform for Chilli Farm Value Chain Development’, has been conceptualised under which over 40,000 farmers covering appx. 100,000 acres in the districts of Prakasam, Krishna, Kurnool and Guntur of Andhra Pradesh are expected to be benefited. In FY 2020-21, the project covered over 10,000 farmers and 26,800 acres in 77 villages. Farmers covered under the project were able to generate 27% additional income

‘more crop per drop’ and improve farmer incomes. Around 3 lakh acres have been covered till date across 6 states. Through micro irrigation and crop-specific precision agronomical practices, potential water savings are to the tune of 208 million cubic metres in a year as per various studies.

During the year, your Company focused on maximising livelihood generation for farmers and daily wage earners under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Starting from mid-April 2020, 55 lakh person days of work, valued at ' 90.5 crores, was completed in 2,448 villages spread across 64 districts in 16 states. These works also led to the construction of long-term productive assets for the community in the form of 5,631 water harvesting structures that provide life-saving irrigation to agriculture.

In Kapurthala District, Punjab, ITC Mission Sunehra Kal has, over the last three years, implemented solutions that have effectively substituted the burning of paddy stubble by farmers. During the year, the programme covered 109,295 acres with appx. 87% of the area witnessing total stoppage of stubble burning, thereby avoiding 75,000 tonnes of carbon release into the atmosphere.

Although India has appx. 18% of the world population, its share of natural resources is disproportionately low with only 2.4% of global land mass, 4% of freshwater resources and 1% of forest resources. According to the ‘State of Working India 2021’ report released recently, the economic fallout of the pandemic is expected to push 230 million Indians into poverty, underscoring the vulnerability of the economically weaker sections of society and reversing the significant progress made by the country over the last two decades. It is more critical than ever before to redouble efforts, both at the national and corporate

level, towards fashioning strategies that foster sustainable, equitable and inclusive growth.

It is your Company’s belief that businesses can bring about transformational change by pursuing innovative business models that synergise the creation of sustainable livelihoods and the preservation of natural capital while enhancing shareholder value.

This ‘Triple Bottom Line’ approach to creating larger ‘stakeholder value’, as opposed to merely focusing on uni-dimensional ‘shareholder value’ creation, is the driving force that defines your Company’s sustainability vision and its growth path into the future.

Your Company is a global exemplar in ‘Triple Bottom Line’ performance and is the only enterprise in the world of comparable dimensions to have achieved and sustained the three key global indices of environmental sustainability of being ‘water positive’ (for 19 years), ‘carbon positive’

(for 16 years), and ‘solid waste recycling positive’

(for 14 years). The focus on creating unique business models that generate substantial livelihoods across the value chains has led to your Company’s Businesses supporting over six million sustainable livelihoods, many of whom belong to the weaker sections of society.

Your Company sustained its ‘AA’ rating by MSCI-ESG -the highest amongst global tobacco companies. It has also been included in the Dow Jones Sustainability Emerging Markets Index - a reflection of being a sustainability leader in the industry and a recognition of your Company’s continued commitment to people and planet. The Kovai unit was awarded Platinum rating by the Alliance for Water Stewardship Standards which is the highest recognition for water stewardship in the world. The unit is the first site in India and the first paper mill in the world to achieve this recognition.

Your Company recognises the urgent need to combat climate change for building a more secure future and the role it can play in enabling a net-zero economy.

To this end, your Company is pursuing a low carbon growth strategy through extensive decarbonisation programmes across its value chain. With its bold Sustainability 2.0 agenda, your Company is setting the bar higher, and remains committed to making a meaningful contribution to the Nation’s future while retaining its status as a sustainable business exemplar. Further details on this subject are available in the Sustainability section of this Report.

FINANCIAL PERFORMANCE

The operating environment during the year was rendered extremely challenging by the outbreak of the pandemic, which caused unprecedented disruptions across your Company’s operating segments. Your Company responded with agility and speed in adapting to the ‘new normal’ by resuming operations expeditiously and launching innovative products in record time to address emergent consumer needs. Your Company also formed strategic partnerships, deployed innovative delivery models and enhanced usage of digital technologies for efficient market servicing. With safety and well-being of your Company’s employees, partners and associates accorded paramount importance, your Company instituted the highest standards of hygiene and safety protocols across all nodes of operations.

The onset of the pandemic rendered the operating environment extremely challenging. While sequential pick-up in all operating segments in the second half of the year mitigated the impact, the disruptions in the first half weighed on the overall performance for the year. Relentless focus on cost reduction across Businesses aided in partially mitigating the impact of negative operating leverage.

-    The FMCG-Others Segment delivered robust performance, with comparable Segment Revenue growing strongly by 15.8% (excluding the Educational and Stationery Products Business which was impacted by prolonged closure of educational institutions, the Lifestyle Retailing Business due to ongoing restructuring of operations and the impact of acquisition of Sunrise Foods Private Limited during the year). This was driven by a surge in demand for Staples, Convenience Foods and Health & Hygiene products in the first half of the year and strong recovery in the discretionary/out-of-home portfolio in the latter half. Profitability of the FMCG-Others Segment improved significantly with Segment EBITDA margin expanding by ~180 bps on the back of higher operating leverage, enhanced operational efficiencies, product mix enrichment, delayering of operations, reduced distance-to-market and other structural interventions across the value chain. Such improvement was achieved notwithstanding incremental operating costs due

to COVID-19 and gestation costs pertaining to new categories/facilities.

-    The FMCG-Cigarettes Segment was severely impacted in the first half of the year due to Covid-induced restrictions. With gradual easing of restrictions and improved mobility, the Business recovered progressively to reach nearly pre-Covid levels towards the close of the year.

-    After an extremely challenging first half, the Hotels Segment witnessed progressive improvement in revenues driven by focused interventions including introduction of special packages for target segments, launch of curated food delivery/takeaway menus, etc. Pick-up in revenues together with aggressive cost reduction measures aided the Business turn EBITDA positive in the second half of the year.

-    The Agri Business Segment posted robust growth in revenue driven by opportunities in wheat, rice and oilseeds, scale up of the value-added portfolio and higher supplies to the Branded Packaged Foods Businesses to support enhanced scale; subdued demand for leaf tobacco in international markets and adverse business mix, however, weighed on Segment Results.

-    The Paperboards, Paper & Packaging Segment was adversely impacted by subdued offtake in end-user segments such as publications, liquor and wedding cards; robust growth in exports and strong demand in pharma & decor segments helped partially mitigate the impact. A significant uptick in volumes and realisations in paperboards in the latter half of the year on the back of recovery in most end-user industries, relentless focus on enhancing operational efficiency and structural cost-saving interventions resulted in a much-improved performance.

Overall for FY 2020-21, Gross Revenue at ' 48151.24 crores increased by 3.9%, while Profit Before Tax (before exceptional items) at ' 17164.15 crores degrew by 11.1% over FY 2019-20 and Profit After Tax stood at ' 13031.64 crores (previous year ' 15136.05 crores). Total Comprehensive Income for the year stood at ' 13277.89 crores (previous year ' 13754.24 crores). Earnings Per Share for the year stood at ' 10.59 (previous year ' 12.33).

In line with your Company’s track record of consistent increase in annual dividend payouts, the Directors of your Company are pleased to recommend a Final Dividend of ' 5.75 per Ordinary Share of ' 1 each for the financial year ended 31st March, 2021. Together with the Interim Dividend of ' 5.00 per share paid on 10th March, 2021, the total Dividend for the financial year ended 31st March, 2021, amounts to

' 10.75 per share (previous year ' 10.15 per share). Total cash outflow on account of Dividends (including interim Dividend of ' 6152.68 crores paid in March 2021) will be ' 13230.27 crores.

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

Over the last five years, the Value-Added by your Company, i.e. the value created by the economic activities of your Company and its employees, aggregated around ' 239000 crores of which over ' 167000 crores accrued to the Exchequer.

Including the share of dividends paid and retained earnings attributable to government owned institutions, your Company’s contribution to the Central and State Governments represented over 75% of its Value-Added during the year.

Your Company remains amongst the Top 3 Indian corporates in the private sector in terms of Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in your Company’s portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. Foreign exchange earnings of the ITC Group over the last ten years aggregated nearly US$ 7.3 billion, of which agri exports constituted 56%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company’s contribution to the rural economy.

During the financial year 2020-21, your Company and its subsidiaries earned ' 5934 crores in foreign exchange. The direct foreign exchange earned by

PROFITS, DIVIDENDS AND RETAINED EARNINGS
Â	(Rs. in Crores)
PROFITS	FY 2020 - 21	FY 2019 - 20	Â
a) Profit Before Tax@	17164.15	19166.81	Â
b) Tax Expense	Â	Â	Â
- Current Tax	4035.36	4441.97	Â
- Deferred Tax	97.15	(411.21)	Â
c) Profit for the year®	13031.64	15136.05	Â
d) Other Comprehensive Income	246.25	(1381.81)	Â
e) Total Comprehensive Income	13277.89	13754.24	Â
STATEMENT OF RETAINED EARNINGS	Â	Â	Â
a) At the beginning of the year	33596.14	26978.13	Â
b) Add: Profit for the year	13031.64	15136.05	Â
c) Add: Other Comprehensive Income (net of tax)	(29.66)	(113.54)	Â
d) Add: Transfer from share option on exercise and lapse	222.96	17.73	Â
e) Less: Dividends	Â	Â	Â
- Ordinary Dividend of ' 10.15 (2020: ' 5.75) per share	12476.61	7048.71	Â
- Interim Dividend of ' 5.00 (2020: Nil) per share	6152.68	-	Â
- Income Tax on Dividend paid	(13.98)	1373.52	Â
f) Transfer from Equity Instruments through Other Comprehensive Income reserve on renunciation of rights entitlements (net of tax)	4.82	Â	Â
g) At the end of the year	28210.59	33596.14	Â
@Previous year includes Exceptional items representing cost of leaf tobacco stocks (including taxes) destroyed at a third party owned warehouse due to fire, for which insurance claim has been filed and is under process.

 

your Company amounted to ' 4600 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency amounted to ' 1664 crores, comprising purchase of raw materials, spares and other expenses of ' 1366 crores and import of capital goods of ' 298 crores.

FMCG CIGARETTES

The onset of COVID-19 pandemic towards the end of FY 2019-20 and the subsequent lockdowns and restrictions imposed to curb its spread, caused unprecedented disruption across the value chain with manufacturing and sales operations coming to a virtual standstill. Manufacturing operations were resumed in mid-May immediately upon receipt of requisite permissions; the Business swiftly ramped up production and availability of its brands across markets, while ensuring the highest standards of hygiene and safety protocols across all nodes of operations. Supply chain operations were re-configured and re-aligned to service market requirements through proactive planning leveraging digital technologies and agility in execution amidst a dynamic environment. The imposition of localised lockdowns in several regions towards the end of June 2020, restricted hours of convenience store operations and temporary disruptions in certain wholesale markets impacted the recovery momentum in the second quarter. The Business strengthened direct reach in target markets across all traditional trade channels and augmented the stockist network to service rural and semi-urban markets efficiently. With easing of restrictions and improvement in mobility from September, 2020 onwards, the Business recovered progressively over the remainder of the year to reach nearly pre-Covid levels towards the close of the year.

Notwithstanding the headwinds faced during the year under review, your Company sustained its leadership position in the cigarette industry through its unwavering focus on nurturing a portfolio of world-class products anchored on superior consumer insights, robust innovation pipeline and superior product development capabilities. Several new

variants were introduced during the year to cater to the continuously evolving consumer preferences and to ensure the future readiness of the product portfolio. These include the launch of innovative offerings such as ‘Gold Flake Neo’, ‘Classic Connect’, ‘American Club Clove Mint’, ‘Gold Flake Indie Mint’ and ‘Capstan Fresh Flavour’. Refreshed packs were also introduced for several ‘Navy Cut’ variants.

The Business also expanded its presence in strategic markets with the launch of differentiated offerings to fortify the portfolio across segments.

Globally, cigarette smoking is the dominant form of tobacco use. In the Indian context, tobacco use comprises a diverse range of chewing and smoking formats that are available at different price points, reflecting the varying socio-economic and demographic profiles of the population. While India is the world’s second largest consumer of tobacco, legal cigarettes constitute only 9% of overall tobacco consumption in India, as against a global average of 90%. It is pertinent to note that India accounts for less than 2% of global cigarette consumption despite comprising 18% of the world’s population, making India’s per capita cigarette consumption amongst the lowest in the world.

Over the years, discriminatory and punitive taxation on cigarettes has led to a progressive migration from consumption of duty-paid cigarettes to other lightly taxed/tax-evaded forms of tobacco products, comprising illegal cigarettes and bidi, chewing tobacco, gutkha, zarda, snuff, etc. Consequently, while the share of legal cigarettes in total tobacco consumption has declined from 21% in 1981-82 to a mere 9%, aggregate tobacco consumption in the country has increased over the same period. As a result, despite accounting for less than 1/10th of the

tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5th of the revenue generated from the tobacco sector. During the period 2012-13 to 2016-17, excise duty on cigarettes increased sharply at a CAGR of 15.7%; however, tax revenue from cigarettes grew by a mere 4.7% CAGR during the same period. In 2017-18, the legal cigarette industry was further impacted by a sharp rise of 20% in tax incidence as a result of increase in excise duty and transition to the GST regime. Thereafter, relative stability in taxation until January, 2020 helped the legal industry partially claw back volumes lost to the illicit trade in earlier years; consequently, revenue collections witnessed a marked buoyancy growing by 10% during this period.

It is pertinent to note that India’s per capita cigarette consumption is amongst the lowest in the world and is significantly lower compared to that of China, Japan, USA, UK and even neighbouring countries like Bangladesh, Nepal and Pakistan.

Tobacco control measures in India have ranked amongst the most stringent in the world from the time of enactment of the Cigarettes (Regulation of Production, Supply and Distribution) Act, 1975 to the present.

India is also one of the few countries where tobacco products are regulated across the value chain -from their manufacture to sale to consumers. The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) requires cigarette packages to bear the statutorily mandated pictorial and textual warnings covering 85% of the surface area of the packet - one of the largest in the world.

Punitive taxes on the legal cigarette industry have resulted in rapid growth in the illicit cigarette trade, making India the 4th largest illicit cigarette market globally according to Euromonitor estimates. This dubious distinction has arisen on the back of punitive taxation of cigarettes over the years that has created extremely attractive tax arbitrage opportunities for unscrupulous players indulging in illicit cigarette trade. While legitimate cigarette industry volumes have declined consistently over the last decade, illicit

cigarette trade volumes in contrast have grown rapidly during the same period, accounting for about one-fourth of the domestic industry. The king-size segment in particular has been severely impacted in recent years consequent to the sharp tax increase of 19% on this segment under GST. The steep increase in cigarette taxes with effect from 1st February, 2020, has provided further fillip to illicit cigarette trade in the country.

It is estimated that on account of illegal cigarettes alone, revenue loss to the Government is appx.

' 15000¹Â crores per annum. In respect of the other tobacco products also, the revenue losses are significant since about 68%²Â of the total tobacco consumed in the country remains outside the tax net. During the year, the media has reported several cases of evasion of taxes/duties by dealers in illicit cigarettes which came to light because of raids conducted by Directorate General of GST Intelligence (DGGI).

As per the reply given by the Union Minister of State for Commerce & Industry in the Lok Sabha on 17th March, 2021, the seizure of illicit cigarettes has seen a quantum jump over the previous year.

It is pertinent to note that smuggled international brands of cigarettes do not bear any of the pictorial or textual warnings mandated by Indian laws or, bear much smaller pictorial warnings as per the tobacco laws of the countries from where these cigarettes originate. As reported in prior years, findings from research conducted by IMRB International, an independent market research organisation, show that

the lack of pictorial warnings on packets of smuggled international brands of cigarettes or their diminutive size creates a perception in the consumers’ mind that these illicit cigarettes are ‘safer’ than domestic duty-paid cigarettes that carry the 85% pictorial warnings. The combination of low prices to consumers consequent to tax evasion and the wrong perception created by the absence of statutory pictorial warnings provides significant buoyancy to illicit cigarette volumes.

India is among the top three tobacco growing countries in the world. Tobacco occupies a prime place in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors³. The large and rapidly growing illicit cigarette trade also has a deleterious impact on millions of farmers and farm workers engaged in the tobacco value chain. In India, cigarettes are manufactured largely using Flue Cured Virginia (FCV) tobacco grown in the states of Andhra Pradesh, Telangana and Karnataka. FCV tobaccos are also traded internationally and India is an exporter of this commodity. Since smuggled international brands of cigarettes do not use Indian tobaccos, in addition to revenue losses, the growth of the illegal cigarette trade has also resulted in a sharp drop in demand for Indian FCV tobaccos in the domestic market.

A combination of factors including the decline in leaf exports due to lower availability of Indian crop, lower export incentives in India and relative weakness of currencies in certain competing geographies have

 

severely impacted the earnings of tobacco farmers and farm workers in the country.

It is pertinent to note that several other major tobacco producing countries, including the USA, have established regulatory frameworks taking into consideration the economic interests of their tobacco farmers. The punitive and discriminatory taxation & regulatory regime on cigarettes in India continues to affect the livelihood of Indian tobacco farmers with corresponding gains to those in countries that have opted for moderate and equitable tobacco regulations. These developments have had a devastating impact on 46 million livelihoods comprising tobacco farmers, farm workers, tribals, etc. who are dependent on the tobacco value chain. It is estimated that since 2014, Indian tobacco farmers have suffered a cumulative drop in earnings of over ' 6000 crores. Stability in taxes on cigarettes will have the salutary effect of enabling the legal cigarette industry to combat illicit trade and claw back volumes, thereby engendering domestic demand for Indian tobaccos besides cushioning the impact of volatility in international markets.

As reported in earlier years, your Company and several other stakeholders had challenged the validity of the pictorial and textual warning covering 85% of the surface area of the packet prescribed under COTPA. The Honourable Karnataka High Court, by its judgment in December, 2017, held the 85% pictorial warnings to be factually incorrect and unconstitutional. Upon Special Leave Petitions filed by the Government and others, the Honourable Supreme Court has stayed the judgment of the High Court. The cases are pending before the Honourable Supreme Court.

The extremely stringent regulations along with the discriminatory and steep taxation on cigarettes have had numerous negative, albeit unintended repercussions. These include:

-    rapid growth in illicit cigarette volumes, resulted in sub-optimisation of the revenue potential of the tobacco sector and significant loss to the Exchequer. It is estimated that on account of illegal cigarettes alone, the revenue loss to the Government is appx. ' 15000 crores per annum.

-    widespread availability of illegal cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices. As a result, despite accounting for less than 1/10th of the tobacco consumed in the country, duty-paid cigarettes contribute more than 4/5th of the revenue generated from the tobacco sector.

-    a large component of tobacco consumption in the country, aggregating around 68% remaining outside the tax net.

-    persistent negative impact on the livelihood of tobacco farmers and others dependent on tobacco. Studies by the Central Tobacco Research Institute (CTRI) indicate that on account of agro-climatic conditions, there is no equally remunerative alternate crop that can be grown in the FCV tobacco growing regions of the country.

Your Company continues to engage with policy makers for a framework of equitable, non-discriminatory, pragmatic, evidence-based regulations and taxation policies that balance the economic imperatives of the country and tobacco control objectives, having regard

to the unique tobacco consumption pattern in India. Stability in taxes is critical for addressing the interests of all the stakeholders of this industry, including the tobacco farmers, the Exchequer and the consumers.

Despite India already having implemented one of the most stringent regulatory frameworks for tobacco control, in early January, 2021, the Union Ministry of Health & Family Welfare had proposed additional stringent restrictions on the tobacco trade under the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) (Amendment) Bill, 2020 and elicited comments from the stakeholders.

It is apprehended that the proposed amendments would result in unintended consequences further fuelling the increase in illicit trade and have an adverse effect on the livelihood of millions of people directly and indirectly involved with related farming and legal trade. It is hoped that the Government will take a pragmatic and judicious view in the matter keeping in mind the interests of all stakeholders.

As in the past, the research and development initiatives of your Company continue to add to the country’s bank of Intellectual Property Rights (IPR). In addition to grant of several patents in earlier years, it is deeply satisfying to report that your Company has been granted two more patents during the year in respect of cigarettes.

Manufacturing facilities continue to be modernised by inducting contemporary technologies towards securing higher levels of productivity and product excellence. New benchmarks were set in areas of

quality, sustainability, supply chain responsiveness and productivity. Cutting-edge technologies such as Industry 4.0 and Data Sciences were leveraged to build a smart manufacturing environment of connected systems. These initiatives, coupled with innovative capabilities and in-house design and development expertise, have further improved the speed-to-market for new launches and augmented the innovation pipeline of the Business.

Your Company continues to be recognised for its operational excellence. The Saharanpur unit was adjudged ‘Winner’ in Frost and Sullivan 2020 Project Evaluation & Recognition Program (PERP) in Quality Excellence Leadership and Operational Excellence Leadership categories in the Manufacturing Sector.

In line with your Company’s commitment to the ‘Triple Bottom Line’, the Business continued to step up sustainability initiatives, earning industry recognition. The Ranjangaon unit was recognised with the ‘Golden Trophy - Sarvashreshtha Suraksha Puraskar Safety Awards 2020’ by National Safety Council of India (NSCI) for the second time in a row. The Saharanpur unit was awarded ‘Excellent Energy Efficient Unit’ in the CII National Award for Excellence in Energy Management, 2020. The Bengaluru unit received the Frost and Sullivan ‘Sustainable Factory of the Year’ award, highest across all categories. Renewable energy usage in the Business accounted for over 55% of the total energy consumed.

As aforestated, after a challenging first half, the Business staged a robust recovery with the easing of restrictions with volumes nearly touching pre-Covid levels towards the close of the year. However, the

outbreak of the second wave is expected to cause disruptions in the front-end supply chain operations in the near term. Pace of vaccinations and restrictions on mobility and convenience store operations will be the key monitorables in the ensuing months. Notwithstanding such challenges, your Company continues to closely track the developments and remains confident of responding with agility to the dynamic environment and consolidating its leadership position in the legal cigarette industry leveraging its superior strategies, future ready portfolio, robust innovation pipeline, cutting-edge manufacturing and digital technologies, and best-in-class execution capabilities.

FMCG - OTHERS

The FMCG industry, which was already witnessing a marked deceleration in growth rates, was severely impacted by the outbreak of the COVID-19 pandemic which caused unprecedented disruptions across the value chain. This resulted in contraction of the FMCG industry during the first half of the year - a first in the last decade. With gradual easing of restrictions and increased mobility, the FMCG industry picked up pace to grow by ~8% in the second half. Urban markets were deeply impacted by the intensity of COVID-19 cases while rural markets were relatively more resilient.

Following the outbreak of the pandemic, there was heightened demand for high quality products anchored on the vectors of hygiene, health, wellness and immunity. ‘At-home’ consumption surged even as ‘out-of-home’ consumption was severely impacted due to mobility restrictions. There was a marked preference

for larger pack formats as consumers sought to reduce frequency of purchase. Heightened concerns on hygiene and safety also manifested in consumers’ preference for trusted brands. Consequently, staples, noodles, biscuits, dairy products, sanitizers, hand wash, floor cleaners, etc. witnessed robust demand during the first half of the year. On the other hand, discretionary categories and those with relatively higher salience of ‘out-of-home’ consumption saw contraction in sales. Demand for staples and convenience foods normalised during the second half of the year as consumers broadened their purchase assortment along with lower ‘at-home’ consumption on the back of progressive easing of restrictions and increased mobility. Demand for health & hygiene products, on the other hand, remained elevated through the year even as the pace of growth moderated as compared to the first half of the year. As the year progressed, discretionary and ‘out-of-home’ consumption products witnessed smart recovery buoyed by pent-up demand and increased availability across channels.

At the onset of the pandemic, the key task was to make quality products available to consumers.

Your Company was amongst the fastest off the blocks to resume operations after obtaining necessary permissions and establishing comprehensive hygiene and safety protocols. Over 90% of the facilities manufacturing essential products were operational within two weeks of imposition of the lockdown. Demonstrating a high degree of agility and responsiveness to the market dynamics at play, your Company rapidly expanded capacity and re-purposed manufacturing lines to cater to the heightened demand for essentials and health

& hygiene products. A series of concerted actions were taken to realign the distribution infrastructure so as to respond to the multiple challenges arising out of restricted mobility of people and goods, curbs on working hours and outlet operations. Several technology-driven solutions were deployed to effectively service the surge in demand. Anticipating the increase in consumer preference for ‘contactless shopping’ and home delivery, your Company proactively engaged with e-Commerce platforms and aligned the supply chain to deliver the right product assortment and SKUs. Sales through the e-Commerce channel more than doubled during the year, taking its salience to over 5% of Segment Revenue. Your Company also pioneered an innovative model - ‘ITC Store on Wheels’ - to directly service consumers, covering over 900 residential complexes across 13 cities. Your Company also rolled out the ‘ITC e-store’ - an exclusive direct-to-consumer platform - to facilitate ‘contactless shopping’ and make its products accessible to consumers, which was the need of the hour. Product availability was also augmented through alternative channels in collaboration with new partners such as Dominos, Swiggy, Zomato and Dunzo. During the lockdown phase, in tune with the trends of increased ‘at-home’ consumption, need for sanitizing products in the ‘health & hygiene’ space and the consumer need for health & wellness content, purposeful communication sharply focused on these need spaces were rolled out.

Leveraging the robust innovation platforms of your Company’s Life Sciences and Technology Centre (LSTC), your Company launched over 120 new and

innovative products with compelling value propositions in record time, demonstrating agility and execution excellence. During the year, both direct and indirect reach were stepped up significantly. Market and outlet coverage were expanded to 1.3x and 1.1x respectively compared to pre-Covid levels. The stockists network was nearly doubled to sharp target rural markets to drive growth, mitigate the impact of disruptions in the wholesale channel and effectively service emergent demand.

As demand levels fluctuated significantly during various phases of lockdown, associated risks and uncertainties were managed with agility leveraging shorter operations planning cycles, sharper product and SKU assortments and predictive data analytics. Direct-to-market shipments were also scaled up substantially to ensure freshness and reduced time-to-market in categories like Atta, Snacks and Biscuits.

The Education and Stationery Products Business (ESPB) was significantly impacted with prolonged closure of educational institutions across the country. Operations of the Lifestyle Retailing Business (LRBD) continued to be restructured during the year.

Your Company acquired Sunrise Foods Private Limited (Sunrise), a leading player in the branded spices market in the East, in July 2020. The Scheme of amalgamation of Sunrise with your Company (Scheme) was sanctioned by the Honourable National Company Law Tribunal, Kolkata Bench; the Scheme became effective from 1st April, 2021 with 27th July, 2020 being the Appointed Date. The rationale for the acquisition and the key drivers of value creation have been discussed in detail in the Branded Packaged

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Notwithstanding the challenging conditions prevailing during the year, your Company’s FMCG businesses recorded Segment Revenue of ' 14728.21 crores representing an increase of 14.7% over the previous year.

On a comparable basis (i.e. excluding ESPB, LRBD and the impact of acquisition of Sunrise during the year), FMCG-Others Segment Revenue grew by 15.8%. Growth in the first half of the year was driven by surge in demand for Staples & Convenience Foods and Hygiene products; sequential recovery in demand in the Discretionary/Out-of-home categories such as Snacks, Juices, Confectionery, Bodywash and Fragrances reflected in the second half performance.

Segment EBITDA for the year grew at a robust pace of 44.1% to ' 1316.82 crores with significant margin expansion of ~180 bps to 8.9%. This was driven by enhanced scale, product mix enrichment, reduced distance-to-market and other strategic cost management initiatives, after absorbing the impact of sustained investment in brand building and gestation costs of new categories and facilities.

Your Company remains focused on building purpose-led brands anchored on larger consumer needs. The Businesses continue to leverage digital technologies and platforms enhancing consumer experience. Strategic interventions in this area are aimed at delivering delightful brand experiences seamlessly across touchpoints through personalised journeys mapped to individual’s needs, preferences and context. The Businesses continue to increasingly leverage ‘Sixth Sense’, the Marketing Command Centre and Consumer Data Hub - an AI powered hyper-personalised platform backed by a robust partner ecosystem for content and data - to gain insights on market trends and consumer behaviour

and synthesise the same to craft contextual brand communication and product development. Over 2000 content assets have been deployed leveraging this capability within a relatively short span of time at significantly lower cost.

The year also marked the scale up of your Company’s direct-to-consumer channel, the ‘ITC e-Store’. Launched just prior to the lockdown in March 2020, this initiative was extended to 11 cities during the year along with the introduction of several new features. Powered by state-of-the-art digital technologies and a robust fulfilment infrastructure, the platform offers consumers on-demand access to a wide range of your Company’s FMCG products under one roof. The initiative has been well received by consumers and plans are on the anvil to rapidly scale up the same in the ensuing months.

Cutting-edge digital technologies including Industry 4.0, Advanced Analytics, Big Data and industrial Internet of Things (loT) continue to be deployed towards strengthening your Company’s real time operations and execution platform. Several digitally powered interventions are underway towards enhancing productivity, driving efficiency and reducing costs. These initiatives are anchored on the key pillars of synchronised planning and forecasting, next generation agile supply chain, smart manufacturing and sourcing, and smart demand capture and fulfilment. Strategic investments are also being made towards enhancing value creation leveraging data and analytics. Key interventions include augmenting your Company’s NextGen data architecture powered by Artificial Intelligence/Machine Learning (AI/ML), identifying and prioritising use cases for impactful outcomes and setting up a Data Science academy comprising data scientists and engineers to drive and sustain data and analytics programmes.

The FMCG Businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years.

Your Company’s vibrant portfolio of over 25 world-class Indian brands, largely built through an organic growth strategy in a relatively short period of time, represents an annual consumer spend of over ' 22000 crores. These home-grown, purpose-led Indian brands support the competitiveness of domestic value chains, especially in the agri space, thereby ensuring creation and retention of value within the country.

Your Company’s FMCG products reach over 150 million households in India.

Your Company’s FMCG brands have achieved impressive market standing in a relatively short span of time. Today, Aashirvaad is No. 1 in Branded atta, Bingo! is No. 1 in Bridges segment of Snack Foods (No.2 overall in Snacks & Potato Chips), Sunfeast is No. 1 in the Cream Biscuits segment, Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in Noodles,

Engage is No. 2 in Deodorants and Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment) (Source: Nielsen).

Your Company remains focused on rapidly scaling up the FMCG businesses anchored on strong growth platforms and a future-ready portfolio. Towards this, it seeks to fortify its market standing in the existing core operating categories, in many of which it is already a leading player as aforementioned. It is pertinent to note that these categories, which are largely characterised by low household penetration levels and/or low per capita consumption, offer significant headroom for long-term growth. This is borne out by several analyst reports which highlight that your Company’s total addressable market expansion potential is amongst the highest in the Indian FMCG space. In this context, it is pertinent to note that your Company is well poised to address adjacent growth opportunities by leveraging the 25 powerful mother brands it has established over the years. Recent examples of such brand extensions include Aashirvaad to dairy, ready meals, salt and spices; Sunfeast to dairy beverages and cakes;

Bingo to namkeens; ITC Master Chef to frozen snacks and cooking pastes; Savlon to surface & clothes disinfectant sprays, sanitizers, masks etc. Simultaneously, the FMCG businesses continue to make strategic investments in building the ‘new core’ by scaling up nascent categories such as Dairy (Aashirvaad Svasti), Beverages (B Natural), Chocolates (Fabelle, Candyman Fantastik), Coffee (Sunbean), Home Care (Nimyle, Nimwash, Nimeasy) and Skin Care (Dermafique, Charmis). Your Company is also proactively pursuing value accretive acquisition, joint venture and collaboration opportunities in strategic areas towards accelerating growth and value creation.

 

The FMCG businesses continue to drive structural competitive advantage and enhance profitability by leveraging world-class distributed manufacturing footprint and a multi-channel distribution network. Investments over the years in several state-of-the-art Integrated Consumer Goods Manufacturing and Logistics facilities (ICMLs) have laid a strong foundation to drive structural advantages such as ensuring product freshness, enhancing agility and responsiveness of the supply chain, reducing cost of servicing proximal markets through lower distance-to-market etc. Capacity utilisation at the 9 operational ICMLs is being ramped up along with focused smart manufacturing interventions leveraging automation and Industry 4.0 technologies to drive operational efficiencies, yield and energy management and further enhance safety and quality. With increasing scale, supply chain operations are being increasingly delayered through direct-to-market shipments thereby reducing freight costs and eliminating multiple handling. Your Company is confident that these strategic interventions which are already delivering substantial benefits will realise their full potential over the medium term and continue to create long-term value.

The severity of the second wave of COVID-19 infections in the country poses a key challenge and remains a key monitorable for the FMCG industry in the near term. There is a perceptible shift with consumers adopting a more precautionary savings approach with resources being set aside for medical needs. The spread of the virus to rural areas on a relatively higher scale as compared to the first wave is also expected to weigh on industry growth outlook. Your Company continues to monitor the evolving situation and will respond with agility to enhance its market standing while managing risks

associated with the heightened uncertainties in the business environment. While the supply chain is fully operational, constraints in number of operating outlets and limited hours of operation continue to pose front-end challenges for the FMCG industry. Recent learnings in dealing with the pandemic spanning sales and distribution, supply chain operations, innovation and product development will continue to be leveraged in this regard.

Notwithstanding the short-term pressures, the structural drivers of long-term growth such as rising disposable incomes and consumer awareness, low levels of penetration of consumer goods, favourable demographics, increasing urbanisation and growing preference for trusted brands are firmly in place. Your Company remains confident of rapidly scaling up its FMCG Businesses building on strategic pillars viz. strong future-ready portfolio powered by world-class quality, superior consumer insights, cutting-edge innovation and purpose-led brands. The Businesses will continue to leverage its institutional strengths viz. strong backward linkages with the Agri Business, a deep and wide multi-channel distribution network, cuisine knowledge resident in the Hotels Business, packaging knowhow and access to robust R&D platforms nurtured by LSTC. Investments in innovation, state-of-the-art distributed manufacturing footprint and digital technologies will continue to be pursued to strengthen market standing and seize growth opportunities going forward.

Branded Packaged Foods

Against the backdrop of an extremely challenging operating environment as aforestated, your Company sustained its position as one of the fastest growing branded packaged foods businesses in the country, leveraging a robust portfolio of brands, a slew of

first-to-market offers, a range of distinctive products customised to address regional tastes and preferences, supported by an efficient supply chain and distribution network.

With the onset of COVID-19 in March 2020, the key task on hand for the Business, as one of the largest players in the branded packaged foods space in India, was to make its quality products widely available to consumers amidst large scale disruptions in the market. Your Company responded with speed and agility, obtaining the necessary permissions in an expeditious manner and ramping up production rapidly to service the surge in demand for essential items.

The Businesses, along with the Trade Marketing and Distribution team, worked tirelessly to ensure that the products reached consumers across the country notwithstanding the significant operational challenges posed by the pandemic-induced lockdowns.

The Branded Packaged Foods Businesses remain focused on addressing emerging consumer needs with innovations anchored on the vectors of health, wellness, immunity and naturals. The Businesses launched several innovative and first-to-market products addressing emergent consumer needs leveraging superior consumer insights, strong innovation pipeline, capabilities of your Company’s Life Sciences and Technology Centre and cuisine expertise resident in your Company’s Hotels Business.

The Businesses continued to make sharp targeted investments towards brand building and scaling up its nascent categories. Cut-through advertising campaigns and consumer engagement both on conventional and digital media along with focused market development efforts resulted in enhanced market standing across most major categories.

Digital campaigns launched during the year received

wide recognition and won prestigious awards across leading platforms. Some noteworthy award-winning campaigns during the year include Sunfeast Mom’s Magic’s ‘Stay strong Moms’, B Natural’s ‘We are India’ and Aashirvaad Svasti’s ‘Immunity song’ campaign.

Innovative and purposeful programmes were launched to engage consumers at home through digital and other communications to enable useful activities for at-home engagement, ensure top-of-mind recall and consumer delight in such difficult circumstances.

Some of the widely acclaimed interventions include:

-    ‘Sunfeast India Run as One’ (India’s largest citizen-led movement in support of livelihoods affected by the pandemic) #SunfeastRunAsOne

-    The ‘5 Star Kitchen’ exclusive cooking show by executive chefs of ITC Hotels was created in collaboration with several other businesses of your Company and was telecast across 33 Star TV channels and Hotstar for six weeks involving over ten ITC brands. This programme showcased unique strengths from internal synergies derived from its diverse portfolio of businesses #5StarKitchenStory

-    ‘Bingo! Comedy Adda’, which started out with distinctive and witty content on social media platforms has now grown into an extremely popular, full-fledged entertainment show on Star TV network #BingoComedyAdda

-    Sunfeast Mom’s Magic collaborated with celebrated musical artists for a virtual musical concert to celebrate the undying spirit of mothers #StayStrongMoms

The Businesses continue to leverage the agri-commodity sourcing expertise resident in your Company’s Agri Business to procure high quality raw

materials thereby ensuring the highest levels of quality, consistency and safety of its products. In addition, each of your Company’s branded packaged foods product is manufactured in HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms.

- Amidst a challenging operating environment, the Staples Business posted yet another year of robust performance growing well ahead of the industry. Several innovative and value-added offerings catering to region-specific preferences and consumer health needs were added to the portfolio during the year. ‘Aashirvaad’ atta fortified its market standing across geographies leveraging a robust product portfolio anchored on your Company’s agri-sourcing expertise. The value-added portfolio, consisting of Multigrain, Select and Sugar Release Control atta, posted robust growth driven by higher salience in Modern Trade and e-Commerce channels. ‘Aashirvaad Nature’s Super Foods’, a differentiated range of products comprising Gluten Free Flour, Ragi Flour and Multi-Millet Mix gained strong consumer traction during the year.

In line with consumers increasingly seeking a holistic lifestyle and the brand ethos of ‘Nurturing through Nature’, the portfolio of Aashirvaad Nature’s Super Foods was augmented with the launch of an organic range comprising organic atta and organic pulses - tur dal, moong dal, chana dal and urad dal. These products are available across select general and Modern Trade outlets as well as leading e-Commerce platforms and have received encouraging response.

Focused and purposeful marketing inputs, consumer activations and region-specific interventions supported by sharply directed

media investments, especially in digital platforms, enabled further improvement in Aashirvaad’s brand health metrics. Powered by the trust reposed by over 3.9 crore households (source: HHP,

MAT Dec’20), your Company is confident of strengthening Aashirvaad’s position as India’s No. 1 atta brand going forward.

As highlighted in prior years, the Business continues to contend with increased competitive intensity post the implementation of 5% GST on branded atta. While it has been the Government’s intention to provide relief of nil rate of GST only to small and local manufacturers thereby benefiting consumers with lower priced staple products, many unscrupulous players have used this distinction in rates as an attractive tax-evasion/avoidance opportunity, by classifying their products as unbranded or with a declaration that all actionable claims or rights associated with brand identity have been foregone, while continuing to market the product with brand names and distinct trademarks. This inequitable GST differential between branded and unbranded players has resulted in market distortion, widening the price gap between national registered brands and local unregistered brands, and acts as a disincentive to invest in value creation for the agri sector.

Supported by its new positioning, ‘Created by Sun and Sea - pure just like nature intended it to be’, Aashirvaad Salt gained traction in key focus geographies and posted a healthy growth during the year. The portfolio was augmented with the launch of two new variants - Iodized Crystal Salt for south markets and Salt Proactive (with 15% lesser sodium) in Modern Trade and e-Commerce channels in the major metros.

In the Spices category, the Aashirvaad portfolio was augmented with the introduction of blended spices in the e-Commerce channel and focus markets to enable full portfolio play and to cater to regional tastes and preferences.

During the year, your Company acquired Messrs. Sunrise Foods Private Limited (Sunrise), an Indian company primarily engaged in the business of spices under the trademark ‘Sunrise’. Sunrise is a clear market leader in eastern India in the fast-growing Spices category with a rich heritage and brand legacy of over 70 years. Over the years, the brand has built a loyal consumer franchise, anchored on a differentiated product portfolio tailored to regional tastes and preferences, both in the basic and blended spice segments.

Your Company acquired Sunrise along with its two wholly owned subsidiaries. Besides augmenting your Company’s product portfolio, the acquisition is also aligned with your Company’s aspiration to significantly scale up its Spices business and expand its footprint across the country. The deep consumer connect and distribution strength of Sunrise in focus markets, together with synergies arising out of the sourcing and supply chain capabilities of your Company’s Agri Business and, its pan-India and multi-channel distribution network, will provide significant value creation opportunities for your Company. The transaction is also in line with your Company’s philosophy of enhancing the competitiveness of agri value chains in India whilst making a meaningful contribution to enhancing farmer incomes.

The Scheme of Amalgamation of Sunrise with your Company was approved by the Honourable National Company Law Tribunal, Kolkata Bench,

vide order dated 26th February, 2021. The Scheme became effective from 1st April, 2021, consequent to filing of certified copies of the order with the Registrar of Companies, West Bengal on 1st April, 2021. Consequently, Sunrise has amalgamated with your Company with effect from the Appointed Date being 27th July, 2020.

-    The Biscuits category recorded robust growth with significant surge in demand driven by increased at-home consumption during the first half of the year. However, the category witnessed moderation in demand during the second half of the year as the options for out-of-home consumption increased with easing of restrictions and increase in mobility. Product portfolio was bolstered with a number of innovative new launches such as ‘Sunfeast Bounce’ Double Creme, ‘Sunfeast Farmlite’ Digestive (with high-fibre content, in three variants) and ‘Sunfeast All Rounder’. ‘Sunfeast Veda Marie’ Light, with the goodness

of five natural ingredients (Ashwagandha, Tulsi, Mulethi, Adrak and Elaichi), continued to gain traction during the year. The ‘Sunfeast Dark Fantasy’ range of differentiated cookies sustained its leadership position in the super premium segment. The range was augmented with the launch of innovative variants - Choco Nut Fills, Choco Chip, Choco Creme and Vanilla Creme. The Cakes portfolio was strengthened with the launch of differentiated variants - Trinity Cakes and Swiss Roll under the brand ‘Sunfeast Caker’.

All of these products have received excellent consumer response.

-    The Snacks Business, which has a high salience of out-of-home consumption, was severely impacted by the lockdowns and mobility restrictions imposed

in the immediate aftermath of the onset of the COVID-19 pandemic. The Business posted a smart recovery in the latter half of the year with progressive improvement in mobility and diversification of consumers’ purchase assortment. The Business continues to be the market leader in the bridges sub-segment and improved its market standing in potato chips. ‘Tedhe Medhe’ continues to be the most widely distributed snack brand in the country. Several innovative variants were launched during the year including Pizza and Cheese Nachos under ‘Bingo! Mad Angles’, which met with encouraging market response.

The year also marked the Business’ foray into the Traditional Snacks segment with the launch of popular formats like Aloo Bhujia, Nut Crackers, along with first-to-market offerings like Cocktail Mix and Pulse Mix in select markets.

- In the Instant Noodles category, ‘YiPPee!’ noodles posted stellar growth, well ahead of the industry and strengthened its market standing as a strong No.2 brand. Product portfolio was premiumised with the launch of ‘YiPPee! Saucy Masala’ in unique red coloured noodle blocks with a drizzle of tomato sauce and two offerings in a differentiated bowl format. YiPPee! also led the industry in terms of packaging innovation in family packs, enabling impactful visibility and driving growth in Modern Trade. Innovative media campaigns, focused digital interventions and celebrity endorsements continued to create buzz around the brand resulting in strong traction with consumers.

During the year, the Business deployed a focused campaign, with MS Dhoni as the celebrity brand ambassador, to reinforce the 3 core elements of the YiPPee! Noodles’ value proposition viz. longer,

tastier, non-sticky. On the back of MS Dhoni’s wide appeal and popularity, the campaign connected well with the consumers across age groups and resulted in superior brand imagery.

-    The Ready-To-Eat (RTE) category witnessed healthy growth during the year led by the launch of several innovative and value-added offerings for domestic consumers. These include a range of ‘hot pour over’ instant meals and a variety of cooking aids coupled with enhanced traction in the existing Meals, Instant Mixes and Ready-To-Cook products in key focus geographies, both within and outside India.

In the Frozen Snacks category, the delectable range of ‘ITC Master Chef’ products comprising 30 differentiated variants continues to garner increasing consumer franchise. During the year, availability was extended to 100 new markets in a short span of time taking the aggregate to 135 towns. The accessibility of the range is being scaled up via e-Commerce and direct-to-home models. While the Retail segment benefited from increased ‘at-home’ consumption, the Food Service segment was severely impacted by Covid-induced restrictions in outlet operations.

-    In the Dairy & Beverages Business, the ‘Aashirvaad Svasti’ fresh dairy portfolio comprising pouch milk, pouch curd and paneer, gained strong consumer traction on the back of highest quality standards and superior taste profile. The products are currently available in Bihar and West Bengal. ‘Aashirvaad Svasti Select’ Milk, a first-to-market offering with the added assurance to consumers through ready online access to quality report for each pouch, was successfully launched during

the year in Kolkata. Aashirvaad Svasti Ghee continued to receive excellent product feedback and witnessed a substantial increase in consumer traction. During the year, value-added fresh dairy segment was augmented with the launch of flavoured lassi. The Dairy Beverages category was adversely impacted during the first half of the year due to reduced ‘out-of-home’ consumption following the outbreak of the COVID-19 pandemic. With gradual easing of restrictions and improved mobility, the Sunfeast range of milk shakes comprising four differentiated variants (Sunfeast Badam Milkshake, Strawberry Milkshake, Vanilla Milkshake and Dark Fantasy Chocolate shake with Belgian Chocolate), were launched with new packaging. The products have met with encouraging consumer response and are being extended to target markets.

‘B Natural’ range of juices faced a challenging year, with severe disruptions during the peak season due to the pandemic. Amidst such challenging circumstances, B Natural range of juices continued to deepen consumer connect by leveraging its ‘goodness of fruit and fibre’ proposition. The B Natural range of juices was augmented with the launch of two innovative variants (Mixed Fruit+ and Orange+) addressing immunity needs in partnership with Amway. The immunity range has met with encouraging response from discerning consumers. Partnerships with alternate delivery channels enhanced product availability in spite of disruptions in traditional trade channels. The sourcing strength of your Company’s Agri Business was leveraged for procuring the raw materials from over 3000 small and marginal farmers from Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat.

- In the Chocolates, Coffee & Confectionery Business, the Confectionery category was severely impacted as out-of-home consumption fell sharply in the first half of the financial year. Limited functioning of the convenience channels and prolonged closure of schools also exacerbated the situation. The category witnessed progressive recovery in the second half of the year with easing of restrictions. Product portfolio was augmented with the launch of a new jelly-based variant, ‘Candyman Jelimals Immunoz’, with immunity-boosting vitamin-C and zinc, which received encouraging response. Several variants in multi-unit packs were launched in line with the increasing trend of at-home consumption. The category launched a new variant, ‘Mini Treats’ under the ‘Candyman Fantastik’ brand, to address the growing demand for home snacking which is receiving encouraging response.

‘Fabelle’ chocolates continue to receive excellent response from discerning consumers setting new benchmarks in the luxury and FMCG chocolate segments. Backed by innovative brand campaigns on digital platforms, Fabelle chocolates increased its presence in stores across Karnataka and select large stores in other metro cities. During the year, availability of Fabelle was enhanced by leveraging alternate channels including the ITC e-Store, e-Commerce platforms, food delivery aggregators and the takeaway menus of ITC Hotels. The category has also expanded its presence in the popular segment with the launch of ‘Candyman Fantastik Chocobar XL’, with rich milk chocolaty taste, at convenient price points; initial response has been encouraging.

‘Sunbean’ gourmet coffee, which is available across all ITC Hotels and select e-Commerce platforms, continues to receive excellent response from discerning consumers. Sunbean Beaten Caffe, a unique ready-to-use beaten coffee paste that produces a rich, creamy, frothy cup of coffee, was well received by consumers in launch markets. Encouraged by the initial consumer response, the product is now being extended to other markets; a new variant has been introduced recently for consumers who prefer a stronger cup of coffee.

- During the year, exports recorded robust growth led by atta, biscuits and RTE despite the operational disruptions caused by the pandemic. The Business currently exports to over 50 countries.

Over the years, your Company has invested in setting up multiple Integrated Consumer Goods Manufacturing and Logistics facilities (ICML) towards augmenting its manufacturing and sourcing footprint across categories. With enhanced scale and improved capacity utilisation, these ICMLs will provide structural advantages to the Business over time, by enhancing product freshness, improving market responsiveness, reducing the cost of servicing proximal markets and ensuring the highest standards of product hygiene, safety and quality. The ICMLs also enable scalability, besides setting new benchmarks in quality, safety, productivity and process excellence. Amidst unprecedented disruptions caused by the pandemic, the ICML units were amongst the first in the country to resume operations thereby ensuring availability of food products for consumers. Several ICML units

as the Confederation of Indian Industry (CII), Quality Circle Forum of India, National Convention on Quality Concepts, etc. for their high standards of safety, operational excellence and benchmarks in green and sustainable manufacturing.

Several manufacturing units of your Company’s Branded Packaged Foods Businesses, competing with the best within and outside the industry, have also received over 90 prestigious awards and accolades during the year bearing testimony to your Company’s focus on manufacturing excellence, safety and quality.

The Business implemented several strategic cost management initiatives in areas such as supply chain optimisation, Smart Procurement and productivity improvement through automation, leveraging new-age tools such as Industry 4.0 and Smart Utilities. These interventions helped in partially mitigating the escalation in input costs and absorbing start-up costs of new facilities and strategic investments in brand building for new categories viz. Dairy, Juices, Chocolates and Coffee.

A big thrust on India’s Food Processing sector, which lies at the intersection of value-added agriculture and manufacturing, can lead to significant job creation. The sector also has immense potential to enhance rural incomes and help manage food inflation. Recognising this potential and headroom for growth in the Indian market, your Company has made significant investments in food processing and remains focused on establishing itself as the leading player in the branded packaged foods industry.

As stated earlier in this Report, recent announcements relating to the Production Linked Incentives (PLI)

scheme for the food processing industry, with an estimated outlay of ' 10900 crores, is expected to not only boost farmer incomes but also infuse fresh investments, build Indian brands for the global market and promote exports.

Your Company is well poised to strengthen its position as one of the fastest growing foods companies and the ‘most trusted provider of food products’ in the Indian market. Your Company remains confident of rapidly scaling up the Branded Packaged Foods Businesses leveraging the strong growth platforms nurtured over the years in chosen categories which offer immense headroom for growth, and powerful purpose-led mother brands that have the potential to be extended to address opportunities in adjacent spaces. In addition, your Company’s deep & wide multi-channel distribution network, with growing presence in emerging channels such as e-Commerce, modern trade, on-the-go and institutional sales, continue to deliver competitive advantage through superior product availability, visibility and freshness. Recent investments in establishing a world-class distributed manufacturing footprint have created a solid foundation to secure structural advantage over time. Cutting-edge R&D platforms of your Company’s LSTC are driving agile innovation and faster turnaround times for introduction of differentiated & first-to-market products catering to constantly evolving consumer needs. Your Company has also stepped up investments in leading edge digital technologies and platforms towards delivering delightful brand experiences through personalised & contextual communication, while seamlessly integrating consumers’ journey across online and offline touchpoints.

Personal Care Products

Your Company’s Personal Care Products Business posted robust growth during the year driven by several innovative and disruptive first-to-market products in the Health and Hygiene space amidst heightened concern of consumers around health and hygiene.

Demonstrating a high degree of agility and responsiveness to the market dynamics at play, the Business rapidly expanded manufacturing capacity manifold across categories - Handwash 4.5x, Sanitizers 100x, Floor Cleaner 2.3x, Soaps & Antiseptic Liquids 6x - and enhanced availability of ‘Savlon’ antiseptic liquid, soap, handwash, hand sanitizer and ‘Fiama’ handwash products in the market. The newly set-up perfume manufacturing plant at Manpura, Himachal Pradesh was re-purposed in quick time to manufacture hand sanitizers and service the increased demand. Leveraging deep consumer insights and cutting-edge R&D platforms of your Company’s Life Sciences and Technology Centre, the Business launched several exciting and relevant offerings in record time under the ‘Savlon’ brand viz., Surface Disinfectant Spray, Clothes Disinfectant and Refreshing Spray, Spray and Wipe, Multi-purpose Disinfectant Liquid, Germ Protection Wipes, Face Mask, ‘Hexa’ range of soaps and hand sanitizing liquid. These products received excellent consumer response and have been scaled up across markets. The development and the subsequent launch of these products across India in a short span of time, is a testament to your Company’s superior insight discovery processes, innovative capacity and robust product development platforms nurtured over the years to address evolving consumer needs.

‘Savlon’ witnessed significant growth in revenue and reached nearly ' 1200 crores in terms of consumer

spends during the year. The brand has expanded its germ protection equity from ‘Skin First’ to ‘Surface Hygiene’ as well. The strong growth in revenues was driven by existing categories of soaps, handwashes and antiseptic liquids as well as through agile innovation in the surface disinfectants space and germ protection products like wipes and masks. These products, which have been crafted using advanced technology, provide effective protection against a wide range of germs including the Coronavirus. Savlon Surface Disinfectant Spray, a first-to-market offering, was rapidly scaled up across markets achieving clear market leadership. The brand also strengthened its foothold in the Personal Wash & Hygiene category with the launch of the Savlon Hexa range of soaps and sanitizers.

The Business remained focused on building a future ready portfolio, strengthening its position in the Liquid Personal Wash space during the year. Savlon Handwash grew well ahead of the industry and Fiama Shower Gels also consolidated its position as the second largest brand in the Liquid Bodywash category.

The Business continued to expand its presence in the Home Hygiene segment by leveraging the ‘Nimyle’ brand and the ‘Nim’ equity. During the year, Nimyle witnessed strong growth in the operating markets of the East, achieving leadership position in West Bengal and Odisha in the Floor Cleaner category. The brand gained good traction in new markets in the South. Product range was augmented with the launch of a differentiated lemongrass fragrance variant which has received encouraging response from consumers. During the year, the Business expanded its presence in the Home Hygiene space with the launch of ‘Nimwash’ which is a 100% natural action vegetable

and fruit wash liquid made with neem and citrus extracts. The products are gaining traction and are being scaled up. Leveraging the equity of ‘Nim’, the Business has also recently launched ‘Nimeasy’ - an enzyme-based eco-friendly dish wash gel, which enables a powerful lift off action that reduces the need for scrubbing and eases removal of greasy/oily food particles, removes food malodour and washes away bacteria from the surface of the utensils. The product has received encouraging response.

Accreditation by globally acclaimed laboratories has further strengthened the efficacy credentials of the Savlon, Nimyle and Nimwash range of products with regard to their ability to protect from 99.9% germs including Coronavirus.

The Fragrances category which witnessed significant decline in demand due to pandemic induced restrictions on mobility, recovered in the second half of the year, resulting in sequential increase in sales of ‘Engage’ perfumes and deodorants. Over the years, your Company has established itself as the clear leader in the pocket perfume segment and the second largest player in the industry overall. This has been achieved on the back of a range of differentiated products and disruptive innovations anchored on the twin vectors of ‘affordability’ and ‘convenience’ towards driving category expansion. The world-class range of masstige perfumes, ‘Engage L’amante’, has been well received by discerning consumers.

The fragrances category with its robust portfolio and compelling value proposition is well positioned to bounce back as the situation normalises.

The Business continued to strengthen its presence in the premium skincare space through its ‘Dermafique’ brand and in the popular space through ‘Charmis’.

The premium skincare segment was adversely affected especially in the first half of the year due to the pandemic. A focused digital-first approach adopted by the Business aided revival of demand in the second half. The Dermafique range was augmented with the launch of bio-cellulose face masks - co-designed by dermatologists and made from bio-degradable fibres derived from 100% natural coconut water using patented technology, redefining the ordinary sheet masking experience. Leveraging the deep radiance technology developed at your Company’s state-of-the-art Life Sciences and Technology Centre and Charmis’ Skin Care equity, the Business launched the ‘Charmis Radiance Range’ of face wash, face serum and hand cream in target markets.

The Business continued to leverage creative brand campaigns and social media platforms towards deepening consumer engagement. Vivel’s ‘Voice of Art’ Campaign on gender equality won Gold in Drivers of Digital Awards for best innovation and creativity in social media and best content in marketing.

Savlon’s #NoHandsUnwashed Campaign won Gold at The Indian Public Relations and Corporate Communications Conference and Silver at Mad Over Marketing Awards for Best Public Awareness Campaign. The Cannes Lions Creativity Report listed the Savlon’s signature campaign - Healthy Hands Chalk Sticks amongst the decade’s most iconic works.

The Business continues to accord the highest priority to manufacturing excellence. All the three Company-owned units at Haridwar, Manpura and Guwahati continued to be Five-S certified by the Quality Circle Forum of India. The Guwahati unit also won Par Excellence Award in the National Convention on Quality Concepts, 2020 for project on sustenance of Five-S.

You r Company’s strategic focus in recent years has been to invest behind emerging need spaces spanning health & hygiene, naturals and liquids.

This has been supported by cutting edge innovation, superior consumer insight discovery processes, purpose-led brands and impactful communication in digital and conventional media. Access to institutional strengths such as robust R&D platforms resident in LSTC, packaging knowhow and your Company’s multi-channel distribution network continue to be leveraged to rapidly scale up the business. The pandemic has resulted in heightened awareness and enhanced demand for products addressing hygiene needs of consumers. Your Company, with its future-ready portfolio and purpose-led brands, is well positioned to seize the opportunities and emerge as a significant player in this space.

Education and Stationery Products

The Education and Stationery products industry was severely impacted during the year due to COVID-19 induced lockdowns and closure of educational institutions for a major part of the year. The Business expanded the reach of its products by including grocery, independent stores and rural stockists in both urban and semi-urban markets as the traditional stationery outlets were largely non-operational. Presence in e-Commerce platforms was expanded to sustain leadership and ensure consistent availability of the relevant product mix in the notebooks segment. Notwithstanding the challenging business environment, the Business sustained its clear market leadership position in the industry demonstrating a high degree of agility and responsiveness across the value chain in dealing with

The Business remained focused on developing and launching innovative and superior quality products in the market by leveraging robust product development platforms in collaboration with your Company’s Life Sciences and Technology Centre. Several initiatives were launched during the year in line with the Business’s strong commitment of partnering with students in their journey of learning and development. Product portfolio was augmented with the launch of ‘Classmate Interaktiv’ series with ‘Origami theme’ as the first in the series of engagement-based notebooks, encouraging students to learn through ‘Do It Yourself’ activities. With prolonged closure of educational institutions, this exciting range of notebooks also played a significant role in enhancing the activity and engagement levels of students during the pandemic. The ‘Paperkraft’ range was enriched with the launch of premium pens. The Business continued to strengthen its reach in the college and value segments of the notebook industry through ‘Classmate Pulse’ and ‘Saathi’ brands respectively.

The Business continued to deepen consumer engagement through Classmateshop.com, a first-to-market initiative that offers personalised notebook covers and has elicited encouraging response. The unique ‘MyClassmate’ app is being enriched with powerful new features focusing on cognitive and co-curricular skill development in a storytelling and gamified format.

The robust distribution network of your Company was leveraged to achieve higher productivity and capture demand in non-traditional channels through outlet and market expansion. During the year, the Business continuously engaged with a large number of customers towards managing the heightened

uncertainties in the business environment while also addressing market opportunities with agility. The Business also deployed aggressive cost reduction measures which helped in partially mitigating the impact of negative operating leverage. Proactive management of inventory and receivables was another key focus area that helped reduce working capital intensity and manage risks associated with a highly uncertain operating environment.

The Classmate and Paperkraft range of notebooks leverage your Company’s world-class fibre line at Bhadrachalam - India’s first ozone treated elemental chlorine free facility - and embody the environmental capital built by your Company in its paper business. The Business continued to scale up the Paperkraft range of notebooks using Forest Stewardship Council (FSC) certified paper, made at your Company’s paper mill, benchmarking with the best paper quality in the world.

With over 250 million school going students and 1.7 million schools, India has one of the largest education systems in the world. The Indian Education and Stationery Products industry holds immense growth potential driven by growing literacy, increasing enrolment ratios, Government’s thrust on the education sector and a favourable demographic profile of the country’s population. The New Education Policy approved in July, 2020 is expected to transform the education sector and in-school education which augurs well for the Education and Stationery Products industry.

The second wave of COVID-19 has heightened the uncertainty around the timing of resumption of physical schooling and normalisation of business environment. Notwithstanding the challenges in the short-term, your Company, with its strong brands

and robust product portfolio, product innovations, collaborative linkages with small & medium enterprises and superior distribution network is well poised to strengthen its leadership position in the industry.

Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti industry witnessed significant challenges in the wake of the COVID-19 pandemic marked by severe disruptions in market and outlet operations across the country along with a drop in ‘out-of-home’ consumption due to closure of temples. There was a visible shift in consumer behaviour towards trusted and credible brands and ‘value for money’ packs.

Despite the headwinds faced due to Covid-induced restrictions especially in the first quarter, ‘Mangaldeep’ Agarbattis and Dhoop bounced back strongly, resulting in enhanced household penetration and market standing for the brand with all-round improvement in brand health measures. The Business remained focused on driving brand salience through targeted marketing investments and a differentiated, superior product experience with deep connect to devotion. Proactive steps were also taken towards driving product mix enrichment and cost optimisation.

With a vision to enable the pursuit of devotion for every Indian, Mangaldeep focused its brand interventions on digital media to reach out to consumers who were unable to visit temples due to restrictions on mobility. Mangaldeep initiated live Pujas leveraging the Facebook live platform to create an emotional connect with devotees - the initiative met with encouraging response from consumers. The Mangaldeep devotional app continues to play a key

role in the devotional journey of consumers. The app, which has garnered nearly one million downloads, has been enriched with the inclusion of ‘Life Lessons from the Gita’ - a podcast series on interpretations of shlokas from the holy Bhagwad Gita. The app is now available in four more countries - Australia, Singapore, United Kingdom and South Africa, connecting the Indian diaspora with their rich culture and heritage.

Category first innovations during the year include the launch of first-to-market fragrance - Mangaldeep Marigold and innovations in new product formats such as Mangaldeep Treya Cup Sambrani (fragranced cups in Sambrani format). The Business also launched new variants under the Mangaldeep Temple ‘Fragrance of God’ range anchored on the core proposition of ‘bringing home the divinity of the temple’.

Over the years, the Business has implemented several measures to enhance the competitiveness of the agarbatti value chain in India. These include import substitution and backward integration of sourcing raw materials and manufacturing raw battis using indigenous inputs. The Business has been a pioneer in developing domestic manufacturing capabilities for ‘raw battis’. To augment the import substitution and develop a reliable domestic agarbatti stick manufacturing value chain, the Business has been working closely with the Government under the aegis of the National Bamboo Mission and other nodal agencies of state governments, for cultivating bamboo plantations. The bamboo species required to make agarbatti sticks, are being grown in the states of Tripura, Assam, Maharashtra, Uttarakhand and Karnataka. The first harvest of bamboo poles from the North East is expected to be available for conversion into agarbatti sticks in the near future. The proactive measures implemented by

your Company, as highlighted above, sub-serve the national priorities of employment generation and provide a source of competitive advantage to the Business while generating superior incomes for bamboo farmers in the agarbatti stick and raw batti manufacturing value chain.

While demand conditions in the Safety Matches industry remained sluggish, the Business strengthened its market leadership position through agile supply chain operations during lockdown, portfolio premiumisation and by leveraging a robust portfolio of offerings across market segments.

The strong distribution network of your Company ensured continuous availability of its products amidst disruption in market operations. It is pertinent to note that with effect from 1st April, 2020, GST rates for all safety matches irrespective of process of manufacture (mechanised/semi-mechanised units and ‘handmade’ safety matches) have been harmonised at 12% compared to 18% for mechanised/semi-mechanised and 5% for handmade matches earlier. The harmonised rates offer a level playing field for all players. The Business continues to focus on enhancing the salience of value-added products in its portfolio and enhance supply chain efficiency by sourcing products manufactured closer to market.

TRADE MARKETING & DISTRIBUTION

The outbreak of COVID-19 pandemic and unprecedented disruptions caused by resultant lockdowns - closure of outlets, restrictions on mobility of people and goods, curbs on working hours - posed significant distribution challenges during the year. Your Company’s Trade Marketing & Distribution (TM&D) vertical demonstrated a high degree of agility and responsiveness to resume operations expeditiously

while ensuring safe working conditions for employees, trade partners and their associates. Amidst heightened uncertainty and market disruptions, TM&D ensured efficient market servicing and availability of your Company’s products through concerted actions across all nodes of operations. This includes extension of support to trade partners, realignment of the distribution infrastructure, deployment of innovative delivery models, strategic partnerships and enhanced usage of digital technologies.

In response to the high degree of variability in demand under the circumstances, TM&D adopted shorter demand planning cycles, leveraged data analytics for sharper demand forecasts, focused on fewer large runner SKUs, activated delivery routing options and pro-actively managed working capital deployed in the business. Nearly two-thirds of the throughput during the lockdown phase was delivered direct-to-customer/ market from factories to reduce transit time and ensure timely access to your Company’s products.

Your Company was amongst the first in the industry to launch an online ordering system for retailers to mitigate the disruption in sales operations. Customers were facilitated by TM&D to scale up tele-calling and WhatsApp based order taking from retailers.

Your Company also pioneered an innovative model -‘ITC Store on Wheels’ - to directly service consumers in residential complexes. The initiative catered to over 900 residential societies in top markets. The exclusive ‘ITC e-store’, launched just prior to the country wide lockdown, was also leveraged to provide on demand access to consumers in select markets. Your Company also enhanced the presence of its product portfolio in alternative channels and entered into collaboration with new partners (viz., Dominos, Swiggy, Zomato and Dunzo) to efficiently service consumers.

The dynamic interplay of diverse demographic profiles, vast geographical landscape, multiplicity of channels, varied consumer preferences along with socio-economic factors pose a high degree of complexity for distribution of FMCG products in India. Given the diverse set of needs and challenges associated with each channel, TM&D has crafted channel-specific strategies to efficiently service consumers across the country. TM&D continues to leverage the critical insights into consumer behaviour and channel-specific trends it has gained over the years, to deliver superior performance in terms of availability, visibility and freshness. The rapid growth of Modern Trade and e-Commerce channels, ‘Out-of-Home’ & ‘On-the-Go’ consumption and the growing importance of chemists and specialty outlets in recent years, has warranted crafting of differentiated market/outlet specific strategies to seize the emergent opportunities.

The Food Service and Institutional channels witnessed a protracted recovery cycle due to pandemic induced restrictions. However, with the easing of restrictions and increased mobility, there has been a progressive recovery in these channels during the second half of the year.

The availability of your Company’s products in over six million retail outlets across various trade channels in the country is facilitated by its robust distribution network which was further strengthened during the year with the addition of more markets and outlets to its service base. Market and outlet coverage were stepped up to appx. 1.3x and 1.1x respectively compared to pre-Covid levels. The pandemic triggered large scale reverse migration to rural/semi-urban clusters fuelling higher demand in such markets. During the year, your Company focused on driving

rural distribution by strengthening its direct distribution network in identified markets on the basis of socio-economic indicators and market potential.

This was supported through a hub & spoke distribution model with the expansion of the rural stockists network to 1.9x of pre-Covid levels in the focus markets. Your Company’s extensive e-Choupal network was also leveraged in key geographies to build local connect and carry out extensive consumer engagement activities. These initiatives helped in substantially mitigating the impact of disruptions in the wholesale channel and sharp targeting rural markets in certain states that witnessed reverse migration due to the pandemic, leading to robust growth in rural sales.

Demand in the urban areas was relatively more impacted, particularly during the first half of the year, due to pandemic-induced restrictions and exodus of migrant workers to rural areas as aforementioned.

With economic activity gaining pace during the second half and migrant workers returning to work, urban markets witnessed revival in demand. Customised servicing and retail engagement programmes were deployed by TM&D to stimulate demand for your Company’s products with enhanced focus on premium grocery outlets. Further, chemist outlets coverage was scaled up by nearly 50% driven by the health and hygiene category.

During the year, TM&D continued to focus on enhancing availability in markets proximal to its ICMLs. Over the last three years, your Company has rapidly expanded its footprint with 40% increase in its service base in markets proximal to ICMLs.

This was facilitated by driving awareness levels, product trial generation, expansion of distribution and consumer promotions.

 

The year was a mixed bag for the Modern Trade channel. After a surge in buying by consumers in the initial stages of the lockdown, there was a dramatic drop in footfalls as consumers began avoiding crowded spaces. Temporary discontinuation of operations by some of the key retail chains exacerbated the situation. On the other hand, the Cash and Carry format, which deals in the B2B space, stepped in to fill the void created by disruption in wholesale trade. Your Company’s business with Modern Trade continued to grow ahead of the industry on the back of a format-based assortment approach catering to the needs of a diverse set of shoppers and category specific sell-out strategies. This was further aided by close collaboration on supply chain management which led to enhanced operational and execution efficiencies.

As stated earlier in this Report, the pandemic boosted the e-Commerce channel as consumers sought to fulfil their needs from the safety of their homes during the lockdown period. Significant increase in internet penetration, growing popularity of digital payments, attractive loyalty programmes, wide assortment of products and faster deliveries continue to drive the rising salience of this channel. Anticipating the increase in consumer preference for ‘contactless shopping’ and home delivery, your Company proactively engaged with e-Commerce platforms and aligned the supply chain to deliver the right SKUs and product assortments. Sales through the e-Commerce channel more than doubled during the year, taking its salience to over 5% of Segment Revenue.

Your Company collaborated with the leading e-Commerce platforms on all aspects of operations i.e. category development, marketing, supply chain and customer acquisition. This was augmented

by development of exclusive and relevant pack assortments, capability building to execute plans to drive ‘Digital First’ brands and platform discoverability through jointly curated campaigns. Joint Business Plans built and executed in close co-ordination with the e-Commerce platforms further consolidated the market standing of your Company. Besides, the presence of your Company’s brands in health and hygiene space was strengthened on the specialist e-pharma platforms.

The scale and diversity of your Company’s distribution network continues to be a critical lever to enhance market presence, gain valuable insights into consumer & trade behaviour and provide speed and scale of execution for launches across geographies. During the year, your Company executed more than 120 new product launches across geographies apart from extending distribution reach of several existing products in the portfolio.

TM&D continues to leverage digital technologies to drive productivity, improve market servicing, draw actionable insights for sharp-focused interventions, augment sales force capability and deepen connect with retailers. Recent initiatives include UNNATI (eB2B App) and VIRU (Virtual Salesman App) platforms, which facilitate digital ordering and trade engagement; direct-to-consumer e-Commerce platform (ITC e-Store); WhatsApp based chatbot (ITC Storelocator) enabling easier access for consumers to your Company’s products in their vicinity; deployment of innovative delivery models and use of alternate channels (ITC Store-on-Wheels) and use of AI/ML for outlet level actionable insights, etc. The ‘ITC One Supply Chain’ initiative continued to be leveraged to drive supply chain cost optimisation on the back of digital technologies and scale benefits.

Technology enablement in the form of customised mobility solutions, routing solutions, machine learning algorithms, efficient transaction processing and data analytics comprising insightful visualisation tools and predictive analysis are being leveraged increasingly to enable quick and accurate data capture, informed decision making in real time, scientific design of trade inputs and drive sales.

A virtual summit on ‘Digital Enablement for Kirana Outlets’ to educate and upskill retailers on best practices in retail management was organised by your Company during the year. The summit saw an overwhelming participation of over 1500 retailers, securing a place in the GUINNESS WORLD RECORDS® for ‘Most viewers for a retail management live stream on a bespoke platform’.

Several interventions were undertaken by TM&D during the year to reduce distribution cost and, enhance operational efficiency and productivity.

These include increase in direct shipments from factories to customers, direct delivery to Modern Trade stores, deployment of dedicated vehicles, palletisation, efficient freight procurement and deployment of IOT Technology to improve turnaround times. The initiatives helped in mitigating the increase in logistics costs as a result of a steep rise in global crude oil prices during the year.

Notwithstanding the disruptions caused by the pandemic, your Company made steady progress during the year in setting up state-of-the-art Ancillary Manufacturing cum Logistics Facilities (AMLF).

The AMLF located in your Company’s Pudukkottai manufacturing complex has been recently commissioned and another one at Kapurthala is expected to be commissioned in the near future.

These state-of-the-art automated facilities co-located with the ICMLs will provide several benefits including inventory optimisation and improved reliability of supplies, besides reducing complexity in operations and cost of servicing.

Your Company continues to invest in augmenting the depth and width of its distribution network while adopting a differentiated approach to address the unique needs of its diverse FMCG product portfolio, market segments and trade channels. Cutting-edge digital technologies are being scaled up towards strengthening TM&D’s real time operations and execution platform spanning synchronised planning and forecasting, NextGen agile supply chain, and smart demand capture and fulfilment.

With its robust systems and processes, an agile and responsive supply chain and a synergistic relationship with its channel partners, TM&D’s distribution highway is a source of sustainable competitive advantage for your Company’s FMCG Businesses; and is well poised to support the rapid scale up of operations in the ensuing years.

HOTELS

The Travel & Tourism industry, which accounted for appx. 10.5% of global GDP and 10% of employment in 2019, ranked amongst the most severely impacted sectors due to the COVID-19 pandemic. As per the World Travel and Tourism Council, Travel & Tourism GDP contracted steeply by 49.1% in 2020 along with appx. 62 million job losses. According to the UNWTO World Tourism Barometer, 2020 was the worst year on record in the history of tourism, with losses estimated at 10 times higher than that caused by the Global Financial Crisis of 2007-08.

The Travel & Tourism sector holds prime importance for the Indian economy as well, with its direct and indirect economic impact estimated at appx. 10% of GDP (at pre-Covid levels), translating to ' 20 lakh crores per annum. The extensive tourism value chain spanning hotels, travel agents, airlines, tour operators, tourism destinations restaurants, tourist transporters and guides, etc. results in a huge economic multiplier impact, ranking it amongst the highest across industries on this count. As per estimates of the Federation of Associations in Indian Tourism & Hospitality, the sector accounts for around 10% to 12% of the country’s employment, directly and indirectly.

The Indian hospitality industry was significantly impacted during the year due to severe restrictions on domestic and international travel and heightened sensitivity around hygiene and social distancing norms. Domestic Air Passenger traffic declined by over 50% and international tourist arrivals degrew by 97% during the period April-December, 2020, leading to low room demand. Consequently, several hotels had to either temporarily close down or scale down operations especially in the first half of the year.

With gradual withdrawal of restrictions, albeit with strict guidelines and protocols, the hospitality sector witnessed partial revival led by domestic leisure tourism and motorable destinations around large cities. The hospitality industry staged a progressive recovery with room occupancies and food & beverage (F&B) revenue picking up in the latter half of the year. Health and safety remained prime concerns for consumers resulting in emergence of new service standards viz. improved sanitization procedures,

Responding with agility to the dynamic situation, the Business swiftly re-engineered operating protocols for enhanced health, safety & hygiene, augmented revenue streams and deployed aggressive cost reduction measures to cushion the impact of the headwinds facing the industry. The ‘WeAssure’ programme, designed in collaboration with medical professionals and disinfectant experts, was rolled out to reassure guests and to provide best-in-class experience in hygiene and safety at your Company’s iconic Hotels. Under this initiative, stringent protocols and visible markers of safety across all guest touch points have been implemented demonstrating ITC Hotels’ commitment to well-being and safety of all its stakeholders. Further, investments in digital assets and contactless technologies were made to significantly reduce physical touchpoints with guests during check-in, check-out, stay and usage of F&B facilities. State-of-the-art technology has been deployed to provide a pathogen-free environment in each property, thereby re-assuring guests and associates of the highest standards of safety. The programme, certified by M/s. DNV (one of the world’s leading certification bodies), is benchmarked to world-class standards in the areas of health, hygiene, safety & pathogen management, and achieved a Platinum Level certification. The ‘WeAssure’ programme was also recognised as the Best Safety Protocol programme by the readers of Travel +

Leisure India & South Asia 2020-21.

The Business launched a host of curated offerings across accommodation, dining and banqueting to augment revenues and mitigate the impact of low occupancy across properties. These include introduction of special packages offering value and flexibility targeting short getaways/staycations, revamped packages for the MICE (meetings,

incentives, conferencing, exhibitions) segment, extension of additional benefits to members of the Club ITC loyalty programme and launch of ‘Gourmet Couch’ and ‘Flavours’ home delivery/takeaway offerings.

The Gourmet Couch menu brings a medley of the finest cuisines from the signature restaurants of ITC Hotels for diners in all major cities in India.

The Business also partnered with food delivery platforms ‘Zomato’ and ‘Swiggy’ to enable wider availability of the offerings. ‘Gourmet Couch by ITC Hotels’, was adjudged the Best 5 Star Food delivery at the Travel + Leisure India’s Best Awards 2020.

Significant disruptions in operations were manifest in the financial performance of the Business. Segment Revenue for the year stood at ' 627.51 crores representing a degrowth of 66% while Segment EBITDA turned negative at ' 268.60 crores compared to ' 419.88 crores in the previous year. A combination of interventions spanning augmentation of revenue streams, customised packages and an aggressive cost reduction programme helped partially mitigate the impact of low occupancies and room rates. Progressive improvement in mobility, strong demand for leisure properties along with robust wedding business led to a smart sequential recovery and the Business turning EBITDA positive in the second half of the year.

Your Company’s Hotels Business remains amongst one of the fastest growing hospitality chains in the country with 107 properties and over 10,200 rooms under four distinct brands - ‘ITC Hotels’ in the Luxury segment, ‘Welcomhotel’ in the Upper-Upscale segment, ‘Fortune’ in the Mid-market to Upscale segment and ‘WelcomHeritage’ in the Leisure and Heritage segment. Travel + Leisure India’s Best Awards 2020

acknowledged ITC Hotels as the Best Luxury Hotel Chain in India.

The F&B segment continues to be a major strength of your Company’s Hotels Business with some of the most iconic brands in the country. The Bukhara restaurant at ITC Maurya continued to feature in ‘Asia’s 100 Best restaurants 2021’ while Avartana at ITC Grand Chola made an impressive debut in the coveted list. Dum Pukht at ITC Maurya was adjudged winner, ‘Favourite Restaurant in a Hotel’ in the Conde Nast Traveller Readers’ Travel Awards 2020.

‘Club ITC’, your Company’s unique loyalty programme continues to gain franchise amongst the premium clientele of ITC hotels. For ease-of-use and flexibility, Club ITC adopted a digital-first approach besides introducing additional benefits and privileges. The programme continues to strengthen its strategic partnership with Marriott Bonvoy, the combined loyalty programme of Marriott International. The dining loyalty programme - ‘Club ITC Culinaire’ - continued to service members through food delivery options and regained membership enrolment momentum in the second half of the year.

The world-class ambience of your Company’s luxury hotels continues to be leveraged for the gourmet luxury chocolates under the Fabelle brand with exclusive boutiques across eight ITC Hotels and kiosks at four Welcomhotels. The Fabelle chocolate boutiques offer a range of exquisitely crafted desserts and cocoa beverages, created live by Fabelle Master Chocolatiers.

In the Upper-Upscale segment, the ‘Welcomhotel’ brand continues to strengthen market standing driven by its refreshed and distinctive positioning of offering ‘Enriching Experiences’. During the year, three hotels

were added to the Welcomhotel portfolio of managed properties - Welcomhotel Bay Island in Port Blair, designed by the world renowned architect Late Charles Correa; Welcomhotel Shimla, nestled amidst the Himalayas; and Welcomhotel Ahmedabad offering exquisite experiences across culture, cuisine and nature. The Welcomhotel portfolio of 19 hotels and over 2,100 keys is poised to scale up further with the addition of several new properties in the near term, in line with the ‘asset-right’ strategy of the Business.

The ‘Fortune’ brand continues to maintain its pre-eminent position in the Mid-market to Upscale segment, with the positioning of ‘First class, full service hotels - an affordable alternative’, comprising 39 properties and nearly 3000 rooms across 35 cities. The ‘WelcomHeritage’ brand retains its leadership as the country’s most successful and largest chain of heritage hotels with an operational inventory of 35 hotels comprising over 900 rooms.

The Business continues to make digital investments towards facilitating guest acquisition, enhancing guest experience, augmenting revenue generation and driving operational efficiency. During the year, the Business deployed a contemporary cloud-based central reservation and distribution system, which provides seamless distribution of inventory across multiple channels including global distribution systems, voice, brand website, online travel agents, etc. for all owned and managed properties. The Business also augmented the brand website with mobile-first design to enhance customer experience. Aided by a state-of-the-art booking engine and advanced analytics, the refreshed website serves as a single window platform to make bookings across all the four brands of your Company’s Hotels Business.

The brand website continues to be an integral channel of communication with the customers. With targeted social media communication, the Business heightened guest engagement including amplified messaging towards the new protocols on health, hygiene & safety. Your Company continues to invest behind world-class integrated technologies including mobile app and web-based solutions to provide best-in-class guest experience and enhance operational efficiency.

Your Company’s ‘Triple Bottom Line’ philosophy is manifest in the Hotels Business’s ‘Responsible Luxury’ ethos, making it a pioneer in luxury hoteliering globally. The Business continuously strives to reduce water and energy consumption, and enhance the usage of renewable energy to meet its overall energy requirements. Currently, energy requirements in several ITC hotels are being fully met through renewable sources and plans are on the anvil to scale up the same.

As a testament to your Company’s ‘Responsible Luxury’ ethos and ‘Triple Bottom Line’ philosophy, ITC Windsor, Bengaluru, became the first hotel in the world to receive the prestigious LEED Zero Carbon Certification. Awarded by US Green Building Council (USGBC), this certification recognises buildings operating with net zero carbon emissions.

Around the early 2000s, your Company had embarked upon an aggressive investment-led growth strategy to rapidly expand its footprints in the luxury and Upper Upscale segments of the Indian hospitality industry. Since then, your Company has added 13 iconic properties comprising nearly 3400 rooms; construction of another 3 properties - ITC Narmada, a Luxury Collection hotel in Ahmedabad and Welcomhotels at Bhubaneswar and Guntur - with around 500 rooms is nearing completion.

As reported earlier, your Company’s ‘asset-right’ strategy envisages a large part of incremental room additions going forward to accrue through management contracts. The Business is witnessing growing interest amongst property owners to align with its iconic brands resulting in healthy generation of leads and pipeline for management contracts.

While new signings/openings were adversely impacted during the year due to the pandemic, the Business is confident of bouncing back as the situation normalises. In this context, apart from its Welcomhotels brand, plans are on the anvil to introduce a boutique brand - ‘Storii’ - to offer curated travel experiences to the new age traveller.

The second wave of the pandemic has triggered a fresh round of mobility and travel restrictions leading to severe disruptions. The near-term outlook for the hospitality industry will depend largely on the return of confidence in business and leisure travel. Progress of vaccination, rate of Covid infections and easing of restrictions, will be the key monitorables in the near term. Your Company’s Hotels Business has demonstrated remarkable agility in curating special offerings, augmenting new revenue streams and pursuing strategic cost management measures towards mitigating the impact of the pandemic and staged a smart recovery in the second half of the year. Some of these interventions and learnings have been embedded in business operations in the new normal, which will provide sustained benefits going forward.

Notwithstanding the short-term challenges, your Company, with the highest standards of hygiene supported by a portfolio of world-class properties, iconic cuisine brands and best-in-class levels of service anchored on ‘Responsible Luxury’ ethos, is well-positioned to stage a strong recovery in line with

industry dynamics and sustain its pre-eminent position in the Indian Hospitality industry. Your Company will continue to aggressively pursue the asset-right strategy leveraging its brands and digital investments, focus on sweating existing assets, creating additional revenue streams and examine alternative structures towards engendering enhanced value creation.

PAPERBOARDS, PAPER AND PACKAGING

The Indian Paperboards and Paper industry was confronted with severe challenges in FY 2020-21.

The onset of the COVID-19 pandemic and imposition of nationwide lockdowns severely impacted domestic demand across most end-user industries with the exception of Pharma, Laminates, e-Commerce and sectors catering to essential commodities, which remained relatively resilient. With the easing of restrictions, demand across most segments witnessed progressive recovery barring the Writing & Printing Paper segment which remained under stress due to closure of educational institutions. The Recycled Paper segment too was impacted due to a sharp drop in generation and collection of waste paper in addition to a weak demand environment. Global pulp prices were initially bullish mainly due to strong demand in the tissues segment, but corrected sharply thereafter as the global demand environment turned bearish with rapid spread of the virus. Towards the latter half of the third quarter, pulp prices firmed up again driven by Chinese demand. The Packaging Business too was impacted by the pandemic - while packaging for essential consumer goods witnessed heightened demand, packaging demand for discretionary goods such as liquor and personal care remained subdued.

Against the backdrop of a challenging environment as aforestated, your Company delivered a competitively

superior performance in the Paperboards, Paper & Packaging segment. The Businesses proactively engaged with its customers to ensure continuity of supplies as its first priority. In recent years, the Business has made several strategic investments in areas such as pulp import substitution, proactive capacity augmentation in Value Added Paperboards (VAP) segment, innovation platforms focused on providing holistic & customised solutions to end-user industries and strengthening the fibre chain for securing cost-competitive wood supplies. Go-to-market strategies have also been sharpened to service customers with greater speed and agility. These augmented capabilities have made the Business stronger and more resilient and have helped it to effectively navigate the emergent challenges in the aftermath of the pandemic. After a challenging first half, the Businesses recovered smartly with significant sequential improvement in revenue and profitability. Robust growth in exports aided in partly offsetting the impact of a tepid domestic demand environment.

Paperboards & Specialty Papers

Global demand for Paper & Paperboards in 2020 witnessed degrowth of 12% on account of the pandemic. The decline was sharper in Writing & Printing Paper and Newsprint segments due to reduced circulation of newspapers and closure of educational institutions and commercial establishments. End-user industry segments such as essential consumer goods, Pharmaceuticals,

Food Service and e-Commerce are expected to drive demand for Paperboards going forward.

The Business responded with agility ensuring expeditious commencement of operations ahead of

competition, deployment of tactical interventions in the domestic market through introduction of new products, leveraging superior distribution infrastructure and capitalising on deep engagements with end-users & large convertors. Quick Service Centres (QSCs), strategically located proximal to large markets, also played a critical role in the swift resumption of operations and minimised supply discontinuity. These interventions helped your Company in fortifying its clear leadership of the VAP segment and in consolidating its preferred supplier position amongst leading end-use customers and brands. Robust growth in export volumes partially mitigated the drop in domestic demand. Recently, the Bhadrachalam unit augmented its VAP capacity by 45000 TPA which will further strengthen its market standing.

The additional capacity is expected to be fully deployed in FY 2021-22.

In line with its pursuit of providing sustainable packaging solutions to customers, your Company launched antifungal soap packaging paper designed to replace single use plastics. The Business scaled up its sustainable products portfolio comprising recyclable paperboards, ‘FiloPack’ and ‘FiloServe’ for the food delivery and food service segments respectively and biodegradable paperboards, ‘OmegaBev’ and ‘OmegaBarr’, which are alternatives to plastic coated containers, cups and other deep freeze applications. Your Company is actively engaged in developing suitable paper/paperboards as well as barrier-coated substrates that can replace single use plastics. Your Company is also a leading player in the eco-labelled products segment and premium recycled fibre-based boards space. Further, the Business has also developed antiviral paper for applications in pharma and education & stationery businesses which is in the process of commercialisation.

In FY 2020-21, the Specialty Papers segment delivered strong performance supported by robust demand for Decor papers and lower imports from China. Further, uninterrupted supply to pharma segment aided by an agile supply chain amidst disruptions in the industry helped in fortifying its market standing. During the year, the Director General of Trade Remedies initiated anti-dumping investigations on decor papers imported from China. Appropriate policy interventions to encourage higher level of import substitution will help realise the full potential of this sector.

The Business continues to make structural interventions to reduce operating costs and dependence on imported pulp. Significant increase in in-house pulp production was achieved during the year through strategic interventions, Industry 4.0 initiatives and improved wood mix. Capacity utilisation of Bleached Chemical Thermo Mechanical Pulp mill (BCTMP) at the Bhadrachalam unit touched a record high. Initiatives such as bund plantation and scaling up plantations in new core catchment areas in Odisha (Malkangiri) and Chhattisgarh are expected to secure cost-effective access to fibre.

The Business has been practising the principles of Total Productive Maintenance (TPM), Lean and Six Sigma for over a decade now and has reaped substantial benefits through its Business Excellence initiatives. In recent years, the Business has made deep investments in Industry 4.0 technologies which have yielded substantial benefits in the form of higher process efficiencies, productivity enhancement, improved resource utilisation and cost reduction. Several initiatives anchored on AI/ML and advanced analytics are underway to drive structural advantages

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The Industry 4.0 Centre of Excellence (CoE), established to build in-house capability in new technologies and for sustaining the benefits, is focusing on the development of new systems/platforms for archiving learnings and conducting structured and comprehensive training programmes for developing a critical mass in the Business.

The Business implemented several cost saving initiatives in order to protect margins and conserve cash in the back drop of headwinds faced by the industry due to the pandemic. These initiatives were implemented across multiple areas such as chemical optimisation in Pulp Mill and BCTMP mill, procurement efficiencies, fuel cost optimisation, etc.

During the year, the Business achieved ‘Level-5 Exemplary’ recognition from CII - Total Cost Management Division which confirms that the cost management systems and processes deployed by the Business are a trendsetter in the industry.

The Paperboards & Specialty Papers Business of your Company is one amongst four organisations which has been accorded the Level-5 Exemplary league recognition out of 100 organisations assessed.

Your Company continues to source its wood requirements from sustainable sources. Research on clonal development has resulted in introduction of high-yielding and disease-resistant clones that are adaptable to a wide variety of agro-climatic conditions which aid in securing greater consistency in farmer earnings. In this context, your Company’s Life Sciences and Technology Centre is engaged in developing higher yielding second generation clones with enhanced pest and disease resistance attributes.

The pioneering initiative taken by the Business to introduce a system of direct purchase of wood from

farmers with online payment enablement which facilitates transparent price discovery and enhances transactional efficiencies was further scaled up during the year - currently, close to 20% of the total wood procurement is being sourced through this system.

Your Company has the distinction of being the first in India to have obtained the Forest Stewardship Council-Forest Management (FSC-FM) certification, which confirms compliance with the highest international benchmarks of plantation management across the dimensions of environmental responsibility, social benefit and economic viability. Till date, your Company has received FSC-FM certification for close to 100,000 acres of plantations involving over 23,500 farmers. During the year, over 195,000 tonnes of FSC-certified wood were procured from these certified plantations. All four manufacturing units of the Business have obtained the FSC Chain of Custody certification and have complied with all the requirements during the year, thereby sustaining your Company’s position as the leading supplier of FSC-certified paper and paperboards in India.

All manufacturing units of the Business continue to recycle nearly 100% of the solid waste generated during operations by converting the same into lime, fly ash bricks, grey boards, egg trays, etc. In addition, the Business recycled around 100,000 tonnes of waste paper during the year, thereby sustaining your Company’s positive solid waste recycling footprint.

The manufacturing facilities at Bhadrachalam, Kovai, Tribeni and Bollaram continue to receive industry recognition for their green credentials and safety standards in line with your Company’s focus on sustainable business practices. Bhadrachalam Unit is the first pulp & paper plant and the second in the

boilers with a state-of-the-art and future-ready High Pressure Recovery Boiler and has made steady progress towards its commissioning. Along with pulp capacity augmentation, this intervention will reduce the carbon footprint of operations through lower coal consumption.

The Business had commissioned a 46 MW wind energy project in Andhra Pradesh in July, 2014.

The wind mill is currently wheeling power to various Business units of your Company located in Andhra Pradesh, Telangana, Karnataka, Uttar Pradesh, Uttarakhand, Bihar, West Bengal, Maharashtra and NCR. Usage of wind energy has led to a reduction of Greenhouse Gas emission by appx. 0.92 lakh tonnes of CO2 equivalent during the year, primarily at the Bhadrachalam Mill. As reported in previous years, while the bifurcation of erstwhile state of Andhra Pradesh into two separate states of Telangana and Andhra Pradesh was enacted in June, 2014, permission for inter-state wheeling of power was granted only in September, 2016 after several representations and discussions with the concerned authorities on the matter. The regulatory framework for levy of charges and banking of power on inter-state wheeling of renewable energy is still evolving. Consequently, your Company continues to bear charges/levies at multiple points which have weighed on the returns on this investment. Your Company continues to engage with State and Central regulatory authorities towards seeking relief from such additional levies/charges.

With progressive improvement in demand across end-user industries, the Business delivered a competitively superior performance in the second half of the year on the back of strong volume recovery to

 

country overall, to be rated GreenCo Platinum+ by CII, as part of Green Company rating system.

The Kovai unit is the first site in India and the first paper mill in the world to achieve the highest platinum rating under the Alliance for Water Stewardship Standards. Bhadrachalam and Kovai mills won awards for Excellence in Energy Management at the ‘21st National Awards for Excellence in Energy Management’ in the Pulp & Paper sector.

The Business continues to strengthen its safety processes, adopting globally recognised best practices, ensuring that facilities are designed, constructed, operated and maintained in an inherently safe manner.

The Business took several steps to ensure safe and hygienic working conditions for its employees and workers. These steps include periodic awareness and communication programmes on the importance of ‘SMS’ (‘sanitizing’, ‘wearing masks’ and ‘social distancing’), disinfection inside mill and residential colonies, encouraging work from home and setting up of isolation wards for employees and their families infected by the virus. Steps were also taken to protect the community in the vicinity of the mills.

In line with the objective of enhancing the share of renewable energy in its operations, the Business has implemented several initiatives including investments in a green boiler, soda recovery boilers, high pressure & efficiency circulating fluidised bed boiler, solar & wind energy and increased usage of bio-fuel.

With these initiatives, renewable sources presently account for 43% of total energy consumed at the four manufacturing units. Your Company has embarked upon a pioneering initiative at the Bhadrachalam mill that seeks to replace conventional soda recovery

Packaging and Printing

Your Company’s Packaging and Printing Business is a leading provider of superior value-added packaging for the FMCG industry. The Business also provides strategic support to your Company’s FMCG Businesses and Cigarettes Business by facilitating faster turnaround for new launches, innovative packaging solutions, design changes, ensuring security of supplies and delivering benchmarked international quality at competitive cost.

The Business caters to the packaging requirements of leading players across several industry segments viz. Food & Beverage, Personal Care, Home Care, Footwear, Consumer Electronics, Pharma, Liquor and Tobacco. With its comprehensive capability-set across multiple packaging platforms coupled with in-house cylinder making and blown film manufacturing lines, the Business continues to provide innovative solutions to several key customers in India and overseas.

The year under review was particularly challenging for the Business in view of the disruptions caused by the COVID-19 pandemic and slowdown in demand across major end-user industries. Whilst exports and domestic FMCG business posted robust growth, the liquor and other discretionary segments witnessed muted demand during the year. Amidst heightened competitive intensity and sluggish economic conditions, the Business continued to aggressively pursue new business development opportunities across segments and focused on new product development to drive growth.

The Business rose to the challenge of servicing the critical packaging supplies of essential items to its domestic customers as well as that of your Company’s Branded Packaged Foods and Personal Care Products Businesses. Leveraging its supply

 

pre-Covid levels and improvement in margins driven by higher realisations and operational efficiencies, and lower input prices. However, the second wave of pandemic has weighed on the recovery momentum creating uncertainty in the business environment.

The current import policy and extant regulations governing commercial and social forestry in the country have over the years put the Indian Paper and Paperboard industry at a significant disadvantage vis-a-vis imports. There is clearly a need to review the current import duty structure and re-examine the existing Free Trade Agreements as well as the new ones under formulation, towards providing a level playing field to the domestic industry and encouraging commercial farming of wood in India. Legislative changes along with appropriate environmental safeguards need to be implemented to enable private sector participation in commercial forestry on drylands and wastelands.

The integrated nature of the business model -comprising access to high-quality fibre, in-house pulp capacity, world-class product quality, state-of-the-art manufacturing facilities along with robust forward linkages with the Education and Stationery Products Business - is a key source of competitive advantage for your Company’s Paperboards & Specialty Papers Business. Recent investments in innovation platforms, sharply focused on deploying a future-ready portfolio anchored on the development of sustainable products, and cutting-edge digital technologies to drive efficiencies and productivity will continue to be leveraged to consolidate your Company’s clear leadership position in the Indian Paper and Paperboards industry.

chain network and superior customer relationships, the Business also responded with agility to seize opportunities in the export markets reinforcing its position as a reliable supply chain partner in both domestic and export markets. This is a testimony not only to your Company’s resilience in the face of adversity but also to the remarkable commitment of the workforce to pursue excellence in execution. During this phase of sub-optimal capacity utilisation due to supply chain bottlenecks, the Business combated the impact of negative operating leverage through improved customer and portfolio mix, enhanced operational efficiency, and relentless focus on cost reduction.

The Business continues to craft innovative packaging solutions leveraging its deep understanding of end-user needs and the capabilities of your Company’s Life Sciences and Technology Centre. Recognising the need for sustainable packaging and the resultant emerging demand for plastic substitutes, the Business had taken several initiatives to develop biodegradable/recyclable packaging solutions. Key interventions in this direction include the development of a pipeline of pioneering products such as ‘Bioseal’ (bio-compostable packaging solution for Quick Service Restaurants, personal care and packaged foods industries) and ‘Oxyblock’ (a recyclable packaging solution with enhanced barrier properties for packaged foods, edible oils, etc.) which are under various stages of commercialisation. Going forward, the Business will continue to invest resources to develop sustainable packaging solutions towards meeting the increasing drive from brand owners for ‘reducing, reusing and recycling’ plastic packaging.

The Business continues to be acknowledged as a

FMCG companies in the country for providing superior and cost-effective packaging solutions across areas such as sustainable packaging, superior structural design and enhanced security features. The Business has been consistently recognised amongst the top ranked global packaging companies on productivity parameters as per the latest International Packaging Group and International Flexibles Packaging Network rankings.

The Business continues to win several awards for operational excellence and creative packaging solutions. During the year, the Business won the prestigious WorldStar awards for Aashirvaad Atta ‘Breathable Wheat Flour Pack with Air Release Control’ and several AsiaStar/IndiaStar awards.

The manufacturing facilities at Tiruvottiyur, Haridwar and Munger maintained the highest standards in Quality and Environment, Health & Safety (EHS).

All the three units are certified as per the Integrated Management System, consisting of ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 and ISO 45001:2018, and have also received Social Accountability Certification (SA 8000:2014). Both the Tiruvottiyur and Haridwar units received the ‘Grade A’ Brand Reputation Compliance Global Standards (BRCGS) certification, for global standards in packaging and packaging materials - a key enabler for supplies to the packaged foods industry. The Tiruvottiyur unit also received ‘5 star’ rating for Excellence in the field of EHS from CII-SR, EHS Consistent Performer Award for securing ‘5 star’ rating since the last 3 years from CII-SR, and CII EHS Award - First Place in the Category of Manufacturing Process by CII-SR. The Risk Management Framework of the Business was re-certified under ISO 31000:2018 during the year. The 14 MW wind energy farm in Tamil Nadu, set up in 2008, continues to provide clean

energy to the Tiruvottiyur facility, contributing towards reducing your Company’s carbon footprint.

Going forward, to cater to its growing customer base across the country and to further improve service levels to its customers, the Business has initiated investments to expand its manufacturing footprint in the Western region with state-of-the-art equipment for both the cartons and flexibles platforms.

With world-class manufacturing technology across a diverse range of platforms and best-in-class quality management systems, the Packaging and Printing Business has established itself as a one-stop packaging solutions provider to several industry segments viz. Food & Beverage, Personal Care, Home Care, Footwear, Consumer Electronics, Pharma, Liquor and Tobacco. With its comprehensive capability-set across multiple packaging platforms coupled with in-house cylinder making and blown film manufacturing lines, the Business continues to provide innovative packaging solutions to several key customers in India and overseas. Focused investments in human resource development and a distributed manufacturing footprint will fuel growth plans going forward.

AGRI BUSINESS Leaf Tobacco

The Indian Flue Cured Virginia (FCV) crop remained relatively stable at 224 million kgs in 2020, after a secular decline over the last six years during which crop output dropped by over 30%. A punitive and discriminatory taxation and regulatory regime on cigarettes, apart from providing a fillip to illicit trade and severely impacting the domestic legal Cigarettes industry, has exerted significant pressure on the leaf tobacco crop grown in India. This, together with lower

export incentives in India, excess production and relative weakness of currencies in certain competing geographies has culminated in reduced demand for Indian tobacco in international markets. This is reflected in the decline in leaf tobacco exports by around 26% over the last seven years - from 236 million kgs. in FY 2013-14 to appx. 175 million kgs. in FY 2020-21. A stable domestic base of demand for leaf tobacco would be critical in enabling the Indian farmer to weather the volatility associated with international markets.

The COVID-19 pandemic posed several operational challenges. The Business mitigated the same with agility and ensured continuity in operations across all nodes while strictly adhering to comprehensive safety protocols. Opportunities to drive revenue were captured by responding to customers’ needs with speed and agility, meeting exigent demand of mid-tier manufacturers by rapidly re-orienting internal processes, and facilitating remote inspections for all major customers leveraging digital technologies.

Against the backdrop of a challenging business environment, the Business continued to leverage its crop development expertise, superior product quality and world-class processing facilities and consolidated its leadership position in the Indian leaf tobacco industry. New business development and enhanced value delivery to existing customers enabled the Business to sustain its pre-eminent position as the largest Indian exporter of unmanufactured tobacco. The Business also continued to provide strategic sourcing support to your Company’s Cigarettes Business, meeting all requirements during the year at competitive prices.

Strategic cost management across the value chain continues to be a key focus area for the Business.

The digitally powered real time system continues to be scaled up to facilitate efficient leaf tobacco buying across auction platforms. Several initiatives implemented in recent years have led to substantial benefits including improvement in processing yields and manufacturing efficiencies, reduction in specific consumption of power and logistics cost optimisation.

The Business continues to make focused investments across the tobacco value chain anchored on the key vectors of Quality, Consistency, Compliance and Sustainability. Crop and region-specific agronomic practices continue to be deployed to cater to the emerging preferences of customers. Synergistic R&D initiatives with focus on varietal development and climate smart farming techniques are being scaled up towards improving productivity, product quality and reduction in cultivation costs. The Business has successfully implemented integrated energy management initiatives spanning energy conservation, promotion of alternative fuel usage and energy plantations, towards achieving fuel self-sufficiency in the curing process of FCV tobacco.

The Business continues to set benchmarks in leaf threshing operations through focused initiatives and innovative technological solutions. Investments continue to be made in your Company’s Green Leaf Threshing (GLT) plants at Anaparti, Chirala and Mysuru towards delivering world-class quality and upgrading processing technology. The energy needs of all three GLTs are substantially met from renewable sources in line with your Company’s philosophy of adopting a low-carbon growth path.

The Business remains committed to the highest standards of EHS and quality and continues to win recognition in these areas. During the year, the Business won the National Energy Management

Award from CII for Excellence in Energy Management and ‘Significant Achievement in Employee Relations Award’ from Employers’ Federation of India.

A sharp fall in domestic crop output, sustained pressure on domestic legal cigarette volumes due to steep escalation in tax incidence and stringent regulations, and decline in leaf tobacco exports, as aforestated, have led to severe stress on farmer earnings which have declined by over ' 6000 crores in the last six years since 2014. Illicit cigarettes, as well as smuggled New Generation Products (NGPs) and Electronic Nicotine Delivery Systems (ENDS) in the country also impact leaf tobacco trade as these products do not use Indian tobacco. Accordingly, a more balanced regulatory and taxation regime that cognises for the unique tobacco consumption pattern prevalent in India and the economic realities of the country is the need of the hour to support the Indian tobacco farmer and the 46 million livelihoods dependent on tobacco.

Lower export incentives in India and relatively unfavourable import duty in several markets including the USA, Europe and Russia have weighed on the competitiveness of Indian leaf tobacco exports. Restoring export incentives to earlier levels and necessary policy support to alleviate trade barriers would go a long way in enhancing the competitiveness of Indian tobacco exports and contribute to increasing farmer earnings. Your Company continues to engage with policy makers on these matters.

The Business will continue to provide strategic sourcing support to your Company’s Cigarettes Business even as it consolidates its leadership position as a major exporter of quality Indian tobacco thereby catalysing the multiplier impact of increased

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strong R&D capability, modern processing facilities, crop development and extension expertise and deep understanding of customer and farmer needs, your Company is well poised to sustain its position as a world-class leaf tobacco organisation.

Other Agri Commodities

The imposition of lockdowns and mobility restrictions consequent to the onset of COVID-19 pandemic resulted in significant disruptions across the agriculture value chain besides causing higher volatility in agri-commodity prices. Amidst such unprecedented circumstances, the Business responded with agility and swiftly resumed operations across all nodes by the first week of April, 2020 itself. To ensure availability of essential commodities, provide steady support to the Branded Packaged Foods Businesses of your Company and also to support the agri sector during such a critical time, the Business secured the requisite permissions expeditiously and ramped up agri operations including direct buying from farmers. Leveraging its e-Choupal network, the Business acted with agility and expanded the number of buying locations to overcome operational challenges during the initial phase of the lockdown. The Business leveraged its robust supply chain network and ensured transportation through multiple modes ably supported by its trade partners. Strict adherence with safety protocols was ensured for the well-being and safety of employees and supply chain partners.

The scope and scale of operations of your Company’s Agri Business have grown manifold over the years and currently encompass over 3 million tonnes in 22 states and over 20 agri-value chain clusters. The strategic focus of the Business in recent years has been to accelerate growth and enhance value capture

by rapidly developing and scaling up its Value-Added Agri Products (VAAP) portfolio comprising Spices, Coffee, Frozen Marine Products and Processed Fruits amongst others. The Business continues to leverage its deep rural linkages and extensive sourcing expertise towards strengthening and customising supply chains for traceable and identity-preserved sourcing of agri-commodities.

- Your Company is a leading player in whole spices such as chilli, turmeric, coriander and cumin. In line with its strategy of enhancing value addition, the Business has, in recent years, expanded into ‘food safe’ markets viz. USA, EU and Japan, leveraging its key strengths such as identity-preserved sourcing expertise, strong backward integration, superior processes, custody of supply chain and customer focused strategies. During the year, the Business consolidated its position as a preferred supplier for discerning customers in food safe markets, as reflected in a strong growth in exports on the back of addition of new customers and foray into new markets such as Malaysia and Ecuador. The domestic business too posted a robust growth driven by higher offtake from large players in foods business. The Business also scaled up its Integrated Crop Management (ICM) programme, thereby enhancing its ability to produce food safe spices in a sustainable manner. The Business continues to partner with the various State Governments for production of food safe spices and has maintained an unblemished track record over the years in terms of compliance with stringent food safety parameters.

The Business also leveraged its strong backward integration linkages to foray into the organic spices segment, with the entire value-chain

certified by Control Union, Switzerland, providing assurance on product authenticity and compliance with stringent norms in the USA, EU and Indian markets. The Business continues to pursue sustainable farm management practices anchored on Rainforest Alliance and Global GAP accreditation. The Business was awarded first prize by Food Future Foundation supported by CII’s Food and Agriculture Centre of Excellence (FACE) for sustainable sourcing of spices.

-    During the year, the Coffee business was subdued due to the impact of COVID-19 induced restrictions. Exports to the European and Middle East markets were affected during the year due to prolonged lockdowns. Leveraging its strategic presence in key coffee producing regions in India, deep sourcing expertise, knowledge of estate and region-specific characteristics and supply chain linkages, the Business increased its focus on value-added offerings including coffee certified by Rainforest Alliance, Specialty and Monsooned coffee. Apart from servicing the needs of leading coffee houses in the value-added space, these supply chain linkages are also being leveraged to source the high quality coffee grades customised to the needs of your Company’s gourmet coffee brand, ‘Sunbean’.

-    Your Company is a leading exporter of value-added frozen marine products from India with expertise

in processing individually quick-frozen (IQF), raw and cooked products, which adhere to the highest standards of safety and hygiene standards prevalent in developed markets such as USA, EU and Japan. However, significant disruption in the supply chain in the aftermath of the COVID-19

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markets, impacted exports during the year. Leveraging its deep understanding and sourcing expertise, the Business recently forayed into the domestic retail segment with its ‘ITC Master Chef’ range of ‘Super Safe’ frozen prawns. The product has been well received by consumers and continues to gain steady traction.

-    In the processed fruits category, the Business sustained its leadership position in exports of certified mango pulp. The scale and scope of the projects involving supply of certified products continue to be expanded through a robust collaborative network comprising over 3000 small and marginal farmers spanning four states in India.

The Business remains focused on enlarging its scope of operations to include fresh and processed products in identified agri-commodities such as staples for the Food Service segment, fresh and frozen fruits & vegetables and spices. As these businesses develop critical mass, the Business is also scaling up end-to-end presence across the value chain, supported by R&D capabilities of your Company’s Life Sciences and Technology Centre and external collaborations.

-    During the previous year, leveraging its extensive sourcing and product development capabilities and ability to supply consistent quality products, your Company had forayed into the Bulk Staples business catering to the Food Service channel. While disruptions in Food Service industry due to the pandemic adversely impacted customer offtake during the year, the Business is well poised to rapidly scale up its presence in this segment as the situation normalises. During the year, the Business developed customised specialty flour for value-added end-use and for the growing Food Service space across six major metro markets through an

 

ecosystem of custom manufacturing units and a network of channel partners.

- Towards building deeper expertise in Medicinal and Aromatic Plant Extracts (MAPE), the Business scaled up its customised crop development programme in Madhya Pradesh during the year, under which it is collaborating with farmers, providing necessary inputs, advisory and on-field support. The Business is also focusing on crafting suitable products and value propositions by leveraging research platforms of your Company’s Life Sciences and Technology Centre.

More than two decades ago, your Company conceptualised and rolled out the e-Choupal network as a unique delivery mechanism towards enhancing agricultural growth and productivity, and fostering sustainable rural development. Leveraging this robust platform, your Company continues to focus on providing a range of value-added services in rural areas towards enhancing the competitiveness of Indian agriculture and playing a critical enabling role in integrating farmers, input vendors and government agencies besides facilitating necessary market linkages. Integrated rural service hubs, christened ‘Choupal Saagar’, continue to serve farmers through their procurement and storage infrastructure, and front-end retail stores. The Choupal Saagars facilitate efficient sourcing of a wide range of agri-commodities while making available assorted brands and merchandise from categories such as apparel, footwear, consumer durables, electronics and fuel, tailored to farmers’ needs. The Choupal Saagars also serve as an ideal platform for your Company’s FMCG brands to deepen their engagement with rural markets. Interventions such as Choupal Pradarshan Khet, Choupal Mahotsav, etc. continue to enhance the vitality of your Company’s e-Choupal network.

Towards enhancing the competitiveness of domestic agri value chains, foster new business models and value creation opportunities, your Company is scaling up e-Choupal 4.0 - a crop-agnostic ‘phygital’ integrated agri solutions platform. This digitally powered platform seeks to empower the farming community by delivering customised solutions by synergistically integrating NextGen agri-technologies. These include e-Marketplace for agri inputs and farm outputs, wide range of advisory services covering weather forecasts, agronomy, best practices for improved productivity, quality assurance, etc. Value propositions across each of these opportunity spaces are expected to create new and scalable revenue streams for your Company over time. The platform is also expected to facilitate re-engineering commodity sourcing through a robust network of ten million farmers and nearly 4,000 Farmer Producer Organisations (FPOs), leading to efficient price discovery, lower transaction costs and higher levels of traceability in the supply chain. Your Company also rolled out ‘Project Astra’ - an AI/ML and advanced analytics based digital platform to enhance operational efficiency and facilitate seamless execution.

During the year, as part of a pilot programme, your Company collaborated with leading agri input companies in the country to provide high quality and customised inputs to chilli farmers at competitive prices. Additionally, drone spraying technology was demonstrated extensively to the chilli farmers establishing multiple benefits viz., safe process of pesticide spraying, uniform spraying and ~90% water saving. This pilot programme has yielded promising results towards enhancing the competitiveness of the chilli value chain and farmer incomes.

Over the years, the Business has invested significantly in building competitively superior agri-commodity

sourcing expertise comprising multiple business models, wide geographical spread and customised infrastructure to mitigate the impact of uncertainties arising out of climatic variations, changes in Government policies and global demand-supply dynamics. These capabilities and infrastructure enable the Business to offer differentiated value-added services of identity preservation, traceability and certification and have created structural advantages for your Company’s Branded Packaged Foods Businesses.

- The Business continues to leverage its strong farm linkages and wide sourcing network across geographies to secure supplies of critical grades of wheat with benchmark quality towards meeting the growing requirements of Aashirvaad atta.

During the year, the Business further scaled up its strategic sourcing and supply chain interventions. These include focused crop development towards securing the right varieties for Aashirvaad atta with a view to providing consumers best-in-class product quality and experience, use of multi-modal transportation comprising rail, road & coastal routes and blend/cost optimisation through geographical and varietal arbitrage. The Business also ramped up direct buying at various atta factories. At the Kapurthala ICML plant, direct buying of wheat offers substantial benefits to farmers including transparency in grading, weighment and pricing, besides reducing transaction costs due to minimisation of handling and transportation. Plans are on the anvil to scale up this initiative backed by focused crop development in the area to upgrade crop quality.

Ongoing collaborations with reputed research organisations such as Indian Agricultural Research Institute, Indian Institute of Wheat & Barley

Research, Punjab Agricultural University and Agharkar Research Institute continue to aid the Business in building an efficient and cost competitive agri value chain. During the year, the Business further scaled up its wheat crop development programme and introduced location-specific new and superior seed varieties along with appropriate package of practices across Rajasthan, Uttar Pradesh, Bihar, West Bengal, Punjab, Madhya Pradesh and Maharashtra. Sharp focus on deepening capabilities in proprietary crop intelligence, scaling up the sourcing & delivery network and developing customised blends will support your Company’s Branded Food Packaged Businesses in the years to come.

In recognition of the various initiatives undertaken by the Business, including keeping the entire supply chain fully functional during the pandemic, your Company was awarded the first prize in ‘Food, Perishables, Beverages and FMCG’ category at the CII Supply Chain And Logistics Excellence (SCALE) Awards, 2020.

- Despite the operational challenges posed by the pandemic, the Business continued to strengthen its milk procurement network for ‘Aashirvaad Svasti’ dairy products with significant increase in daily milk collection. The Business strengthened its network in West Bengal and Bihar to support the growing requirement for fresh dairy products and in Punjab towards supporting the requirements of ‘Sunfeast’ dairy beverages. In this regard, the Business provided farmers with the requisite infrastructure (such as automatic milk testing equipment and chilling units) and imparted package of practices to improve operational efficiency and maintain high quality along with identity preservation and

traceability. The capability to source superior quality milk enabled the launch of ‘Aashirvaad Select’ milk during the year - the first-of-its kind in the country providing complete traceability of milk quality across the supply chain.

-    The Business also leveraged its extensive sourcing network and associated infrastructure in key growing areas coupled with deep-rooted farmer linkages to source high quality fruit pulp for your Company’s ‘B Natural’ juices brand.

Your Company continues to leverage its institutional capabilities, deep expertise and structural advantage in sourcing to access a wide range of agri-commodities for servicing the needs of domestic and export customers while improving the overall operational efficiency across all nodes of the supply chain.

-    Indian wheat crop witnessed a bumper harvest in FY 2020-21, leading to increase in the surplus available for domestic trade. Lower wheat production in Ukraine and the imposition of export tariffs in Russia, led to Indian wheat prices turning competitive after a period of four years. Consequently, there was strong demand for Indian wheat from Bangladesh, Middle East and South-Asian markets. The Business leveraged its extensive sourcing network and responded swiftly, accounting for a substantial share of the total wheat exports from India to these countries. However, in the domestic market, COVID-19 induced lockdowns severely impacted the

Food Service channel resulting in relatively muted demand from roller flour millers.

-    In the Rice business, due to shortage of crop in competing origins of Thailand and Vietnam coupled with additional demand from China and Bangladesh, there was a significant increase in exports of rice from India. Your Company was agile in harnessing the opportunity and registered a three-fold increase in export volumes.

-    During the year, the Business also leveraged its geographical presence, sourcing network and risk management capabilities to capture trading opportunities in oil seeds and coarse cereals.

In line with the national goal of doubling farmers’ income, your Company remains committed to catalyse a transformational shift of the agri ecosystem from the conventional production-centric to demand-responsive value chains. Towards this, your Company continues to focus on developing NextGen Indian agriculture anchored on digitally enabled and climate smart agri value chains with strong market linkages. The focus of these interventions is to reduce vulnerability and increase the resilience of farmers, while lowering greenhouse gas emissions and promoting food security by facilitating development of climate-smart villages and enabling the adoption of sustainable agri practices. Your Company’s Agri Business is well positioned to scale up identified areas that lend to higher value addition while continuing to provide strategic sourcing support to your Company’s Branded Packaged Foods Businesses.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements of the Company prepared in accordance with Indian Accounting Standard 110. Shareholders desirous of obtaining the Report and Accounts of your Company’s subsidiaries may obtain the same upon request. Further, the Report and Accounts of the subsidiary companies is also available under the ‘Shareholder Value’ section of your Company’s website, www.itcportal.com, in a downloadable format. Your Company’s Policy for determination of a material subsidiary, as adopted by your Board, in conformity with Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, can be accessed on your Company’s corporate website at https://www.itcportal.com/about-itc/policies/policy-on-material-subsidiaries.aspx . Presently, your Company does not have any material subsidiary.

Surya Nepal Private Limited

The year under review was severely impacted by the outbreak of the COVID-19 pandemic, which resulted in unprecedented disruption to economic activities in Nepal.

GDP⁴ of Nepal degrew by 1.9% for the year ended 15th July, 2020, as against a growth of 6.7% in the previous year. The agriculture sector was adversely impacted on account of a delayed monsoon and widespread crop damage due to infestation, leading to slowdown in growth rate to 2.2%

(previous year: +5.2%).

The non-agriculture sector contracted by 3.7% (previous year: +6.9%) primarily due to degrowth in manufacturing and services. The Manufacturing and Services sector contracted by 9.1% and 3.6% respectively. Tourism & hospitality, transportation, wholesale and retail trade were amongst the sectors severely impacted by the pandemic.

The Government of Nepal implemented several fiscal and monetary measures to stimulate the economy. It also enacted the Foreign Investment and Technology Transfer Rules, 2077 and Environment Protection Rules, 2077 during the year, with a view to attract foreign capital and improve the ease of doing business in Nepal. Increase in inward remittances since July, 2020 and progressive easing of restrictions since October, 2020, led to gradual revival in economic activity. However, the recent resurgence of COVID-19 infections and renewed disruptions across the country including a severe drop in tourism have adversely impacted the prospects of early normalisation of the economy. Rapid increase in vaccination coverage along with focused measures to contain the spread of the virus remain critical in the near term to protect lives and support the economy.

On-ground implementation of reforms and promulgation of industry-friendly policies remain the key imperatives for long-term sustainable growth of the economy.

The legal cigarettes industry occupies an important place in Nepal’s economy and is a major contributor to the manufacturing sector of the country. However, the industry continues to face significant challenges

taxation and regulatory regime. The company continues to engage with policy makers for equitable, non-discriminatory, pragmatic, evidence-based regulations and taxation policies that balance the economic imperatives of the country and the tobacco control objectives, considering the unique tobacco consumption pattern in Nepal.

Steep increase in tax incidence on the legal cigarettes industry over the years coupled with severe disruption in operations in the aftermath of the pandemic rendered the operating environment extremely challenging during the period under review. Against this backdrop, the company reinforced its market standing by leveraging its robust portfolio of offerings, superior product quality and a deep and wide distribution network. Differentiated and innovative portfolio interventions under the Surya and Shikhar trademarks received encouraging consumer response. Several initiatives were successfully deployed to ensure product availability and efficient market servicing amidst significant disruptions to sales operations due to the pandemic.

During the year, the company strengthened its market standing in the Agarbatti industry through focused investments in building brand salience and enhancing distribution in target markets by leveraging its robust trade marketing and distribution infrastructure. Product portfolio was strengthened with the introduction of an innovative ‘Zip Lock Pack’ offering ‘Trisara’ which has received encouraging response. The company’s range of products currently straddle all segments, offering consumers a wide choice of fragrances, price points and packaging formats.

In the Safety Matches business, the company further enhanced its market standing and leadership position. The company continued to focus on delivering superior product quality, enhancing distribution across markets leveraging its strong trade marketing and distribution capabilities, along with cost optimisation initiatives.

In the Confectionery segment, sales during the period under review were relatively subdued in line with lower demand for discretionary and out-of-home consumption categories in the wake of the pandemic.

The company focused on scaling up availability of products across markets with the progressive easing of restrictions.

The company has adopted all measures towards ensuring safety and well-being of all its stakeholders. The company continues to support and invest in initiatives aimed at enhancing the social and economic capital of Nepal, covering areas relating to environmental preservation, social empowerment and promoting and improving education in public schools. During the year, the company:

-    assisted farmers in agri-infrastructure and vermicomposting in areas proximate to operating locations.

-    provided training to farmers towards improvement in productivity and other income generating activities.

-    supported the animal husbandry sector by providing extension services covering animal breeding, health and nutrition in order to drive yield improvement and higher returns for underprivileged farmers.

-    continued to contribute towards improvement in quality of education in public schools in the vicinity of its operating locations.

-    contributed Nepali Rupees (NRs.) 1 crore each (aggregating NRs. 7 crores) to the ‘Funds for treatment and control of COVID-19’ established by all seven provinces in Nepal and supported the local governments and communities in the immediate vicinity of its manufacturing locations in dealing with the pandemic.

During the year, the company recorded Revenue from Operations of NRs. 3612 crores (previous year NRs. 4018 crores) and Net Profit of NRs. 867 crores (previous year NRs. 1110 crores); the decline in performance being primarily attributable to the severe disruptions in business operations caused by the pandemic.

The company declared a dividend of NRs. 488 per equity share of NRs. 100 each for the year ended 15th July, 2020 (31st Asadh, 2077) amounting to

NRs. 983.81 crores (previous year NRs. 489 per equity share amounting to NRs. 985.82 crores).

The company continues to be one of the largest contributors to the exchequer in Nepal. The company is well positioned to consolidate its leadership position by leveraging its robust portfolio of products, deep and wide distribution network, best-in-class manufacturing facilities and execution excellence. Plans are on the anvil to rapidly scale up the newer FMCG businesses.

ITC Infotech India Limited and its subsidiaries

The year under review witnessed structural shifts in the IT services industry due to the impact of COVID-19 pandemic. Despite disruptions due to the pandemic, the Indian IT Services and Business Process Management (BPM) industry grew by 2.3% in US dollar terms in FY 2020-21, according to NASSCOM estimates. The industry demonstrated agility in seamlessly delivering services to global clients by adopting a distributed delivery model to overcome the supply side disruptions caused by the pandemic through effective use of mobile computing devices and enterprise collaboration software.

The pandemic further accelerated the mainstream adoption of digital technologies such as Cloud, Intelligent Automation, Digital workplace and Cybersecurity in the enterprise technology landscape. Organisations are increasingly adopting these technologies to enhance flexibility and scalability of their technology infrastructure to enable seamless operations with a distributed workforce, expand channels of customer outreach and optimise human resources, especially for routine and well-defined tasks.

With increasing adoption of digital technologies to drive value creation and enhance operational efficiencies, enterprises are looking at IT service providers as partners who can deliver impactful business solutions leveraging such technologies. Accordingly, IT service providers continue to sharpen their digital offerings by collaborating with relevant Independent Software Vendors (ISVs) and start-ups. Winning large transformation opportunities from enterprise clients through differentiated client centric deal constructs has emerged as a key focus area.

Re-skilling and up-skilling employees in digital technologies and acquiring targets with digital or domain related capabilities have also become a defining trend in recent times.

Against this backdrop, the company’s strategy remains anchored on providing domain-led digital services and solutions to customers in identified industry verticals. During the year, the company recorded robust growth in revenue on the back of strong traction in the Americas, Europe and India businesses. Global In-house Centre services, Digital Experience using data analytics and Infrastructure services were the key drivers of growth. The company also forged new alliances and strengthened existing relationships with ISVs and start-ups in areas such as Automation, Digital Manufacturing and Data analytics. In addition to strong revenue growth, the operating margins of the company also improved substantially during the year driven by structural interventions such as improved customer mix, enhanced resource utilisation and reduction in controllable general & administrative costs. The company remains focused on sustaining the gains during the year and driving further improvement through multiple interventions across the value chain.

The company’s superior service delivery and technology capabilities continue to earn global recognition. During the year, the company improved its positioning in Avasant’s Intelligent Automation RadarView report, and was rated amongst the top service providers globally in the ‘Innovators’ category (from being recognised in the ‘Disruptors’ category in the previous year). The company was also featured as a ‘Strong Performer’ in the Forrester wave report on mid-sized Robotic Process Automation service providers during the year. The company’s capability in Manufacturing Execution Systems (MES) was recognised and featured in a note on ‘An innovative approach for accelerating MES implementation’ by Information Services Group, Inc. (ISG), a global technology research and advisory firm. The company was also awarded ‘Best of The Global Outsourcing 100’ service providers by International Association of Outsourcing Professionals (IAOP) and was featured

as a ‘Leader’ in their ‘Global Outsourcing 100’ report. The company received the PR World Awards during the year for its efforts in effectively responding to the COVID-19 pandemic.

During the year, the company’s consolidated Total Income grew by 8.8% to ' 2469.29 crores (previous year ' 2268.63 crores). Profit Before Tax stood at ' 604.13 crores (previous year ' 288.34 crores) and Net Profit more than doubled to ' 451.30 crores (previous year ' 209.47 crores).

For the year under review:

a.    ITC Infotech India Limited recorded Revenue from Operations of ' 1834.98 crores (previous year

' 1529.87 crores) and Net Profit of ' 447.79 crores (previous year ' 194.69 crores). The company paid a total dividend of ' 32.50 per Equity Share of ' 10 each aggregating ' 276.90 crores (previous year ' 11.75 per Equity Share aggregating ' 100.11 crores).

b.    ITC Infotech Limited, UK, (ITC Infotech UK),

a wholly-owned subsidiary of the company, recorded Revenue of GBP 48.80 million (previous year GBP 49.82 million) and Net Profit of GBP 0.90 million (previous year GBP 1.23 million). The company paid a dividend of GBP 1.25 per share aggregating GBP 0.86 million (previous year Nil).

c.    ITC Infotech (USA), Inc., (ITC Infotech USA), a wholly-owned subsidiary of the company, together with its wholly-owned subsidiary Indivate Inc., recorded Revenue of US$ 108.36 million (previous year US$ 105.62 million) and Net Income of US$ 2.59 million (previous year US$ 3.31 million). The company paid a total dividend of US$ 14 per share aggregating US$ 2.55 million (previous year US$ 11 per share aggregating US$ 2 million).

The company remains committed in its journey of providing differentiated, business-friendly offerings to select industry verticals anchored on domain-expertise. The company will continue to focus on expanding its presence in strategic accounts, creating and winning large transformation opportunities, sharpening its domain-specific digital solutions across identified

areas, strengthening its distributed delivery framework and investing in re-skilling/up-skilling its employees in digital technologies.

Technico Agri Sciences Limited

The company’s leadership in production of early generation seed potatoes and strength in agronomy continues to support the Bingo! range of potato chips of your Company and in servicing the seed potato requirements of the farmer base of your Company’s Agri Business.

During the year, a significant drop in potato cultivation acreage and adverse climatic conditions led to a sharp decline in production by nearly ten per cent over the previous year. Consequently, table potato prices increased steeply.

Revenue from Operations grew at a robust pace of 42% during the year to ' 287.09 crores (previous year ' 202.26 crores) on the back of the company’s brand strength, superior product quality, better on-field performance and strong trade and customer relationships. Net Profit increased substantially to ' 72.92 crores (previous year ' 20.34 crores).

Total Comprehensive Income for the year stood at ' 72.92 crores (previous year ' 20.26 crores). During the year, the company declared an interim dividend of ' 16.00 per Equity Share of ' 10 each, aggregating ' 60.74 crores (previous year ' 4.00 per Equity Share).

Leveraging its strong tissue culture capabilities, the company has also started piloting production of banana plantlets. The company continues to build a strong foundation for the future with development of new varieties and extensive multi-location trials.

Technico Pty Limited and its subsidiaries

The company continues to focus on upgradation and commercialisation of its TECHNITUBER® Seed Technology and customising its application across various geographies. Further, the company is also engaged in the marketing of TECHNITUBER® seed produced at the facilities of its subsidiaries in China and Canada and Technico Agri Sciences Limited,

India, a wholly-owned subsidiary of your Company, to global customers. For the year under review:

a.    Technico Pty Limited, Australia registered a turnover of Australian Dollar (A$) 2.09 million (previous year A$ 2.49 million) and a Net Profit of A$ 0.79 million (previous year A$ 1.56 million).

b.    Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China - there were no significant events to report with respect to the above companies.

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company was incorporated in Sri Lanka with the objective of developing and operating a mixed-use development project (‘Project’) comprising a luxury hotel and a super-premium residential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded the status of a ‘Strategic Development Project’ entitling the company to various fiscal benefits in Sri Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.

Project construction activity, which was running on schedule till Q3 FY19, has been adversely impacted largely due to disruptions in the aftermath of the terror incidents in 2019 and then by the COVID-19 pandemic. Project activity resumed in May, 2020, post relaxation of restrictions imposed by the authorities to curb the spread of the virus. However, Colombo was significantly impacted by the second wave of the pandemic in October, 2020, leading to another round of disruptions in Project activity. Construction activity was progressively ramped up during the fourth quarter with easing of restrictions. The company has put in place comprehensive health and safety protocols for the safety and well-being of all stakeholders.

The company remains focused on completing the project in an expeditious manner despite significant disruptions caused by the aforementioned factors.

The business environment in Sri Lanka continues to remain subdued in the wake of the pandemic.

This has impacted, inter alia, the sales velocity of ‘The Sapphire Residences’ luxury apartments.

Your Company’s investment in WLPL stood at US$ 278 million as at 31st March, 2021.

Landbase India Limited

The company owns and operates the Classic Golf & Country Club, a 27-hole Jack Nicklaus Signature Golf Course - which continues to enjoy strong brand equity with its members, guests and the golfing fraternity.

In view of the COVID-19 pandemic, operations at the Club had been suspended in March, 2020. The Club was re-opened in May, 2020, after implementing the highest safety and hygiene standards, social distancing norms, etc., leading to progressive improvement in member footfalls.

The company also owns ‘ITC Grand Bharat’ - a 104-key all-suite luxury retreat at Gurugram, which has been licensed to your Company. The retreat, an oasis of unhurried luxury, is co-located with the company’s prestigious Classic Golf & Country Club.

ITC Grand Bharat has received several accolades, establishing itself amongst the top luxury resort destination hotels in the world. During the year, the retreat has received accolades from Travel + Leisure, one of the world’s leading magazines in the travel and hospitality industry. The property was also declared the ‘Best Wellness Retreat’ in the domestic category as part of India’s Best Awards, 2020 by Travel + Leisure India & South Asia.

During the year ended 31st March, 2021, the company recorded Total Income of ' 25.03 crores (previous year ' 28.37 crores) and Net Profit of ' 3.80 crores (previous year ' 2.85 crores). Total Comprehensive Income for the year stood at ' 3.85 crores (previous year ' 2.82 crores).

Srinivasa Resorts Limited

The company owns ‘ITC Kakatiya’ - a 188-key luxury hotel in Hyderabad city, which is operated and marketed by your Company. The company was

adversely impacted by the lockdown and resultant disruptions due to the COVID-19 pandemic. With the progressive easing of restrictions, the hotel resumed operations following the highest standards of safety and hygiene for all stakeholders.

The property continued to receive several accolades, with ‘Dakshin’ and ‘Kebabs and Kurries’, being adjudged the ‘Best South Indian Fine Dining Restaurant’ (11th consecutive year) and ‘Best North Indian Fine Dining Restaurant’ respectively in the Times Food Guide Nightlife Awards, 2021.

During the year ended 31st March, 2021, the company recorded Total Income of ' 26.74 crores (previous year ' 62.48 crores) with Net Loss of ' 8.42 crores (previous year Net Profit of ' 3.24 crores). Total Comprehensive Income for the year stood at (-) ' 8.34 crores (previous year ' 3.16 crores).

Fortune Park Hotels Limited

The company, which caters to the ‘Mid-market to Upscale’ Business Hotels segment under the brand ‘Fortune’, remains a front-runner in its operating segment and is well positioned to sustain its leadership position in the industry.

The company has established ‘Fortune’ as a premier business hotel brand in the Indian hospitality sector. The brand Fortune continues to forge new alliances and expand its footprint. Currently, it has an aggregate inventory of nearly 4,000 rooms spread over 50 properties of which 39 are operating hotels. Three more properties are slated to be commissioned in the ensuing year while eight are in various stages of development.

The COVID-19 pandemic, which has significantly impacted the travel & tourism industry, caused severe disruption across all properties in the first half of the year under review. There was progressive recovery thereafter, especially in the leisure segment. ‘Safe Stays’ programme has been implemented at the hotels with enhanced focus on safety, health and hygiene.

During the year ended 31st March, 2021, the company recorded Total Income of ' 17.71 crores (previous year ' 39.68 crores) and Net Loss of ' 6.28 crores

(previous year Net Profit ' 2.69 crores). Total Comprehensive Income for the year stood at (-) ' 6.28 crores (previous year ' 2.76 crores).

Bay Islands Hotels Limited

The company’s hotel in Port Blair, licensed to your Company, continues to offer a unique gateway to the Andamans with its strategic location, excellent architectural design and superior quality. Consequent to a comprehensive renovation and expansion programme towards enhancing its market positioning, the hotel was rebranded from ‘Fortune’ to ‘Welcomhotel’ with effect from 1st December, 2020. Accordingly, the operation and marketing of the hotel is now being managed by your Company.

With the outbreak of COVID-19, the hospitality industry has been severely impacted and the hotel remained shut during the first quarter of the year.

The hotel resumed operations from July, 2020, after easing of lockdown restrictions and has demonstrated progressive improvement. Appropriate measures relating to safety, health and hygiene protocols have been put in place to ensure safety of all stakeholders.

During the year ended 31st March, 2021, the company recorded Total Income of ' 1.11 crores (previous year ' 1.69 crores) and Net Profit of ' 0.77 crore (previous year ' 1.23 crores). Total Comprehensive Income for the year stood at ' 0.77 crore (previous year ' 1.23 crores).

The Board of Directors of the company have recommended a dividend of ' 70.00 per Equity Share of ' 100 each for the year ended 31st March, 2021 (previous year ' 70.00 per Equity Share).

Wimco Limited

The company’s business activities comprise fabrication and assembly of machinery for tube filling, cartoning, wrapping, material handling including conveyor solutions, and engineering services for the FMCG and Pharmaceutical industries.

The company’s performance during the year was severely impacted by the sluggish demand arising out of subdued business sentiment in the wake of

the COVID-19 pandemic. The company continues to focus on developing superior solutions towards addressing customer requirements.

The company’s Revenue from Operations for the year stood at ' 6.29 crores (previous year ' 12.33 crores) with a Net Loss of ' 2.42 crores (previous year Net Profit of ' 0.07 crore). Total Comprehensive Income for the year stood at (-) ' 2.42 crores (previous year ' 0.06 crore).

The Honourable National Company Law Tribunal, Mumbai Bench (‘NCLT’), vide Order dated 9th April, 2021, confirmed the reduction of Issued, Subscribed and Paid-up Equity Share Capital of the company from ' 18,84,60,000 comprising 18,84,60,000 Equity Shares of ' 1 each to ' 18,50,81,193 comprising 18,50,81,193 Equity Shares of ' 1 each, by way of cancelling and extinguishing, in aggregate, 33,78,807 Equity Shares of ' 1 each held by shareholders other than your Company, in lieu of payment not exceeding ' 1 per share to such shareholders. The said reduction of Equity Share Capital of the company will be given effect to during FY 2021-22 on completion of necessary formalities under Section 66 of the Companies Act, 2013 and as directed by the NCLT.

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East Nutrients Private Limited, a company formed with the objective of setting up a food processing facility in Mangaldoi, Assam, to cater to the fast-growing biscuits market in Assam and other north-eastern states.

During the year, the company posted robust revenue growth driven by increased ‘at-home’ consumption, particularly in the first half. The company successfully catered to the surge in demand amidst a challenging operating environment while ensuring full compliance with applicable health and safety protocols, and food safety standards. Over the years, the company has consistently improved operational efficiency, productivity and strengthened safety standards.

The company has also upgraded its Food Safety Management System to the latest version of FSSC 22000 during the year.

The company’s Revenue from Operations for the year stood at ' 172.52 crores (previous year ' 147.85 crores), while Net Profit for the year increased to ' 9.06 crores (previous year ' 4.79 crores), largely driven by volume growth and increase in operating efficiencies. Total Comprehensive Income for the year stood at ' 9.08 crores (previous year ' 4.73 crores).

Hobbits International Foods Private Limited and Sunrise Sheetgrah Private Limited

As stated earlier in this Report, during the year, your Company acquired 100% of the Equity Share Capital of Messrs. Sunrise Foods Private Limited (Sunrise) on 27th July, 2020. Consequently, Sunrise and its two wholly-owned subsidiaries viz., Hobbits International Foods Private Limited (HIFPL) and Sunrise Sheetgrah Private Limited (SSPL), became wholly owned subsidiaries of your Company with effect from the said date. Sunrise subsequently amalgamated with your Company, and HIFPL and SSPL became direct wholly-owned subsidiaries of your Company.

HIFPL provides support to your Company’s Business of manufacturing and marketing of spices and other food products, inter alia, under the ‘Sunrise’ brand. During the year, the company recorded Total Income of ' 0.67 crore and Net Loss of ' 0.13 crore.

SSPL also provides support to your Company’s Business of manufacturing and marketing of spices and other food products, inter alia, under the ‘Sunrise’ brand. During the year, the company recorded Net Loss of ' 0.04 crore.

HIFPL and SSPL have filed joint petition with the Honourable National Company Law Tribunal, Allahabad Bench, seeking, inter alia, the approval for amalgamation of the said companies with your Company. The said petition is pending.

ITC IndiVision Limited

ITC IndiVision Limited (IIVL) was incorporated as a wholly-owned subsidiary of your Company on 9th July, 2020.

The company has obtained necessary regulatory approvals for setting up a facility near Mysuru,

Karnataka, primarily for the manufacture and export of nicotine and nicotine derivative products. Steady progress was made during the year in project construction activities while ensuring adherence to the highest standards of hygiene and safety protocols.

Your Company’s investment in IIVL stood at ' 50 crores as at 31st March, 2021.

Russell Credit Limited

During the year, the company recorded Total Income of ' 64.37 crores (previous year ' 64.99 crores) and Net Profit of ' 49.47 crores (previous year ' 41.75 crores). Total Comprehensive Income for the year stood at ' 86.38 crores (previous year (-) ' 68.86 crores), reflecting the sharp recovery in market value of certain long-term strategic investments over the previous year which was severely impacted due to the pandemic. The company continues to monitor its investments closely in the face of volatile market conditions and explore opportunities to make strategic investments for the ITC Group. Temporary surplus liquidity of the company is mainly deployed in bonds, debt mutual funds, bank fixed deposits, etc. During the year, the company declared interim dividend of ' 0.20 per Equity Share of ' 10 each, aggregating ' 12.93 crores (previous year ' 0.85 per Equity Share of ' 10 each aggregating ' 54.95 crores).

Gold Flake Corporation Limited

The company holds 50% equity stake in ITC Essentra Limited - a joint venture with Essentra Group, UK. During the year, the company recorded Total Income of ' 8.41 crores (previous year ' 8.48 crores) and Net Profit of ' 7.30 crores (previous year ' 7.30 crores). The company declared interim dividend of ' 6.25 per Equity Share of ' 10 each, aggregating ' 10.00 crores (previous year Nil).

Greenacre Holdings Limited

The company continues to provide maintenance services for commercial office buildings, engineering, procurement and construction management services as well as project management consultancy services.

company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Income of ' 9.51 lakhs (previous year ' 8.36 lakhs) and Net loss of ' 3.17 lakhs (previous year Net profit of ' 0.03 lakhs).

NOTES ON JOINT VENTURES ITC Essentra Limited

The performance of the company during the year was adversely impacted by the COVID-19 pandemic. With the easing of restrictions, the company restarted operations in a seamless manner while ensuring the highest standards of hygiene and safety protocols. The persistent pressure on volumes of the legal cigarette industry on account of a punitive taxation regime and stringent regulations, continues to exert pressure on the demand for cigarette filters from the legal industry.

Against the backdrop of such challenging business conditions, the company retained its leadership position of being the preferred supply chain partner for several well-known national and international brands leveraging its core strengths - strong customer relationships, world-class innovation, superior execution, consistent delivery and best-in-class quality. The company continues to make investments in technology induction and capability building towards sustaining its position as the ‘innovation and quality benchmark’ in the Indian cigarette filter industry.

During the year ended 31st March, 2021, the company’s Revenue from Operations stood at ' 337.87 crores (previous year ' 381.19 crores).

Net Profit during the year stood at ' 36.23 crores (previous year ' 42.09 crores).

The Board of Directors have recommended a dividend of ' 70.00 per Ordinary Share of ' 10 each (including special dividend of ' 30.00 per Ordinary Share) for the year ended 31st March, 2021 (previous year ' 30.00 per Ordinary Share).

 

During the year, the company recorded Total Income of ' 5.65 crores (previous year ' 5.70 crores) and Net Profit of ' 3.71 crores (previous year ' 1.33 crores) after considering once-off reversals of certain deferred tax liabilities aggregating ' 1.44 crores.

ITC Investments & Holdings Limited

The company, an unregistered Core Investment company within the meaning of the Core Investment Companies (Reserve Bank) Directions, 2016 and related guidelines, recorded Total Revenue of ' 0.06 crore during the year (previous year ' 0.07 crore) and Net Profit of ' 0.01 crore (previous year ' 0.02 crore).

MRR Trading & Investment Company Limited

The company, a wholly-owned subsidiary of ITC Investments & Holdings Limited, holds tenancy rights in a commercial building located in Mumbai and also provides estate maintenance services. During the year, the company recorded Total Income of ' 7.26 lakhs (previous year ' 7.33 lakhs) and Net Profit of ' 0.33 lakhs (previous year ' 0.24 lakhs).

Pavan Poplar Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February, 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April, 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Income of ' 0.22 crore (previous year ' 0.07 crore) and Net profit of ' 0.09 crore (previous year Net loss of ' 0.14 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February, 2014 dismissing the writ petition filed by the

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 35 heritage properties across 14 States in India under the ‘WelcomHeritage’ brand. The portfolio of properties, comprising ‘Legend Hotels’, ‘Heritage Hotels’ and ‘Nature Resorts’, provides uniquely differentiated offerings to guests in the cultural, heritage, nature, wellness and adventure tourism segments respectively. Operations across properties were impacted by the pandemic in the first half of the year. With gradual easing of restrictions, the properties demonstrated progressive recovery in performance.

During the year, the WelcomHeritage brand was awarded the ‘Gold Award’ by Service Industry Advertising Awards, Atlanta, USA for the campaign ‘Work from Here’ promoting long stay at select WelcomHeritage Hotels.

During the year ended 31st March, 2021, the company recorded Total Income of ' 2.30 crores (previous year ' 3.69 crores) and Net Loss of ' 0.68 crore (previous year Net Profit of ' 0.39 crore). Total Comprehensive Income for the year stood at (-) ' 0.68 crore (previous year ' 0.35 crore).

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and the Ambience Group, Hyderabad, for developing a luxury hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in EHPL and will, inter alia, provide hotel operating services upon commissioning of the hotel.

As reported in prior years, the Ambience Group has expressed its desire to review the timing of further investments in EHPL, citing concerns about the viability of the project in view of the challenging economic environment and the sluggish demand conditions currently prevailing in the relevant market. Your Company continues to explore its options in this regard.

Your Company’s investment in EHPL stood at ' 46.51 crores as at 31st March, 2021.

Logix Developers Private Limited

Logix Developers Private Limited (LDPL) is a joint venture between your Company and Logix Estates Private Limited for developing a luxury hotel-cum-service apartment complex at the company’s leasehold site located at Sector 105 in New Okhla Industrial Development Authority (NOIDA). Under the terms of the Joint Venture Agreement, your Company holds 27.9% equity stake in LDPL and will, inter alia, provide hotel operating services, upon commissioning of the hotel by LDPL.

As reported in prior years, your Company reiterated its position with the JV partner that it was committed to developing a luxury hotel-cum-service apartment complex as envisaged under the JV Agreement and that it was not interested in progressing with any alternative project plans proposed by the JV partner. However, the JV partner refused to progress the project and instead expressed its intent to exit from the JV by selling its stake to your Company.

Subsequently, the JV partner proposed that both parties should find a third party to sell the entire shareholding in LDPL. In view of these developments, your Company had filed a petition before the erstwhile Company Law Board submitting that the affairs of the JV entity were being conducted in a manner that was prejudicial to the interest of your Company and the JV entity. The matter is currently before the National Company Law Tribunal (NCLT). The JV partner had also filed a petition before the Honourable Delhi High Court for winding up the JV company, which was transferred to the NCLT by the Honourable Delhi High Court. The matter was heard before the NCLT on several occasions in the past but could not be concluded. On 21st January, 2020, the matter was assigned to a new bench; the matter is being heard and the date of next hearing is slated for 28th July, 2021.

During the year, the company received notices from NOIDA demanding payments in respect of the aforesaid lease. The company has submitted its responses in this regard.

During the year ended 31st March, 2021, the company recorded a Net Loss of ' 40.28 crores

(previous year ' 75.36 crores). The Net Worth of the company stood at (-) ' 147.62 crores as at 31st March, 2021 (previous year (-) ' 107.34 crores). Your Company’s total investment in LDPL was ' 41.95 crores. Your Company had made provisions aggregating ' 33.45 crores towards diminution in the carrying value of investment in LDPL in the previous years, bringing the carrying value of the company’s investment in LDPL as at 31st March, 2021, to ' 8.5 crores.

The financial statements of LDPL for the year ended 31st March, 2021, are yet to be approved by its Board of Directors. In the absence of audited financial statements of LDPL, the Consolidated Financial Statements of your Company for the year ended 31st March, 2021, have been prepared based on the financial statements prepared by the management of LDPL.

NOTES ON ASSOCIATESInternational Travel House Limited

The company is engaged in the business of providing travel related services to corporate travellers in India and abroad. The services include car rentals, business travel, leisure, meetings, incentives, conferencing, exhibitions, foreign exchange and hotel travel services.

The company’s operations have been severely impacted due to restrictions on travel and related activities on account of the ongoing pandemic. The company has reviewed and rationalised its cost structures, to partly mitigate the impact of negative operating leverage. To address the latent demand of safe travel during the pandemic, the company launched ‘The SAFE Car Promise’ during the year, reassuring its commitment to the customers on the highest standards of reliability, safety and hygiene.

To supplement its revenues, the company has also forayed in the adjacent space of Corporate Employee Transportation services for essential sectors and promoted domestic leisure holidays through the launch of various holiday packages. The company is evaluating multiple strategies of growth in keeping with the post-pandemic operating environment.

During the year ended 31st March, 2021, the company recorded a Total Income of ' 62.16 crores (previous year ' 210.52 crores) and Net Loss for the year of ' 45.07 crores (previous year Net Loss of ' 7.41 crores). Total Comprehensive Income for the year stood at (-) ' 45.01 crores (previous year (-) ' 8.99 crores).

Gujarat Hotels Limited

The company’s hotel, ‘Welcomhotel Vadodara’, at Vadodara is operated by your Company under an Operating License Agreement.

Pandemic induced restrictions and lockdowns adversely impacted the revenue from License Agreement especially during the first half of the year.

During the financial year ended 31st March, 2021, the company recorded Total Income of ' 3.06 crores (previous year ' 5.92 crores) with Net Profit and Total Comprehensive Income of ' 2.27 crores (previous year ' 4.30 crores). The Board of Directors of the company have recommended a dividend of ' 1.80 per Equity Share of ' 10 each for the year ended 31st March, 2021 (previous year ' 2.50 per Equity Share).

ATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. During the year, the company recorded Total Revenue of ' 25.47 crores (previous year ' 25.32 crores) and Net Profit of ' 0.24 crore (previous year ' 0.12 crore).

The company’s operations during the year were impacted by the lockdowns and supply chain disruptions due to the COVID-19 pandemic. On resumption of operations, the company ramped up its production in an expeditious manner while ensuring the highest standards of hygiene and safety protocols.

The company continued to maintain high levels of operational responsiveness and benchmark quality in its manufacturing operations to meet the needs of its customers. During the year, the company was conferred Platinum certification and Excellence award by the Indian Green Building Council National Energy Management award by the Confederation of Indian Industry and Prashansa Patra by the National Safety

Council of India. The company also signed a long-term settlement agreement with the Employees Union during the year.

Delectable Technologies Private Limited

During the year, Delectable Technologies Private Limited (Delectable) became an associate of your Company pursuant to acquisition of the second tranche of Compulsorily Convertible Preference Shares on 17th September, 2020. Your Company effectively holds 20.06% stake in Delectable on a fully diluted basis. The company is, inter alia, engaged in sale of FMCG products leveraging app-based technology through vending machines, primarily installed across office locations. During the year, the operations of the company were adversely impacted with most offices remaining shut or operating with limited employees, on account of the pandemic.

During the year, the company recorded Total Revenue of ' 0.90 crore and Net Loss of ' 1.87 crores.

Associates of Russell Credit LimitedRussell Investments Limited

During the year, the company recorded Total Income of ' 3.50 crores (previous year ' 4.73 crores) and Net Profit of ' 2.27 crores (previous year ' 2.50 crores). Total Comprehensive Income for the year stood at ' 8.88 crores (previous year (-) ' 43.01 crores) reflecting the recovery in market value of certain long-term strategic investments over the previous year which was severely impacted due to the pandemic. The company continues to explore opportunities for strategic investments.

Divya Management Limited

During the year, the company recorded Total Income of ' 0.52 crore (previous year ' 0.53 crore) and Net Profit of ' 0.17 crore (previous year ' 0.16 crore). The company continues to explore opportunities for strategic investments.

Antrang Finance Limited

During the year, the company recorded Total Income of ' 0.28 crore (previous year ' 0.31 crore) and Net

Profit of ' 0.10 crore (previous year ' 0.06 crore).

The company continues to explore opportunities for strategic investments.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The ITC Code of Conduct commits management to financial and accounting policies, systems and processes.

The Corporate Governance Policy and the ITC Code of Conduct stand widely communicated across the enterprise at all times and together with the ‘Strategy of Organisation’, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Company’s Financial Statements.

Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across your Company. The Accounting Policies are reviewed and updated from time to time. These, in turn, are supported by a set of divisional policies and Standard Operating Procedures (SOPs) that have been established for individual businesses.

Your Company uses Enterprise Resource Planning (ERP) systems as a business enabler and also to maintain its books of accounts. The SOPs, in tandem with transactional controls built into the ERP systems, ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through till implementation.

Your Company has in place adequate internal financial controls with reference to the Financial Statements. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial information; complying with applicable statutes; safeguarding assets from unauthorised use; ensuring that transactions are carried out with proper authorisation and complying with Corporate Policies and Processes. Such controls have been assessed during the year, after taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by The Institute of Chartered Accountants of India. Based on the results of such assessment carried out by management, no reportable material weakness or significant deficiency in the design or operation of internal financial controls was observed. Nonetheless, your Company recognises that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis.

RISK MANAGEMENT

As a diversified enterprise, your Company continues to focus on a system-based approach to business risk management. The management of risk is embedded in the corporate strategies of developing a portfolio of world-class businesses that best match organisational capability with market opportunities, focusing on building distributed leadership and succession planning processes, nurturing specialism and enhancing organisational capabilities through timely developmental inputs. Accordingly, management of risk has always been an integral part of your Company’s ‘Strategy of Organisation’ and straddles its planning, execution and reporting processes & systems. Backed by strong internal control systems, the current Risk Management Framework consists of the following key elements:

- The Corporate Governance Policy approved by the Board, clearly lays down the roles and responsibilities of the various entities in relation to risk management covering a range of

responsibilities, from strategic to the operational. These role definitions, inter alia, provide the foundation for appropriate risk management procedures, their effective implementation across your Company and independent monitoring and reporting by Internal Audit.

-    The Risk Management Committee, constituted by the Board, monitors and reviews the strategic risk management plans of your Company as a whole and provides necessary directions on the same.

-    The Corporate Risk Management Cell, through focused interactions with businesses, facilitates the identification and prioritisation of strategic and operational risks, development of appropriate mitigation strategies and conducts periodic reviews of the progress on the management of identified risks.

-    A combination of centrally issued policies and divisionally-evolved procedures brings robustness to the process of ensuring that business risks are effectively addressed.

-    Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with unique/relatively high risk profiles.

-    A strong and independent Internal Audit function at the Corporate level carries out risk focused audits across all businesses, enabling identification of areas where risk management processes may need to be strengthened. The Audit Committee

of the Board reviews Internal Audit findings and provides strategic guidance on internal controls. The Audit Compliance Review Committee closely monitors the internal control environment within your Company including implementation of the action plans emerging out of internal audit findings.

-    At the Business level, Divisional Auditors continuously verify compliance with laid down policies and procedures and help plug control gaps by assisting operating management in the formulation of control procedures.

-    A robust and comprehensive framework of strategic planning and performance management ensures realisation of business objectives based on effective strategy implementation. The annual

planning exercise requires all Businesses to clearly identify their top risks and set out a mitigation plan with agreed timelines and accountabilities. Businesses are required to confirm periodically that all relevant risks have been identified, assessed, evaluated and that appropriate mitigation systems have been implemented.

Your Company endeavours to continuously sharpen its Risk Management systems and processes in line with a rapidly changing business environment. In this regard, it is pertinent to note that some of the key businesses of your Company have adopted the ISO 31000 Standard and accordingly, the Risk Management systems and processes prevalent in these businesses have been independently assessed to be compliant with the said global Standard on Risk Management. During the year, the said Businesses have successfully transitioned from the erstwhile ISO 31000:2009 Standard to the revised ISO 31000:2018 Standard. This intervention provides further assurance on the robust nature of risk management practices prevalent in your Company.

The centrally anchored initiative of conducting external independent reviews of key business processes with high ‘value at risk’ continued during the year. The Risk Management Committee met thrice during the year and was updated on the status and effectiveness of the risk management plans. The Audit Committee was also updated on the effectiveness of your Company’s risk management systems and policies.

A Cyber Security Committee, chaired by the Chief Information Officer, is in place to provide specific focus on cyber security related risks, with the primary responsibility of tracking emerging practices and technologies and provide suitable recommendations for enhancing security of the IT systems and infrastructure. The Chief Information Officer, is invited to the Risk Management Committee meetings and is responsible for ensuring that the Cyber Security systems of your Company remain effective and contemporary.

Your Company sources several commodities for use as inputs in its businesses and also engages in agri-commodity trading as part of its Agri Business.

In respect of commodities sourced for use as inputs in its Businesses, your Company has well laid out policies to manage the risks arising out of the inherent price volatility associated with such commodities.

This includes robust mechanisms for monitoring market dynamics towards making informed sourcing decisions; well defined inventory holding norms based on considerations such as seasonality and the strategic nature of the commodity concerned; entering into long-term contracts with suppliers to secure supply of critical items at competitive cost and continuous diversification of supplier base. Multiple sourcing models, wide geographical spread, extensive sourcing and supply chain network and associated infrastructure in key growing areas coupled with deep-rooted farmer linkages ensure sourcing of high quality agri-commodities at competitive cost.

Your Company’s strategy of backward integration in sourcing of agri-commodities such as wheat, potato, fruit pulp, spices, milk and leaf tobacco; in-house manufacturing of paperboards, paper and packaging (including pulp production and print cylinder making facilities); wood procurement from the economic vicinity of the Bhadrachalam unit, facilitates access to critical inputs at benchmark quality and competitive cost besides ensuring security of supplies. Further, each of your Company’s businesses continuously focuses on product mix enrichment towards protecting margins and insulating operations from spikes in input price.

In respect of Agri-commodity trading, your Company has a well laid out policy to manage the risks associated with sourcing of such commodities.

This includes:

-    segregation of duties and robust internal controls through a system of checks and balances embedded in the organisation and governance structure;

-    clearly defined limits for trading position (long and short) and net cash loss for specific commodities/ commodity groups;

-    mitigation of price, liquidity and counter party risks in respect of commodities such as soya, mustard and chana through hedging on commodity exchanges (mainly NCDEX). Correlation between

 

prices prevailing in the physical market and those on the commodity exchange is analysed regularly to ensure effectiveness of hedging;

- robust monitoring and review mechanisms of net open positions and ‘value at risk’.

The combination of policies and processes as outlined above adequately addresses the various risks associated with sourcing of commodities for your Company’s businesses.

The COVID-19 pandemic has triggered new risks in business operations. At the onset of the pandemic, your Company pro-actively put in place Crisis/ Contingency Management Teams, both at the Business as well as at the Corporate levels.

These cross-functional teams, represented by senior management, continually review strategic, operational, financial matters as well as measures relating to employee well-being, health and safety. Each of the Businesses, guided by the Risk Management Framework, have reviewed their approach to risk mitigation.

In the area of Employee Well-being and Safety, detailed advisories have been issued to employees on how to safeguard themselves, their colleagues and associates, and their families both at the workplace as well as at their homes. These guidelines also provide details on social distancing norms and how employees should seek help on any aspect concerning their health from within the organisational support system. Advisories and guidelines are continuously updated in line with the evolving situation incorporating the latest inputs from expert groups.

Heightened safety protocols were implemented at all units that resumed operations, with end-to-end solutions from transportation of workmen, screening, regular deep cleaning and sanitization, innovations to ensure safe distancing and strict adherence to hygiene standards and use of personal protective equipment where required. Your Company’s employees, trade partners, transporters and their associates were provided extensive training - both online and at the place of work - in social distancing and personal protection. Standard Operating Procedures were developed to ensure safe and

hygienic conditions both at the work place as well as in the market. This was supplemented with training materials like posters, pamphlets and guidelines.

All employees and associates were encouraged to download and use the Aarogya Setu app as advised by the Government. Prior to entry into any Company location and facility, the status in the Aarogya Setu App is mandatorily checked. Your Company has also made arrangements with various medical establishments to facilitate and encourage COVID-19 vaccination among eligible employees and their families.

Senior management continues to frequently engage with teams to bolster employee morale. E-learning programmes and platforms have been made available to ensure upskilling and knowledge enhancement.

Access to secure and contemporary platforms has been provided to facilitate working through remote access. With the implementation of Work From Home (WFH), safeguards against cyber security risks have been strengthened. Employees have been provided with devices and secure remote connectivity to facilitate WFH. A 24x7 service desk has been setup to assist in WFH. Cyber Security related advisories and guidelines have been shared with all concerned employees to facilitate secure and uninterrupted access to your Company’s IT systems and information.

As enumerated above, your Company is comprehensively geared to address potential risks arising out of the pandemic.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant to the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances.

Your Company remains committed to ensuring an effective internal control environment that, inter alia, provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records and Management Information

Systems, timely preparation of reliable financial information, adherence with relevant statutes and compliance with related party transactions.

Your Company’s independent and robust Internal Audit processes, both at the Business and Corporate level, provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements.

Independent consultants have confirmed compliance of Internal Audit systems and processes with the Standards on Internal Audit (SIA) issued by the Institute of Chartered Accountants of India. Although the Standards continue to be recommendatory in nature, such external validation evidences the contemporariness of the Internal Audit function.

The Internal Audit function, consisting of professionally qualified accountants, engineers and Information Technology (IT) specialists, is adequately skilled and resourced to deliver audit assurances at highest levels.

In the context of your Company’s IT environment, systems and policies relating to Information Management are periodically reviewed and benchmarked for contemporariness. Compliance with the Information Management policies receive focused attention of the Internal Audit team. Information Technology systems undergo pre-implementation audit before being deployed for usage in businesses, thereby delivering an independent assurance with respect to the rigour of implementation.

Qualified engineers in the Internal Audit function review the quality of design, planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield ‘value for money’. Internal Audit continues to use state-of-the-art tools and software for conducting project audits.

Processes in the Internal Audit function have been continuously strengthened for enhanced effectiveness and productivity including the deployment of best-in-class tools for analytics in the Audit domain,

staff, etc. The usage of data analytics in audits has been augmented across the organisation. Your Company’s Internal Audit processes are certified as complying with ISO 9001:2015 Quality Standards.

The Audit methodology is also designed to validate effectiveness of critical IT controls that are embedded in the business systems, leading to greater alignment with the business process environment.

The onset of COVID-19 pandemic and consequent lockdowns and restrictions imposed to curb its spread, made the conduct of physical audits extremely difficult. Under such challenging circumstances and considering the safety and well-being of employees, Corporate Internal Audit envisioned and adopted a ’remote audit’ approach by leveraging technology to ensure continuity in audit and assurance processes.

A comprehensive Standard Operating Procedure comprising, inter alia, ‘Work From Home’ guidelines,

IT security controls and communication protocols, facilitated seamless and effective conduct of remote internal audits during the year.

The Audit Committee of your Board met eight times during the year. The Terms of Reference of the Audit Committee, inter alia, included reviewing the effectiveness of the internal control environment, evaluation of your Company’s internal financial control and risk management systems, monitoring implementation of the action plans emerging out of Internal Audit findings including those relating to strengthening of your Company’s risk management systems and discharging of statutory mandates.

HUMAN RESOURCE DEVELOPMENT

The talent management strategy of your Company focuses on sustaining ITC’s position as one of India’s most valuable corporations, remaining customer focused, competitively superior, performance driven and future ready. The initiatives and processes strive to deliver the unique talent promise of Building Winning Businesses, Developing Business Leaders and Creating Value for India. The talent development practices help create, foster and strengthen the capability of human capital to deliver critical outcomes on the vectors of strategic impact, operational efficiency and capital productivity.

Your Company’s ‘Strategy of Organisation’ is designed to promote agility through a culture of distributed leadership enabled by a three-tier governance structure. This is manifested in market and consumer facing Businesses which are driven by empowered teams and supported by shared assets and capabilities, enabling strategic relevance, speed, responsiveness and operational excellence. This approach allows Businesses, through their Management Committees, to focus, develop and execute business plans relevant to their product-market spaces while leveraging the institutional strengths of your Company and harvesting internal synergies.

Your Company’s Human Resource development approach spans four key organisational dimensions of Agility, Alignment, Ability and Architecture which are supported through strategies crafted in areas of impact such as talent acquisition, engagement, capability building, employee relations, performance & rewards and employee well-being.

Your Company’s strong employer equity has enabled the attraction and retention of high-quality talent.

The management trainee programme augmented with recruitment of experienced talent from the market, is an integral part of the leadership pipeline development process. Your Company continues to draw the finest management, technical and commercial talent from premier institutions in the country and is ranked amongst the leading companies in these institutions. Intensive engagement with the country’s premier academic institutions over the years to communicate your Company’s talent proposition through case-study competitions, knowledge sharing programmes by senior managers and the annual internship programmes have all contributed to create a compelling proposition for the best candidates to aspire for a career with your Company. Your Company continues to enthuse talent with high impact roles, competitive and performance driven remuneration, diversity in learning opportunities, an employee-centric climate, well-being focused infrastructure and support that promotes fellowship and commitment amongst employees.

Your Company’s approach to management development is founded on the belief that learning initiatives must remain synergistic and aligned to business outcomes. Towards this end, your Company has assiduously built a culture of continuous learning, innovation and collaboration by providing cutting-edge learning and development support to managers. The emphasis is on providing experiential learning through on-the-job assignments, an enabling & supportive environment and promoting learning agility. Deep functional expertise is fostered early in one’s career through immersion in complex problemsolving assignments requiring the application of domain expertise. Managers are assessed on your Company’s behavioural competency framework and provided with learning and development support to address areas identified for improvement. Key talent is provided critical experiences in high impact roles and mentored by senior managers. This promotes the development of a pool of high-quality talent through mentorship, coaching and learning opportunities.

Your Company has identified three capability platforms relevant to making businesses future-ready - Business Critical Strategic Competencies, Leadership Development and Organisation Identity & Pride. Employees are offered best-in-class learning and development support comprising a blend of classroom, online and on-the-job training. Programmes are designed with learning content benchmarked to the highest standards. Globally benchmarked learning curriculums are designed and delivered through subject matter experts and internationally recognised faculty which are supplemented with business-critical application projects. Learning is further supplemented with on-demand, online programmes made accessible to employees through globally recognised content platforms. This approach ensures the application of learning fructifies in a manner which benefits your Company’s business results.

Your Company continues to strengthen its performance management system and its culture of accountability through the widespread adoption of the

employees about new business models, products and processes. Over 3100 managers participated in the contest, which generated over 2000 ideas, of which several are in the pilot stage of evaluation.

While your Company has covered significant ground and scaled up its digital investments exponentially, it seeks to embrace digitalisation as a foundation capability, vital to accelerating value creation, offering novel ways of interacting with consumers and reconfiguring value chains, and transforming business models.

It is in this context that the ‘Young Digital Innovators Lab’ has been constituted, comprising select digital natives, drawn from ITC’s Businesses who will benchmark your Company’s digital assets, identify best-in-class digital technologies and practices and spot opportunities across your Company’s value chains to secure competitive advantage. The Young Digital Innovators act as mentors to the ‘Digital Council’, which has been created to ideate, seed, sponsor high impact digital interventions and harness the power of synergy for cross-fertilisation of ideas while also pitching ideas to them. Both these forums in combination are expected to serve as a fertile ground for ideation, exploration and harvesting of the full potential of digitalisation at your Company.

Your Company believes that alignment of all employees to a shared vision and purpose is vital for winning in the marketplace. It also recognises the mutuality of interests with key stakeholders and is committed to building harmonious employee relations. Your Company remains dedicated to an Employee Relations climate of partnership and mutuality while ensuring operations are competitive, flexible and responsive. The Employee Relations philosophy of your Company, anchored in the tenets of Scientific Management, Industrial Democracy, Human Relations and Employee Well-being, has contributed to building a robust platform which has aided the conclusion of collective bargaining agreements at several of its manufacturing units and hotel properties, ensured smooth commencement of operations at greenfield locations and the execution of productivity improvement practices. Several initiatives have been

 

system of Management By Objectives. Performance planning through clearly defined goals, outcome-based assessment and alignment of rewards to achievement of results have all contributed to a robust culture of ownership and accountability. ‘Career Conversations’ and succession planning processes have contributed to helping employees realise their potential, craft their careers while recognising their strengths and areas of development and ensure a sound workforce planning system.

Your Company continues to periodically assess the quality of employee engagement through Company-wide surveys. During the year, the employee engagement initiatives, viz. leadership outreach through extensive communication, recognition programmes acknowledging exceptional contributions of employees and teams, career conversations and training & development planning and investments in employee well-being, etc. were further strengthened, leveraging digital technologies to not only widen the reach but also enhance the quality of engagement.

ITC Hotels was certified as a ‘Great Place to Work’ by the Great Place to Work Institute, a global authority on building, sustaining and recognising high-trust and high-performance culture at workplaces. This is an important milestone in the Business’ engagement journey and a recognition of its workplace culture.

Your Company continued its practice of active leadership outreach to employees. Periodic communications were cascaded throughout the ITC community through the ‘StudioOne Townhall’ led by the Chairman, providing employees an avenue to hear from and engage with leaders about your Company’s vision, strategy and milestones. This was supplemented by a more personalised engagement through the ‘StudioOne Xchange’ initiative. The Chairman and other Members of the Corporate Management Committee interacted with managers across businesses in small groups, sharing your Company’s vision and strategies while also inviting suggestions and feedback.

As a means of crowd sourcing ideas, your Company launched ‘Relmagine Next’, an organisation-wide innovation contest inviting suggestions from

taken to foster a culture of commitment amongst the demographically diverse workforce in these new facilities.

The COVID-19 pandemic has cast unprecedented challenges and your Company has taken a host of measures to ensure employee well-being and business continuity. The provision of medical equipment across locations, Covid care centres for employees and their families, assistance with hospitalisation and treatment, paid leave for those infected or in quarantine, vaccination facilitation through camps for employees and their family members, service provider personnel and supply chain partners, medical advise through a network of Company doctors, webinars on preventive measures, counselling services and stringent risk mitigation protocols such as ‘zoning’ in factories, restrictions on travel and office presence, masking, precautionary random testing, temperature checks and social distancing measures in all locations, have been instrumental in reassuring employees, mitigating risks and ensuring medical care in the event of infection.

Your Company‘s thought, strategy and action are inspired by a larger purpose of being an exemplary Indian enterprise that not only pursues agile innovation to be extremely competitive, but also one that embeds sustainability and inclusiveness at the core of its Businesses. It is your Company’s firm belief that this approach has enabled it to create enduring value for the Indian economy, the larger community of stakeholders, as also delight consumers with a vibrant portfolio of best-in-class products and services. We are confident that every one of your Company’s employees will relentlessly strive to meet the bold growth agenda, deliver world-class performance, innovate newer and better ways of doing things, uphold human dignity, foster team spirit and discharge their role as ‘trustees’ of all stakeholders with true faith and allegiance.

Your Company is committed to perpetuate this vitality - its growth as a value generating engine and also as an exemplary institution - so that it continues to succeed in its relentless pursuit of creating enduring value.

 

Details of constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are provided in the ‘Business Responsibility Report’, forming part of the Report and Accounts.

WHISTLEBLOWER POLICY

Your Company’s Whistleblower Policy encourages Directors and employees to bring to your Company’s attention, instances of illegal or unethical conduct, actual or suspected incidents of fraud, actions that affect the financial integrity of your Company, or actual or suspected instances of leak of unpublished price sensitive information that could adversely impact your Company’s operations, business performance and/or reputation. The Policy requires your Company to investigate such incidents, when reported, in an impartial manner and take appropriate action to ensure that the requisite standards of professional and ethical conduct are always upheld. It is your Company’s Policy to ensure that no complainant is victimised or harassed for bringing such incidents to the attention of your Company. The practice of the Whistleblower Policy is overseen by the Audit Committee and no employee was denied access to the Committee during the year. The Whistleblower Policy is available on your Company’s corporate website at https://www.itcportal.com/about-itc/values/index.aspx#sectionb5 .

SUSTAINABILITY 2.0 - Building Back Better

Your Company believes that when enterprises make societal value creation an integral part of their corporate strategy, powerful drivers of innovation emerge that make growth more enduring for all stakeholders. This paradigm is called ‘Responsible Competitiveness’ - an abiding strategy that focuses on extreme competitiveness but in a manner that replenishes the environment and supports sustainable livelihoods.

Your Company’s innovative business models synergise the building of economic, environmental and social capital, thus embedding sustainability at the core of its corporate strategy. Today, this strategy has not only contributed to building strong businesses of the future

-    Sustain and enhance carbon sequestration by expanding forestry projects on wastelands through ITC’s Social and Farm Forestry programme and other such initiatives.

Water Stewardship

-    Achieving 40% reduction in specific water consumption by 2030 as compared to a FY 2018-19 baseline.

-    Creation of rainwater harvesting potential equivalent to over 5 times the net water consumption by 2030.

-    Certification of all sites in high water stressed areas as per the international water stewardship standard by Alliance for Water Stewardship (AWS) by 2035.

-    Improve crop water use efficiency in agri value chains through demand side management interventions and enable savings of 2000 million kilolitres of water by 2030.

Plastic Waste and Circular Economy

-    100% of your Company’s Packaging to be Reusable, Recyclable or Compostable by 2028.

-    Plastic Neutrality: Enable sustainable management of waste in excess of the amount of packaging utilised by FY 2021-22.

Sustainable Agriculture

-    Promote climate smart village approach in core Agri Business catchments covering over 3 million acres by 2030.

Biodiversity Conservation

-    Revive & sustain ecosystem services and products provided by nature, through adoption of nature-based solutions and biodiversity conservation covering over 250,000 acres by 2030.

Sustainable Livelihoods

-    Supporting sustainable livelihoods for 10 million people by 2030.

To achieve its Sustainability 2.0 vision, your Company

has strengthened its management approach which

 

as well as a portfolio of winning world-class brands, but also in making your Company a global exemplar in ‘Triple Bottom Line’ performance. Your Company continues to be a carbon, water and solid waste re-cycling positive organisation and is a global exemplar in sustainability. This approach has also enabled your Company and its businesses, to support sustainable livelihoods for more than six million people.

As the world prepares for a post-pandemic future, your Company is actively working towards Sustainability 2.0, an agenda which reimagines sustainability under the pressing challenges of climate change.

With a view to ‘Building Back Better’, Sustainability 2.0 calls for inclusive strategies that can support sustainable livelihoods, pursue newer ways to fight climate change and enable the transition to a net zero economy, work towards ensuring water security for all and create an effective circular economy for post-consumer packaging waste. It also entails protecting and restoring biodiversity. Your Company believes that agility in thought and action, meaningful public-private-people partnerships and responsible competitiveness will act as core enablers of this new agenda. Your Company has the potential to make a large-scale impact not only from an economic standpoint, but also from an employment generation and social enablement lens because of its presence across several critical sectors of the economy. With its bold Sustainability 2.0 agenda, your Company is setting the bar higher, and remains committed to making a meaningful contribution to the Nation’s future while retaining its status as a sustainable business exemplar. The Sustainability 2.0 ambitions include:

Climate Change

-    Enhancing the share of renewable energy usage to 50% of total energy consumption by 2030.

-    Meeting 100% of purchased grid electricity requirements from renewable sources by 2030.

-    Reducing specific energy consumption by 30% and specific GHG emissions by 50% by 2030 as compared to a FY 2018-19 baseline.

reduction of specific energy, construction of green buildings, greening logistics and optimising ‘distance-to-market’, and promoting regenerative agriculture practices in agri value chains.

Your Company’s extensive operational base including factories, warehouses and hotels are also vulnerable to climate change risks. Appropriate investments have been made towards strengthening climate resilience covering your Company’s operational units including those located in coastal areas. Business continuity plans are also in place to mitigate any operational interruption due to extreme weather events. Similarly, factors such as rise in extreme weather events, varying climatic parameters and dependence on rainwater for irrigation make agriculture in India quite vulnerable to climate change. For major crops like wheat, pulp-wood and leaf tobacco among others, there is significant and sustained work being done on the development of climate-tolerant varieties as well as dissemination of climate-resilient and regenerative agronomic practices in the growing areas. More details are available in the ‘Sustainable Agriculture’ section.

Additionally, in order to identify long-term risks, your Company has worked with climate experts to conduct a comprehensive climate change risk and vulnerability assessment using climate models across its operating locations (factories, hotels, warehouses etc.). The assessment considered impacts of climate variables like temperature, precipitation, sea level rise, river/ coast proximity and extreme weather events over long-term time frames (2040-2060 and 2060-2080) under two Representative Concentration Pathway (RCP) scenarios - RCP 4.5 and RCP 8.5. In line with the findings of the assessment, appropriate site-specific risk mitigation and adaptation measures are being evaluated. Detailed studies are also being conducted to understand the potential adverse impacts of climate change on your Company’s value chain covering both physical assets as well as key agri value chains. These risk assessments will help fine tune the climate resilience measures that are being implemented across your Company’s value chain.

 

is guided by a comprehensive set of sustainability policies and is being implemented across the organisation. The organisation is also strengthening the mechanisms of engagement with key stakeholders, identification of material sustainability issues and progressively monitoring and mitigating the impacts along the value chain of each Business. Your Company will continue to update these systems and processes in line with the evolving disclosure standards and Environmental, Social and Governance (ESG) requirements.

Your Company’s 17th Sustainability Report, published during the year detailed the progress made across all dimensions of the ‘Triple Bottom Line’ for the FY 2019-20. This report is in conformance with the Global Reporting Initiative (GRI) standards under ‘In Accordance - Comprehensive’ category and is third-party assured at the highest criteria of ‘reasonable assurance’ as per International Standard on Assurance Engagements (ISAE) 3000. The 18th Sustainability Report covering the sustainability performance of your Company for FY 2020-21, is being prepared in accordance with the GRI Standards and will be made available shortly.

In addition, the Business Responsibility Report (BRR), as mandated by the Securities and Exchange Board of India (SEBI) for the year under review is annexed to the Report and Accounts. The BRR maps the sustainability performance of your Company against the reporting framework suggested by SEBI.

During the year, your Company sustained its ‘AA’ rating by MSCI-ESG - the highest amongst global tobacco companies, and has also been included in the Dow Jones Sustainability Emerging Markets Index.

Building Climate Resilience

Your Company recognises the urgent need to combat climate change for building a more secure future and the role it can play in enabling a net-zero economy.

To this end, your Company is pursuing a low carbon growth strategy through extensive decarbonisation programmes across its value chain. These include increasing the share of renewable energy, continuous

largest LEED^® Platinum certified green hotels.

The data centre at Bengaluru, ITC Sankhya, is the first data centre in the world to receive the LEED^® Platinum certification by USGBC. During the year,

ITC Windsor’s best practices on carbon management has resulted in it being credited with the defining distinction of becoming the first hotel in the world to be LEED® Zero Carbon certified.

Several of your Company’s factories and office complexes have also received the Green Building certification from Indian Green Building Council (IGBC), the LEED® certification from USGBC and star ratings from the Bureau of Energy Efficiency (BEE). Large infrastructure investments such as the ITC Green Centre at Manesar and the ITC Green Centre at Bengaluru (both are LEED^® Platinum certified) continue to demonstrate your Company’s commitment to green buildings. Virginia House, Kolkata and ITC Centre, Kolkata- the headquarters of your Company, is also now USGBC Green Building certified at the highest ‘LEED Platinum’ rating. To date, 33 buildings of your Company have achieved Platinum certification by USGBC/IGBC. In order to continually reduce your Company’s energy footprint, green features are integrated in all new constructions and also incorporated in existing hotels, manufacturing units, warehouses and office complexes.

Your Company’s Social and Farm Forestry initiatives, besides mitigating the impact of increasing levels of GHG emissions in the atmosphere, help greening of degraded wasteland, prevent soil erosion, enhance organic matter content in soil and increase ground water recharge.

Towards Water Security for All

With water scarcity increasingly becoming an area of serious concern, your Company continues to focus on an integrated water management approach that includes water conservation and harvesting initiatives at its units - while at the same time working towards meeting the water security needs of all stakeholders at the local watershed level. Interventions have been rolled out to improve water-use efficiencies by adopting latest technologies and increasing reuse and recycling practices within the fence while also working

Energy Conservation and Renewable Energy

As a responsible corporate citizen, your Company has made a commitment to reduce dependence on energy from fossil fuels. Accordingly, all factories incorporate appropriate green features and premium luxury hotels and office complexes continue to be certified at the highest level by either the US Green Building Council, Indian Green Building Council or the Bureau of Energy Efficiency (BEE). During the year, over 41% of your Company’s total energy requirements were met from renewable sources such as biomass, wind and solar.

Your Company is well positioned to benefit from energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. Your Company continues its efforts to achieve a 50% renewable energy share in its total energy consumption based on a mix of energy conservation and renewable energy investments, despite significant enhancement in its scale of operations going forward.

Greenhouse Gases and Carbon Sequestration

The GHG inventory of your Company for the FY 2020-21 compiled according to the ISO 14064 Standard has been assured, as in the earlier years, at the highest ‘Reasonable Level’ by an independent third party. The GHG inventory covers emissions from your Company’s operations and GHG removals from your Company’s large-scale forestry programmes.

Reaffirming your Company’s commitment to the ethos of ‘Responsible Luxury’, all premium luxury hotels of your Company are Leadership in Energy & Environmental Design (LEED®) Platinum certified, making it a trailblazer in green hoteliering globally.

Your Company is a pioneer in the green buildings movement. In 2004, the ITC Green Centre at Gurugram was awarded the Platinum Green Building rating by USGBC-LEED (U.S. Green Building Council - Leadership in Energy and Environmental Design), making it the largest Platinum rated building in the world at that point in time.

ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst the world’s with farmers and other community members towards improving their water-use efficiencies.

The demand side measures are followed by augmenting supply at the sub-catchment level through various interventions focused on harvesting rainwater based on the recommendations of hydrogeological studies. The supply side interventions include enhancing capture and storage of rainwater (in soil and storage ponds) and recharging aquifers. Your Company also conducts efficacy studies to assess the impact of the watershed work carried out, and to ensure that maximum benefits accrue in the long-term. As on 31st March, 2021, your Company’s integrated watershed development projects covering over 1.23 million acres of land have created a total rainwater harvesting potential (RWH) of 42.95 million kl, which is over 4 times the net water consumed by your Company’s operations in FY 2020-21.

Your Company’s Paperboards & Speciality Papers unit at Kovai was only the second facility in the world and first in India to be awarded the AWS Platinum level certification in FY 2019-20 - the highest recognition for water stewardship in the world. Your Company is in the process of implementing the AWS Standards at other units in high water stress areas, and will progressively obtain AWS certification for these sites in the coming years.

Building a Circular Economy for Post-Consumer Packaging

Your Company continues to make significant progress in reducing specific waste generation through constant monitoring and improvement of efficiencies in material utilisation and also in achieving almost total recycling of waste generated in operations. In this way, your Company has prevented waste reaching landfills and the associated problems of soil and groundwater contamination and GHG emissions, all of which can adversely impact public health. In the current year, your Company has achieved over 99% waste recycling. In addition, your Company’s Paperboards & Specialty Papers Business recycled over 79,000 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Your Company aims to go beyond the requirements of Plastic Waste Management Rules, 2016 to ensure that, over the next decade, 100% of packaging is reusable, recyclable or compostable. Your Company is working towards optimising packaging in a way that it reduces the environmental impact arising out of post-consumer packaging waste without affecting integrity of the product. This is being done in a structured manner by optimising design, identifying alternative packaging material with lower environmental impact and suitable end-of-life solutions for packaging waste. Your Company is also working towards establishing scalable, replicable and sustainable models of municipal solid waste management based on circular economy principles. The approach is centred around treating waste as a resource and ensuring that zero waste goes to landfill, which can be achieved only when waste is segregated at source. The initiatives focus on educating citizens on segregating waste at source into dry and wet streams and ensuring that value is derived from these resources and in the process support sustainable livelihood for waste collectors and rag-pickers. These models operate on a public-private partnership basis with active involvement of Urban Local Bodies, Civil Society and the informal sector of waste collectors. Through these models, your Company is targeting sustainable management of waste in excess of the amount of plastic packaging utilised by FY 2021-22.

Your Company’s waste recycling programme,

‘WOW - Well Being Out of Waste’, enables the creation of a clean & green environment and promotes sustainable livelihoods for waste collectors. During the year, the programme continued to be executed in Bengaluru, Mysuru, Hyderabad, major towns of Telangana, Coimbatore, Chennai, Tirupur, Cochin, Muzaffarpur, Delhi and several districts of Andhra Pradesh. The quantum of dry waste collected during the year was about 70,900 MT from 1,067 wards. The programme has covered over 1.5 crore citizens in over 38 lakh households, 52 lakh school children and around 2,040 corporates since its inception. It has promoted sustainable livelihood for over 16,900 waste collectors by facilitating an effective collection system in collaboration with

managerial expertise with meaningful collaborations and partnerships, your Company has created sustainable, scalable and replicable business models in response to these challenges. Some of these include the revolutionary ITC e-Choupal ecosystem which has empowered over 4 million farmers, the Social and Farm Forestry Initiative which has greened over 876,000 acres of land, and the Integrated Watershed Development that brings soil and moisture conservation to over 1.23 million acres. Your Company’s holistic and sustainable waste management models enabled recycling of more than 78,000 MT of dry waste in FY 2020-21. These models not only reduce the burden on landfills but also promote sustainable livelihoods for waste collectors and entrepreneurs in the waste value chain.

To ensure wider adoption of the ‘Triple Bottom Line’ philosophy across the Industry, your Company established the ‘CII-ITC Centre of Excellence for Sustainable Development’ in 2006 in collaboration with the Confederation of Indian Industry (CII). The Centre continues to focus on its endeavour to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the following:

Climate Change

-    Climate Change: The first Climate Change Council meeting for FY 2020-21 was held on 30th July, 2020. Two new working groups were set up: (a) to undertake an analytical study on impact of carbon border tax on different industry sectors as a result of the Carbon Border Tax proposed in the European Green Deal; and (b) an Alliance for Climate Smart Agriculture, to undertake a study to understand key challenges and barriers for making Indian agriculture ‘Climate Smart’.

-    Edition 2 of the Climate Action Programme (CAP 2.0°) started with the self-assessment stage of 36 large companies and 154 MSMEs who had enrolled into the programme. The winners were recognised at ‘CAP 2.0 Degrees Recognition’ on 17th March, 2021.

 

municipal corporations. The intervention has also created over 140 social entrepreneurs who are involved in maximising value capture from dry waste collected. In Pune, your Company is spearheading a circular economy based first-of-its-kind Multi-Layer Plastic (MLP) collection and recycling programme.

The ‘Green Temple’ initiative, powered by your Company’s Social Investments programme ‘Mission Sunehra Kal’, is a closed loop waste management model involving processing of waste generated in temples to provide biogas to the kitchen and compost for its gardens. During the year, the initiative was expanded to 188 temples across the cities of Chennai, Madurai, Trichy, Haridwar and Saharanpur.

In addition to WOW, a separate programme on Solid Waste Management (SWM) which deals with both wet and dry waste is operational in 17 districts of 11 states covering 7.31 lakh households and collected 41,645 MT of waste during the year. This programme focuses on minimising waste to landfill by managing waste at source. Home composting was practiced by over 95,000 households. In FY 2020-21, 26,916 MT of wet waste was composted, 7,300 MT of dry waste was recycled, and only 18% of the total waste was sent to landfills.

Your Company, on the back of above programmes and other tie-ups with leading waste management agencies, collected more than 31,000 MT of post-consumer plastic waste during the year from 24 States and Union Territories, more than doubling last year’s collections despite the challenges posed by the COVID-19 pandemic. This is equivalent to more than 80% of plastic packaging films utilised by your Company during the year. In the ensuing fiscal, the endeavour would be to collect in excess of 100% of plastic packaging introduced in the market.

Promoting Thought Leadership in Sustainability

Your Company’s pursuit of the ‘Triple Bottom Line’ approach has allowed it to develop unique, sustainable and industry-leading solutions to some of the most pressing sustainable development challenges faced by our country. Combining deep-

Circular Economy

-    The Un-Plastic Collective: A voluntary multi-stakeholder initiative was launched in 2019-20 by UN-Environment Programme India, the Centre and WWF-India, with the objective to eliminate plastic pollution and move towards a circular economy. India Plastics Pact is a collaborative business-led initiative to transform the plastics packaging value chain from linear to circular. The Centre and WWF-India, supported by WRAP, UK have initiated work in this area including stakeholder mapping, content, documentation, etc.

-    Plastic Waste Management: The Ministry of Environment, Forest and Climate Change (MoEFCC), released the guideline document on the unified framework for Extended Producer Responsibility (EPR) under the Plastic Waste Management Rules 2016, which was broadly based on the Draft National Framework on EPR developed by the Centre. Highlights include:

a) three different models - fee based, Producer Responsibility Organisation (PRO) based and plastic credit model; b) uniform EPR scheme across the country; and c) brand and geography neutral EPR framework.

-    Circular Economy and Resource Efficiency: Sessions and webinars were organised on topics such as Circular Plastics Economy strategy for India, An Un-Plastic World and Inclusive & Green Transformation of Manufacturing Sector in India.

Biodiversity

-    India Business and Biodiversity Initiative (IBBI) organised a session on the International day for Biological Diversity (22nd May, 2020) on the theme of ‘Working in Harmony with Nature’, to showcase different measures taken by IBBI members to adopt nature-based solutions.

An Indian business position paper was prepared by IBBI, based on a roadmap for biodiversity conservation, and recommendations were made for inclusion of specific biodiversity quantifying metrics for monitoring and measuring performance.

Air Pollution

-    The India CEO Forum for Clean Air organised a stakeholder dialogue series for scaling of ex-situ solutions for rice straw management in the states of Punjab and Haryana. Three dialogues were held which focused on collection and logistics, processing and conversion of rice straw and for energy use.

Industry Response to COVID-19

-    CSR Compendium on Industry Action towards COVID-19 was launched on 29th September,

2020. Eminent speakers shared insights on initiatives taken by the Indian corporates to provide relief and rehabilitation to communities across

the country.

Excellence in Sustainability

-    15th Sustainability Summit - Action Agenda for the Next Decade, was held virtually from 8th to 10th September, 2020, with 100 speakers and 700 participants. Eminent national and international leaders, including Mr. Piyush Goyal, Minister of Railways & Commerce and Industry, Mr. Prakash Javadekar, Union Minister of Environment, Forest, Climate Change, Mr. Suresh Prabhu, India’s Sherpa to the G20, Dr. Abdullah Belhaif Al Nuaimi, Minister of Climate Change and Environment,

UAE and Mr. Sanjiv Puri, Chairman and Managing Director, ITC Limited were some of the key speakers at the summit.

-    The 15th CII-ITC Sustainability Awards were presented to 22 companies for demonstrating ‘Excellence in Sustainable Business’ in a virtual ceremony held on 18th December, 2020.

The Centre promoted capacity building in sustainability through a range of training and consulting assignments on topics including Waste Management Rules and Compliance, CSR Rules and Impact Measurement, Sustainability Reporting, Integrated Reporting, GRI Reporting, training Internal Auditors on Safety, Health & Environment, Human Rights and Biodiversity Assessment & Carbon Sequestration.

With the onset of second wave of the pandemic, your Company continues its unwavering commitment in supporting the fight against the pandemic and has undertaken several initiatives including:

-    Import of 24 cryogenic containers of 20 tonnes each in collaboration with Linde India Limited to ease the bottlenecks in transporting oxygen.

-    Supply of oxygen to identified Government hospitals in the state of Telangana from Paperboards unit in Bhadrachalam.

-    Setting up of 3 facilities with 600 beds to enhance the availability of Covid healthcare facilities.

-    Import of oxygen concentrators and generators to ease the burden on the country’s healthcare system.

-    Provision of essential healthcare infrastructure and supply of PPEs to hospitals in several states.

-    Supply of dry ration kits or cooked food to the needy and vulnerable groups.

Your Company’s overarching commitment to create significant and sustainable societal value is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Towards this end, your Company adopted a comprehensive CSR Policy outlining programmes, projects and activities that your Company plans to undertake to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Section 135 read with Schedule VII of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The key elements of your Company’s CSR interventions are to:

-    deepen engagement in identified core operational geographies to promote holistic development and design interventions in order to respond to the most significant development challenges of your Company’s stakeholder groups.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

In addition to the regular Social Investments Programme (SIP) of your Company, in these extraordinary times of COVID-19, the immediate and most pressing need was to provide assistance and relief to the poor and vulnerable in the short term and assist in their economic rehabilitation over the medium term. Your Company has always risen to the challenge of mitigating the worst impacts of major natural disasters that threaten the well-being and livelihoods of its stakeholders. Your Company along with ITC Education and Health Care Trust and ITC Rural Development Trust had set up a COVID Contingency Fund of ' 215 crores to help the victims of the COVID-19 pandemic. A large part of the Fund has been utilised towards providing relief to the poor and vulnerable sections of society who are facing severe disruptions to their livelihoods. The actions include (a) providing food and personal hygiene products to district authorities and other government bodies whose eco-system reaches out to the weakest sections of society; (b) supply of dry ration kits or cooked food to migrant labour camps and for doctors in government hospitals; (c) supply of appx. seven lakh PPEs to district hospitals and to the frontline staff of the health department; and (d) contribution to the PM CARES Fund. Additionally, your Company along with ITC Education and Health Care Trust and ITC Rural Development Trust took the following initiatives:

-    Provided financial assistance to states which have witnessed the worst outbreak of the pandemic and are engaged in minimising its spread.

-    Provided funds with the aim of (a) distributing hampers containing essential food products and personal hygiene products amongst beneficiaries in identified geographies across India; (b) providing assistance to appropriate entities engaged in combating and controlling the spread of the COVID-19 pandemic; and (c) contributions to identified civil society organisations engaged in providing relief to the poor and vulnerable groups suffering economic privations brought upon by the COVID-19 pandemic.

pulpwood deliver significantly higher productivity vis-a-vis earlier clones. The clones have been developed s to grow under varying ecological conditions, thereby building farmer resilience and contributing towards increasing income for the farming community.

Besides enhancing farm level employment, generating incomes and increasing green cover, this large-scale initiative also contributes meaningfully to the nation’s endeavour to create additional carbon sinks for tackling climate change.

In addition to the above, the Social and Farm Forestry initiative of your Company, through a multiplier effect, has led to improvement in pulpwood and fuelwood availability in Andhra Pradesh, Telangana, Karnataka, Chhattisgarh and Odisha. In the states of Tripura,

.y Assam, Maharashtra, Uttarakhand and Karnataka, this initiative is also creating bamboo wood source that is suitable for agarbatti manufacturing.

Soil and Moisture Conservation

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The Soil and Moisture Conservation programme aims to ensure water security for all dependents in the factory catchments and to drought-proof the agri-catchments to minimise risks to agricultural livelihoods arising from drought and moisture stress. The programme promotes the development and >.    management of local water resources in moisture-

stressed areas by facilitating community participation in planning and implementing such measures as well as building, reviving and maintaining water-harvesting structures. The coverage of this programme currently extends to 38 districts of 14 states. During the year, i the area under watershed increased by 97,549 acres, taking the cumulative coverage area to over 12.31 lakh acres. 3,006 water-harvesting structures were built during the year, creating 3.94 million cubic metres of rainwater harvesting potential. This took the total number of water harvesting structures to 21,991 and the net water storage to 41.95 million cubic meters. In addition, your Company continues to work with farmers to achieve ‘more crop per drop’ by promoting agronomic practices and micro irrigation techniques targeted towards saving water in cultivation and improving farmer incomes. Around 3 lakh acres have been covered till date across 6 states.

 

-    strengthen capabilities of Non-Government Organisations (NGOs)/Community Based Organisations (CBOs) in all the project catchments for participatory planning, ownership and sustainability of interventions.

-    drive the development agenda in a manner that benefits the poor and marginalised communities in our factory and agri-catchments, thereby significantly improving Human Development Indices (HDI).

-    ensure behavioural change through focus on demand generation for all interventions, thereby enabling participation, contribution and asset creation for the community.

-    strive for scale by leveraging government partnerships and accessing the most contemporary knowledge / technical know-how.

Your Company’s stakeholders are confronted with multi-dimensional and inter-related concerns, at the core of which is the challenge of securing sustainable livelihoods. Accordingly, interventions under your Company’s Social Investments Programme are appropriately designed to build their capacities and promote sustainable livelihoods.

The footprint of your Company’s projects is spread over 25 States/Union Territories covering 216 districts.

Social Forestry

Your Company’s pioneering afforestation initiative through the Social Forestry programme greened 30,439 acres during the year. It is currently spread across 17 districts in 8 States covering over 3.94 lakh acres in 5,694 villages, impacting over 1.28 lakh poor households. Together with your Company’s Farm Forestry programme, this initiative has greened over 8.76 lakh acres till date, and generated about 160 million-person days of employment for rural households, including poor tribal and marginal farmers. Integral to the Social Forestry programme is the Agro-Forestry initiative, which cumulatively extends to over 1.23 lakh acres and ensures food, fodder and wood security. Your Company’s recently developed fast growing, high yielding and disease resistant hybrid clones and saplings of Eucalyptus

According to various studies, potential water savings with the help of these practices are to the tune of 208 million cubic metres in a year.

Biodiversity

The focus of the programme is on reviving ecosystem services provided to agriculture by nature, such as natural regulation of pests, pollination, nutrient cycling, soil health retention and genetic diversity, which have witnessed considerable erosion over the past few decades. During the year, your Company’s biodiversity conservation initiative covered 13,124 acres, taking the cumulative area under biodiversity conservation to over 0.44 lakh acres in 13 districts across 7 states. While the conservation work is being carried out in select plots of village commons, this intervention significantly benefits agricultural activity in the vicinity of these plots through soil moisture retention, carbon sequestration and by acting as hosts to insects and birds beneficial to agriculture.

Sustainable Agriculture

The Sustainable Agriculture programme attempts to de-risk farmers from erratic weather events through the promotion of climate-smart agriculture premised on dissemination of relevant package of practices, adoption of appropriate mechanisation and provision of institutional services. Currently, 8.81 lakh acres are covered under the programme, which has a significant multiplier effect in terms of adoption by the farming community. During the year, knowledge was disseminated through 5,969 Farmer Field Schools and 2,253 Choupal Pradarshan Khets benefiting 2.54 lakh farmers. 401 Agri Business Centres delivered extension services, arranged agri-credit linkages and established collective input procurement and provided agricultural equipment for hire. In pursuit of your Company’s long-term sustainability objective of increasing soil organic carbon, a total of 2,801 compost units were constructed during the year, taking the total number till date to 48,767 units.

The ‘Village Adoption Programme’ pioneered by your

Company’s Agri Business presently covers

228 model villages in the states of Andhra Pradesh

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Prime Minister’s Sansad Adarsh Gram Yojana (SAGY), an initiative to promote holistic rural development. Your Company had entered into a partnership with NITI Aayog in April, 2018, to improve agriculture and other allied services in 27 aspirational districts of 8 states (Assam, Bihar, Jharkhand, Rajasthan, Madhya Pradesh, Maharashtra, Odisha and Uttar Pradesh). The plan is to train government officers who, in turn, would cascade the methodology to farmers. During the year, 3.8 lakh farmers were brought onto digital training platforms by forming 4,836 WhatsApp groups in around 5,000 villages.

The total number of farmers trained in 5 seasons including Rabi 2019-20 season is 25 lakhs.

The ‘Baareh Mahine Hariyali’ programme in certain districts of Uttar Pradesh (Chandauli, Ghazipur, Prayagraj and Varanasi) is a pioneering initiative to facilitate farmers to enhance their incomes. This programme is founded on a 360-degree, multipronged approach with interventions such as increased cropping intensity with a third crop during summer, enhancement of productivity through context-specific agronomic practices demonstrated through Choupal Pradarshan Khets (on-farm demonstrations) and provision of market linkages with transparency in assessment of quality, price and weighment.

In some regions, taking a holistic approach to income diversification as an adjacency, livestock development, women empowerment and agro forestry are also included. Over 2 lakh farmers have already benefited from the interventions under the ‘Baareh Mahine Hariyali’ programme - over 35,000 farmers who have adopted the package of practices reported doubling of income and those who have implemented the programme partially reported increase in their incomes by 30% to 75%.

Livestock Development

The programme provides an opportunity for farmers to improve their livestock-based livelihoods by improving productivity of the progeny through breed improvement and dissemination of improved animal husbandry practices. The programme provided extension services, including breeding, fodder propagation and training of farmers in 4 states

and 16 districts. During the year, 1.08 lakh artificial inseminations (AIs) were carried out which led to the birth of 0.41 lakh high yielding progeny. Cumulatively, the figures for AIs and calving stand at 26.13 lakh and 9.10 lakh respectively.

Your Company is also working with dairy farmers in Bihar and West Bengal to improve productivity through several extension services and to facilitate higher milk production. Qualified teams comprising veterinarians and para-veterinarians have been deployed to facilitate animal breeding, animal nutrition and animal health services towards improving productivity and promoting commercial dairy farming among farmers. During the year, 74,851 cattle of 44,214 dairy farmers across 501 villages in 8 districts of Bihar and 2 districts of West Bengal were supported through training programmes on clean milk production, mastitis control and animal husbandry services like deworming, ectoparasite control, etc.

Women Empowerment

This initiative provided a range of gainful employment opportunities to over 77,000 poor women cumulatively, supported with capacity building and provided financial assistance by way of loans and grants. Included in the total are 29,184 ultra-poor women in your Company’s core catchments who have access to sustainable sources of income through on-farm and off-farm livelihood opportunities. The financial literacy and inclusion project, in partnership with Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation, was operational in 26 districts during the year. 1,062 Super Trainers were trained directly and they in turn trained 2,824 Master Trainers who cascaded the training to over 74,000 self-help-groups and more than 7.60 lakh women cumulatively across 4,384 villages.

Over 4.18 lakh women of those trained have been linked to government social security schemes.

Education

The Primary Education Programme aims to provide children from weaker sections of society in your Company’s factory catchments access to education with focus on learning outcomes and retention.

Operational in 26 districts of 13 states, the programme covered over 0.33 lakh children during the year, taking the cumulative coverage to over 8.08 lakh children. 263 government primary schools and anganwadis were provided infrastructure support comprising boundary walls, additional classrooms, sanitation units, and furniture, taking the total number of government primary schools and anganwadis covered till date to 2,105. To ensure sustainable operations and maintenance of infrastructure provided,

684 School Management Committees were strengthened and 330 Child Cabinets and Water and Sanitation (WATSAN) Committees were formed in various schools with the active involvement of students and teachers.

Skilling & Vocational Training

This programme provides training in market linked skills to youth to enable them to compete in the job market. 12,470 youth were enrolled under different courses during the year of which 40% were female and 32% belonged to the SC/ST communities. Cumulatively, 93,980 youth have been enrolled under this programme. The programme is operational in 32 districts of 17 States. During the pandemic, these initiatives played an active role in training over 1200 healthcare assistants during the year.

In addition, since the inception of ITC Culinary Skills Training Centre in Chhindwara in 2014, nearly 150 trainee chefs have successfully completed the six-month programme wherein cooking skills are imparted to the unskilled and under privileged youth of the region.

Health & Sanitation

Your Company continues to adopt a multi-pronged approach towards improving public health and hygiene. To promote a hygienic environment through prevention of open defecation and reduce incidence of water-borne diseases, 640 Individual Household Toilets (IHHTs) were constructed in 28 districts of 15 states in collaboration with the respective State Governments/District sanitation departments taking the total to 38,153 IHHTs constructed so far in your Company’s catchment areas. In addition,

 

23 community toilets were constructed/renovated in West Bengal and Tamil Nadu in the year, taking the cumulative to 104 community toilets. Along with sanitation infrastructure development, special focus was given to awareness campaigns to create demand and drive behavioural change.

To make potable water available to local communities in two districts of Andhra Pradesh, Reverse Osmosis (RO) water purification plants were set up in villages where the water quality was poor. 6 new RO plants were established in FY 2020-21 taking the total to 148, which provide safe drinking water to over 1.8 lakh rural people.

Your Company continued to enhance awareness on various health related issues through a network of 430 women Village Health Champions (VHCs) who covered nearly 1.2 lakh women, adolescent girls and school children during the year. The programme is operational in seven districts of Uttar Pradesh and three districts of Madhya Pradesh. As the group activities remained suspended for the entire year due to the pandemic, the VHCs conducted door-to-door visits in the villages focusing on aspects like sanitation, menstrual and personal hygiene, family planning, diarrhoea prevention and nutrition.

Over 2.2 lakh beneficiaries were covered under Mother and Child Health initiative aimed at improving the health-nutrition status of women, adolescents and children in the catchments of a few of your Company’s factories with high maternal and infant mortality indices. This was achieved by strengthening institutional capacity, promoting greater convergence with existing government schemes and increasing access to basic services on maternal, child, and adolescent health, nutrition and child protection.

Your Company’s ‘Swasth India Mission’ programme has been a front runner in driving behavioural change towards good hand hygiene habits since its inception in 2016. The ‘Swasth India Mission’ drove a range of initiatives to aid and enable the country in its fight against COVID-19:

- Foot pedal operated hand sanitizer dispensers

over 850 schools and 1,200 other places of public congregation.

-    Health & hygiene products, such as hand sanitizers and disinfectants, were distributed to over 1.65 lakh doctors in more than 3,600 hospitals across the country.

-    Given the huge congregation of humanity at the Kumbh mela, over 600 hand wash stations and over 135 hand sanitizing stations were installed and were re-filled on a continuous basis.

-    To encourage and instil mask etiquette and compliance, your Company launched the ‘Mask hai Mazaak Nahin’ campaign which had a cumulative digital reach of 60 million.

-    To underline the importance of continued hand washing, the ‘No hand unwashed’ campaign was deployed in partnership with the Mouth & Foot Painters Association (MFPA) and had a cumulative digital reach of 370 million.

Solid Waste Management

Your Company’s initiatives focus on creating replicable, scalable and sustainable models of municipal solid waste management that can be implemented across the country to ensure that zero waste goes to landfills. Details of these models are provided in the ‘Building a Circular Economy for Post-Consumer Packaging’ section above.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA/ Academy), established in 1977, is an embodiment of your Company’s sustained commitment to a priceless national heritage. Your Company’s pledge towards ensuring enduring excellence in Classical Music education continues to drive ITC SRA in furthering its objective of preserving and propagating Hindustani Classical Music based on the age-old principle of ‘Guru-Shishya Parampara’. The eminent Gurus of the academy impart intensive training and quality education in Hindustani classical music to the scholars. The present Gurus of the Academy are Padma Bhushan Pt. Ajoy Chakrabarty,

Padma Shri Pt. Ulhas Kashalkar, Pt. Partha Chatterjee,

Pt. Uday Bhawalkar, Vidushi Subhra Guha and Shri Omkar Dadarkar. The Academy’s focus continues to be on nurturing exceptionally gifted students selected from across the country through a system of multi-level audition. Full scholarship is provided to them to reside and pursue music education in the Academy’s campus and in other designated locations under the tutelage of the country’s most distinguished musicians. Creation of the next generation of masters of Hindustani classical music for the propagation of a precious legacy continues to be the Academy’s objective.

Forging Partnerships with NGOs

The meaningful contribution made by your Company’s Social Investments Programme to address some of the country’s key development challenges, has been possible in significant measure, due to your Company’s partnerships with globally renowned NGOs such as BAIF, DSC, FES, DHAN Foundation, MYRADA, Pratham, SEWA Bharat, WASH Institute and Water for People, amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilisation skills of NGOs, will continue to provide innovative grassroot solutions to some of India’s most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities, as required under Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014, is provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company’s Environment, Health & Safety (EHS) strategies are directed towards achieving the greenest and safest operations across all your Company’s units by optimising natural resource usage and providing a safe and healthy workplace. Systemic efforts continue to be made towards natural resource conservation

by continuously improving resource-use efficiencies and enhancing the positive environmental footprint by following a life-cycle based approach.

Your Company believes that a safe and healthy work environment is a pre-requisite for ensuring employee well-being, and adopting best practices in occupational health & safety bears a direct impact on its overall performance. With an aim to percolate safety deeper into ITC’s operational practices and achieve the ‘Zero Accident’ goal, your Company has adopted a comprehensive EHS strategy founded on two pillars: ‘Safety by Design’ and ‘Safety by Culture’.

Safety

Your Company follows ‘Safety by Design’ by continuously striving to improve on safety performance by incorporating best-in-class engineering standards in the design and project execution for all investments in the built environment. This helps reduce potential hazards as well as optimise operational costs. In addition, Environment, Health & Safety audits are being carried out to verify compliance with standards.

‘Safety by Culture’ looks at driving behavioural changes so that safety is ingrained in the culture of the organisation across operating units. To drive the safety culture, your Company is making use of tools such as a structured conversation with workers on ‘Safe and Unsafe’ acts which were supplemented by adoption of keystone behaviours which inculcate a sense of ownership. Your Company has also pioneered the usage of Design Thinking principles for seamless integration of safety in business operations. This initiative has resulted in significant positive behavioural changes.

Several national awards and certifications received by various units reaffirm your Company’s commitment to provide safe and healthy workplace to all.

COVID Response: Health & Safety

The COVID-19 pandemic necessitated immediate action to safeguard people and maintain continuity of operations, to which, your Company promptly responded by establishing comprehensive safety

protocols tailored to each Business’ requirements. These quick and appropriate protocols helped ensure business continuity during government-imposed lockdowns, without causing major disruptions across operating locations. Further, to ensure resilience and safety across the value chain, several businesses also supported their respective supply chain partners in implementing these protocols.

Your Company had put in place stringent safety protocols in the early stages of the pandemic, and also established Central and Business Contingency Management Teams, tasked with developing and ensuring risk mitigation measures, business contingency plans, employee well-being, provision and coordination of employee support, assistance to local communities and coordination with local regulatory authorities and health care providers.

Extensive communication and training on safety protocols were carried out, and employees and the extended workforce were provided with protective equipment. Extensive IT enablement for a productive work from home and relevant internet reimbursement policy have been put in place. Office presence was restricted to bare minimum, and only under exceptional circumstances. Similarly, elaborate measures have been taken to ensure employee safety in ITC residential complexes and COVID-19 awareness camps and webinars with Doctors were organised for employees and their family members.

Business units continue to ensure comprehensive compliance with all COVID-19 risk mitigation measures and provide support to employees & families. Apart from the full coverage of medical expenses of employees and immediate family members, your Company has also extended a loan facility to employees to support medical treatment of family members, who may not be otherwise covered under the Company medical policy. Medical insurance coverage has also been extended to your Company’s supply chain partners. Additionally, your Company set-up dedicated Covid care centres, helplines managed by company personnel for emergency support such as testing, provision of oxygen concentrators, telemedicine support, home care kits, hospitalisation support and organised dedicated

camps for vaccination of employees, family members, service providers and supply chain partners, at your Company’s expense.

The criticality of vaccination and continuous ‘SMS’ (‘sanitizing’, ‘wearing masks’ and ‘social distancing’) is being reinforced through frequent communication.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company’s state-of-the-art ITC Life Sciences and Technology Centre (LSTC) in Bengaluru is at the core of driving science-led product innovation to support and build your Company’s portfolio of world-class products and brands. The LSTC team comprising over 350 highly qualified scientists has a mandate to work on future ready science platforms, design differentiated products to address unique needs and deliver superior benefits to Indian consumers.

LSTC harnesses contemporary advances in relevant core areas of science and technology to continuously translate ‘proofs of concept’ to novel product opportunities. R&D teams seamlessly integrate classical concepts of product development to explore and harness cross-business synergies. The team is at the forefront in executing robust R&D strategies and plans that embed sustainability and digitalisation, in order to secure long-term competitiveness for each business.

LSTC has evolved over the years and is presently equipped with world-class scientific infrastructure and state-of-the-art facilities to create knowledge, and build intellectual property for your Company through experimental research, rapid prototyping and process development. Over 900 patents have been filed in a relatively short period of time bearing testimony to LSTC’s vitality and capabilities. Centres of Excellence in Biosciences, Agri-sciences and Materials, and robust research platforms such as Beauty & Hygiene, Heath & Wellness, Agro-forestry & Crop Sciences and Sustainable Packaging Materials continue to drive world-class innovation. Rigorous systems, processes and industry best practices have enabled securing global quality certifications - a key enabler in delivering products that follow the highest standards in quality, safety and efficacy to the Indian consumers.

All branded packaged foods manufacturing units of your Company not only have ISO quality certification but also follow the stringent standards under the integrated food quality management system-FSSC 22000; these systems ensure adherence to internationally accepted quality standards in producing safe and high-quality food. All manufacturing units of the Branded Packaged Foods Businesses (including contract manufacturing units) and Hotels operate in compliance with stringent food safety and quality standards. Your Company’s food quality assurance laboratories are also accredited under ISO 17025, a global standard for testing and calibrating labs, which guarantees quality of every analysis. Additionally, the quality of all FMCG ingredients and finished products of your Company are monitored through best-in-class customer-centric ‘Quality Control and Quality Assurance Processes’ and ‘Product Quality Ratings Systems’ (PQRS) enhancing competitive superiority of your Company’s product offerings.

In the Agri-sciences domain, LSTC has an ambitious R&D programme to address future demand of food security, improving yields & quality and developing new varieties. Research on wheat and potato varietal securitisation are at advanced stages to achieve flexibility in sourcing of raw material, creation of region-specific blends and to ensure robust agro-climatic adaptability. LSTC, in collaboration with the Agri Business Division endeavours to ensure contemporary science outcomes are fully integrated across the value chain from farm to factory. Scientific platforms in Agroforestry have led to pioneering work on new clones in tandem with Paperboards and Specialty Papers Division to enhance wood productivity and pulp quality for sustainable raw materials and farmer profitability.

The Paperboards, Paper and Packaging Businesses continued to pursue ‘Total Productive Maintenance’ (TPM) programmes with focus on customer delivered quality. The Paperboards and Specialty Papers Division has also set up a state-of-the-art Next Generation Smart and Hyperscalar Digital and Data Infrastructure at its plants, to enable real time operations control, process optimisation and quality improvements. Consistent quality enables customers

 

In line with your Company’s relentless focus on operational excellence and quality, each Business is mandated to continuously innovate on materials, training, processes and systems to enhance their quality competitiveness. Innovations are integral to the Business strategies and LSTC actively collaborates with the Businesses in this regard.

Your Company has been a forerunner in introducing first-to-market innovative products for Indian consumers. In the context of the COVID-19 pandemic, LSTC researchers and product development teams continue to enable the Branded Packaged Foods and Personal Care Businesses to deliver a range of differentiated and superior quality products.

Innovative science-based programmes continue to be leveraged to drive systematic reduction in salt, sugar and fat from packaged food products recipes without compromising on sensory attributes. Leading edge technology platforms in Hygiene, Health & Wellness and immunity continue to power innovation and develop next generation product offerings to serve emergent consumer needs. Your Company’s unique competencies in Materials and Packaging have focused on delivering innovative recyclable flexible packaging and bio-compostable coating solutions in line with the environmental sustainability agenda. LSTC has created long-term research platforms to evolve multi-generation product concepts. New synergistic value chains in health, nutrition and sensory sciences have been created to propel future growth and develop differentiated, first-to-market products without compromising on sensory and other attributes. Advances in materials chemistry, agronomy and process science have led to replacement of imported bamboo for manufacture of incense sticks (Agarbattis).

During the year, your Company’s Hotels Business leveraged technology to enhance business process efficiencies and outcomes. To combat new challenges posed by the pandemic, the Hotels Business heightened its commitment towards prioritising the safety and security of their guests through the award winning ‘WeAssure’ programme. Building agile operating systems that adapt quickly to the dynamic business environment and strengthening the service excellence framework have been the key strategies of the Hotels Business amidst pandemic-induced disruptions.

of your Company in improving their operating efficiencies through reduced wastages and lower machine down-times.

In its quest to be an innovation engine and to be future-ready, LSTC is developing and deploying bespoke tools & dashboards for quality performance analytics and competition benchmarking using Artificial Intelligence and Machine Learning technological platforms to strengthen the quality management systems (via product/process optimisation). Going forward, your Company will continue to identify opportunities to create new value chains leveraging R&D insights emerging from contemporary sciences and your Company’s diverse core competencies.

PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

In the proceedings initiated by the Enforcement Directorate in 1997, the appropriate authority after hearing arguments on behalf of your Company has passed orders in favour of your Company and dropped some of the show cause memoranda issued by the Directorate. In respect of some of the remaining memoranda, your Company filed writ petitions challenging their validity. The Honourable Calcutta High Court, by its orders, allowed these writ petitions, and the proceedings in respect of these memoranda were quashed. The Enforcement Directorate filed appeals against these orders before the Division Bench of the Calcutta High Court, which are pending.

Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Honourable Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year, your Company’s treasury operations continued to focus on deployment of surplus liquidity and management of foreign exchange exposures within a well-defined risk management framework.

Market interest rates during the year declined sharply on the back of Monetary Policy easing by the Reserve Bank of India (RBI). This was necessitated to mitigate the impact of COVID-19

induced lockdowns on economic activity. Through a combination of conventional and un-conventional policy measures, RBI sought to reduce borrowing cost, increase liquidity in the Banking system and provide regulatory forbearance to ensure stability of financial markets. Globally, Monetary Policy stance was accommodative in both Developed and Developing Economies during this period with interest rate cuts and quantitative easing. This resulted in large inflows into emerging markets including India, thereby complementing RBI’s interventions as aforestated. As economic activity gradually began to normalise with the easing of restrictions, the Central Government embarked on fiscal expansion with Fiscal Deficit for the year widening to around 9.5% of GDP. This entailed significant market borrowings which in turn pushed market interest rates higher by the end of the year.

All investment decisions relating to deployment of your Company’s surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Treasury operations focused on proactive rebalancing of portfolio duration and mix in line with the evolving interest rate environment. Further, amidst heightened economic stress, your Company’s ongoing practice of continuous review and monitoring of credit worthiness, including regular engagement with market participants, ensured that the investment portfolio was not exposed to undue credit risks.

In the currency market, the onset of COVID-19 and resultant lockdowns resulted in a sharp sell-off in emerging market currencies including the Indian Rupee. The unprecedented scale and speed of interventions by Governments and Central Banks across the world in the form of monetary and fiscal easing ignited a ‘risk-on’ sentiment and triggered a rally in financial markets. Further, as the impact of the pandemic started to ebb and news on vaccine development started to take center stage, emerging markets started to receive significant capital flows which caused their currencies, including the Indian Rupee, to appreciate.

Indian Rupee also remained supported by the policy measures announced by the Government and RBI to support the economy and revive growth. Lower oil

(‘the Board’) with effect from 1st May, 2021.

Your Directors place on record their appreciation for the services rendered by Mr. Jerath. Further,

Mr. David Robert Simpson was also appointed, with your approval, as a Non-Executive Director of your Company for a period of five years with effect from 28th July, 2020, representing the Tobacco Manufacturers (India) Limited, a subsidiary of British American Tobacco p.l.c.

Mr. Sumant Bhargavan will complete his present term as a Wholetime Director of your Company on 11th July, 2022. The Board at the meeting held on 1st June, 2021, on the recommendation of the Nomination & Compensation Committee (‘the Committee’), recommended for the approval of the Members, the re-appointment of Mr. Sumant as a Director, liable to retire by rotation, and also as a Wholetime Director of your Company for a period of three years with effect from 12th July, 2022.

The Board, on the recommendation of the Committee, also recommended for the approval of the Members, the appointment of Mr. Shyamal Mukherjee as a Director, and also as an Independent Director of your Company for a period of five years with effect from the date of the 110th Annual General Meeting (‘AGM’) of your Company. Mr. Mukherjee has the required integrity, expertise and experience for appointment as an Independent Director of your Company.

Messrs. Sumant and Mukherjee, pursuant to Section 152 of the Act, have given their consents to act as Directors of your Company, and have also given requisite Notices, pursuant to Section 160 of the Act, proposing their respective appointment as Directors of your Company. Appropriate resolutions seeking your approval to the above are appearing in the Notice convening the 110th AGM of your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Companies Act, 2013 (‘the Act’) read with Articles 94 and 95 of the Articles of Association of your Company, Messrs. Hemant Bhargava and Sumant Bhargavan will retire by rotation at the ensuing AGM and being eligible, offer themselves for re-election.

The Board has recommended their re-election.

 

prices and domestic demand during the year led to a large reduction in the Trade Deficit and the Current Account moved into surplus. The Balance of Payment for the year stood at a large surplus of around US$

85 - 90 billion due to strong capital inflows. However, persistent intervention in the forex market by RBI restricted sharp appreciation of the Rupee besides a record high level of foreign exchange reserves.

Given the high volatility in the currency markets, your Company adopted a proactive risk management strategy and actively managed the foreign currency exposures through the use of appropriate hedging strategies and instruments.

As in earlier years, commensurate with the size of temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including independent check of 100% of transactions by your Company’s Internal Audit Department.

DEPOSITS

Your Company’s erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2021, there were no deposits due for repayment except in respect of two deposit holders aggregating ' 20,000 which have been withheld on the directives received from the government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company’s erstwhile Schemes.

Your Company has not accepted any deposit from the public / members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year.

DIRECTORS Changes in Directors

Mr. Atul Jerath was appointed, with your approval, as a Non-Executive Director of your Company for a period of three years with effect from 4th September, 2020, representing the General Insurers’

(Public Sector) Association of India. He stepped down from the Board of Directors of your Company

Six meetings of the Board were held during the year ended 31st March, 2021.

Attributes, Qualifications & Independence of Directors and their Appointment

The Corporate Governance Policy of your Company, inter alia, requires that Non-Executive Directors be drawn from amongst eminent professionals, with experience in business/finance/law/public administration and enterprises. The Nomination & Compensation Committee has laid down the criteria for determining qualifications, positive attributes and independence of Directors (including Independent Directors). The Board Diversity Policy of your Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The skills, expertise and competencies of the Directors as identified by the Board, along with those available in the present mix of the Directors of your Company, are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

The Articles of Association of your Company provide that the strength of the Board shall not be fewer than five nor more than eighteen. Directors are appointed/ re-appointed with the approval of the Members for a period of three to five years or a shorter duration, in accordance with retirement guidelines and as may be determined by the Board from time to time. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the Members. One-third of the Directors who are liable to retire by rotation, retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that (a) they meet the criteria of independence prescribed under Section 149 of the Act and Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’), and (b) they are not aware of any circumstance or situation which could impair or impact their ability to discharge duties with an objective,

 

independent judgement and without any external influence. In the opinion of the Board, the Independent Directors fulfil the conditions prescribed under the Act and the Listing Regulations, and are independent of the management of the Company.

Details of your Company’s Policy on remuneration of Directors, Key Managerial Personnel and other employees are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

Board Evaluation

The Nomination & Compensation Committee, as reported in earlier years, formulated the Policy on Board evaluation, evaluation of Board Committees’ functioning and individual Director evaluation, and also specified that such evaluation will be done by the Board, pursuant to the Act and the Rules thereunder and the Listing Regulations.

In keeping with ITC’s belief that it is the collective effectiveness of the Board that impacts Company’s performance, the primary evaluation platform is that of collective performance of the Board as a whole. Board performance is assessed against the roles and responsibilities of the Board as provided in the Act and the Listing Regulations, read with your Company’s Governance Policy. The parameters for Board performance evaluation have been derived from the Board’s core role of trusteeship to protect and enhance shareholder value as well as to fulfil expectations of other stakeholders through strategic supervision of your Company. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by the respective Committee Chairmen with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, in assisting the Board in realising its role of strategic supervision of the functioning of your Company in pursuit of its purpose and goals.

While the Board evaluated its performance against the parameters laid down by the Nomination & Compensation Committee, the evaluation of individual Directors was carried out against the laid

down parameters anonymously in order to ensure objectivity. Reports on functioning of Committees were placed before the Board by the respective Committee Chairmen after discussions with the respective Committee members. The Independent Directors Committee of the Board also reviewed the performance of the Chairman, other non-Independent Directors and the Board, pursuant to Schedule IV to the Act and Regulation 25 of the Listing Regulations.

KEY MANAGERIAL PERSONNEL

Mr. Supratim Dutta was appointed by the Board as the Chief Financial Officer (‘CFO’) of your Company with effect from 5th September, 2020. Mr. Rajiv Tandon, Wholetime Director, ceased to be the CFO with effect from close of work on 4th September, 2020.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section ‘Board of Directors and Committees’ in the Report and Accounts.

Statutory Auditors

Messrs. S R B C & CO LLP, Chartered Accountants (‘SRBC’), were appointed with your approval as the Auditors of your Company for a period of five years till the conclusion of the 113th AGM. The Board, on the recommendation of the Audit Committee, recommended for the approval of the Members, the remuneration of SRBC for the financial year 2021-22. Appropriate resolution seeking your approval to the remuneration of SRBC is appearing in the Notice convening the 110th AGM of your Company.

Cost Auditors

Your Board, as recommended by the Audit Committee, appointed the following Cost Auditors for the financial year 2021-22:

(i)    Messrs. ABK & Associates, Cost Accountants, for audit of Cost Records maintained by your Company in respect of ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

(ii)    Messrs. S. Mahadevan & Co., Cost Accountants, for audit of Cost Records maintained in respect of all applicable products of your Company, other

than ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolutions seeking your ratification to the remuneration of the aforesaid Cost Auditors are appearing in the Notice convening the 110th AGM of your Company.

Your Company maintains necessary cost records as specified by the Central Government under Section 148(1) of the Act read with the Companies (Cost Records and Audit) Rules, 2014.

Secretarial Auditors

Your Board appointed Messrs. Vinod Kothari & Company, Practising Company Secretaries, as the Secretarial Auditors of your Company for the financial year ended 31st March, 2021. The Report of the Secretarial Auditors pursuant to Section 204 of the Act, is provided in the Annexure forming part of this Report.

CHANGES IN SHARE CAPITAL

During the year, 1,66,12,990 Ordinary Shares of ' 1 each, fully paid-up, were issued and allotted upon exercise of 16,61,299 Options under your Company’s Employee Stock Option Schemes. Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2021, stands increased to ' 1230,88,44,231 divided into 1230,88,44,231 Ordinary Shares of ' 1 each. The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options, as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the Regulations’), are available in the Notes to the Financial Statements and can also be accessed on your Company’s corporate website ‘ www.itcportal.com ’ under the section ‘Shareholder Value’. During the year, there has not been any material change in your Company’s Employee Stock Option Schemes.

Your Company’s Auditors, Messrs. S R B C & CO LLP, have certified that the Employee Stock Option Schemes of your Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of your Company (‘ISC’), accredited with ISO 9001:2015 certification, is registered with the Securities and Exchange Board of India as Category II Share Transfer Agent for providing in-house share registration and related services. ISC continues to focus on providing best-in-class services to the shareholders and investors of your Company, while ensuring compliance with the applicable statutory requirements.

Further, the ‘Investor Relations’ section on your Company’s corporate website ‘ www.itcportal.com ’ serves as a user-friendly online referencer for the shareholders and investors in respect of share related matters.

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by your Company with its related parties during the financial year were in accordance with the provisions of the Companies Act, 2013 and the Listing Regulations. All such contracts or arrangements, which were approved by the Audit Committee, were in the ordinary course of business and on arm’s length basis. No material contracts or arrangements with related parties were entered into during the year under review. Accordingly, the disclosure of Related Party Transactions as required in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 in Form AOC -2 is not applicable for this year.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act, 2013, your Directors confirm having:

a)    followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures, if any;

b)    selected such accounting policies and applied them consistently and made judgements and

estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c)    taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d)    prepared the Annual Accounts on a going concern basis;

e)    laid down internal financial controls to be followed by your Company and that such internal financial controls were adequate and were operating effectively; and

f)    devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company’s Board of Directors is responsible for the preparation of the consolidated financial statements of your Company and its Subsidiaries (‘the Group’), Associates and Joint Venture entities, in terms of the requirements of the Companies Act, 2013 (the Act) and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act.

The respective Boards of Directors of the companies included in the Group and of its associates and joint venture entities are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of each company and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation

of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of your Company, as aforestated.

OTHER INFORMATION

Compliance with the conditions of Corporate Governance

The certificate from your Company’s Auditors, Messrs. S R B C & CO LLP, confirming compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations, is annexed.

Integrated Report

Your Company has voluntarily prepared its Integrated Report for the financial year 2020-21. As a green initiative, the Report has been hosted on your Company’s corporate website at https://www.itcportal.com/about-itc/shareholder-value/itc-integrated-report-2021.pdf .

Going Concern status

There is no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of your Company or its future operations.

Annual Return

The Annual Return of your Company is available on its corporate website at https://www.itcportal.com/investor/disclosures-under-SEBI.aspx .

Particulars of loans, guarantees or investments

Details of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Notes 4, 5, 6 and 9 to the Financial Statements.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

Compliance with Secretarial Standards

Your Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Act.

Employees

The total number of employees as on 31st March, 2021, stood at 26,017.

There were 153 employees, who were employed throughout the year and were in receipt of remuneration aggregating ' 102 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating ' 8.5 lakhs per month or more during the financial year ended 31st March, 2021. The information required under Section 197(12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.

Dividend Distribution Policy

Your Company’s Dividend Distribution Policy, approved by the Board on 18th March, 2020, may be accessed on its corporate website at https://www.itcportal.com/about-itc/policies/dividend-distribution-policy.pdf .

Articles of Association

During the year, the Articles of Association of your Company were amended, with your approval, to make them consistent and aligned with the provisions of the Companies Act, 2013 and the Rules and Regulations framed thereunder, and the Secretarial Standards on Board Meetings and General Meetings.

Key Financial Ratios

Key Financial Ratios for the financial year ended 31st March, 2021, are provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ‘anticipate’, ‘believe’, ‘estimate’,

‘expect’, ‘intend’, ‘will’ and other similar expressions as they relate to your Company and/or its Businesses are intended to identify such forward-looking statements. Your Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Your Company’s Triple Bottom Line philosophy has over the years spurred the creation of innovative business models that synergise the building of economic, environmental and social capital. With Sustainability as the bedrock of your Company’s corporate strategy, the superordinate goal of serving larger national priorities and creating value for all stakeholders has evolved into a new paradigm -‘Responsible Competitiveness’ - an abiding strategy that focuses on extreme competitiveness but in a manner that replenishes the environment and supports sustainable livelihoods.

The strategic Vision of creating multiple drivers of growth through the pursuit of market opportunities that best match institutional strengths, has resulted in the development of strong Businesses of the future as well as a portfolio of winning world-class brands and future-ready products. Today, your Company is the leading FMCG marketer in India, a pre-eminent hotel chain and a globally acclaimed icon in green hoteliering, the clear market leader in the Indian Paperboards and Packaging industry, a pioneering trailblazer in farmer and rural empowerment through its Agri Business and a global exemplar in sustainable business practices. In the last two decades, your Company’s non-cigarettes businesses have grown over 25-fold and presently constitute over 60% of net Segment Revenue. At the heart of this transformation lies the power of synergy, with seamless access for your Company’s new Businesses/initiatives to the deep and varied capabilities resident across different parts of the enterprise, and its world-class talent pool.

Several structural interventions and strategy resets effected in the recent past have resulted in appreciable progress and enhanced the market standing and competitiveness of each operating segment, thereby laying the foundation for the next horizon of growth and value creation.

In recent years, the FMCG Businesses have delivered strong revenue growth along with significant margin expansion, and are well poised to be rapidly scaled up. Multi-dimensional interventions have been made in recent years to strengthen the FMCG Businesses for sustained profitable growth. Following a strategic review of the business portfolio, the Lifestyle Retailing Business has been restructured. At the same time, the product portfolio has been strengthened in alignment with new opportunities and enterprise strengths with sharper focus on fortifying the core, addressing adjacencies through mother brands and creating the new core for powering growth. To accentuate consumer centricity, agility and enable sharper focus in the context of the growing scale and complexity of operations, the Branded Packaged Foods Businesses have been reorganised into market centric clusters with integrated and empowered teams. Focused interventions made in the recent past have also augmented your Company’s multi-channel go-to-market capability, resulting in manifold expansion in the reach and availability of its products. Over the last five years, market and outlet coverage have grown 3.6x and 1.6x respectively while the network of stockists has expanded to 4x during the same period. Sharp focused investments have augmented capability in emerging channels such as e-Commerce and Modern Trade, resulting in strong growth in sales and enhanced market standing; a new vertical has also been developed to address the fast-growing Food Services segment. In addition, investments towards accelerating agile and purposeful innovation with platform centricity, optimising supply chain efficiencies and digitisation have significantly enhanced competitiveness. The impact of these multi-dimensional interventions are evident in the substantial margin expansion of 640 bps in Segment EBITDA over the last four years.

The Businesses will continue to leverage your Company’s institutional strengths as a key source of sustainable competitive advantage viz. strong

backward linkages with the Agri Business, a deep & wide multi-channel distribution network, cuisine knowledge resident in the Hotels Business, packaging knowhow and the robust R&D platforms nurtured by LSTC. Structural advantages arising out of distributed manufacturing footprint, anchored on state-of-the-art ICMLs strategically located proximal to large demand centres, will be increasingly leveraged to drive rapid growth of the FMCG Businesses. With enhanced scale and margin expansion, the FMCG Businesses are expected to make increasingly higher contributions to your Company’s profit pool, thereby setting the stage for further value enhancement opportunities.

The Hotels Business has established a strong footprint of iconic properties and F&B brands on the back of an investment-led growth strategy. In recent years, the strategy has been reset to pursue an ‘asset-right’ growth path and augment revenue streams while simultaneously leveraging your Company’s world-class properties to drive growth.

As reported earlier, your Company will continue to examine alternate structures in line with industry recovery dynamics towards engendering the next horizon of growth as also enhancing value creation.

The Agri Business has been a strong backbone and a key source of competitive advantage for your Company’s FMCG and Cigarettes businesses. The scope and scale of operations have grown manifold over the years and currently encompass over 3 million tonnes in 22 states and over 20 agri-value chain clusters. In recent years, the Business has pivoted its strategic focus towards rapidly scaling up its Value-Added Agri Products portfolio to accelerate growth and enhance value capture. With policy enablers in place, your Company is developing NextGen agriculture value chains that are digitally enabled and climate smart, and re-structuring the back-end into a robust network of Farmer Producer Organisations. This will further strengthen the sourcing network and facilitate the development of customised supply chains for traceable and identity-preserved sourcing of agri-commodities and in augmenting the product portfolio with the addition of value-added products such as staples for the Food Service segment, fresh and frozen fruits & vegetables, medicinal and aromatic plant extracts. Investments are also being stepped up

towards developing a robust business model to scale up ‘e-Choupal 4.0’ - a crop-agnostic ‘phygital’ platform integrating NextGen agri-technologies and solutions -to deliver customised solutions to the farming community while creating new and scalable revenue streams and augmenting sourcing efficiencies.

The Paperboards, Paper and Packaging Businesses have made significant progress in recent years in terms of enhanced scale and profitability improvement. Strategic investments have been stepped up in areas such as pulp import substitution, proactive capacity augmentation in Value Added Paperboards segment, decarbonisation of operations, application of Industry 4.0 and towards nurturing robust innovation platforms. The focus going forward is on driving cutting-edge innovation to rapidly scale up single use plastic substitutes as a new vector of growth, building structural advantage through product mix enrichment and scaling up the use of emergent technologies such as Industry 4.0 to enhance operational efficiency, reduce wastage and costs.

The pandemic has given wings to the trend of Digitalisation that was already gathering momentum. Apart from e-Commerce, digital entertainment, work-from-home conferencing, telemedicine, education, learning and skill development, e-services and social media communications, have all experienced exponential surge. Accelerated digital transformation is integral to your Company’s future-ready strategy and is increasingly being harnessed to enhance competitive advantage. Cutting-edge digital technologies are being increasingly deployed across key touch points spanning Consumer Experience, Smart and Agile Manufacturing & Supply Chain Operations, Employee Experience and Intelligent Insights Platforms. Foundational initiatives such as the ‘DigiNext’ and ‘Young Digital Leaders Forum’ have been implemented towards steering your Company through its digital journey and fostering a data driven and ‘digital first’ culture across the organisation.

As the world prepares for a post-pandemic future, your Company is actively working towards Sustainability 2.0, an agenda which reimagines sustainability under the pressing challenges of climate change and the pandemic. With a view to ‘Building Back Better’, Sustainability 2.0 calls for inclusive strategies that can support sustainable

livelihoods, enable the transition to a net zero economy, work towards ensuring water security for all, create an effective circular economy and protect & restore biodiversity. With its bold Sustainability 2.0 agenda, your Company is setting the bar higher, and remains committed to making a meaningful contribution to the Nation’s future while retaining its status as a sustainable business exemplar.

Your Company continues to explore opportunities to craft disruptive business models and value propositions anchored at the intersection of Digitalisation and Sustainability - the two defining trends in the ‘new normal’ - leveraging its institutional strengths. NextGen business models such as e-Choupal 4.0 in the agri-ecosystem, tech-enabled cloud kitchens in the food services space, sustainable paperboards and packaging solutions customised for end-use with focus on single use plastic substitutes, are being blueprinted to actualise these opportunities. Value-accretive acquisitions, joint venture and collaborations continue to be proactively pursued towards accelerating growth and value creation.

During the year, the COVID-19 pandemic unleashed incalculable loss to human life and unprecedented disruption to economic activity. Amidst an extremely challenging operating environment, your Company responded with speed and agility demonstrating resilience and adaptive capacity while operating in the ‘new normal’. The severe intensity of the second wave has triggered a fresh round of disruptions and partial lockdowns, leading to slackening in the recovery momentum. There is heightened uncertainty around the timing and shape of the recovery trajectory along with dampening of consumer and business sentiment. Your Company continues to monitor the evolving situation and will respond with agility while managing risks associated with the heightened uncertainties in the business environment. Recent learnings in dealing with the pandemic spanning sales and distribution, supply chain operations, innovation

and product development will continue to be leveraged in this regard.

Your Company’s diverse talent pool of professional entrepreneurs, ‘proneurs’, have the unique opportunity to create categories, products and brands right from scratch. This talent pool is being nurtured not only to create winning products and services for today, but also to seize larger opportunities as they emerge from the expanding horizons of your Company’s businesses. Your Company’s employees and frontline warriors put in extraordinary efforts amidst adversity and responded to the call of duty with utmost dedication and commitment. The agility of response to the unprecedented situation, the innovations that were implemented at record speed to seize the opportunities in the market, the accelerated adoption of digital technologies, the collaborations and realignments to execute according to the dynamic environment and the compassionate manner in which vulnerable communities in our catchments were aided, are highly commendable. The Board of Directors would like to express its deepest appreciation of these efforts put in by Team ITC.

Your Company’s Board and employees are inspired by the Vision of sustaining ITC’s position as one of India’s most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society.

The vision of enlarging your Company’s contribution to the Indian economy is driven by its ‘Nation First:

Sab Saath Badhein’ credo anchored on the core values of Trusteeship, Transparency, Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of your Company’s Corporate Governance philosophy.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

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Mar 31, 2019

Report of the Board of Directors

Profit After Tax at Rs. 12464.32 crores registered growth of 11.1% over the previous year. Total Comprehensive Income for the year stood at Rs. 12826.88 crores (previous year Rs. 11605.59 crores). Earnings Per Share for the year stood at Rs. 10.19 (previous year Rs. 9.22). Cash generated from operations aggregated Rs. 17234.93 crores.

The Directors are pleased to recommend an Ordinary Dividend of Rs. 5.75 per share (previous year Ordinary Dividend of Rs. 5.15 per share) for the year ended 31st March, 2019. Total cash outflow in this regard will be Rs. 8497.59 crores including Dividend Distribution Tax of Rs. 1448.88 crores.

Over the last five years, the Value-Added by your Company, i.e. the value created by the economic activities of your Company and its employees, aggregated around Rs. 220000 crores of which over Rs. 160000 crores accrued to the Exchequer.

Including the share of dividends paid and retained earnings attributable to government owned institutions, your Company’s contribution to the Central and State Governments represented about 80% of its Value-Added during the year.

Your Company remains amongst the Top 3 Indian corporates in the private sector in terms of Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. Foreign exchange earnings of the ITC Group over the last ten years aggregated nearly US$ 7.2 billion, of which agri exports constituted 56%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company’s contribution to the rural economy.

During the financial year 2018-19, your Company and its subsidiaries earned Rs. 4673 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 3828 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency aggregated Rs. 2373 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1947 crores and import of capital goods at Rs. 426 crores.

PROFITS, DIVIDENDS AND RETAINED EARNINGS

(Rs. in Crores)

PROFITS	2019	2018
a) Profit Before Tax®	18444.16	16851.70
b) Tax Expense
- Current Tax	5849.24	5599.83
- Deferred Tax	130.60	28.62
c) Profit for the year®	12464.32	11223.25
d) Other Comprehensive Income	362.56	382.34
e) Total Comprehensive Income	12826.88	11605.59
STATEMENT OF RETAINED EARNINGS
a) At the beginning of the year	21991.24	17576.81
b) Add: Profit for the year	12464.32	11223.25
c) Add: Other Comprehensive Income (net of tax)	5.59	52.78
d) Add: Transfer from share option on exercise and lapse	3.88	18.65
e) Less: Dividend
- Ordinary Dividend of Rs. 5.15 (2018: Rs. 4.75) per share	6285.21	5770.01
- Income Tax on Dividend paid	1201.69	1110.24
f) At the end of the year	26978.13	21991.24

@Previous year includes Exceptional items representing provisions for earlier years in respect of Tamil Nadu entry tax that were written back based on a favourable order of the Honourable Supreme Court.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances.

Your Company remains committed to ensuring an effective internal control environment that inter alia provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records, timely preparation of reliable financial information and compliance with the requirements with respect to related party transactions.

Your Company’s independent and robust Internal Audit processes, both at the Business and Corporate levels, provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements.

Independent consultants have confirmed compliance of Internal Audit systems and processes with the Standards on Internal Audit (SIA) issued by the Institute of Chartered Accountants of India (ICAI). Although the Standards continue to be recommendatory in nature, such validation evidences the contemporariness of the Internal Audit function.

The Internal Audit function consisting of professionally qualified accountants, engineers and Information Technology (IT) Specialists is adequately skilled and resourced to deliver audit assurances at highest levels.

In the context of the IT environment of your Company, systems and policies relating to Information Management are periodically reviewed and benchmarked for contemporariness. Compliance with the Information Management policies receive focused attention of the Internal Audit team. Information Technology systems undergo pre-implementation audit before being deployed for usage in businesses, thereby delivering an independent assurance with respect to the rigour of implementation. The usage of data analytics in audits was augmented across the organisation.

Qualified engineers in the Internal Audit function review the quality of design, planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield ‘value for money’. Internal Audit continues to use state-of-the-art tools and software for conducting project audits.

Processes in the Internal Audit function have been continuously strengthened for enhanced effectiveness and productivity including the deployment of best-in-class tools for analytics in the Audit domain, certification as complying with ISO 9001:2015 Quality Standards in its processes, ongoing knowledge improvement programmes for staff, etc. The Audit methodology is also designed to validate effectiveness of critical IT controls that are embedded in the business systems, leading to greater alignment with the business process environment.

The Audit Committee of your Board met eight times during the year. The Terms of Reference of the Audit Committee inter alia included reviewing the effectiveness of the internal control environment, evaluation of the Company’s internal financial control and risk management systems, monitoring implementation of the action plans emerging out of Internal Audit findings including those relating to strengthening of your Company’s risk management systems and discharging of statutory mandates.

HUMAN RESOURCE DEVELOPMENT

The talent management strategy of your Company focuses on sustaining ITC’s position as one of India’s most valuable corporations, remaining customer-focused, competitively-superior, performance-driven and future-ready. The initiatives and processes strive to deliver the unique talent promise of Building Winning Businesses, Developing Business Leaders and Creating Value for India. The talent development practices help create, foster and strengthen the capability of human capital to deliver critical outcomes on the vectors of strategic effectiveness, operational efficiency and capital productivity.

Your Company’s ‘Strategy of Organisation’ is based on the approach of distributed leadership enabled through a three-tier governance structure. Such an approach allows businesses, through their management committees, to focus, develop and execute business plans relevant to their product-market spaces while leveraging the institutional strengths of your Company and the opportunities for synergy between businesses.

Your Company’s strong employer equity has enabled the attraction and retention of high quality talent.

The management trainee programme augmented with recruitment of high quality talent when required, is an integral part of our leadership pipeline development process. We continue to draw the finest technical, managerial and financial talent from premier institutions in the country and are ranked amongst the leading companies in these institutions. A recent survey conducted by Nielsen amongst MBA students featured ITC amongst the Top 8 most preferred employers. Your Company’s intensive engagement with campuses over decades to communicate ITC’s talent proposition through case study competitions, knowledge sharing programmes by senior managers and the annual internship programmes have all contributed to create a compelling reason for the best candidates to aspire for a career with ITC.

Your Company’s approach to talent development is founded on the belief that learning initiatives must remain synergistic and aligned to business outcomes, emphasise experiential learning, provide an enabling and supportive environment and promote learning agility. Deep functional expertise is fostered through immersion in solving complex customer problems by the application of domain expertise early in managerial careers.

Key talent is provided critical experiences in high impact roles and mentored by senior managers. Managers are assessed on your Company’s behavioral competency framework and provided with learning and development support to address any areas identified for improvement. As part of your Company’s managerial development and capability building strategy, five platform areas have been identified - Strategic, Value Chain, Leadership, Innovation and Human Resources Development. Various programmes have been designed and customised to your Company’s requirements under these platforms, delivered by leading international faculty. Learning is further supplemented with on demand, online programmes made accessible to employees through globally recognised content platforms. Your Company’s investments in creating an internal technical training infrastructure and academy was recently acknowledged by Frost & Sullivan when the institute, ITC Gurukul, won the ‘Project Evaluation and Recognition Program 2018’ for ‘Enhancing Learning Effectiveness by Leveraging Technology’.

Your Company has further strengthened its performance management system and its culture of accountability through renewed emphasis on Management by Objectives which includes clearly defined goals, outcomes based assessment and even sharper alignment of performance and rewards.

Your Company continued with the practice of periodically assessing employee engagement through a Company-wide survey in 2018. During the year, comprehensive action plans were formulated and implemented which included the launch and strengthening of various recognition initiatives, systems for career dialoguing, employee wellbeing programmes, periodic communication by the leadership teams in each business as well as through the novel digital platform ‘Studio One’.

Driven by an ambitious growth agenda, your Company has already commissioned several world-class Integrated Consumer Goods Manufacturing and Logistics facilities across the country and the footprint is in the process of being expanded further. Your Company believes that alignment of all employees to a shared vision and purpose is vital for winning in the marketplace. It also recognises the mutuality of interests with key stakeholders and is committed to building harmonious employee relations. Your Company remains dedicated to an Employee Relations climate of partnership and mutuality while ensuring operations are cost competitive, flexible and responsive. The Employee Relations philosophy of your Company, anchored in the tenets of Scientific Management, Industrial Democracy, Human Relations and Employee Well-being, has contributed to building a robust platform which has aided the conclusion of long-term agreements at several of its manufacturing units and hotel properties, ensured smooth commencement of operations at greenfield locations and the execution of productivity improvement practices. Several initiatives have been taken to foster a culture of commitment amongst the demographically diverse workforce in these new facilities.

Your Company believes that the drive for progress is in never being satisfied with the status quo. We are confident that every one of your Company’s 27,000 plus employees will relentlessly strive to meet the bold growth agenda, deliver world-class performance, innovate newer and better ways of doing things, uphold human dignity, foster team spirit and discharge their role as ‘trustees’ of all stakeholders with true faith and allegiance.

Your Company is committed to perpetuate this vitality of ITC - its growth in dimensions and also as a great institution - so that it continues to succeed in its relentless pursuit of creating enduring value.

Details of constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are provided in the ‘Business Responsibility Report’, forming part of Report and Accounts.

WHISTLEBLOWER POLICY

Your Company’s Whistleblower Policy encourages Directors and employees to bring to the Company’s attention, instances of unethical behaviour, actual or suspected incidents of fraud or leak of unpublished price sensitive information, or any violation of the ITC Code of Conduct, that could adversely impact your Company’s operations, business performance and / or reputation. The Policy provides that your Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that requisite standards of professional and ethical conduct are always upheld. It is your Company’s Policy to ensure that no employee is victimised or harassed for bringing such incidents to the attention of the Company. The practice of the Whistleblower Policy is overseen by the Audit Committee and no employee has been denied access to the Committee. The Whistleblower Policy is available on your Company’s corporate website ‘www.itcportal.com’.

SUSTAINABILITY - CONTRIBUTION TO THE ‘TRIPLE BOTTOM LINE’

Inspired by the opportunity to sub-serve larger national priorities, your Company redefined its Vision to not only reposition the organisation for extreme competitiveness but also make societal value creation and environmental replenishment the bedrock of its corporate strategy. This super-ordinate vision spurred innovative strategies to address some of the most challenging societal issues including widespread poverty, unemployment and environmental degradation. Your Company’s sustainability strategy aims at creating significant value for the nation through superior ‘Triple Bottom Line’ performance that builds and enriches the country’s economic, social and environmental capital. The sustainability strategy is premised on the belief that the transformational capacity of business can be very effectively leveraged to create significant societal value through a spirit of innovation and enterprise.

Your Company is today a global exemplar in sustainability. It is a matter of immense satisfaction that your Company’s models of sustainable development have led to the creation of sustainable livelihoods for around six million people, many of whom belong to the marginalised sections of society. Your Company has also sustained its position of being the only Company in the world of comparable dimensions to have achieved the global environmental distinction of being carbon positive (for 14 consecutive years), water positive (for 17 years in a row) and solid waste recycling positive (for 12 years in succession).

To contribute to the nation’s efforts in combating climate change, your Company’s strategy of adopting a low-carbon growth path is manifest in its growing renewable energy portfolio, establishment of green buildings, large-scale afforestation programme, achievement of international benchmarks in energy and water consumption. During the year, about 41% of your Company’s total energy requirements were met from renewable energy sources - a creditable performance given its expanding manufacturing base.

Your Company has adopted a comprehensive set of sustainability policies that are being implemented across the organisation in pursuit of its ‘Triple Bottom Line’ agenda. These policies are aimed at strengthening the mechanisms of engagement with key stakeholders, identification of material sustainability issues and progressively monitoring and mitigating the impacts along the value chain of each business.

Your Company’s 15th Sustainability Report, published during the year details the progress made across all dimensions of the ‘Triple Bottom Line’ for the year 2017-18. This report is in conformance with the Global Reporting Initiative (GRI) standards under ‘In Accordance - Comprehensive’ category and is third-party assured at the highest criteria of ‘reasonable assurance’ as per International Standard on Assurance Engagements (ISAE) 3000. The 16th Sustainability Report, covering the sustainability performance of your Company for the year 2018-19, is being prepared in accordance with the GRI Standards and will be made available shortly.

In addition, the Business Responsibility Report (BRR), as mandated by the Securities and Exchange Board of India (SEBI), for the year under review is annexed to this Report and Accounts. The BRR maps the sustainability performance of your Company against the reporting framework suggested by SEBI.

Corporate Social Responsibility (CSR)

Your Company’s overarching commitment to create significant and sustainable societal value is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Towards this end, your Company adopted a comprehensive CSR Policy in 2014-15 outlining programmes, projects and activities that your Company plans to undertake to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Schedule VII read with Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The key elements of your Company’s CSR interventions are to:

- Deepen engagement in identified core operational geographies to promote holistic development and design interventions in order to respond to the most significant development challenges of your Company’s stakeholder groups.

- Strengthen capabilities of Non-Government Organisations (NGOs) / Community Based Organisations (CBOs) in all the project catchments for participatory planning, ownership and sustainability of interventions.

- Drive the development agenda in a manner that benefits the poor and marginalised communities in your Company’s factory and agri-catchments, thereby significantly improving Human Development Indices (HDI).

- Ensure behavioural change through focus on demand generation for all interventions, thereby enabling participation, contribution and asset creation for the community.

- Continue to strive for scale by leveraging government partnerships and accessing the most contemporary knowledge / technical know-how.

Your Company’s stakeholders are confronted with multi-dimensional and inter-related concerns, at the core of which is the challenge of securing sustainable livelihoods. Accordingly, interventions under your Company’s Social Investments Programme (SIP) are appropriately designed to build their capacities and promote sustainable livelihoods.

The footprint of your Company’s projects is spread over 27 States/Union Territories covering 235 districts.

Social Forestry

Your Company’s pioneering afforestation initiative through the Social Forestry programme greened 33,982 acres during the year. It is currently spread across 16 districts in six States covering 3.29 lakh acres in 5,087 villages, impacting over 1,21,557 poor households. Together with your Company’s Farm Forestry programme, this initiative has greened nearly 7.33 lakh acres till date, and generated about 135 million person days of employment for rural households, including poor tribal and marginal farmers. Integral to the Social Forestry programme is the Agro-Forestry initiative, which cumulatively extends to over 1.12 lakh acres and ensures food, fodder and wood security.

Besides enhancing farm level employment, generating incomes and increasing green cover, this large-scale initiative also contributes meaningfully to the nation’s endeavour to create additional carbon sinks for tackling climate change.

In addition to the above, the Social and Farm Forestry initiative of your Company, through a multiplier effect, has led to improvement in pulpwood and fuelwood availability in Andhra Pradesh, Telangana, Karnataka, Chhattisgarh and Odisha. In the state of Tripura, this initiative is also creating bamboo wood source that is suitable for agarbatti manufacturing.

Soil and Moisture Conservation

The Soil and Moisture Conservation programme aims to ensure water security for all stakeholders in the factory catchments and to drought-proof the agri-catchments to minimise risks to agricultural livelihoods arising from drought and moisture stress. The programme promotes the development and management of local water resources in moisture-stressed areas by facilitating community participation in planning and implementing measures such as building, reviving and maintaining water-harvesting structures. The coverage of this programme currently extends to 43 districts of 15 States. During the year, the area under watershed increased by 1,37,105 acres, taking the cumulative coverage area till 2018-19 to over 10.12 lakh acres. 2,646 water-harvesting structures were built during the year, creating 3.39 million kilolitres of rainwater harvesting potential, taking the total number of water harvesting structures to 15,086 and total net rainwater harvesting potential to 34.64 million kilolitres.

Biodiversity

The focus of the programme is on reviving ecosystem services provided to agriculture by nature such as natural regulation of pests, pollination, nutrient cycling, soil health retention and genetic diversity, which have witnessed considerable erosion over the past few decades. During the year, your Company’s biodiversity conservation initiative covered 5,937 acres in seven states and 18 districts, taking the cumulative area under biodiversity conservation to 22,031 acres. While the conservation work is being carried out in select plots of village commons, this intervention significantly benefits agricultural activity in the vicinity of these plots through soil moisture retention, carbon sequestration and by acting as hosts to insects and birds.

Sustainable Agriculture

The Sustainable Agriculture programme attempts to de-risk farmers from erratic weather events through the promotion of climate-smart agriculture premised on dissemination of relevant package of practices, adoption of appropriate mechanisation and provision of institutional services. Currently, 3.95 lakh acres are covered under the programme, which has a significant multiplier effect in terms of adoption by the farming community. During the year, knowledge was disseminated through 4,747 Farmer Field Schools and Choupal Pradarshan Khets benefiting around 1.34 lakh farmers. 351 Agri Business Centres delivered extension services, arranged agri-credit linkages and established collective input procurement and agricultural equipment on hire. In pursuit of your Company’s long-term sustainability objective of increasing soil organic carbon, a total of 3,169 compost units were constructed during the year taking the total number till date to over 40,699 units.

The ‘Village Adoption Programme’ pioneered by your Company’s Agri Business presently covers 250 model villages in the states of Andhra Pradesh, Karnataka, Telangana and Rajasthan. This initiative is aligned to the Prime Minister’s Sansad Adarsh Gram Yojana (SAGY), an initiative to promote holistic rural development. Your Company had entered into a partnership with NITI Aayog in April, 2018 to improve agriculture and other allied services in 27 aspirational districts of eight states (Assam, Bihar, Jharkhand, Rajasthan, Madhya Pradesh, Maharashtra, Odisha and Uttar Pradesh). The plan was to train government officers who, in turn, would cascade the methodology to farmers. During the year, your Company succeeded in creating 402 block level agri-officers as Master Trainers (MT), who in turn trained 2,259 village level personnel as Village Resource Persons (VRPs) to train farmers directly. These VRPs have so far covered 2.05 lakh farmers in package of practices appropriate for the dominant crop of the region.

Livestock Development

The programme provides an opportunity for farmers to improve their livestock based livelihoods by improving productivity of the progeny through breed improvement and dissemination of improved animal husbandry practices. The programme provided extension services, including breeding, fodder propagation and training of farmers in six States and 21 districts. During the year, 1.46 lakh artificial inseminations (AIs) were carried out which led to the birth of 0.62 lakh high yielding progeny. Cumulatively, the figures for AIs and calving stand at 23.67 lakh and 8.13 lakh respectively.

Your Company is also working with dairy farmers in Bihar and Punjab to improve farm productivity through several extension services and to facilitate higher milk production. Qualified teams comprising veterinarians and para-veterinarians have been deployed to facilitate animal breeding, animal nutrition and animal health services towards improving farm productivity and promoting commercial dairy farming among farmers. During the year, 1.29 lakh cattle of 55,074 dairy farmers across 426 villages in six districts of Bihar were supported through training programmes on clean milk production, mastitis control and animal husbandry services like deworming, ectoparasite control, etc.

Women Empowerment

This initiative provided a range of gainful employment opportunities to over 64,000 poor women cumulatively, supported with capacity building and financial assistance by way of loans and grants. Included in the total are 22,700 ultra-poor women in your Company’s core catchments, who have access to sustainable sources of income through non-farm livelihood opportunities. The financial literacy and inclusion project, in partnership with Madhya Pradesh State Rural Livelihood Mission (MPSRLM) and CRISIL Foundation, was rolled out in 765 villages across 11 districts during the year.

Education

The Primary Education Programme aims to provide children from weaker sections of society in your Company’s factory catchments access to education with focus on learning outcomes and retention. Operational in 24 districts of 14 states, the programme covered 1.15 lakh children during the year, thus taking the total coverage to around 6.91 lakh children. In addition, nearly 27,000 children were covered through support in teaching and learning material. 199 government primary schools were provided infrastructure support comprising boundary walls, additional classrooms, sanitation units, and furniture, taking the total number of government primary schools covered till date to 1,802. To ensure sustainable operations and maintenance of infrastructure provided, 682 School Management Committees were strengthened and 566 Child Cabinets and Water and Sanitation (WATSAN) Committees cumulatively were formed in various schools with the active involvement of students and teachers.

Skilling & Vocational Training

The Skilling & Vocational Training programme provides training in market linked skills to youth to enable them to compete in the job market. 12,172 youth were enrolled under different courses during the year of which 44% were female and 36% belonged to the SC/ST communities. The programme is operational in 32 districts of 17 States. In addition, 785 youth were trained with requisite skills and provided increased opportunities for entrepreneurial development.

The Company continues to work with the Welcomgroup Graduate School of Hotel Administration (WGSHA) together with Dr TMA Pai Foundation to cater to the ever-growing need for professionally trained human resources in the hospitality industry. In addition, since the inception of ITC Culinary Skills Training Centre, Chhindwara in 2014, 103 trainee chefs have successfully completed the six-month programme wherein cooking skills are imparted to youth from economically marginalised communities.

Health & Sanitation

Your Company continues to adopt a multi-pronged approach towards improving public health and hygiene. To promote a hygienic environment through prevention of open defecation and to reduce incidence of water-borne diseases, 4,443 Individual Household Toilets (IHHT) were constructed in 26 districts of 15 States in collaboration with the respective State Governments/District sanitation departments. With this, a total of 35,916 IHHTs have been constructed so far in your Company’s catchment areas. In addition, 32 community toilets were constructed/renovated in Bihar, West Bengal and New Delhi during the year, taking the cumulative to 62. Along with sanitation infrastructure development, special focus was given to awareness campaigns to create demand and drive behavioural change.

To make potable water available to local communities in three districts of Andhra Pradesh, Reverse Osmosis (RO) water purification plants were set up in villages with poor quality water. 26 new RO plants were established in 2018-19 taking the total to 127, which provide safe drinking water to over 150,000 rural people.

The Company continued to enhance awareness on various health related issues through a network of 415 women Village Health Champions (VHCs) who covered nearly 3.22 lakh women, adolescent girls and school children during the year. The programme is operational in seven districts of Uttar Pradesh and four districts of Madhya Pradesh. The VHCs conducted over 7,000 village meetings and participated in over 4,000 group events, apart from making door-to-door visits focusing on aspects like sanitation, menstrual and personal hygiene, family planning, diarrhoea prevention and nutrition.

Through your Company’s ‘Swasth India Mission’, a combination of audio-visual aids, games and practical training was leveraged to encourage healthy hygiene habits. Nearly 19.2 lakh children from around 5,247 schools in 60 cities in 12 states were covered during the year. Additionally, access to handwashing was enabled through the unique ‘ID Guard’ initiative to all the students covered in these 5,247 schools.

Over 77,000 beneficiaries were covered under Mother and Child Health initiative aimed at improving the health-nutrition status of women, adolescents and children in the catchments of a few of your Company’s factories with high maternal and infant mortality indices. This was achieved by strengthening institutional capacity, promoting greater convergence with existing government schemes and increasing access to basic services on maternal, child, and adolescent health, nutrition and child protection.

Solid Waste Management

Your Company’s waste recycling programme,

‘WOW - Well-Being Out of Waste’, enables the creation of a clean and green environment and promotes sustainable livelihoods for waste collectors. The programme continued to be executed in Coimbatore, Chennai, Bengaluru, Delhi, Muzaffarpur (Bihar), several districts of Telangana and Andhra Pradesh and now expanded to Mysuru and Chikmagalur districts during the year. The quantum of dry waste collected during the year was 51,696 tonnes from 651 wards. The programme has covered 89 lakh citizens, 48 lakh school children and 2,000 corporates since its inception.

It creates sustainable livelihoods for 14,745 waste collectors by facilitating an effective collection system in collaboration with municipal corporations.

The intervention has also created over 178 social entrepreneurs who are involved in maximising value capture from dry waste collected.

In addition to WOW Programme, another programme on solid waste management which deals with both dry and wet waste has spread to 15 districts of 10 States covering 2.12 lakh households and collected 12,608 tonnes of waste during the year. This programme focuses on minimising waste to landfill by managing waste at source. Home composting was practiced by 10,892 households. Under this programme, in 2018-19, 8,462 tonnes of wet waste was composted, 2,383 tonnes of dry waste recycled and only 14% of the total waste was sent to landfills.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA), which was established in 1977, is an embodiment of your Company’s sustained commitment to a priceless national heritage. The Company’s pledge towards ensuring enduring excellence in Classical Music education continues to drive ITC SRA in furthering its objective of preserving and propagating Hindustani classical music in the age-old principle of the ‘Guru-Shishya Parampara’. The eminent Gurus of the Academy, most of whom reside in the Academy’s campus, impart intensive training and quality education in Hindustani Classical Music to the Scholars. The present Gurus of the Academy are Padma Shri Pt. Ajoy Chakrabarty, Padma Shri Pt. Ulhas Kashalkar, Pt. Partha Chatterjee, Pt. Uday Bhawalkar, Vidushi Subhra Guha and Shri Omkar Dadarkar. The Academy’s focus continues to be on nurturing exceptionally gifted students selected from across India through a system of multi-level audition. Full scholarship is provided to them to reside and pursue music education in the Academy’s campus and in other designated locations under the tutelage of the country’s most distinguished musicians. The creation of the next generation of masters of Hindustani classical music for the propagation of a precious legacy continues to be the Academy’s objective.

Forging Partnerships with NGOs

The meaningful contribution made by your Company’s Social Investments Programme to address some of the country’s key development challenges, has been possible in significant measure, due to your Company’s partnerships with globally renowned NGOs such as BAIF, DSC, FES, DHAN Foundation, MYRADA, Pratham, SEWA Bharat, Outreach, WASH Institute and Water for People, amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilisation skills of NGOs, will continue to provide innovative grassroots solutions to some of India’s most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities as required under Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company’s Environment, Health & Safety (EHS) strategies are directed towards achieving the greenest and safest operations across all your Company’s units by optimising natural resource usage and providing a safe and healthy workplace. Systemic efforts continue to be made towards natural resource conservation by continuously improving resource-use efficiencies and enhancing the positive environmental footprint following a life-cycle based approach.

Your Company’s focus on inculcating a green and safe culture is supported through the adoption of EHS standards that incorporate best international standards, codes & practices and verified through regular audits.

Your Company is addressing the critical area of climate change mitigation through several innovative and pioneering initiatives. These include continuous improvement in energy efficiency, enhancing the renewable energy portfolio, integrating green attributes into the built environment, better efficiency in material utilisation, maximising water use efficiencies and rain water harvesting, maximising reuse and recycling of waste and utilising post-consumer waste as raw material.

Energy Conservation and Renewable Energy

Your Company is well positioned to benefit from energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. As a responsible corporate citizen, your Company has made a commitment to reduce dependence on energy from fossil fuels. Accordingly, all factories incorporate appropriate green features and premium luxury hotels and office complexes continue to be certified at the highest level by either the US Green Building Council, Indian Green Building Council or the Bureau of Energy Efficiency (BEE).

Despite capacity augmentation during the year in FMCG, Hotels and Paperboards Businesses, about 41% of your Company’s total energy requirements were met from renewable sources such as biomass, wind and solar.

Your Company continues its efforts to achieve a 50% renewable energy share in its total energy consumption based on a mix of energy conservation and renewable energy investments, despite significant enhancement in its scale of operations going forward.

Water Security

With water scarcity increasingly becoming an area of serious concern, your Company continues to focus on an integrated water management approach that includes water conservation and harvesting initiatives at its units - while at the same time working towards meeting the water security needs of all stakeholders at the local watershed level. Interventions have been rolled out to improve water-use efficiencies by adopting latest technologies and increasing reuse and recycling practices within the fence while also working with farmers and other community members towards improving their water-use efficiencies. The supply side interventions include enhancing capture and storage of rainwater (in soil and storage ponds) and recharging aquifers. These initiatives have resulted in the creation of rainwater harvesting potential that is over three times the net water consumption of your Company’s operations.

Greenhouse Gases and Carbon Sequestration

The greenhouse gas (GHG) inventory of your Company for the year 2018-19 compiled as per the ISO 14064 Standard has been assured, as in the earlier years, at the highest ‘Reasonable Level’ by an independent third party.

Reaffirming your Company’s commitment to the ethos of ‘Responsible Luxury’, premium luxury hotels of your Company are Leadership in Energy & Environmental Design (LEED®) Platinum certified, making it a trailblazer in green hoteliering globally. Your Company is a pioneer in the green buildings movement. In 2004, the ITC Green Centre at Gurugram was certified as the largest platinum rated building in the world by the US Green Building Council (USGBC-LEED).

ITC Grand Chola, the 600-key super-premium luxury hotel complex in Chennai, is amongst the world’s largest LEED® Platinum certified green hotels, besides holding a 5-Star rating from the Green Rating for Integrated Habitat Assessment (GRIHA) Council. The data centre at Bengaluru, ITC Sankhya, is the first data centre in the world to receive the LEED® Platinum certification by USGBC.

Several of your Company’s factories and office complexes have also received the Green Building certification from Indian Green Building Council (IGBC), the LEED® certification from USGBC and star ratings from the Bureau of Energy Efficiency (BEE). Large infrastructure investments, such as the ITC Green Centre at Manesar (LEED® Platinum certified) and the ITC Green Centre at Bengaluru (pre-certified for LEED® Platinum) continue to demonstrate your Company’s commitment to green buildings. To date, 24 buildings of your Company have achieved Platinum certification by USGBC/IGBC. In order to continually reduce your Company’s energy footprint, green features are integrated in all new constructions and also incorporated in existing hotels, manufacturing units, warehouses and office complexes.

Over twice the amount of Carbon Dioxide emissions from your Company’s operations, are being sequestered through its Social and Farm Forestry initiatives. Besides mitigating the impact of increasing levels of GHG emissions in the atmosphere, these initiatives help greening of degraded wasteland, prevent soil erosion, enhance organic matter content in soil and enhance ground water recharge.

Waste Recycling

Your Company continues to make significant progress in reducing specific waste generation through constant monitoring and improvement of efficiencies in material utilisation and also in achieving almost total recycling of waste generated in operations. In this way, your Company has prevented waste reaching landfills and the associated problems of soil and groundwater contamination and GHG emissions, all of which can adversely impact public health. In the current year, your Company has achieved over 99% waste recycling, with the Paperboards and Specialty Papers Business, which accounts for 89% of the total waste generated in your Company, recycling 99.9% of the total waste generated by its operations. During the year, this Business also recycled around 89,000 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Circular Economy Approach to Plastic Packaging

ITC aims to go beyond the requirements of Plastic Waste Management Rules, 2016 to ensure that, over the next decade, 100% of packaging is reusable, recyclable or compostable. Your Company is working towards optimising packaging in a way that it reduces the environmental impact arising out of post-consumer packaging waste without affecting integrity of the product. This is being done in a structured manner by optimising design, identifying alternative packaging material with lower environmental impact and suitable end-of-life solutions for packaging waste. ITC is also working towards establishing scalable, replicable and sustainable models of municipal solid waste management based on circular economy principles. ITC’s approach is centred around treating waste as a resource and ensuring that zero waste goes to landfill, which can be achieved only when waste is segregated at source. These initiatives focus on educating citizens on segregating waste at source into dry and wet waste streams and ensuring that value is derived from these resources and in the process create sustainable livelihood for waste collectors and rag-pickers. These models operate on a public-private partnership basis with active involvement of Urban Local Bodies, Civil Society and the informal sector of waste collectors.

Under its flagship ‘Well-Being Out of Waste’ (WOW) programme running across various cities in Karnataka, Bihar, Delhi, Tamil Nadu, Andhra Pradesh and Telangana, around 16,000 tonnes of post-consumer plastic waste including around 7400 tonnes of Low Value Plastics (LVP), comprising of multi-layered plastic and thin films, is being collected annually. In 2018-19, your Company also launched an LVP waste collection programme in Pune in collaboration with SWaCH, a cooperative of waste pickers with decade long experience in implementing source segregation and door-to-door collection in Pune. The collection programme was operationalised in January 2019 and has successfully started channelising post-consumer LVP waste to an authorised recycler and is targeting a collection of around 200 tonnes of LVP waste per month.

Safety

Your Company’s commitment to provide a safe and healthy workplace to all has been reaffirmed by several national and international awards and certifications received by various units. Your Company’s approach has been to institutionalise safety as a value-led concept with focus on inculcating a sense of ownership at all levels in order to drive behavioural change. In line with this approach, several of your Company’s operating units are progressively implementing behaviour-based safety initiatives and customised risk assessment supported by planned job observation programmes to strengthen their safety culture.

Your Company continuously strives to improve on safety performance by incorporating best-in-class engineering standards in the design and project execution phase itself for all investments in the built environment, besides optimising costs. Environment, Health & Safety audits before commissioning and during the operation of units continue to be carried out to verify compliance with standards.

Promoting Thought Leadership in Sustainability

The ‘CII-ITC Centre of Excellence for Sustainable Development’, established by your Company in 2006 in collaboration with the Confederation of Indian Industry (CII), continues to focus on its endeavour to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the following:

- The 13th edition of the Centre’s flagship event, the ‘Sustainability Summit: Everyone’s Future’, was held on 6th & 7th September, 2018 in New Delhi with focus on the ‘Circular Economy Mission’ (CEM) under the European Union Resource Efficiency Initiative. Key dignitaries included Dr Harsh Vardhan, Minister for Environment, Forest & Climate Change, Science & Technology, and Earth Sciences, Mr Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, Mr Hardeep Singh Puri, Minister for State (I/C) Housing and Urban Affairs, Mr Karmenu Vella, Commissioner for Environment, Maritime Affairs and Fisheries, European Commission and Mr Sanjiv Puri, ITC Limited. 80 delegates from 16 different countries with their representatives from industry, business associations and academia as well as research institutions were present at the EU-CEM.

- The circular economy guidebook for CEOs, titled ‘Circular Economy: A New Source of Competitiveness’, which discusses alternatives to current business models by adopting the concept of circular economy, was launched at the Sustainability Summit.

- A high-level B2G Partnership Conclave on Sustainable Development Goals (SDGs) was jointly organised by the Centre, NITI Aayog and the UNDP. The conclave focused on three core areas— water, energy and green industry—which have been identified as fast tracks for the 2030 Agenda. Key dignitaries included Mr. Raj Kumar Singh, Hon’ble Minister of State (I/C), Power and New & Renewable Energy and Mr. Amitabh Kant, CEO, NITI Aayog.

A three-year partnership MoU was signed between CII and NITI Aayog at the Conclave. This partnership aims to showcase the efforts of Indian businesses to the Government and the UNDP, increase awareness amongst businesses, share best practices and build a tracking mechanism for further improving industry engagement to achieve SDGs by 2030. The Centre also launched a report during the event titled ‘Indian Solutions for the World to Achieve SDGs’.

- The Centre’s India Business & Biodiversity Initiative (IBBI) participated in the Business & Biodiversity Forum of the 14th Meeting of the Conference of the Parties (COP 14) to the UN Convention on Biological Diversity (CBD) held in Sharm El Sheikh, Egypt from 17th to 29th November 2018 with the theme of ‘Investing in biodiversity for people and planet’.

The Centre took an Indian industry delegation to participate in the forum to present Indian companies’ initiatives and best-practice case studies on mainstreaming biodiversity into the sectors of energy, mining, infrastructure, manufacturing and processing and health.

- The Centre organised a session on voluntary climate adaptation framework for industry at the 24th Conference of Parties under United Nations Framework Convention on Climate Change (COP24) held at Katowice, Poland in December 2018.

- The 13th CII-ITC Sustainability Awards 2018 took place in December 2018. Since 2006, 878 businesses have applied for the Awards, of which 275 have been recognised so far. In 2018, out of 77 applicants, 39 companies were declared winners in various categories.

- The Centre promoted capacity building in sustainability through a range of training and consulting assignments. In 2018, almost 2,000 participants were covered through 75 programmes, conducted both in India and abroad. Topics included Value Innovation, CSR Rules and Impact Measurement, Sustainability Reporting, Integrated Reporting, Cluster Platform for Transformative Solutions, Human Rights and Biodiversity.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company continues to invest in a comprehensive Research & Development programme leveraging its world-class infrastructure, benchmarked processes, state-of-the-art technology and a business-focused R&D strategy.

ITC’s Life Sciences & Technology Centre (LSTC), Bengaluru, continues to focus on its mandate to develop unique sources of competitive advantage and build future readiness. LSTC seeks to achieve this by harnessing contemporary advances in several relevant areas of science and technology and blending the same with classical concepts of product development often leveraging cross-business synergies. Competencies are constantly evolving at LSTC as it strives for scientific rigour at par with the best our global competitors have to offer. LSTC is resourced with 350 highly qualified scientists, world-class measurement systems and state-of-the-art facilities to conduct experimental research, rapid prototyping and process development. Several Centres of Excellence have been established over the past few years in these areas in LSTC. In addition, a number of areas centred around these capabilities have secured global quality certifications.

The Agrisciences R&D team continues to engage in evaluating and introducing several germplasm lines of identified crops including Casuarina and Eucalyptus to increase the genetic and trait diversities in these species. This intervention would facilitate the development of new varieties with higher yields, better quality and other traits relevant for your Company’s businesses. These new lines are being introduced commercially and will enable farmers increase their revenues and earnings significantly on account of productivity gains and improved disease resistance. Besides pulpwood species, the Agrisciences team continues to focus on delivering world-class solutions using contemporary technologies in crops such as wheat, soya, potato and rice. This includes evaluating and building research collaborations with globally recognised centres of excellence with a view to accelerating the journey towards demonstrating multiple ‘proofs of concept’. These collaborations, covering identified crops and species, are designed in a manner that enables your Company in gaining fundamental insights into several technical aspects of plant breeding and genetics and the influence of agro-climatic conditions on the growth of these species. Such interventions will accelerate LSTC’s efforts in creating future generations of crops that are more adaptable to varied agro-climatic conditions thereby providing farmers relatively safer and more profitable alternatives, whilst helping secure your Company’s supply chain and contributing to the vitality and competitiveness of your Company’s Branded Packaged Foods Businesses. Further, these outcomes have a strong potential to contribute towards augmenting the nation’s ecological capital and biodiversity as well.

Recognising the unique construct of your Company in terms of its strong presence in Agri, Branded Packaged Foods and Personal Care Products Businesses, a convergence of R&D capabilities is being leveraged to deliver future products aimed at nutrition, health and well-being. In keeping with the above, during the year, your Company launched a variety of potatoes which are low in sugar content and rich in antioxidants. LSTC’s Biosciences team has designed and developed several long-term research platforms for evolving multi-generation product concepts and associated claims that are fully backed by scientific evidence for the Branded Packaged Foods and Personal Care Products Businesses. Consumer insight driven propositions have been identified in the area of functional foods which are being progressed to products of the future with strong scientifically validated claims via clinical trials. Several of these initiatives have completed clinical assessment of safety and efficacy of products in line with global standards and specifically for the Indian population. These interventions will go a long way in enabling your Company to become a world-class producer of nutritionally superior food products in the near-term. Similar advances have been made in the skin care, hair care and health/hygiene arena. New best-in-class initiatives, such as data analytics, consumer experience labs and Industry 4.0 are being seeded across LSTC with a view to further strengthen your Company’s long-term competitiveness. Intellectual properties arising from these efforts have also been secured as appropriate and as of 31st March, 2019, your Company has filed 836 patents. The product development teams at LSTC were instrumental in developing over 50 unique products that were launched during the year by our FMCG Businesses.

LSTC has a clear vision and road map for long-term R&D, backed by a well-crafted Intellectual Property strategy. With scale, speed, science and sustainability considerations, LSTC is poised to deliver long-term competitive advantage for your Company.

In line with your Company’s relentless focus on operational excellence and quality, each Business is mandated to continuously innovate on processes and systems to enhance their competitive position.

During the year, your Company’s Hotels Business leveraged its ‘Lean’ and ‘Six Sigma’ programmes to improve business process efficiencies. This will further enhance capability to create superior customer value through a service excellence framework.

The Paperboards, Paper & Packaging Businesses continued to pursue ‘Total Productive Maintenance’ (TPM) programmes in all units, resulting in substantial cost savings and productivity improvements.

All manufacturing units of your Company have ISO quality certification. All manufacturing units of the Branded Packaged Foods Businesses (including contract manufacturing units) and hotels operate in compliance with stringent food safety and quality standards. Almost all Company owned units/hotels and contract manufacturing units of the Branded Packaged Foods Businesses are certified by an accredited third party in accordance with ‘Hazard Analysis Critical Control Points’ (HACCP)/ISO 22000 standards. Additionally, the quality of all FMCG products of your Company is regularly monitored through ‘Product Quality Rating System’ (PQRS) which measures competitive superiority of your Company’s product offerings.

PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

In the proceedings initiated by the Enforcement Directorate in 1997, in respect of some of the show cause memoranda issued by the Directorate, after hearing arguments on behalf of your Company, the appropriate authority has passed orders in favour of your Company, and dropped those memoranda.

In respect of some of the remaining memoranda, your Company filed writ petitions, challenging their validity before the Honourable Calcutta High Court, which have been allowed, and the proceedings in respect of these memoranda have been quashed. Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Honourable Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year, your Company’s treasury operations continued to focus on deployment of surplus liquidity and management of foreign exchange exposures within a well-defined risk management framework.

The first half of the financial year witnessed a sharp spike in global price of crude oil leading to concerns on retail inflation and the Government’s ability to adhere to the fiscal deficit target. Further, exit by Foreign Institutional Investors from the capital markets led to currency depreciation, which accentuated the negative sentiment. In response, RBI increased policy interest rates. In addition, credit growth outpacing deposit growth, increase in currency holding by the public and default in debt repayment by a large non-banking finance company contributed to volatility and increase in market interest rates. In the second half of the financial year, market concerns started to abate as price of crude oil corrected significantly and domestic retail inflation remained anchored within the targeted range. Consequently, market interest rates normalised, supported by RBI reducing policy interest rates and infusing unprecedented amount of liquidity into the Banking system through open-market purchase of Government Securities.

All investment decisions relating to deployment of surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Treasury operations focused on proactive rebalancing of portfolio duration and mix in line with the evolving interest rate environment.

Your Company’s risk management processes ensured that investment of surplus liquidity was made after proper evaluation of underlying risk while remaining focused on capturing market opportunities.

US$ strength was a dominant theme in global currency markets during the year, attributed to a strong US economy (pick-up in economic growth, decline in unemployment rate) and monetary policy normalisation by the US Federal Reserve through interest rate hikes. By mid-October, the Indian Rupee (INR) depreciated by over 14% against the US$ (from 65 to 74.48). Other factors, which contributed to Rupee weakness include widening Current Account Deficit and global risk aversion due to economic/political crisis in some of the Emerging Markets. Thereafter, as global risk sentiment towards Emerging Markets improved, Rupee regained some of the losses to close the year at Rs. 69.16. In this scenario, your Company adopted a proactive forex exposure management strategy, which included the use of foreign exchange forward contracts and plain vanilla options to protect business margins and reduce risks/costs.

As in earlier years, commensurate with the size of the temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including independent check of 100% of transactions by your Company’s Internal Audit department.

DEPOSITS

Your Company’s erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2019, there were no deposits due for repayment except in respect of two deposit holders totalling to Rs. 20,000/- which have been withheld on the directives received from the government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company’s erstwhile Schemes.

Your Company has not accepted any deposit from the public / members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year.

DIRECTORS

Changes in Directors

Mr. Yogesh Chander Deveshwar, Chairman of the Company since 1st January, 1996, passed away on 11th May, 2019. Your Directors express their sincere condolences on the demise of Mr. Deveshwar and place on record their deep appreciation for his legendary stewardship of the Company for more than two decades.

Spearheading a journey of stellar growth,

Mr. Deveshwar’s leadership transformed ITC into a valuable and admired multi-business conglomerate with a robust portfolio of front-ranking businesses in FMCG, Hotels, Paperboards, Paper & Packaging and Agri Business. His vision to make societal value creation a bedrock of corporate strategy also led ITC to become a global exemplar in sustainability and the only company in the world of comparable dimensions to be carbon positive, water positive and solid waste recycling positive for over a decade, creating over six million livelihoods, many of whom represent the most disadvantaged in society.

Mr. Deveshwar’s outstanding contribution and foresight helped in creation of world-class Indian brands which capture and retain larger value in the country and national assets in the form of intellectual property, state-of-the-art manufacturing facilities and iconic hospitality properties. Mr. Deveshwar’s inspiring vision will continue to guide your Company in the journey ahead.

The Board of Directors of your Company (‘the Board’), on the recommendation of the Nomination & Compensation Committee (‘the Committee’), appointed Mr. Sanjiv Puri, Managing Director, also as the Chairman of the Company with effect from 13th May, 2019.

Mr. Suryakant Balkrishna Mainak [representing the Life Insurance Corporation of India (‘LIC’)] resigned from the Board with effect from 24th July, 2018. Your Directors place on record their appreciation for the services rendered by Mr. Mainak.

Mr. John Pulinthanam was appointed, with your approval, as a Non-Executive Director of the Company with effect from 27th July, 2018, representing the General Insurers’ (Public Sector) Association of India.

On the recommendation of the Committee, the Board at the meeting held on 27th July, 2018, appointed

Mr. Hemant Bhargava as an Additional Non-Executive Director of your Company with effect from 28th July, 2018, representing LIC.

Mr. Sumant Bhargavan, on the recommendation of the Committee, was appointed by the Board at the meeting held on 15th November, 2018, as an Additional Director of your Company and, subject to the approval of the Members, also as a Wholetime Director, with effect from 16th November, 2018.

By virtue of the provisions of Article 96 of the Articles of Association of your Company and Section 161 of the Companies Act, 2013 (‘the Act’), Messrs. Bhargava and Sumant will vacate office at the ensuing Annual General Meeting (‘AGM’) of your Company.

The Board at the meeting held on 13th May, 2019, on the recommendation of the Committee, recommended for the approval of the Members (a) appointment of Mr. Bhargava as a Non-Executive Director of your Company, liable to retire by rotation, for a period of three years from the date of the ensuing AGM, and (b) appointment of Mr. Sumant as a Director, liable to retire by rotation, and also as a Wholetime Director of your Company, for a period of three years from the date of the ensuing AGM.

Further, the Board at the meeting held on 13th May, 2019, on the recommendation of the Committee, recommended for the approval of the Members, the re-appointment of Mr. Arun Duggal, Mr. Sunil Behari Mathur and Ms. Meera Shankar as Independent Directors of your Company in terms of Section 149 of the Act and Regulation 17 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations 2015’) with effect from 15th September, 2019.

Requisite Notices under Section 160 of the Act have been received in respect of Messrs. Bhargava, Sumant, Duggal and Mathur and Ms. Shankar, who have filed their consents to act as Directors of the Company, if appointed.

Appropriate resolutions seeking your approval to the above are appearing in the Notice convening the 108th AGM of your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Act read with Article 91 of the Articles of Association of the Company, Messrs. David Robert Simpson and John Pulinthanam will retire by rotation at the ensuing AGM and being eligible, offer themselves for re-election. The Board has recommended their re-election.

Number of Board Meetings

Eight meetings of the Board were held during the year ended 31st March, 2019.

Attributes, Qualifications & Independence of Directors and their Appointment

The Nomination & Compensation Committee, as reported in earlier years, adopted the criteria for determining qualifications, positive attributes and independence of Directors, including Independent Directors, pursuant to the Act and the Rules thereunder. The Corporate Governance Policy, inter alia, requires that Non-Executive Directors be drawn from amongst eminent professionals, with experience in business/finance/law/public administration and enterprises. The Board Diversity Policy of your Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The skills, expertise and competencies of the Directors as identified by the Board, are provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

The Articles of Association of your Company provide that the strength of the Board shall not be fewer than five nor more than eighteen. Directors are appointed/ re-appointed with the approval of the Members for a period of three to five years or a shorter duration, in accordance with retirement guidelines and as may be determined by the Board from time to time. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the Members. One-third of the Directors who are liable to retire by rotation, retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that (a) they meet the criteria of Independence as prescribed under Section 149 of the Act and Regulation 16 of the Listing Regulations 2015, and (b) they are not aware of any circumstance or situation, which could impair or impact their ability to discharge duties with an objective independent judgement and without any external influence. Further, in the opinion of the Board, the Independent Directors fulfil the conditions prescribed under the Listing Regulations 2015 and are independent of the management of the Company.

Details of the Company’s Policy on remuneration of Directors, Key Managerial Personnel and other employees is provided in the ‘Report on Corporate Governance’ forming part of the Report and Accounts.

Board Evaluation

The Nomination & Compensation Committee, as reported in earlier years, formulated the Policy on Board evaluation, evaluation of Board Committees’ functioning and individual Director evaluation, and also specified that such evaluation will be done by the Board, pursuant to the Act and the Rules thereunder and the Listing Regulations 2015.

In keeping with ITC’s belief that it is the collective effectiveness of the Board that impacts Company’s performance, the primary evaluation platform is that of collective performance of the Board as a whole.

Board performance is assessed against the role and responsibilities of the Board as provided in the Act and the Listing Regulations 2015 read with the Company’s Governance Policy. The parameters for Board performance evaluation have been derived from the Board’s core role of trusteeship to protect and enhance shareholder value as well as to fulfil expectations of other stakeholders through strategic supervision of the Company. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by the respective Committee Chairman with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, in assisting the Board in realising its role of strategic supervision of the functioning of the Company in pursuit of its purpose and goals.

While the Board evaluated its performance against the parameters laid down by the Nomination & Compensation Committee, the evaluation of individual Directors was carried out against the laid down parameters, anonymously in order to ensure objectivity. Reports on functioning of Committees were placed before the Board by the Committee Chairmen.

The Independent Directors Committee of the Board also reviewed the performance of the non-Independent Directors and the Board, pursuant to Schedule IV to the Act and Regulation 25 of the Listing Regulations 2015.

KEY MANAGERIAL PERSONNEL

During the year, Mr. Sumant Bhargavan was appointed as an Additional Wholetime Director of the Company, as stated above. There were no other changes in the Key Managerial Personnel of your Company.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section ‘Board of Directors and Committees’ in the Report and Accounts.

Statutory Auditors

The Company’s Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants, who were appointed with your approval at the 103rd AGM for a period of five years, will complete their present term on conclusion of the ensuing 108th AGM of the Company.

The Board, on the recommendation of the Audit Committee, recommended for the approval of the Members, the appointment of Messrs. S R B C & CO LLP, Chartered Accountants (‘SRBC’), as the Auditors of the Company for a period of five years from the conclusion of the ensuing 108th AGM till the conclusion of the 113th AGM. On the recommendation of the Audit Committee, the Board also recommended for the approval of the Members, the remuneration of SRBC for the financial year 2019-20. Appropriate resolution seeking your approval to the appointment and remuneration of SRBC as the Statutory Auditors is appearing in the Notice convening the 108th AGM of the Company.

Cost Auditors

Your Board, as recommended by the Audit Committee, appointed for the financial year 2019-20:

(i) Mr. P. Raju Iyer, Cost Accountant, for audit of Cost Records maintained by the Company in respect of ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

(ii) Messrs. S. Mahadevan & Co., Cost Accountants, for audit of Cost Records maintained in respect of all applicable products of the Company, other than ‘Wood Pulp’, ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolutions seeking your ratification to the remuneration of the aforesaid Cost Auditors are appearing in the Notice convening the 108th AGM of the Company.

The Company maintains necessary cost records as specified by Central Government under sub-section 1 of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014.

Secretarial Auditors

Your Board appointed Messrs. Vinod Kothari & Company, Practising Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2019. The Report of Messrs. Vinod Kothari & Company is provided in the Annexure forming part of this Report, pursuant to Section 204 of the Act.

CHANGES IN SHARE CAPITAL

During the year, 5,43,36,690 Ordinary Shares of Rs. 1/- each, fully paid-up, were issued and allotted upon exercise of 54,33,669 Options under the Company’s Employee Stock Option Schemes.

Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2019, stands increased to Rs. 1225,86,31,601/- divided into 1225,86,31,601 Ordinary Shares of Rs. 1/- each.

The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options, as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the Regulations’), are available in the Notes to the Financial Statements and can also be accessed on the Company’s corporate website ‘www.itcportal.com’ under the section ‘Shareholder Value’. During the year, there has not been any material change in the Company’s Employee Stock Option Schemes.

Your Company’s Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Employee Stock Option Schemes of the Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of your Company (‘ISC’), accredited with ISO 9001:2015 certification, is registered with the Securities and Exchange Board of India as Category II Share Transfer Agent for providing in-house share registration and related services. ISC continues to focus on upgrading its infrastructure, systems and processes for providing contemporary and efficient services to the shareholders and investors of your Company, in compliance with the applicable statutory requirements.

During the year, Messrs. Det Norske Veritas, accredited agency for ISO certification, accorded the highest possible ‘Level 5’ rating to ISC’s systems and processes for the tenth consecutive year, exemplifying the excellence achieved by ISC in providing quality investor services.

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by the Company with its related parties during the financial year were in accordance with the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. All such contracts or arrangements have been approved by the Audit Committee, as applicable. No material contracts or arrangements with related parties were entered into during the year under review. Further, the prescribed details of related party transaction in Form No. AOC-2, in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in the Annexure to this Report.

Your Company’s Policy on Related Party Transactions, as adopted by your Board, can be accessed on the corporate website at https://www.itcportal.com/about-itc/policies/policy-on-rpt.aspx.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act, 2013, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d) prepared the Annual Accounts on a going concern basis;

e) laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and were operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company’s Board of Directors is responsible for the preparation of the consolidated financial statements of your Company & its Subsidiaries (‘the Group’), Associates and Joint Venture entities, in terms of the requirements of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act.

The respective Board of Directors of the companies included in the Group and of its associates and joint venture entities are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of your Company, as aforestated.

OTHER INFORMATION

Compliance with conditions of Corporate Governance Report

The certificate from your Company’s Auditors,

Messrs. Deloitte Haskins & Sells, confirming compliance with the conditions of Corporate Governance as stipulated under the Listing Regulations 2015, is annexed.

Integrated Report

The Company has voluntarily prepared its Integrated Report for the financial year 2018-19. As a green initiative, the Report has been hosted on the Company’s corporate website at https://www.itcportal.com/about-itc/shareholder-value/index.aspx#sectionb2 .

Going Concern status

There is no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of the Company or its future operations.

Extract of Annual Return

The information required under Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, is provided in the Annexure forming part of this Report.

Particulars of loans, guarantees or investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Notes 4, 5, 6, 9 and 27 (v) (a) (ii) to the Financial Statements.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

Compliance with Secretarial Standards

The Company is in compliance with the applicable Secretarial Standards issued by the Institute of Company

Secretaries of India and approved by the Central Government under Section 118(10) of the Act.

Employees

The total number of employees as on 31st March, 2019 stood at 27,279.

There were 91 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 102 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 8.5 lakhs per month or more during the financial year ended 31st March, 2019. The information required under Section 197(12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.

Dividend Distribution Policy

The Company’s Dividend Distribution Policy is provided in the Annexure forming part of this Report and is also available on the Company’s corporate website ‘www.itcportal.com’. There has been no change in the Policy during the year.

Key Financial Ratios

Key Financial Ratios for the financial year ended 31st March, 2019, are provided in the Annexure forming part of this report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’ and other similar expressions as they relate to the Company and/or its Businesses are intended to identify such forward-looking statements.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Inspired by the opportunity to serve a larger national purpose, your Company redefined its Vision about two decades ago to transform itself into a vibrant engine of growth that would make a substantial contribution to the Indian economy, whilst rewarding shareholders by creating growing value for the Indian society.

Over the last 23 years, your Company has created multiple drivers of growth by developing a portfolio of world-class businesses across all sectors of the national economy spanning agriculture, manufacturing and services. Your Company ranks amongst the Top 3 in the private sector in terms of Contribution to the Exchequer. Over the last 23 years, your Company’s Value Addition aggregated Rs. 4.6 lakh crores of which nearly 75% accrued to the Exchequer at the Central and State levels. During this period, your Company’s net revenue and post-tax profit have recorded an impressive compound annual growth of 13.3% and 18.3% respectively. Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, have grown at a compound rate of 22.3% per annum during this period, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital.

Your Company’s non-cigarette businesses have grown over 21-fold since 1996 and presently constitute appx. 60% of net segment revenue. In aggregate, the non-cigarette businesses account for over 80% of your Company’s operating capital employed, about 90% of the employee base and over 80% of annual investments.

Your Company today is the leading FMCG marketer in India, a pre-eminent hotel chain and a globally acclaimed icon in green hoteliering, the clear market leader in the Indian Paperboard and Packaging industry, a pioneering trailblazer in farmer and rural empowerment through its Agri Business and a global exemplar in sustainable business practices.

Aligned with the Government’s Make in India Vision, your Company is building national assets in the manufacturing and tourism sector. As stated earlier in this Report, several world-class Integrated Consumer Manufacturing & Logistics facilities are being built to deliver sustainable competitive advantage to your Company’s FMCG businesses. Several projects with an aggregate outlay of Rs. 25000 crores are in various stages of implementation / planning across the length and breadth of the country facilitating regional and national economic development. Recognising that tomorrow’s world will belong to those who create, own and nurture intellectual capital, your Company continues to invest in augmenting the capability of its globally benchmarked Life Sciences and Technology Centre to ensure that its Businesses are future-ready and contribute to building intellectual property assets for the nation.

Your Company’s Board and employees are inspired by the Vision of sustaining ITC’s position as one of India’s most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. The vision of enlarging your Company’s contribution to the Indian economy is driven by its ‘Let’s Put India First’ credo anchored on the core values of Trusteeship, Transparency, Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of ITC’s Corporate Governance philosophy.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

On behalf of the Board

13th May, 2019

Gurugram S. PURI Chairman & Managing Director

India R. TANDON Director & Chief Financial Officer

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Mar 31, 2018

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. Foreign exchange earnings of the ITC Group over the last ten years aggregated nearly US$ 7.1 billion, of which agri exports constituted 56%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company’s contribution to the rural economy.

During the financial year 2017-18, your Company and its subsidiaries earned Rs, 4189 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs, 3480 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency amounted to Rs, 2038 crores, comprising purchase of raw materials, spares and other expenses of Rs, 1506 crores and import of capital goods at Rs, 532 crores.

PROFITS, DIVIDENDS AND RETAINED EARNINGS

(? in Crores)

PROFITS	2018	2017
a) Profit Before Tax	16851.70	15502.96
b) Tax Expense
- Current Tax	5599.83	5285.65
- Deferred Tax	28.62	16.41
c) Profit for the year	11223.25	10200.90
d) Other Comprehensive Income	382.34	77.00
e) Total Comprehensive Income	11605.59	10277.90
STATEMENT OF RETAINED EARNINGS
a) At the beginning of the year	17576.81	16589.89
b) Add: Profit for the year	11223.25	10200.90
c) Add: Other Comprehensive Income	52.78	(24.92)
(net of tax)
d) Add: Transfer from share option on exercise and lapse	18.65	14.58
e) Less: Dividends
- Ordinary Dividend of Rs, 4.75 (2017: Rs, 4.33) per share	5770.01	5230.68
- Special Dividend of Rs, Nil (2017: Rs, 1.33) per share	-	1609.44
- Income Tax on Dividend paid	1110.24	1333.52
f) Less: Transfer to General Reserve	-	1030.00
g) At the end of the year	21991.24	17576.81

FMCG Cigarettes

A punitive and discriminatory taxation and regulatory regime continues to exert severe pressure on the domestic legal cigarette industry even as illegal cigarette trade grows unabated.

The legal cigarette industry, already reeling under the cumulative impact of steep increase in taxation over the last five years and intense regulatory pressures, was further impacted by the sharp upward revision in GST Compensation Cess announced in July 2017. Contrary to indications from the Government that the transition to GST would be based on the principle of maintaining revenue neutrality, tax incidence on cigarettes rose sharply by 13% with an even steeper increase of 19% for the king-size filter segment under the GST regime. Coupled with the increase in Excise Duty rates announced in the Union Budget 2017, this resulted in an incremental tax burden of over 20% on your CompanyRs,s Cigarette Business post implementation of GST.

It is pertinent to note that the tax incidence on cigarettes, after cognising for the latest increase in Cess rates, has nearly trebled over the last six years, on a comparable basis.

The Cigarette Business also had to contend with additional costs associated with the transition to GST due to non-availability of Additional Duty Surcharge credit on transition stocks and the unanticipated revision of GST Compensation Cess w.e.f. 18th July, 2017 which impacted pipeline stocks.

In addition to being subjected to punitive taxation, cigarettes continue to be discriminated against in the GST regime. Even as a uniform GST rate of 28% has been made applicable to all tobacco products the discriminatory tax incidence continues on account

of differential rates of GST Compensation Cess.

For example, a Specific GST Compensation Cess, at rates higher than the Central Excise Duty levied on cigarettes in the erstwhile regime, is levied on cigarettes in addition to an Ad-valorem GST Compensation Cess of 36% for king-size cigarettes and 5% for the other length segments. In comparison, no GST Compensation Cess is levied on bidis. Consequently, cigarette taxes remain, effectively, about 50 times higher than on other tobacco products.

The high rates of tax on cigarettes also provide attractive tax arbitrage opportunities to unscrupulous players, fanning the growth of illegal cigarette trade in the country. While the legitimate cigarette industry has declined steadily since 2010-11 at a compound annual rate of 4.8% p.a., illegal cigarette volumes in contrast have grown at about 5% p.a. during the same period, making India one of the fastest growing illegal cigarette markets in the world. It is pertinent to note that, according to Euromonitor International, India is now the 4th largest illegal cigarette market in the world.

Another factor that fuels the growth of smuggled international brands is that such cigarette packs do not carry the excessively large (85% of the surface area of both sides of the cigarette package) pictorial warnings with extremely gruesome and unreasonable images that are prescribed under Indian laws. While the legal cigarette industry scrupulously complies with the statutory provisions, smuggled international brands of cigarettes either do not bear any pictorial or other health warnings or bear warnings of much smaller dimensions, that too different from what is mandated under Indian law. Findings from research conducted by IMRB International, an independent organisation, indicate that the lack of warnings or their diminutive size creates a perception in the consumer’s mind that the smuggled cigarettes are ‘safer’ than domestic duty-paid cigarettes that carry the statutory warnings.

The attractive tax arbitrage opportunity for smuggled cigarettes allows unscrupulous players to make the products available to consumers at a fraction of the price of duty-paid domestic cigarettes. In fact, the affordability of illegal cigarettes and the other cheaper tobacco products (by reason of lower tax incidence as well as evasion of taxes) has been driving the consumption of tobacco from duty-paid cigarettes to the other forms. Consequently, India’s per capita cigarette consumption is amongst the lowest in the world and is significantly lower in comparison to Russia, Japan, China, United States and even neighboring countries such as Pakistan and Bangladesh.

While overall tobacco consumption in the country continues to grow, the share of duty-paid cigarettes has come down substantially over the years and is estimated to account for around 11% of current tobacco consumption in the country. Despite accounting for such a low share of overall tobacco consumption in the country, the legal cigarette industry contributes more than 87% of tax revenue from the tobacco sector.

The other types of tobacco products contribute barely 13% of tax revenue from the tobacco sector despite accounting for 89% of total tobacco consumption.

It is estimated that the exchequer is losing more than Rs, 13000 crores revenue annually on account of tax evasion on cigarettes alone. The loss to the exchequer is even higher when the evaded taxes on other tobacco products are also considered.

The growth of smuggled international brands has also adversely impacted the demand for domestic Flue Cured Virginia (FCV) tobacco that is used in cigarette manufacture. The absence of a strong domestic demand base has not only resulted in loss of income but has also exposed the Indian tobacco farmer to the volatilities of the international market, thereby sub-optimising earnings from tobacco crop exports as well. These developments have had a devastating impact on the Indian tobacco farmer and the 46 million livelihoods dependent on the tobacco value chain.

Soft demand for Indian FCV tobacco has prompted the Tobacco Board of India to reduce the authorized crop size for three successive years i.e. 2015-16, 2016-17, 2017-18. Further, the unprecedented drought in Andhra Pradesh in late 2016 played havoc on the actual crop output in 2017 besides adversely impacting its quality. This, in turn, has also led to lower exports of tobacco. It is estimated that the cumulative drop in farmer earnings is in excess of Rs, 3450 crores over the last three years, i.e., an average loss in earnings of over Rs, 1150 crores per year.

As reported last year, your Company and several other stakeholders had challenged the validity of the pictorial warnings. Based on a direction of the Honourable Supreme Court, all litigation on pictorial warnings were tagged together and heard by the Honourable High Court of Karnataka. The High Court, by its judgment in December 2017 held the 85% pictorial warnings with extremely gruesome imagery to be factually incorrect and unconstitutional. Upon a Special Leave Petition filed by the Government, the Honourable Supreme Court stayed the Order of the High Court. Pending the final hearing of this matter, the regime of the extremely repugnant 85% pictorial warnings continues.

It is pertinent to note that the global average size of pictorial warnings is only about 30% coverage of the principal display area. In fact, the three countries that account for about 51% of the world’s cigarette consumption, viz., USA, Japan and China have not adopted pictorial / graphical warnings and have prescribed only text-based warnings on cigarette packages.

Although India is the 3rd largest FCV tobacco grower in the world, it has put in place extremely stringent tobacco control laws. For instance, the statutorily prescribed pictorial warning occupying 85% of both sides of a cigarette pack ranks India in the 2nd position globally in terms of their stringency¹. Unfortunately, these laws have fuelled, albeit unintentionally, the growth of illegal cigarettes in the country and consequently, impacted adversely on farmer incomes. In contrast, several major tobacco producing countries, including the USA, have taken into consideration the interests of their tobacco farmers in deciding whether or not to adopt large or excessive pictorial warnings. The Indian tobacco control laws have, thus, had the inadvertent and unforeseen effect of causing losses to the Indian farmer with corresponding gains to tobacco farmers in the countries that have opted for moderate and equitable tobacco control laws.

Regardless of the steps taken by the Government towards tobacco control in the country, taking advantage of the country’s large porous international borders as well as by exploiting loopholes in the policies that are in place, the smuggling of international brands of cigarettes into the country continues to grow at an alarming rate. This is confirmed by the fact that detection and seizure of smuggled cigarettes by the enforcement agencies² has gone up from 1312 cases in 2014-15 to 3108 cases in 2016-17 - an increase of more than 136%.

Unfortunately, the taxation and regulatory policies of the country are largely cigarette-centric and based on tobacco consumption patterns prevalent in developed countries. Such policies are not suitable for India since duty-paid cigarettes account for only about 11% of tobacco consumption in the country as compared to the global average of more than 90%. The unintended consequences of the extant tobacco taxation and regulatory framework may be summarized as follows:

- Continuing decline in legal cigarette volumes in favour of lightly taxed and tax-evaded tobacco products, due to extremely attractive tax arbitrage, resulting in sub-optimization of the revenue potential of the tobacco sector and significant loss to the Exchequer.

- Further fillip to the growth of illegal cigarettes in the absence of statutory pictorial warnings on smuggled international brands.

- The greater portion of tobacco consumption in the country (estimated at about 68%³) remaining outside the tax net.

- Widespread availability of illegal cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices.

- Persistent negative impact on the livelihood of tobacco farmers and others dependent on tobacco for their livelihood.

As always, your Company complies with all regulations and laws in letter and spirit whilst remaining engaged

³ Report on the impact of current tax framework on the tobacco sector in India and suggestions for its improvement - 2014, by ASSOCHAM and KPMG.

with policy makers for reasonable, pragmatic and evidence based regulation and taxation policies that balance the health, employment and economic imperatives of the country.

Your Company’s strong product portfolio along with superior consumer insights and a strategy of continuous innovation and value creation has, once again, helped deliver superior competitive performance during the year, notwithstanding the extremely challenging operating environment. It is a matter of deep satisfaction that your Company consolidated its leadership position in the industry during the year and continues to improve its standing in key competitive markets across the country. Some of the key interventions during the year include the launch of innovative variants viz., Classic Double Burst, Gold Flake Mint Switch,

Flake Mint Switch, Bristol Magnum, Navy Cut Century and a new brand, Wave. Additionally, two brands, American Club and Players, which were launched towards the end of 2016-17 were strengthened significantly during the year.

During the year, the Electronic Vaping Devices portfolio was augmented with the launch of EON Myx, a disposable variant which is offered in adult flavours like coffee in addition to menthol and full flavour.

The consumer response to this offering has been encouraging. The rechargeable variant, EON Charge, further strengthened its performance during the year. Given the nascent state of the market and the evolving regulatory oversight globally, your Company remains engaged with the policy makers for adoption of an appropriate and equitable regulatory framework in India for this category. The research and development initiatives of your Company continue to add to the country’s bank of Intellectual Property Rights (IPR).

In addition to grant of several patents in previous years, your Company was granted three more patents during the year - two international and one national - in respect of cigarettes.

To secure increasingly higher levels of productivity and product excellence going forward, the Business continues to modernize its manufacturing facilities by inducting contemporary technologies. The Business leveraged its in-house design and development expertise and innovation capabilities to step up flexibility in manufacturing technologies and to further improve speed to market for differentiated products and pack formats. In line with its philosophy of manufacturing excellence, the Business has commenced several initiatives towards capability enhancement in the arena of Industry 4.0 including Advanced Analytics, Artificial Intelligence, Virtual Assist and Augmented Reality. These interventions are expected to bring about a digital transformation in the manufacturing process. Up gradation of on-line, real time quality assurance systems and induction of state-of-the-art technology for several product and packaging types were carried out during the year. These initiatives have further improved the speed to market for successful launches and augmented the innovation pipeline of the Business. Further, Long Term Agreements were concluded successfully with the unionized workforce at the Bengaluru and Ranjangaon cigarette factories.

It is extremely satisfying to report that the Business continues to be recognized for its leadership role and commitment towards excellence, sustainability and HR practices. The Bengaluru factory was conferred the ‘Sustainable Factory of the Year’ award by Frost & Sullivan and The Energy & Resource Institute (TERI).

The factory has also been recertified as an IGBC Platinum Rated Green Factory Building with the highest score in India. The Saharanpur factory was awarded the First Prize under the ‘FICCI Safety Systems Excellence Awards for Industry 2017’. The Munger factory was honoured with the ‘Excellent Energy Efficient Unit’ award at the 18th National Award for Excellence in Energy Management 2017. The Kidderpore cigarette factory was the recipient of the ‘Safety Innovation Award’ by The Institution of Engineers (India). Your Company was also conferred two awards by the Association for Talent Development (ATD) and another one by Employees Federation of India (EFI) for excellence in HR practices.

A punitive and discriminatory taxation regime along with ever increasing regulatory pressures and the unabated growth in illegal trade will continue to pose several challenges in the year ahead. Your Company will continue to engage with policy makers for a tobacco taxation and regulatory policy that is non-discriminatory, helps combat the menace of illegal cigarettes and addresses the issues of all stakeholders, particularly tobacco farmers, Exchequer and consumers. Such a policy will not only help maximization of the revenue potential of tobacco even in a shrinking basket of tobacco consumption but also address the tobacco control and health objectives of the Government. Your Company remains confident that despite the severe pressures, the trust and faith reposed by the consumers coupled with the Company’s robust product portfolio, world-class quality, innovation in processes, investments in cutting-edge technology and superior execution of competitive strategies will enable it to retain its pole position and reinforce its market standing in the years to come.

FMCG - Others

The FMCG industry faced another challenging year with demand conditions remaining sluggish for the fifth year in a row. The slowdown in the broader economy, as reflected by the marked deceleration in Nominal GDP and private consumption expenditure growth, headwinds in rural demand and supply chain disruptions during the transition to the GST regime was manifest in your Company’s operating segments in the FMCG space. The year also witnessed commodity prices settling at an elevated level, exerting pressure on margins. While it is anticipated that the FMCG industry will take a few more quarters for demand revival to play out fully, the green shoots of economic recovery and expectations of normal monsoons augur well for the industry. The structural drivers of long-term growth such as increasing affluence and consumer awareness, a young and expanding workforce, increasing urbanization, Government’s thrust on infrastructure development and the rural sector, implementation of GST amongst others, remain firmly in place and the FMCG industry is poised for rapid growth in the ensuing years.

Despite the challenging conditions prevailing during the year, your Company’s FMCG-Others Businesses’ Segment Revenue at Rs, 11329 crores grew ahead of industry and recorded an increase of 11.3% (on a comparable basis) on a relatively firm base. It is pertinent to note that while the second half of 2016-17 witnessed reduced consumer off take and trade pipelines in the wake of adverse liquidity conditions, your Company’s FMCG-Others Businesses were relatively less impacted. Most major categories enhanced their market standing during the year. While ‘Bingo!’ snacks, ‘Aashirvaad’ atta and ‘Dark Fantasy Choco Fills’ premium cream biscuits were the key drivers of growth in the Branded Packaged

Foods Businesses, ‘Engage’ deodorants, ‘Vivel’/‘Fiama’ soaps & shower gels and ‘Savlon’ hand wash fuelled strong growth in the Personal Care Products Business. The Education and Stationery Products Business posted a robust performance during the year led by ‘Classmate’ notebooks, which consolidated its leadership position in the industry. However, the performance of the Lifestyle Retailing Business remained sluggish mainly on account of an early and prolonged ‘end-of-season’ sale in the wake of disruption to the trade during transition to GST and ongoing structural interventions to enhance operating efficiencies. Segment Results for the year improved to Rs, 164 crores from Rs, 28 crores in 2016-17 driven by enhanced scale, product mix enrichment and strategic cost management initiatives after absorbing the impact of sustained investment in brand building, gestation costs of new categories viz. Juices, Dairy, Chocolates and Coffee and costs associated with the ongoing structural interventions in the Lifestyle Retailing Business.

Your Company continued to make investments during the year towards enhancing brand salience and consumer connect while simultaneously implementing strategic cost management measures across the value chain. Several initiatives were also implemented during the year towards leveraging the rapidly growing e-commerce channel with a view to enhancing the reach of your Company’s products and harnessing digital and social media platforms for deeper consumer engagement.

During the year, your Company commissioned two world-class Integrated Consumer Goods Manufacturing and Logistics Units (ICMLs) at Panchla, West Bengal and Kapurthala, Punjab. Significant progress was also made in constructing several other state-of-the-art owned ICMLs across regions to secure capacity and enable the FMCG Businesses to rapidly scale up in line with long-term demand forecast. Currently, over 15 projects are underway and in various stages of development - from land acquisition/site development to construction of buildings and other infrastructure. The Businesses are focussing on deploying ‘Industry 4.0’ technologies including advanced analytics, big data and industrial Internet of Things (IoT) in areas such as overall equipment efficiency, energy management, maintenance, downtime analysis, quality and traceability.

The FMCG Businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years.

Today, your Company’s vibrant portfolio of brands represents an annual consumer spend of nearly Rs, 16000 crores in aggregate. These brands have been built organically by your Company over a relatively short period of time - a feat unparalleled in the Indian FMCG industry. In terms of annual consumer spend, ‘Aashirvaad’ is today over Rs, 4000 crores; ‘Sunfeast’ over Rs, 3500 crores; ‘Bingo!’ over Rs, 2000 crores;

‘Classmate’ and ‘YiPPee!’ over Rs, 1000 crores each and ‘Vivel’, ‘Mangaldeep’ and ‘Candyman’ over Rs, 500 crores each. These world-class Indian brands support the competitiveness of domestic value chains of which they are a part, ensuring creation and retention of value within the country.

Your Company’s FMCG brands have achieved impressive market standing in a relatively short span of time. Today, Aashirvaad is No. 1 in Branded Atta, Bingo! is No. 1 in Bridges segment of Snack Foods (No.2 overall), Sunfeast is No. 1 in the Premium Cream Biscuits segment, Classmate is No. 1 in Notebooks, YiPPee! is No. 2 in Noodles, Engage is No. 2 in Deodorants (No. 1 in women’s segment) and Mangaldeep is No. 2 in Agarbattis (No. 1 in Dhoop segment).

Your Company remains extremely agile and responsive to the emerging trends shaping the future of the industry. Some of the noteworthy consumer trends include the emergence of health and wellness products as a key consumer need; increasing preference for products rooted to ‘Indianness’ and with regional/cultural connects; increasing need for customized products and bespoke experiences; growth in demand for ‘on-the-go’ consumption formats and rising influence of social media and digitalization on consumer preferences and shopping behavior. Similarly, the FMCG market construct is likely to undergo rapid change driven by exponential growth in tier - II/III towns and rural India and the emergence of relatively new channels such as Modern Trade and e-commerce.

The Indian FMCG market is at an inflection point and your Company seeks to rapidly scale up the FMCG Businesses leveraging its institutional strengths viz. deep consumer insight, proven brand building capability, agri-commodity sourcing expertise, cuisine knowledge, strong rural linkages, a deep and wide distribution network and packaging know-how. In addition, your Company continues to make significant investments in Research & Development, focus on consumer insight discovery and harness digital technology to develop and launch disruptive and breakthrough products in the market place.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Demand conditions in the Branded Packaged Foods industry remained sluggish during the year due to slowdown in private consumption expenditure growth and supply chain disruptions during the transition to GST. The year was marked by heightened competitive intensity with industry players resorting to aggressive consumer promotions and trade schemes in a bid to garner volumes.

Against the backdrop of a challenging operating environment as foretasted, your Company sustained its position as one of the fastest growing branded packaged foods businesses in the country leveraging a robust portfolio of brands, a range of distinctive products customized to address regional tastes and preferences along with an efficient supply chain and distribution network that ensures benchmark levels of visibility, availability and freshness of products in the market. The Business implemented several initiatives encompassing cost management, supply chain optimization, smart procurement and recipe optimization which helped in mitigating the escalation in input costs and enhancing profitability.

Your Company’s Branded Packaged Foods Businesses continued to make significant investments towards brand building and supporting the launch of new variants apart

from absorbing the gestation costs of new categories viz. Dairy, Juices, Chocolates and Coffee.

Your Company’s vibrant and successful food brands such as ‘Aashirvaad’, ‘Sunfeast’, ‘Bingo!’, ‘YiPPee!’ and ‘B Natural’ amongst others, enable strong forward linkages for domestic agri-value chains, thereby enhancing their competitiveness and making a meaningful contribution to boost farmer earnings.

Relentless focus on delivering superior quality products to consumers remains a key source of competitive advantage for the Branded Packaged Foods Businesses. In this context, the Businesses continue to leverage your Company’s agri-commodity sourcing expertise to procure high quality raw materials thereby ensuring the highest level of quality and safety of its products.

In addition, each of your Company’s branded packaged food products is manufactured in HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms.

The Business launched several innovative, distinctive and first-to-market products during the year leveraging robust product development processes, the capabilities of your Company’s Life Sciences and Technology Centre and the cuisine expertise resident in your Company’s Hotels Business.

Several manufacturing units of your Company’s Branded Packaged Foods Businesses, competing with both the best within and outside the industry, received several awards and accolades during the year bearing testimony to your Company’s focus on manufacturing excellence, safety and quality.

Your Company continues to make investments towards augmenting the manufacturing and sourcing footprint across categories with a view to improving market responsiveness and reducing the cost of servicing proximal markets. During the year, two new owned manufacturing facilities - Kapurthala in Punjab and Panchla in West Bengal - were commissioned while capacity utilization was progressively scaled up at the Uluberia, Mysuru and Guwahati units that commenced operations in the second half of FY17. Plans are on the anvil to commission new lines at the Kapurthala, Panchla and Guwahati facilities in the ensuing year. The manufacturing unit at Pudukkottai, Tamil Nadu is at an advanced stage of completion and is expected to be commissioned shortly.

- The Staples Business posted robust performance during the year, growing well ahead of the industry. In the Staples category, Aashirvaad atta posted healthy growth and fortified its leadership position while maintaining its pricing premium in the market. The value-added product portfolio, comprising Multigrains, Select and Sugar Release Control atta, continued to record robust growth.

This was achieved despite increasing competitive pressures triggered by the imposition of 5% GST on branded atta (compared to nil VAT in most States under the erstwhile tax regime) while non-branded atta (incl. branded atta on which actionable claim or enforceable right has been foregone voluntarily) remained at nil duty. During the year, the Business also had to contend with a concerted attack on Aashirvaad atta on social media with rumour mongers circulating malicious videos and falsely alleging that Aashirvaad atta contains plastic.

The Business launched a 360 degree campaign to reassure consumers and dispel the baseless rumours surrounding Aashirvaad atta.

The communication clearly highlighted that as per FSSAI standards, atta must contain not less than 6% of wheat protein on a dry weight basis and that elasticity is a natural property of the protein without which it is not possible to bind the atta. Simultaneously, complaints were filed with the police authorities and injunction orders restraining circulation of such videos on social media were also obtained from the civil court. These interventions helped in effectively mitigating the short-term impact of the malicious videos on sales momentum, with the brand staging progressive recovery subsequently.

Your Company takes utmost care in manufacturing of its products at HACCP/ISO-certified manufacturing locations ensuring compliance with all applicable laws and adherence to the highest quality norms. Powered by the trust reposed by over 2.5 crore households, your Company is confident of sustaining Aashirvaad’s position as India’s No. 1 atta brand going forward.

Supported by its new positioning, ‘Created by Sun and Sea - pure just like nature intended it to be’ and new pack design, Aashirvaad Salt posted robust performance during the year. In the branded Spices category, the Aashirvaad range of spices registered steady volume growth. In line with its commitment to deliver products with the highest quality and safety standards to Indian consumers, the Business continued to reinforce the value proposition of the recently launched ITC Master Chef ‘Super Safe Spices’, which are tested for over 470 pesticide residues in accordance with European standards as compared to only nine required under Indian regulations.

- In the Snacks and Meals Business, the Bingo! range of snacks recorded robust growth during the year driven by Tedhe Medhe and potato chips.

The Business achieved market leadership on an All-India basis in the Bridges segment driven by a robust portfolio of products under the Tedhe Medhe, Mad Angles and Tangles sub-brands. The potato chips portfolio recorded impressive market share gains and emerged as the leader in the South markets leveraging an optimized portfolio, revamped pack and fresh communication. During the year, the Business forayed into the extruded snacks segment with the launch of ‘No Rulz’ - a-first-of-its-kind offer comprising four different shapes of the product in a single pack. The product has received excellent response and continues to gain traction with consumers. The Bingo! range was augmented during the year with the launch of several variants customized for regional taste palates, viz. Mad Angles Kolkata Kasundi, Tedhe Medhe Lime Chatpata, Tomato Masti and Pudina Twist.

In the Instant Noodles category, YiPPee! noodles sustained its robust growth momentum during the year despite increasing competitive intensity including from several regional discount players. The year also saw the launch of ‘Mood Masala’ - an innovative variant comprising two masala mix sachets in a pack providing the consumer the option to add masala to ‘match his mood’. Mood Masala received encouraging consumer response, further strengthening the brand imagery of YiPPee! amongst tweens and young adults.

- The Confections Business scaled up operations and improved its market standing during the year. In the Biscuits category, the Business continued to focus on premiumising its product portfolio, enhancing brand affinity, strengthening the supply chain and expanding distribution reach. Consistent and impactful communication, coupled with focused marketing inputs helped improve penetration and brand health metrics. Dark Fantasy Choco Fills sustained its clear market leadership position in the Super-Premium Creams segment across the country. Brand architecture in the biscuits category was optimized with the migration of Delishus & Yumfills under the Mom’s Magic and Dark Fantasy brands respectively. The Business augmented its product portfolio in the health segment with the launch of Protein Power, a unique variant based on roasted Bengal gram flour and Digestive five grains biscuits under the Farmlite brand. The Mom’s Magic range was expanded with the addition of ‘Fruit & Milk’ variant. Your Company continues to leverage the biscuits manufacturing unit owned by North East Nutrients Private Limited, a joint venture company, to record impressive gains in market standing in the North East markets.

In the Confectionery category, in line with its strategy of premium sing the portfolio, the Business launched several unique offers in the ‘Re. 1 & above’ price points including Cola Josh, Crunchy and Clear Candy under the Candyman brand, Jelimals Sour Slides and two exciting variants under the ‘mint-o’ brand. These products have received encouraging consumer response.

- In the Dairy & Beverages Business, the ‘B Natural’ range of juices continues to gain traction amongst its target consumers aided by a clutter-breaking media campaign, on-ground trial generation initiatives and visibility & availability enhancement drives.

The journey towards making juices concentrate-free, which commenced last year with the launch of ‘B Natural 100% Pomegranate Juice’, continued during the year with the entire range of B Natural juices being migrated to the ‘not from concentrate’ platform. This first-of-its-kind initiative in India, was anchored on the twin resolve to provide consumers a more nutritive and natural tasting experience and promote the use of fruit pulp procured from Indian farmers, thereby supporting the Indian farm and food processing sector. The Business also introduced ‘Bael’ and ‘Phalsa’ variants during the year catering to regional tastes and preferences which were well received by consumers. In the Dairy segment, ‘Aashirvaad Svasti’ Ghee was extended to Delhi NCR markets during the year, gaining healthy consumer traction. During the year, the Business also forayed into the Pouch Milk segment with the launch of ‘Aashirvaad Svasti’ milk in select markets in Bihar in the vicinity of your Company’s Munger dairy plant.

- In the Chocolates category, the ‘Fabelle’ range of luxury chocolates was scaled up during the year with a view to redefining the luxury chocolate segment in India. The range is available in eight Fabelle Chocolate Boutiques located within ITC hotels and several outlets in premium malls and food stores. Product portfolio was augmented with the launch of two delectable variants of centre-filled chocolate bars - ‘Hazelnut Mousse’, & ‘Dark Choco Mousse’ which have received excellent response from discerning consumers. Towards deepening engagement with consumers, the Business launched a unique experience platform during the year christened - ‘Fabelle Societe de Chocolat’ - across

Fabelle boutiques with Ms. Billie McKay, winner of MasterChef Australia 2015, as the mentor. ‘Sunbean’ gourmet coffee, launched across all ITC Hotels last year, continues to receive excellent response from discerning consumers and plans are on the anvil to scale up presence in the ensuing years.

Your Company remains focused on establishing itself as the ‘most trusted provider of food products in the Indian market’ driven by superior product quality, a differentiated product portfolio, deep understanding of consumer needs and preferences, R&D, innovation and operational excellence across the value chain. Your Company will continue to make investments towards establishing a distributed manufacturing footprint, driving cost efficiencies in a structural manner and focus on supply chain optimization to support the rapid and profitable growth of the Branded Packaged Foods Businesses in the years ahead.

Personal Care Products

Your Company’s Personal Care Products Business delivered a robust performance and enhanced its market standing during the year against a backdrop of significant disruption to trade and supply chain following the roll out of GST. This was driven largely by sustained focus on innovation, product mix enrichment, expansion of distribution reach, proactive cost management and enhancing supply chain responsiveness.

The Business continued to focus on innovation and to delight consumers by launching a range of exciting offerings during the year. In the Fragrance category, the recently launched innovative perfume variants under the brand ‘Engage ON’ and ‘Engage ON ’, designed to drive on-the-go consumption, garnered robust consumer traction. The Business also launched a Sport range of deodorants with long lasting fragrance and a selection of premium Eau de Parfums for both men and women. In the Personal Wash category, the Business introduced a unique Gel Creme range under the ‘Fiama’ brand combining the best of gel and cream for both soap and liquid bathing products, and Vivel Lotus Oil - a unique offering enriched with Lotus Oil and Vitamin E for soft glowing skin. ‘Savlon’ handwash continued to gain ground, with the launch of a new small pack at an attractive price point.

These new innovations received excellent response from consumers during the year and were supported with refreshing communication and engaging consumer activations.

Your Company’s key brands, namely Vivel, Engage and Savlon continue to gain salience with target consumers and win industry recognition.

The Business continued to leverage innovative brand campaigns and social media platforms towards deepening consumer engagement. The recent interventions of restaging key brands anchored on Women Empowerment in the case of Vivel and Healthier Kids, Stronger India in the case of Savlon have received positive response from consumers resulting in a pick-up in sales momentum. Savlon won seven Cannes Lions Awards at the coveted Cannes Lions 2017. Considered to be the highest global accolade that recognises creative excellence in advertising and communications, Savlon won the prestigious awards for its unique and innovative ‘Healthy Hands Chalk Sticks’ initiative.

The ‘Healthy Hands’ initiative also received the Global PR SABRE as one of the Top 10 Best PR campaigns in the world. Vivel’s proposition of empowerment of women through its ‘Ab Samjhauta Nahin’ message, won

certificates of excellence at the South Asia PR SABRE awards for its integrated campaign thought and initiatives. ‘Engage’ won a Gold at Abby (India’s biggest advertising and creative award) for its social and digital campaign christened ‘Pocketful O’ Stories’. The ‘Engage’ campaign designed to introduce the Engage ON pocket perfume on social media also won two Golds at the Content Marketing Awards, South Asia for Best Use of contextual content and Best Use of Digital (Content).

‘Engage’ recorded impressive gains in the Fragrance category, consolidating its leadership position in the women’s segment and No. 2 position overall. The roll out of innovative pocket perfumes, Sport range of deodorants and the Eau de Parfums range have helped the brand grow its consumer equity significantly among both men and women besides premium sing the portfolio. ‘Savlon’ hand wash recorded significant gains during the year across brand health metrics and emerged as the fastest growing brand in the market. In the body wash segment, the ‘Fiama’ range of shower gels continued to garner increasing consumer franchise and is the fastest growing and the second largest brand nationally. The Business also launched moisturizing skin creams under the recently acquired ‘Charmis’ brand and plans are afoot to strengthen your Company’s skincare portfolio in the near to medium term.

During the year, your Company’s manufacturing facility in the North East, which was commissioned in March last year, achieved 90% capacity utilization within a short period of time. This has led to strengthening the supply chain and has enabled efficient servicing of proximal markets in the North East.

Input prices remained stable in the first half of the year, with an uptick in the latter half. The Business continued to pursue strategic cost management initiatives including product cost optimization through innovation, proactive sourcing, alternative vendor development and value capture through supply chain efficiencies which resulted not only in containing inflation but also in enhancing profitability.

Your Company continues to strengthen its presence in the Personal Care space in view of the robust long-term prospects of the industry given the low levels of per capita consumption currently, rising disposable incomes, increasing urbanization and growing consumer preference for enhanced personal grooming. Your Company is well positioned to seize the emerging opportunities and continues to invest in creation of vibrant brands, innovative consumer-centric products and a robust supply chain to emerge as a significant player in this space.

Education and Stationery Products

The Stationery industry was impacted during the year with the roll out of GST coinciding with the school opening season and trade operating with lower inventory levels due to uncertainties around the new tax regime. Despite these challenging conditions, the Business sustained its leadership position in the Indian Education and Stationery Products industry anchored on a portfolio of world-class products and brands.

The Business continued to leverage its dedicated product development cell and your Company’s Life Sciences & Technology Centre to develop & launch innovative and superior products in the market. During the year, the product portfolio was augmented with the launch of several new products including a spiral range of notebooks under Classmate, Classmate All Purpose Paper, ‘Archimedes’ premium geometry boxes with ‘spur gear’ divider and compass for higher precision and several offerings in the pens, mechanical pencils and scholastics categories. The Business also scaled up presence in the value segment of the notebook industry through its brand ‘Saathi’ with a view to consolidating its leadership position.

During the year, the Business launched ‘Classmateshop.com’ - a first-to-market initiative that offers consumers the option to personalize the images to be printed on notebook covers. The Business continued to focus on enhancing brand affinity by leveraging the ‘Classmate Spellbee’ and ‘Classmate Handwriting Competition’ platforms. These competitions collectively reach out to nearly a million children across 1000 schools in 30 cities.

The ‘Be Better Than Yourself’ campaign launched during the year under the Classmate brand across television, out-of-home, digital and social media platforms hit the right note with consumers, receiving positive reviews. The campaign seeks to drive tangible changes in society by encouraging children to realize their full potential by pursuing their personal goals and ambitions rather than comparing them with peers in terms of their marks and other achievements. The campaign has helped generate conversations amongst parents on this critical topic and garnered over seven million views across social media platforms.

In the area of supply chain, initiatives on quality and cost management through network optimization yielded superior product quality and enhanced operational efficiency. The thrust on expanding distribution continued with specific focus on institutional channel and enhancing market penetration and outlet coverage. Sales and distribution systems were strengthened further through technology interventions such as sales force automation and Customer Relationship Management system for the institutional channel.

Classmate and Paper raft notebooks leverage your Company’s world-class fibre line at Bhadrachalam - India’s first ozone treated elemental chlorine free facility - and embody the environmental capital built by your Company in its paper business. During the year, the Business scaled up the Paper raft range of notebooks using Forest Stewardship Council (FSC) certified paper, made at your Company’s paper mill, matching the best quality paper in the world.

The Indian Education and Stationery Products industry is poised for exponential growth driven by growing literacy, increasing enrolment ratios, government’s thrust on the education sector through various policy initiatives like Sarva Shiksha Abhiyan, Right to Education etc. and a favourable demographic profile of the country’s population. Your Company, with its strong brands and robust product portfolio, and collaborative linkages with small & medium enterprises is well poised to strengthen its leadership position in the Indian stationery market.

Lifestyle Retailing Business

2017-18 was another challenging year for the Branded Apparel industry. Transition to GST regime triggered a premature end to the Spring Summer 2017 season with most players announcing an early ‘end-of-season’ sale period which was extended in a bid to liquidate pre-GST merchandise. On the other hand, e-commerce players continued with their aggressive push to capture market share amongst value seeking consumers by offering heavy discounts and launching exclusive labels and brands. The performance of your Company’s Lifestyle Retailing Business was adversely impacted against the backdrop of the challenging environment as foretasted.

The Business continued to execute the structural interventions initiated in the previous year across channels and processes including restructuring the retail foot print, rationalization of stores, modifying the design language of its offerings, restructuring of terms of trade with business partners and sharpening working capital management. The Business refreshed the offers under Wills Lifestyle and John Players adopting a unique ‘Story-based Looks creation’ approach.

This initiative entailed re-crafting the merchandise range architecture, channel specific offerings and special focus on enhancing the portfolio of core merchandise. Distinct and time bound colour stories were introduced aimed at providing freshness to consumers in the retail stores on a continual basis.

The ‘Wills Lifestyle’ range was augmented during the year with the launch of pure superfine linens and flat knits. The brand is available in 350 outlets across multiple channels including national and regional large format stores, exclusive and multi-brand outlets including six exclusive boutique stores across ITC Hotels.

The John Players brand is available at around 750 points-of-sale across leading national and regional department stores, exclusive stores and multi-brand outlets. During the year, the range was made more vibrant and distinct with the launch of outdoor smart casual products made of innovative fabrics. The John Players Jeans range was strengthened by using unique knitted structure fabrics in denims with differentiated washes, laser printing, travel jeans with mobile charger pockets, trendy joggers in camouflage prints, Indigo shirts in checks, prints & dobbies and youthful trendy polo range in indigo, engineered designs & stretch fabrics.

During the year, the Business enhanced its core portfolio, augmented marketing activities including windows and visual merchandising, improved manufacturing productivity and efficacy of replenishment mechanisms. Analytics based on ERP and point-of-sale systems enabled enhancing consumer experience besides further strengthening inventory and receivables management.

The Business will continue to sharpen its design focus, market representation and supply chain responsiveness with a view to improving operating efficiency going forward.

Incense Sticks (Agarbattis) and Safety Matches

The Agarbatti category witnessed increase in competitive intensity during the year with industry players resorting to aggressive media and promotion spends in a bid to garner market share. The continued presence of counterfeit products and supply chain disruptions due to transition to GST also weighed on industry performance. Against the backdrop of these challenging conditions, Mangaldeep sustained its position as the leader in the Dhoop segment and the second largest brand in the Agarbatti segment. During the year, the Business augmented its product portfolio with the launch of new variants and enhanced its distribution reach. Investments in media coupled with on-ground activation activities were made during the year towards enhancing Mangaldeep’s salience as the most preferred brand in the devotional space. Product mix enrichment and cost optimization initiatives continued to be the other key focus areas for the Business.

During the year, the Business upgraded its unique and highly innovative Mangaldeep App in partnership with

several subject matter experts with the introduction of new features which were carefully curated to cater to regional nuances. Currently available in nine languages on both the Android & iOS platforms, the App’s content caters to the everyday devotional needs of consumers by providing detailed information and steps to perform various pujas and has innovative features such as a collection of popular devotional songs, a panchang (Hindu calendar and almanac), an innovative chant counter and temple locator amongst others. The App has received excellent response with over 3,00,000 downloads and an average rating of 4.6 out of 5.0.

The Agarbatti industry continues to import raw battis primarily from Vietnam and China, although bamboo and charcoal - the principal raw materials - are available in India in plenty. This is resulting in loss of livelihood creation opportunities for women and tribals in rural areas, particularly in the North East. In this regard, the recently announced restructured National Bamboo Mission which seeks to bring more than 1,00,000 hectares under plantation and amendment in the Indian Forests Act excluding bamboo grown in non-forest areas from the definition of a ‘tree’, will inter alia encourage manufacture of raw battis from indigenous bamboo and facilitate creation of sustainable livelihood opportunities amongst small and marginal farmers.

In line with your Company’s commitment to enhancing the competitiveness of Indian value chains linked to its operations, the Business has implemented several measures including facilitating the mechanization of agarbatti manufacturing and backward integration into raw batti manufacturing using indigenous inputs at vendor locations.

While demand conditions remained sluggish during the year in the Safety Matches category, the Business sustained its leadership position by leveraging a robust portfolio of offerings across market segments.

The Business focused on enriching its product mix by enhancing the share of value-added products in the portfolio. ‘AIM’ continues to be the largest selling brand in the industry.

Introduction of GST has led to the harmonization of tax rates in the Safety Matches industry by eliminating the tax differential that existed under the erstwhile indirect tax regime between semi-mechanised and mechanized operations. This, coupled with the effective implementation of the recently introduced E-way bill, is expected to facilitate levelling the playing field and in triggering the required investments towards modernizing and enhancing the long-term sustainability and competitiveness of the industry.

Trade Marketing & Distribution

Your Company’s Trade Marketing & Distribution (TM&D) vertical has over the years developed critical insights into customer behavior and channel-specific trends in the FMCG industry. Given the diverse needs of your Company’s FMCG businesses, the TM&D vertical has crafted a differentiated and comprehensive market/outlet specific strategy to address the opportunities in the FMCG industry.

During the year, the TM&D vertical strengthened its formidable distribution network covering over one lakh markets and over six million retail outlets (directly and indirectly) across various trade channels. This further enhanced the reach and availability of your Company’s large and diverse FMCG product portfolio comprising several world-class brands and hundreds of SKUs.

In urban markets, your Company continued its customized servicing / engagement programmes for the top outlets through dedicated infrastructure.

This resulted in enhancing trade relationships and improving the market standing of your Company’s FMCG products. In rural markets, your Company continued to roll out market specific interventions including augmentation of supervision structure and increase in direct coverage, to achieve growth rates higher than industry and support enhanced scale of operations going forward.

During the year, your Company sustained its leadership position in the convenience channel while consolidating its market standing in premium grocery outlets. TM&D’s trade loyalty programmes - ‘First Club’ for retail outlets and ‘Shubh Laabh’ for the wholesale channel - continued to gain traction during the year. Sales of your Company’s FMCG products in the Modern Trade channel continued to grow on the strength of extensive deployment of in-store merchandisers, consumer connect programmes coupled with joint business planning during large-scale customer activation drives, channel specific SKUs, extensive sampling initiatives etc. Your Company continued to make progress during the year in scaling up presence of your Company’s FMCG portfolio in the chemist channel. Your Company worked closely with leading e-commerce companies towards enhancing the availability of its products on their online platforms, aiding sell-out through enhanced visibility and strengthening operational capabilities to service customer requirements. As a result of these initiatives, your Company’s business in the e-commerce segment witnessed robust growth during the year.

The scale and diversity of your Company’s distribution network continues to be a critical lever to enhance market presence, gain valuable consumer/trade insights and facilitate seamless execution of new product/category launches. During the year, TM&D executed more than 60 new launches across geographies apart from extending distribution reach of several existing products in the portfolio. Technology enablement in the form of customized mobility solutions, data analytics comprising insightful visualization tools & predictive analysis are being leveraged increasingly towards enabling quick and accurate data capture, informed decision making and scientifically designing trade promotion schemes.

TM&D’s supply chain and logistics function continues to play a vital role in enabling superior market servicing while continuously reducing cost of market servicing. During the year, several initiatives were undertaken to enhance supply chain responsiveness and cost competitiveness. These include reducing distance to market, enhancing flexibility to cater to new launches and contingencies, and reconfiguring market servicing infrastructure. In addition, innovative distribution models were implemented to optimize inventory holding and improve distribution efficiency of trade channel partners, and reduce transit time by increasing direct market servicing. Your Company is also in the process of setting up several state-of-the-art warehouses co-located with the Integrated Consumer Goods Manufacturing facilities. These modern warehouses are expected to provide long-term benefits by improving operating efficiency and enhancing product freshness in the market.

During the year, the TM&D vertical proactively engaged with its trade partners to help them re-engineer their business processes to be compliant with GST requirements besides continuing to collaborate with them to improve the frequency of servicing, reduce inventory holding and the incidence of out-of-stock situations.

TM&D continues to invest in augmenting the depth and width of your Company’s distribution network while adopting a differentiated approach to address the unique needs of your Company’s diverse FMCG product portfolio, market segments and trade channels.

With its best-in-class systems and processes, agile and responsive supply chain and synergistic relationship with trade, TM&D’s distribution highway is a source of sustainable competitive advantage for your Company’s FMCG Businesses and is well poised to support the rapid scale up of operations in the ensuing years.

HOTELS

The operating environment in the hospitality sector showed signs of improvement with foreign tourist arrivals crossing the ten million mark in 2017. While growth in Segment Revenue during the year was subdued at 5.6% reflecting inter alia the overhang of excess room inventory and the impact of highway liquor ban, performance during the second half was significantly better driven by increase in ARR and robust growth in Food & Beverage revenue. Improvement in room rates and operating leverage aided faster growth of 26% in Segment Results, notwithstanding the gestation costs of ITC Grand Bharat and the recently commissioned Welcome Hotel Coimbatore.

Your Company’s Hotels business remains amongst the fastest growing hospitality chains in the country with over 104 properties under four distinct brands - ‘ITC Hotel’ in the Luxury segment, ‘WelcomHotel’ in the Upper-Upscale segment, ‘Fortune’ in the Mid-market to Upscale segment and ‘WelcomHeritage’ in the Leisure & Heritage segment. The Business continues to focus on strengthening the equity and differentiation of the ITC Hotels brand anchored on unique and path-breaking ‘Responsible Luxury’ initiatives, culinary excellence and personalisation of guest services through hotels that are the truest representation of the region’s culture and ethos.

‘Club ITC’, your Company’s pan-ITC consumer loyalty programme, continues to gain franchise amongst the premium clientele of ITC hotels and Wills Lifestyle. The programme continues to leverage its strategic partnership with Starwood Preferred Guest (SPG) - the global loyalty programme of Marriott International. The dining loyalty programme, ‘Club ITC Culinaire’, has grown rapidly in popularity registering robust growth in membership base during the year.

During the year, the Business further strengthened its digital presence through targeted e-commerce activations for direct conversions, leading to increased reach and engagement with customers in both domestic and international markets. The Business also focused on social media marketing and online reputation management towards enhancing brand salience and market standing. During the year, the Business rolled out a chain-wide #soulofcity campaign, amplifying its brand proposition of ‘Hotels that define the destination’, generating appx. 4.4 million impressions. The Business received global accolades and recognition at The Global Social Hotel Awards for ‘Best Use Of A Visual Network’ and ‘2nd Best Online Reputation Management’ for 2017.

The world-class ambience of your Company’s luxury hotels continues to be leveraged for the gourmet luxury chocolates range under the ‘Fabelle’ brand with exclusive boutiques across eight ITC hotels. In addition to selling premium packaged chocolates from the Branded Packaged Foods Business, the Fabelle chocolate boutiques offer a range of exquisitely crafted desserts and cocoa beverages, created live by Fabelle Master Chocolatiers. The initiative has received encouraging response and will go a long way in establishing the Fabelle brand at the luxury end of the market.

The Fabelle Societe de Chocolat, an exclusive

chocolate-making programme designed by the master chocolatiers of Fabelle chocolates at ITC luxury hotels, provides chocolate lovers and budding chocolatiers an opportunity to foster the love for chocolate and appreciate the fine nuances of chocolate making.

The initiative has received excellent response from discerning chocolate consumers and is planned to be scaled up in the ensuing year.

‘Sunbean’ gourmet coffee, launched last year, established itself as the beverage of choice in your Company’s luxury hotels. The bespoke brand experience was brought alive for the guests through ‘Sunbean Ambassadors’ - specially trained master baristas who demonstrated the brand story, supported by delightful creations.

Your Company’s Hotels Business sustained its pre-eminent position in the hospitality industry receiving several coveted accolades and recognitions during the year. ITC Hotels featured as the ‘Sectoral Leader’, for the fourth time in the Business World ‘Most Respected Companies’ listing. The Travel Leisure magazine acknowledged the chain as the ‘Best Luxury Hotel Chain’ at the ‘India’s Best Awards’. The U.S. Green Building Council presented ITC Hotels with a ‘Leadership Award’ for its commitment to Green Building Design. The Responsible Luxury Fellowship enumerating ITC Hotels’ guiding principles through video blogs won the brand the ‘Best Digital Video’ award by HOTELS magazine USA. Your Company’s world-class properties continued to receive international and domestic accolades - ITC Grand Bharat was ranked amongst the Top 10 resorts in Asia by Conde Nast Traveler USA and the ‘Best Luxury Hotel’ by Travel Leisure India & South Asia, while ITC Maurya was adjudged the ‘Most Eco Friendly Hotel’ by the Ministry of Tourism at the National Tourism Awards.

| In view of the long-term potential of the I remains committed to enhancing th

The Food & Beverage segment continues to be a major strength of your Company’s Hotels Business with some of the most iconic brands in the country. Your Company’s culinary brands retained their leadership position with ‘Bukhara’, ‘Dum Pukht’, ‘Royal Vega’, ‘Dakshin’, ‘Avartana’, ‘K&K’, ‘Ottimo’, ‘EDO’, ‘Pan Asian’ and ‘West View’ receiving the coveted Times Food Awards. ‘Avartana’, a Southern Indian mosaic brand at the ITC Grand Chola was recognized as the ‘Best Restaurant’ in Chennai at the Times Food Awards, within the first year of its opening. ‘Fabelle’ swept the Times Food Awards as the ‘Best Confectionery Destination in the Fine Dining category’ in Mumbai, New Delhi, Bengaluru and Chennai & the ‘Best Chocolatier’ in Kolkata.

Your Company’s internationally acclaimed spa brand, ‘Kaya Kalp’ was recognized at the GEOSPA Asia Spa India Awards with the ‘Most Luxurious Spa Resort’ award for ITC Grand Bharat and ‘Best Hotel Spa’ award for ITC Grand Chola.

Your Company’s Hotels Business continuously strives to reduce water and energy consumption and enhance the usage of renewable energy to meet its overall energy requirements. Such commitment to the Triple Bottom Line is manifest in the Business’s ‘Responsible Luxury’ ethos making it a trailblazer in green hoteliering globally. Over 60% of the total electrical energy consumption of the Business is currently met through renewable sources.

In view of the long-term potential of the Indian hospitality sector, your Company remains committed to enhancing the scale of the Business by adopting an ‘asset-right’ strategy that envisages building world-class tourism assets for the nation and growing the footprint of managed properties by leveraging its hotel management expertise. The Business made steady progress during the year in the construction of luxury hotels at Hyderabad, Kolkata and Ahmadabad. Construction of ITC Kohenur in Hyderabad is nearing completion and is expected to be commissioned in the first quarter of 2018-19.

In addition, your Company’s wholly-owned subsidiary in Sri Lanka made steady progress towards setting up a luxury hotel christened ‘ITC One’ and a super-premium residential apartment complex, ‘Sapphire Residences - Colombo 1’, situated at a strategic location in Colombo.

In the Upper-Upscale segment, the ‘WelcomHotel’ brand continues to build on its ‘asset-right’ strategy with its distinctive ‘charmingly local’ positioning. During the year, the Business commissioned the 103-room WelcomHotel Coimbatore and expanded presence in business and leisure destinations adding managed properties in Chennai, Bengaluru, Pahalgam and Mussoorie. The Business seeks to scale up the brand going forward with the addition of new hotels under construction at Amritsar, Guntur and Bhubaneswar along with a robust pipeline of managed properties.

The ‘Fortune’ brand sustained its pre-eminent position in the Mid-market to Upscale segment, with a sharpened brand positioning of ‘First class, full service hotels - an affordable alternative’. The Fortune brand presently comprises 45 hotels across 37 cities. The ‘WelcomHeritage’ brand remains the country’s most successful and largest chain of heritage hotels with 34 operational hotels.

As reported earlier, your Company was declared the successful bidder for a 250-room luxury beach resort located in South Goa operating under the name Park Hyatt Goa Resort and Spa, following an auction held by IFCI Limited in February 2015 in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Subsequent to your Company making full payment of the bid amount, IFCI issued the requisite Sale Certificates in favour of your Company on 25th February, 2015.

However, based on an appeal by the erstwhile owners, the sale had been struck down by the Honourable Bombay High Court. Your Company and IFCI had contested the said order before the Honourable Supreme Court. On 19th March, 2018, the Honourable Supreme Court upheld the sale of the property by IFCI Limited to your Company and directed that the hotel property be handed over within six months. Accordingly, the property is expected to be handed over to your Company in the coming months.

Your Company’s Hotels Business, with its world-class properties, iconic cuisine brands, globally benchmarked levels of service excellence and customer centricity, is well positioned to sustain its leadership status in the Indian Hospitality industry.

PAPERBOARDS, PAPER AND PACKAGING

The domestic Paperboards, Paper and Packaging industry remained impacted by sluggish demand conditions prevailing in the FMCG, liquor and legal Cigarette industry. The transition to GST also caused short-term disruptions especially during the first half of the year. This, coupled with zero duty imports under ASEAN Free Trade Agreement, cheap imports from China and unabsorbed capacity in the industry weighed on the performance of the Business. On the positive side, relatively benign input costs, higher substitution of imported pulp with in-house pulp and continued focus on product mix enrichment resulted in margin expansion. Consequently, while Segment Revenue de-grew by 2.1%, Segment Results grew at a faster pace of 7.9% during the year.

Paperboards & Specialty Papers

Global demand for Paper & Paperboard in 2017 grew by 1% appx. to 410 million tonnes, with the paperboard segment growing by 2%. Going forward, global demand

for Paper & Paperboard is projected to grow at 0.5% to 1.0% CAGR driven by Asia, Africa and North America. The Writing & Printing and Newsprint segments, on the other hand, are expected to remain under pressure largely due to increasing adoption of digital media and proliferation of smart phone usage.

Domestic demand for Paperboard remained subdued due to sluggish off take by end-user industries besides being temporarily impacted in the first half of the year due to the transition to GST. Writing & Printing paper demand remained firm due to steady off take from the education segment, while prices witnessed an uptrend largely on account of supply disruptions due to operational discontinuities at certain mills.

Over the next five years, the domestic industry is projected to grow at 6% to 7% CAGR to reach 20 million tonnes by 2022 with the Paperboard (48% of the market) and Writing & Printing paper (30% of the market) segments estimated to grow at around 7.5% CAGR and 6.0% CAGR respectively. Within Paperboards, demand for Value-Added Paperboards (VAP) in India is projected to grow at a healthy rate of around 10.5% CAGR driven by growth in demand from the FMCG, Pharma, Publishing, and Food & Beverage industries. In the Writing & Printing paper segment, cut-size paper is projected to register the fastest growth at 9.5% CAGR, driven by the education and office stationery segments.

During the year, import of paper and paperboard from China, ASEAN and South Korea grew by 57% while overall paper imports increased by 38%. As highlighted in previous years’ reports, imports from ASEAN countries have been growing at a rapid pace since the implementation of zero duty on such imports with effect from 1st January, 2014, under various trade agreements. The trade agreement with South Korea also allows import at zero duty from January 2017. Disruption in domestic supplies during the year due to operational discontinuities at certain mills owned by competitors provided further impetus to imports.

The current import policy and extant regulations governing commercial and social forestry in the country have put the Indian Paper and Paperboard industry at a disadvantage vis-a-vis imports. The economic viability of domestic manufacturers has been severely impacted leading to the closure of several paper mills in the recent past. There is clearly a need to review the current import duty structure and re-examine the existing Free Trade Agreements (FTAs) and the new ones under formulation towards providing a level playing field to the domestic industry and encourage commercial farming of wood in India. Legislative changes along with appropriate environmental safeguards need to be implemented to enable private sector participation in commercial forestry on drylands and wastelands.

Your Company remains the clear leader in the VAP segment and continues to consolidate its preferred supplier status amongst leading end-use customers and brands. Further, your Company’s expansion project in the VAP segment at Bhadrachalam unit is nearing completion. The Specialty Papers portfolio was also expanded with the launch of new grades to service the needs of customers. The Business sustained its leadership position in the sale of eco-labelled products, volumes of which grew by appx. 12% during the year. Your Company has been recognized for its environmental transparency and improvement across parameters such as responsible fibre sourcing, clean manufacturing etc. in the WWF Environmental Paper Company Index 2017, which is considered to be the benchmark in the area of responsible pulp and paper manufacturing.

The Business continues to be a leading quality player in the Writing & Printing paper segment, leveraging strong forward linkages with your Company’s Education and Stationery Products Business. In the Specialty Papers segment, your Company sustained its leadership position in the pharma leaflets and thin printing segments. In order to meet the growing demand of quality decor papers, the decor machine at the Tribeni unit has been completely refurbished incorporating latest technology features including superior profile control and smoothness for high print resolution along with capacity expansion. The Business has recently launched an exciting range of decor papers, becoming a one-stop solution for all decor paper needs.

Your Company continues to source its wood requirements from sustainable sources. Your Company’s research on clonal development has resulted in the introduction of high yielding and disease resistant clones that are adaptable to a wide variety of agro-climatic conditions. In this context, your Company’s Life Sciences & Technology Centre is engaged in developing higher yielding second generation clones with enhanced pest & disease resistance attributes.

The Ministry of Road Transport and Highways, Government of India has promulgated the Green Highways (Plantation, Transplantation, Beautification and Maintenance) Policy, 2015, to develop green corridors along national highways through plantation and allied activity on medians, avenues and other available nearby land patches. During the year, your Company worked closely as the knowledge and technical partner of National Green Highways Mission under National Highway Authority of India (NHAI) to develop new models of plantations to expand this commendable initiative which would go a long way in enhancing the green cover of the nation and generate employment opportunities for rural communities.

Your Company has the distinction of being the first in India to have obtained the Forest Stewardship

Council-Forest Management (FSC-FM) certification, which confirms compliance with the highest international benchmarks of plantation management across the dimensions of environmental responsibility, social benefit and economic viability. Till date, your Company has received FSC-FM certification for 33,500 hectares of plantations involving over 30,000 farmers. During the year, nearly 60,000 tonnes of FSC-certified wood were procured from these certified plantations. All four manufacturing units of the Business have obtained the FSC Chain of Custody certification and have complied with all requirements during the year, thereby sustaining your Company’s position as the leading supplier of FSC-certified paper and paperboard in India.

All manufacturing units of the Business continue to recycle nearly 100% of the solid waste generated during operations by converting the same into lime, fly ash bricks, grey boards, egg trays etc. In addition, the Business procured and recycled 1,31,000 tonnes of waste paper during the year, thereby sustaining your Company’s overall positive solid waste recycling footprint.

The manufacturing facilities at Bhadrachalam and Kovai continue to receive industry recognition for their green credentials and safety standards in line with your Company’s focus on sustainable business practices. The Bhadrachalam unit won the prestigious award for being the best performer in the ‘Pulp & Paper Sector’ under PAT Cycle 1 of the Perform Achieve and Trade (PAT) Scheme, a component of the National Mission for Enhanced Energy Efficiency (NMEEE). Organized by the Bureau of Energy Efficiency (BEE), the award was presented by the Director General of BEE for the outstanding efforts made by the unit under PAT Cycle 1. The plant has been identified as the highest achiever in energy savings above the stipulated target as set by BEE in the Pulp & Paper sector. The Kovai unit received

the National Award for Excellence in Energy Management 2017 from CII GBC (Green Business Centre) and the 1st prize in State level safety from Director of Industrial Safety, Government of Tamil Nadu. The Bollaram unit received 4 Star rating in EHS Excellence by CII Southern region.

The Business had commissioned a 46 MW wind energy project in Andhra Pradesh in July 2014, which has been generating wind power since then. As reported in previous years, permission for inter-state wheeling of power was not granted by the authorities post bifurcation of the State of Andhra Pradesh. After several representations and discussions with the concerned authorities on the matter, your Company received permission last year for wheeling of power from Andhra Pradesh to Telangana, thereby enabling the Bhadrachalam mill to utilise wind energy to meet its energy requirements. During the year, inter-state wheeling was extended to the Bollaram unit in Telangana and also your Company’s units in Karnataka. Usage of wind energy has led to a reduction of carbon foot print by lowering consumption of coal by 33000 tonnes during the year. While considerable progress has been made in streamlining the deviation settlement process for multiple inter-state transactions, the regulatory framework for levy of charges and banking of power is still evolving. Consequently, your Company continues to bear charges/levies at multiple points which have adversely impacted the expected returns on this large investment. Your Company continues to engage with State and Central regulatory authorities towards seeking relief from such additional levies/charges and remains hopeful of a favorable resolution of the matter.

In line with the objective of enhancing the share of renewable energy in its operations, the Business has implemented several initiatives including investments in a green boiler, soda recovery boilers, high pressure & efficiency circulating fluidised bed boiler, solar & wind energy and increased usage of bio-fuel. With these initiatives, renewable sources presently account for nearly 45% of total energy consumed at the Bhadrachalam, Bollaram, Tribeni and Kovai units.

The Business continues to make structural interventions in the areas of strategic cost management and import substitution. These include augmentation of in-house pulp manufacturing capacity, efficiency improvements of existing equipment and developing alternative sources of supply for key inputs on an ongoing basis. Operations of the Bleached Chemical Thermo Mechanical Pulp mill (BCTMP) at the Bhadrachalam unit stabilized during the year with progressive improvement in capacity utilization leading to reduced dependence on imported pulp and cost savings. During the year, technology interventions made in the pulp mill resulted in higher pulp production, improvement in pulp quality and reduction in chemical consumption.

Your Company has been practicing principles of TPM, Lean and Six Sigma for almost a decade now and has reaped substantial benefits through its Business Excellence initiative. During the year, the Business embarked on an ‘Industry 4.0’ journey, focusing on areas such as Internet of Things (IoT), Advanced Analytics and Artificial Intelligence. Interventions planned in this area have significant potential to enhance product quality and deliver structural cost savings going forward.

The integrated nature of the business model comprising access to high-quality fibre from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the-art manufacturing facilities along with clear market leadership in value-added paperboards and a robust forward linkage with the Education and Stationery Products Business strategically positions your Company to further consolidate and enhance its leadership status in the Indian Paperboard and Paper industry.

Packaging and Printing

Your Company’s Packaging and Printing Business is a leading provider of superior value-added packaging for the consumer packaged goods industry. The Business also provides strategic support to your Company’s FMCG Businesses by facilitating faster turnaround for new launches, design changes, ensuring security of supplies and delivering benchmarked international quality at competitive cost.

The Business caters to the packaging requirements of leading players across several industry segments viz. Food & Beverage, Personal Care, Home care, Footwear, Consumer Electronics, Pharma, Liquor and Tobacco. With its comprehensive capability-set across multiple platforms, coupled with in-house cylinder making and blown film manufacturing lines, the Business continues to provide innovative solutions to several key customers in India and overseas. With recent investments in rigid boxes and flexo corrugated packaging, the Business has consolidated its position as a ‘one-stop shop for packaging solutions’.

As in previous years, the Business won several awards for operational excellence and creative packaging solutions. The Business continues to be acknowledged as a key associate by several large FMCG companies in the country for providing superior packaging solutions. The manufacturing facilities at Tiruvottiyur, Haridwar and Munger maintained the highest standards in Quality and Environment, Health & Safety (EHS). All the three units are certified as per the Integrated Management System, consisting of ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 and have also received Social Accountability Certification (SA 8000:2008). Both the

Tiruvottiyur and Haridwar units received the highest ‘Grade A’ BRC/IOP certification (British Retail Consortium/ Institute of Packaging), for global standards in packaging and packaging materials - a key enabler for supplies to the packaged foods industry. During the year, Haridwar Unit was adjudged first runners up in National Safety Competition organized by CII IQ (Institute of Quality). The Risk Management Framework of the Business was re-certified under ISO 31000:2009 during the year. The 14 MW wind energy farm in Tamil Nadu, set up in 2008, continues to provide clean energy to the Tiruvottiyur facility, contributing towards reducing your Company’s carbon footprint.

The Packaging and Printing Business has established itself as a one-stop shop offering a wide range of superior and innovative packaging solutions. With world-class technology across a diverse range of packaging platforms, best-in-class quality management systems and a distributed manufacturing footprint, the Business is well positioned to rapidly grow its external business while continuing to service the requirements of your Company’s FMCG Businesses.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements prepared in accordance with Indian Accounting Standard 110. Shareholders desirous of obtaining the report and accounts of your Company’s subsidiaries may obtain the same upon request. Further, the report and accounts of the subsidiary companies will also be available under the ‘Shareholder Value’ section of your Company’s website, www.itcportal.com, in a downloadable format.

During the year, no company became or ceased to be your Company’s subsidiary, joint venture or associate company.

ITC Global Holdings Pte. Limited, Singapore (‘Global’), a subsidiary of your Company, is under winding up in terms of the Order of the High Court of the Republic of Singapore dated 30th November, 2007. Consequently, your Company is not in a position to consolidate the accounts of Global for the financial year ended 31st December, 2017.

The Policy for determining Material Subsidiaries, adopted by your Board, in conformity with Regulation 16, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, can be accessed on your Company’s corporate website at http://www.itcportal.com/aboutitc/policies/

policy-on-material-subsidiaries.aspx. Presently, your Company does not have any material subsidiary.

Surya Nepal Private Limited

The fiscal year ended July 2017 witnessed normalization of economic activity with GDP growth of 6.9% (previous year 0.01%) aided by low base effect, good monsoons and improved energy output leading to higher industrial activity. However, severe floods in August 2017 have since impacted the agriculture sector and growth estimates for the fiscal year ending July 2018 remain subdued at appx. 6%. On the external front, widening trade deficit, muted growth in remittances from overseas and weak balance of payments position continue to weigh on macroeconomic stability.

During the year under review, Nepal completed its transition to a federal structure with successful completion of elections for all three levels of government i.e. local level, provincial assemblies and federal parliament. Significant reforms such as legislation of the new Labour Act and Social Security Act were implemented during the year. These measures, in conjunction with other enabling policies across all the three levels of government, are expected to enhance the ease of doing business in the country and provide a fillip to economic growth in the near term.

The legal cigarette industry contributes 84% of Government’s revenue from the tobacco sector and 10% of the total excise revenue collected by the Government. Further, the industry provides livelihoods, directly and indirectly, to more than four lakh farmers, farm workers and others engaged in the cultivation of tobacco and the tobacco trade. However, the legal cigarette industry in Nepal continues to be adversely impacted by a harsh regulatory regime and discriminatory tobacco taxation policy which is fueling the growth of illegal cigarettes and smokeless tobacco products. This in turn is not only adversely impacting Government revenues but also compromising the tobacco related health objectives of the Government.

During the year, the company’s Revenue from Operations at Nepalese Rupees (NRs.) 3181 crores (previous year NRs. 2873 crores) and Profit After Tax at NRs. 857 crores (previous year NRs. 741 crores) recorded a growth of 11% and 16% respectively. The company continues to be one of the largest contributors to the exchequer, accounting for about 3% of the total revenues of the Government of Nepal.

The company’s Cigarette business continued to consolidate its leadership position by leveraging a portfolio of world-class products anchored on innovation and benchmarked quality backed by a robust distribution network. Adoption of best-in-class manufacturing technologies and benchmarked practices ensured delivery of products of international quality. The manufacturing systems of the company continued to maintain the targeted benchmarks in the areas of quality, productivity and sustainability. During the year, the company strengthened its quality processes, protocols and hygiene standards and introduced new metrics to facilitate ongoing monitoring in these areas.

In the Branded Apparel business, ‘John Players’ has established itself as a leading brand at the premium end of the branded menswear segment in Nepal, with a significant presence across markets through exclusive branded outlets, departmental chains and multi-brand outlets. In the Safety Matches business, the company strengthened its market leadership by leveraging its superior trade marketing & distribution reach. The company is now the largest player in both wax and wooden matches segments. In the Agarbatti business, the company scaled up operations and enhanced its market standing by offering a wide portfolio across consumer segments and improving product availability and visibility across markets.

With the objective of creating new drivers of growth, the company commenced import of confectionery products under the ‘Toffichoo’ and ‘mint-o’ brands on a test basis with the approval of the Department of Industry, Nepal. Launched in June 2017, the products have received encouraging consumer response. The company is in the process of setting up a manufacturing facility towards scaling up the business.

The company continues to support and invest in initiatives aimed at enhancing the social and economic capital of the nation. All the initiatives are woven around and are in alignment with the sustainable development goals of the Government of Nepal. Accordingly, the company continues to:

- assist farmers, proximate to the Simara factory, in agro forestry through (a) high quality Poplar plantation promoting ‘Grow Wood Grow Food’ concept through inter cropping and (b) providing vegetable seeds and constructing vermi-compost pits to increase productivity and provide alternative sources of income generation;

- support animal husbandry extension services covering animal breeding, health and nutrition towards driving milk yield improvement and generating higher returns for underprivileged farmers;

- focus on providing community health services through various ‘Suswasthya’ programmes such as periodic health camps and awareness programmes in the vicinity of the manufacturing units.

The company declared a dividend of NRs. 351.50/- per equity share of NRs. 100/- each for the year ended 15th July, 2017 (31st Ashadh, 2074) amounting to NRs. 708.62 crores.

ITC Infotech India Limited and its subsidiaries

The IT services industry continues to witness rapid transformation driven by increasing adoption of digital technologies, emergence of new models of customer value delivery, enhanced focus on experience journeys and client demands for efficiency, especially in traditional service lines through automation.

The Indian IT Services and Business Process Management (BPM) industry remained under significant pressure in 2017-18 which was marked by increasing headwinds in the form of continued rhetoric on protectionism, labour mobility issues, Brexit related uncertainty and subdued traction in the US Banking and Financial Services Industry. The challenging operating environment for the Indian IT industry is manifest in the continued deceleration in growth rates reported during the year by most of the Indian IT majors, with margins coming under increasing pressure.

Technology spending is witnessing a clear shift in favour of digital technologies, which are estimated to account

for 80% of incremental IT spends. With traditional lines of businesses and business models coming under increasing pressure, the fragmented IT Services market is gearing up to meet these challenges by strengthening alternative delivery models and accelerating investments in digital capabilities.

In this context, ITC Infotech remains focused on providing specialized services led by business and technology consulting. During the year, revenue from emergent technologies (Data & Digital) saw robust growth. The company has sharply defined its Digital strategy and is on course to consolidate and drive the Digital line of business.

During the year, the company’s strategic collaboration with PTC Inc. was strengthened with the launch of the ‘Digital Solutions Innoruption Center’ and ‘ThingWorx® Co-Innovation Lab’. This intervention will facilitate the creation of Augmented Reality solutions across industries such as manufacturing, automotive, industrial, retail, consumer goods, healthcare and hospitality.

During the year, the company’s consolidated Total Income was Rs, 1652.10 crores (previous year Rs, 1554.38 crores), with Profit Before Tax of Rs, 81.69 crores (previous year Rs, 62.44 crores). Net Profit stood at Rs, 40.42 crores (previous year Rs, 37.95 crores). Revenue growth was driven by new client additions and increasing traction with existing customers especially in Europe, Asia-Pacific, Africa, Middle East and India markets. However, INR appreciation vis-a-vis the US Dollar and a subdued demand environment in the USA impacted overall revenue. Consolidation of sales focus in the Asia-Pacific, India, Middle East and Africa markets enabled synergies and led to strong growth in these regions. For the year under review:

a) ITC Infotech India Limited recorded Revenue from Operations of Rs, 1002.93 crores (previous year Rs, 911.99 crores) and Net Profit of Rs, 27.68 crores (previous year Rs, 17.89 crores). For the year under review, the company paid a dividend of Rs, 6/- per Equity Share of Rs, 10/- each aggregating Rs, 51.12 crores (previous year: Nil).

b) ITC Infotech Limited, UK, (ITC Infotech UK), a wholly-owned subsidiary of the company, recorded

Revenue of GBP 42.44 million (previous year GBP 37.00 million) and Net Profit of GBP 1.27 million (previous year GBP 1.17 million).

c) ITC Infotech (USA), Inc., (ITC Infotech USA), a wholly-owned subsidiary of the company, together with its wholly-owned subsidiary Indivate Inc., recorded Revenue of US$ 88.11 million (previous year US$ 91.44 million) and Net Profit of US$ 1.97 million (previous year US$ 1.21 million). For the year under review, ITC Infotech USA paid a maiden dividend of US$ 8 per share on 1.82.000 Common Shares (without par value) aggregating US$ 1.46 million.

The company’s superior service delivery capability continues to earn global recognition. During the year, the company was featured in the leader’s category of ‘2018 Global Outsourcing 100’ by the International Association of Outsourcing Professionals (IAOP) for the twelfth consecutive year. The company was also recognized by Information Service Group (ISG) in its Provider Lens: ADM Quadrant Report US 2017 and Provider Lens: Managed Digital Workplace Services Quadrant Report US 2017 as a ‘Product Challenger’ in the categories of End-to-End Application Development & Maintenance, Application Support & Maintenance, Application Testing and Managed Digital Workplace Services.

During the year, the company successfully organized i-Tech 2017, the third edition of its annual technology event with ‘Experience Intelligence’ as the theme, focusing on emerging technologies around Artificial Intelligence. The event generated strong interest among students, start-ups as well as professional developers to create solutions for complex business applications as part of a programming ‘Codeathon’.

The outlook for the Indian IT Industry in the near term continues to remain subdued with NASSCOM projecting a growth rate between 7% and 9% for 2018-19. This is mainly attributable to global protectionist measures in major markets on the one hand and increasing complexities in rebuilding new age skill sets required to cater to the fast changing technology landscape on the other. The company remains committed to its transformation journey with a sharper focus on select industry verticals and technology areas. The company will continue to focus on building domain specific digital solutions across identified areas and driving efficiencies through automation in delivery and other internal processes.

Technico Pty Limited and its subsidiaries

The company continues to focus on up gradation and commercialization of its TECHNITUBER® seed technology and customizing its application across various geographies. Besides, the company is engaged in the marketing of TECHNITUBER® seed to global customers produced at the facilities of its subsidiaries in China and Canada and Technico Agri Sciences Limited, India, a wholly-owned subsidiary of your Company. The Canadian subsidiary of the company is also engaged in field multiplication of seeds.

For the year under review:

a. Technico Pty Limited, Australia registered a turnover of Australian Dollar (A$) 2.52 million (previous year A$ 2.46 million) and a Net Profit of A$ 1.45 million (previous year A$ 1.36 million).

b. Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China - There were no significant events to report with respect to these companies.

Technico Agri Sciences Limited

The company’s leadership in production of early generation seed potatoes and strength in agronomy continues to support the Bingo! range of potato chips of your Company and in servicing the seed potato requirements of the farmer base of your Company’s Agri Business.

The year under review was an extremely challenging one for potato farmers and the seed potato industry. Potato production for the year stood at about 50 million tonnes representing a significant growth of 11% over the previous year. This excess production resulted in a sharp fall in potato prices compelling most farmers/producers to sell their inventory below cost, especially in November/December 2017 as the fresh potato crop reached markets. The situation was exacerbated by farmers not buying new seeds and using leftover potatoes / cheap seeds mainly due to tight liquidity conditions in the market. Consequently, the seed potato industry came under significant pressure during the year.

The company’s Revenue from Operations for the year stood at Rs, 76.89 crores (previous year Rs, 108.35 crores) with a Net Loss of Rs, 14.07 crores (previous year Net Profit Rs, 14.52 crores). Total Comprehensive Income for the year stood at (-) Rs, 14.02 crores (previous year Rs, 14.48 crores).

During the year, the company declared a dividend of Rs, 41.12 crores (including Dividend Distribution Tax of Rs, 6.95 crores).

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company was incorporated in Sri Lanka with the objective of developing and operating a mixed-use development project (‘Project’) comprising a luxury hotel and a super-premium residential apartment complex situated on 5.86 acres of prime sea-facing land in Colombo.

The Project has been accorded ‘Strategic Development Project’ status entitling the company to various fiscal benefits in Sri Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.

During the year, the company made steady progress on construction of the project. Construction work is in full swing in both the hotel and residential towers.

The Experience Centre, showcasing the features of the super-premium residential apartments, is nearing completion. The company also appointed internationally renowned interior designers and consultants for marketing the super-premium residential apartments internationally.

Your Company’s investment in WLPL stood at US$ 147 million as at 31st March, 2018.

Landbase India Limited

The company owns ‘ITC Grand Bharat’ - a 104-key all-suite luxury Retreat at Gurugram, which has been licensed to your Company. The Retreat, an oasis of unhurried luxury, is co-located with the company’s prestigious Classic Golf & Country Club, a 27-hole Jack Nicklaus Signature Golf Course.

ITC Grand Bharat has received several accolades, establishing itself amongst the top luxury resort destination hotels in the world. During the year, the Retreat was ranked # 10 amongst the ‘Top 50 Resorts in Asia’ by Conde Nast Traveler, USA, and also adjudged the best Luxury Hotel at the ‘India’s Best’ Awards by Travel Leisure India & South Asia.

During the year, the Classic Golf & Country Club hosted various prestigious tournaments and sustained its leadership position in the corporate tournament segment. The Club enjoys strong brand equity with its members, guests and the golfing fraternity and continues to receive the patronage of professional and amateur golfers in the country.

During the year ended 31st March 2018, the company recorded Total Income of Rs, 30.54 crores (previous year Rs, 21.75 crores) and Net Profit of Rs, 9.84 crores (previous year Rs, 2.10 crores). Total Comprehensive Income for the year stood at Rs, 9.89 crores (previous year Rs, 2.10 crores).

Srinivasa Resorts Limited

The company’s hotel ‘ITC Kakatiya’ in Hyderabad improved its performance during the year on the back of higher room occupancy rates and robust growth in Food and Beverages revenue. However, overall room rates remained under pressure.

The company recorded Total Income of Rs, 58.37 crores (previous year Rs, 54.43 crores) for the year ended 31st March, 2018 with Net Profit of Rs, 0.48 crore (previous year Net Loss of Rs, 1.52 crores). Total Comprehensive Income for the year stood at Rs, 0.40 crore (previous year (-) Rs, 1.50 crores).

During the year, ITC Kakatiya received the Times Food Guide awards for ‘Dakshin’ (Best South Indian Fine

Dining) and ‘Marco Polo’ (Best Resto Bar).

Trip Advisor, a renowned hotel review website, rated ‘Kebabs & Kurries’ and ‘Dakshin’ as the best restaurants in Hyderabad, ranking them No.1 and No.3 respectively.

The company’s 101-key full service hotel in Amritsar, located on a land parcel assigned to the company by ITC Limited, is under development. Civil works are nearing completion and interior work is underway.

Fortune Park Hotels Limited

The company, which caters to the ‘Mid-market to Upscale’ segment through a chain of Fortune hotels, continues to forge new alliances and expand its footprint. Currently, the company has an aggregate inventory of nearly 4,200 rooms spread over 54 properties of which 45 are operating hotels. Of the balance nine properties, five are slated to be commissioned in the ensuing year while four are in various stages of development. Three hotels were migrated to the WelcomHotel brand during the year.

The company has established ‘Fortune’ as the premier ‘value’ brand in the Indian hospitality sector. The brand remains a frontrunner in its operating segment and is well positioned to sustain its leadership position in the industry.

During the year, the company bagged the ‘Today’s Traveller Award 2017’ as well as the ‘Hospitality India & Explore The World Annual International Travel Award 2017’ in the ‘Best First Class Business Hotel Chain’ category. It was also awarded the ‘Versatile Excellence Travel Award (VETA) 2018’ in the ‘Best Business Hotel Chain’ category by Travelscapes.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 27.59 crores (previous year Rs, 29.53 crores) and Net Profit of Rs, 1.93 crores (previous year Rs, 2.44 crores). Total Comprehensive Income for the year stood at Rs, 2.05 crores (previous year Rs, 2.39 crores).

The Board of Directors of the company has recommended a dividend of Rs, 12.50 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

Bay Islands Hotels Limited

Fortune Resort Bay Island, the company’s hotel in Port Blair, with its strategic location, excellent architectural design and superior service quality, continues to offer a unique gateway to the Andamans. A comprehensive renovation and expansion programme towards enhancing the market standing of the hotel is currently underway with the first phase (24 rooms) expected to be commissioned shortly.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 1.33 crores (previous year Rs, 1.98 crores) and Net Profit of Rs, 0.97 crore (previous year Rs, 0.76 crore). Total Comprehensive Income for the year stood at Rs, 0.97 crore (previous year Rs, 0.76 crore).

The Board of Directors of the company has recommended a dividend of Rs, 70/- per Equity Share of Rs, 100/- each for the year ended 31st March, 2018.

Wimco Limited

The company’s business activities comprise fabrication and assembly of machinery for tube filling, cartoning, wrapping, material handling and conveyor solutions for the FMCG and Pharmaceutical industries.

The company’s order book was impacted during the year due to sluggish demand conditions prevailing in the FMCG and Pharmaceutical industries. Consequently, the company’s Revenue from Operations for the year declined to Rs, 8.77 crores (previous year Rs, 16.15 crores) with a Net Loss of Rs, 3.03 crores (previous year Rs, 0.07 crore). Total Comprehensive Income for the year stood at (-) Rs, 3.01 crores (previous year (-) Rs, 0.09 crore).

The company is focusing on strengthening its business model, widening its customer base and developing superior solutions towards addressing customer requirements.

North East Nutrients Private Limited

Your Company holds 76% equity stake in North East Nutrients Private Limited (NENPL), a company formed with the objective of setting up a food processing facility in Mangaldoi, Assam to cater to the fast-growing biscuits market in Assam and other north-eastern States.

In August 2015, the company commissioned a state-of-the-art facility comprising three biscuit manufacturing lines in Mangaldoi, Assam.

During the year, the company implemented several initiatives which resulted in improvement in operational efficiency, processing yield and productivity.

The company was awarded the ‘Trophy for Outstanding performance in Food Safety Excellence’ by the Confederation of Indian Industry.

Revenue from Operations for the year stood at Rs, 150.30 crores (previous year Rs, 138.05 crores). The company recorded a Net Profit of Rs, 3.15 crores (previous year Net Loss Rs, 1.81 crores) while Total Comprehensive Income for the year stood at Rs, 3.30 crores (previous year (-) Rs, 1.83 crores).

Russell Credit Limited

During the year, the company registered Total Revenue of Rs, 82.48 crores (previous year Rs, 59.67 crores) and Net Profit of Rs, 63.82 crores (previous year Rs, 34.22 crores). Total Revenue and Net Profit during the year includes Rs, 33.78 crores and Rs, 18.28 crores respectively attributable to the sale of Non-Convertible Preference Shares of ICICI Bank. Temporary surplus liquidity of the company is mainly deployed in bonds, debt mutual funds and bank fixed deposits. The company continues to explore opportunities to make strategic investments for the ITC Group.

Gold Flake Corporation Limited

During the year, the company registered Total Income of Rs, 3.44 crores (previous year Rs, 3.46 crores) and Net Profit of Rs, 2.37 crores (previous year Rs, 2.55 crores). The company holds 50% equity stake in ITC Essentra Limited - a joint venture with Essentra Group, UK.

Greenacre Holdings Limited

During the year, the company recorded Total Income of Rs, 5.45 crores (previous year Rs, 6.34 crores) and Net Profit of Rs, 1.87 crores (previous year Rs, 2.25 crores). The company continues to provide maintenance services for commercial office buildings.

ITC Investments & Holdings Limited

The company, a Core Investment Company within the meaning of the Core Investment Companies (Reserve Bank) Directions, 2011, recorded Total Revenue of Rs, 0.06 crore during the year (previous year Rs, 0.07 crore) and Net Profit of Rs, 0.03 crore (previous year Rs, 0.05 crore).

MRR Trading & Investment Company Limited

The company, a wholly-owned subsidiary of ITC Investments & Holdings Limited, holds tenancy rights in a commercial building located in Mumbai and also provides estate maintenance services. During the year, the company recorded Total Income of Rs, 0.07 crore (previous year Rs, 0.07 crore).

Pavan Poplar Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Revenue of Rs, 0.16 crore (previous year Rs, 0.20 crore) and Net Loss of Rs, 0.29 crore (previous year Rs, 0.32 crore).

Prag Agro Farm Limited

The operations of the company continue to be adversely impacted pursuant to the Order of the Honourable High Court of Uttarakhand at Nainital in February 2014 dismissing the writ petition filed by the company against the Order of the District Magistrate authorising the State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated Order was admitted in April 2014 and the matter is pending before the Honourable High Court.

During the year, the company recorded Total Revenue of Rs, 0.07 crore (previous year Rs, 0.05 crore) and Net Loss of Rs, 0.004 crore (previous year Rs, 0.06 crore).

ITC Global Holdings Pte. Limited

ITC Global Holdings Pte. Ltd (under Judicial Management, hereinafter “Global”) has withdrawn its suit filed in 2002 claiming US$ 18.10 million from the Company.

After protracted litigation of over 15 years, the Company was approached by the Liquidator of Global with an offer to settle the said suit upon payment of US$ 2 million.

Subsequently, the Liquidator agreed to receive a sum of US$ 200,000, discontinue the suit, unconditionally withdraw all claims and take all steps to complete dissolution of Global expeditiously. Your Company, without admission of any liability, remitted the sum of US$ 200,000 to Global after receiving RBI’s approval for the same.

NOTES ON JOINT VENTURES ITC Essentra Limited

The relentless pressure on volumes of the legal cigarette industry on account of the steep increase in taxes and intense regulatory burden continues to adversely impact the demand for cigarette filters. Despite such adverse business conditions, the company retained its leadership position of being the preferred supply chain partner for several well-known national and international brands leveraging its core strengths - strong customer relationships, access to world-class innovation, superior execution, consistent delivery and best-in-class quality.

During the year ended 31st March, 2018, on a comparable basis, the company’s Gross Sales Value (net of rebates/discounts) stood at Rs, 272.16 crores (previous year Rs, 277.79 crores). Net Profit during the year stood at Rs, 16.45 crores (previous year Rs, 9.94 crores).

During the year, in line with its philosophy of developing internal capabilities on an ongoing basis, the company established capability for manufacturing capsule filters to cater to the anticipated growth in this segment. Investments continue to be made in technology induction and capability building towards sustaining the company’s position as the innovation and quality benchmark in the

Indian cigarette filter industry. The company continues to focus on scaling up exports by leveraging a portfolio of high quality products. The Board of Directors of the company has recommended a dividend of Rs, 12.00 per Ordinary Share of ''10/- each for the year ended 31st March, 2018.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 34 heritage properties across 13 States in India. The company, with its WelcomHeritage brand portfolio comprising ‘Legend Hotels’,

‘Heritage Hotels’ and ‘Nature Resorts’, provides uniquely differentiated offerings to guests in the cultural, heritage and adventure tourism segments respectively.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 4.06 crores (previous year Rs, 3.49 crores) and Net Loss of Rs, 0.33 crore (previous year Net Loss Rs, 0.77 crore). Total Comprehensive Income for the year was a Loss of Rs, 0.33 crore (previous year Loss at Total Comprehensive Income level was Rs, 0.78 crore).

The ‘WelcomHeritage Hotels’ brand was awarded the ‘Best Heritage Hotel Chain’ by Today’s Traveller Awards 2017.

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and the Ambience Group, Hyderabad for developing a luxury hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in EHPL and will, inter alia, provide hotel operating services, upon commissioning of the hotel.

As reported in the previous year, the Ambience Group has expressed its desire to review the timing of further investments in EHPL, citing concerns about the viability of the project in view of the challenging economic environment and the sluggish demand conditions currently prevailing in Hyderabad.

Your Company continues to explore its options in this regard.

Your Company’s investment in EHPL stood at Rs, 46.51 crores as at 31st March, 2018.

Logix Developers Private Limited

Logix Developers Private Limited (LDPL) is a joint venture between your Company and Logix Estates Private Limited for developing a luxury hotel-cum-service apartment complex at the company’s site located at Sector 105 in NOIDA. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in LDPL and will, inter alia, provide hotel operating services, upon commissioning of the hotel by LDPL.

As reported in the previous year, your Company reiterated its position with the JV partner that it was committed to developing a luxury hotel-cum-service apartment complex as envisaged under the JV Agreement and that it was not interested in progressing with any alternative project plans proposed by the JV partner. However, the JV partner refused to progress the project and instead expressed its intent to exit from the JV by selling its stake to your Company.

Subsequently, the JV partner proposed that both parties should find a third party to sell the entire shareholding in LDPL. In view of these developments, your Company had filed a petition before the Company Law Board (CLB) submitting that the affairs of the JV entity were being conducted in a manner that was prejudicial to the interest of your Company and the JV entity. The matter is currently before the National Company Law Tribunal (NCLT) which replaced the erstwhile CLB. The JV partner had also filed a petition before the Honourable Delhi High Court for winding up the JV company, which was transferred to the NCLT during the year by the Honourable Delhi High Court. The matters were heard before the NCLT on several occasions during the year and hearing for final arguments for both the matters have been scheduled on 23rd May, 2018.

During the year ended 31st March, 2018, the company recorded a Net Loss of Rs, 24.87 crores (previous year Rs, 22.75 crores). The Net Worth of the company stood at (-) Rs, 1.89 crores as at 31st March, 2018 (previous year Rs, 22.98 crores). Your Company’s total investment in LDPL was Rs, 41.95 crores and it currently owns 27.90% of the equity capital of the company. During the year, in view of the aforestated developments, your Company made a provision of Rs, 23.45 crores towards diminution in the carrying value of investment in LDPL.

The financial statements of LDPL for the year ended 31st March, 2018 are yet to be approved by its Board of Directors. In the absence of audited financial statements of LDPL, the Consolidated Financial Statements of your Company for the year ended 31st March, 2018 have been prepared based on financial statements prepared by the management of LDPL.

NOTES ON ASSOCIATES International Travel House Limited

The company offers a full range of travel services including air ticketing, car rentals, inbound and outbound tourism, domestic holidays, conferences, events and exhibition management and foreign exchange services to travellers.

During the year ended 31st March, 2018, the company recorded Total Income of Rs, 207.69 crores (previous year Rs, 205.74 crores) and Net Profit of Rs, 6.95 crores (previous year Rs, 11.17 crores). Total Comprehensive Income for the year stood at Rs, 6.02 crores (previous year Rs, 10.46 crores).

The Board of Directors of the company has recommended a dividend of Rs, 4.25 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

Gujarat Hotels Limited

The company’s hotel, ‘WelcomHotel Vadodara’, at Vadodara is operated by your Company under an Operating License Agreement.

During the financial year ended 31st March, 2018, the company recorded Total Income of Rs, 5.02 crores (previous year Rs, 5.12 crores), Net Profit and Total Comprehensive Income of Rs, 3.37 crores (previous year Rs, 3.86 crores).

The Board of Directors of the company has recommended a dividend of Rs, 3.50 per Equity Share of Rs, 10/- each for the year ended 31st March, 2018.

ATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. During the year, the company recorded Total Revenue of Rs, 23.13 crores (previous year Rs, 21.03 crores) and Net Profit of Rs, 0.66 crore (previous year Rs, 0.22 crore).

The company continued to maintain high levels of operational responsiveness, benchmark quality and cost efficiency during the year. The company was conferred the ‘Suraksha Puraskar’ by the National Safety Council of India and the ‘Long Term Nil Lost Time Accident Award’ by the Tamil Nadu State Government.

Associates of Russell Credit Limited Russell Investments Limited

During the year, the company recorded Total Revenue of Rs, 7.59 crores (previous year Rs, 3.72 crores) and Net Profit of Rs, 6.75 crores (previous year Rs, 2.78 crores). The company continues to explore opportunities to make investments.

Divya Management Limited

During the year, the company recorded Total Revenue of Rs, 0.49 crore (previous year Rs, 0.52 crore) and Net Profit of Rs, 0.21 crore (previous year Rs, 0.20 crore). The company continues to explore opportunities to make investments.

Antrang Finance Limited

During the year, the company recorded Total Revenue of Rs, 0.28 crore (previous year Rs, 0.30 crore) and Net Profit of Rs, 0.10 crore (previous year Rs, 0.09 crore). The company continues to explore opportunities to make investments.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The ITC Code of Conduct commits management to financial and accounting policies, systems and processes.

The Corporate Governance Policy and the ITC Code of Conduct stand widely communicated across the enterprise at all times, and, together with the ‘Strategy of Organisation’, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Company’s Financial Statements.

Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across the Company. The Accounting Policies are reviewed and updated from time to time. These, in turn, are supported by a set of divisional policies and Standard Operating Procedures (SOPs) that have been established for individual businesses.

Your Company uses ERP Systems as a business enabler and also to maintain its Books of Account. The SOPs in tandem with transactional controls built into the ERP Systems ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation.

Your Company has in place adequate internal financial controls with reference to the Financial Statements. Such controls have been assessed during the year taking into consideration the essential components of internal controls stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by The Institute of Chartered Accountants of India. Based on the results of such assessment carried out by management, no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed. Nonetheless your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances.

Your Company remains committed to ensuring an effective internal control environment that inter alia provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds / errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information.

Your Company’s independent and robust Internal Audit processes, both at the Business and Corporate levels, provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements.

Independent consultants have confirmed compliance of Internal Audit systems and processes with the Standards on Internal Audit (SIA) issued by the Institute of Chartered Accountants of India (ICAI). Although the Standards are recommendatory in nature, such validation evidences the contemporariness of the Internal Audit function.

The Internal Audit function consisting of professionally qualified accountants, engineers and IT Specialists is adequately skilled and resourced to deliver audit assurances at highest levels. In the context of the IT environment of your Company, systems and policies relating to Information Management are periodically reviewed and benchmarked for contemporariness. Compliance with the Information Management policies receive focused attention of the Internal Audit team. Qualified engineers in the Internal Audit function review the quality of design, planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield ‘value for money’.

Processes in the Internal Audit function have been continuously strengthened for enhanced effectiveness and productivity including the deployment of best-in-class tools for analytics in the Audit domain, certification as complying with ISO 9001:2015 Quality Standards in its processes, ongoing knowledge improvement programmes for staff, etc. The Audit methodology is also designed to validate effectiveness of critical IT controls that are embedded in the business systems, leading to greater alignment with the business process environment.

The Audit Committee of your Board met eight times during the year. The Terms of Reference of the Audit Committee inter alia included reviewing the effectiveness of the internal control environment, evaluation of the Company’s internal financial control and risk management systems, monitoring implementation of the action plans emerging out of Internal Audit findings including those relating to strengthening of your Company’s risk management systems and discharging of statutory mandates.

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Mar 31, 2017

The following sections outline your Company’s progress in pursuit of the ‘Triple Bottom Line’.

FINANCIAL PERFORMANCE

Your Company delivered a steady performance during the year in the backdrop of a persistently sluggish demand environment, continuing pressure on the legal cigarette industry due to the cumulative impact of steep increase in taxation and regulatory pressures, sharp hike in input costs and gestation costs relating to new products/categories especially in the non-cigarette FMCG segment. The operating environment was rendered particularly challenging in the second half of the year with the currency crunch impacting the incipient recovery in demand. The business environment in the Hotels industry also remained subdued, with only a marginal improvement in room rates reflecting the overhang of excess room inventory in key markets. The Paperboards, Paper and Packaging segment also had to contend with a weak demand and pricing environment.

Despite the challenging business environment as foretasted, Gross Revenue at Rs, 55001.69 crores grew by 6.6% primarily driven by an 8.0% growth in the non-cigarette FMCG segment, 10.8% growth in Agri Business and 5.1% growth in the Cigarettes segment. Profit Before Tax registered a growth of 7.4% to Rs, 15502.96 crores while Profit After Tax at Rs, 10200.90 crores increased by 9.4%. Total Comprehensive Income for the year stood at Rs, 10277.90 crores (previous year Rs, 9261.79 crores). Earnings Per Share for the year stood at Rs, 8.43 (previous year Rs, 7.74). Cash flows from Operations aggregated Rs, 15214.98 crores, compared to Rs, 14039.64 crores in the previous year.

Your Directors are pleased to recommend an Ordinary Dividend of Rs, 4.75 per share (previous year Ordinary Dividend of Rs, 4.33 per share and Special Dividend of Rs, 1.33 per share; adjusted for Bonus Issue) for the year ended 31st March, 2017. Total cash outflow in this regard will be Rs, 6944.65 crores including Dividend Distribution Tax of Rs, 1174.64 crores.

Your Directors approved a transfer of Rs, 1030.00 crores (previous year Rs, 990.00 crores) to General Reserve. Consequently, Retained Earnings as at 31st March, 2017 stands at Rs, 17576.81 crores (previous year Rs, 16589.89 crores).

VALUE-ADDED AND CONTRIBUTION TO EXCHEQUER

Over the last five years, the Value-Added by your Company, i.e. the value created by the economic activities of your Company and its employees, aggregated Rs, 188384 crores and grew at a compound annual rate (CAGR) of 11.8%. During this period, your Company’s Contribution to the Exchequer aggregated Rs, 138375 crores growing at 12.2% CAGR. It is pertinent to note that 75% of the incremental Value-Added during this period accrued to the Exchequer.

Including the share of dividends paid and retained earnings attributable to government owned institutions, your Company’s contribution to the Central and State Governments represents 80% of its Value-Added during the year.

Your Company remains amongst the Top three Indian corporate in the private sector in terms of Contribution to Exchequer.

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. Foreign exchange earnings of the ITC Group over the last ten years aggregated nearly US$ 7.0 billion, of which agri exports constituted 56%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company’s contribution to the rural economy.

During the financial year 2016-17, your Company and its subsidiaries earned Rs, 4609 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs, 3961 crores, mainly on account of exports of agri-commodities. Your Company’s expenditure in foreign currency amounted to Rs, 1828 crores, comprising purchase of raw materials, spares and other expenses of Rs, 1301 crores and import of capital goods at Rs, 527 crores.

PROFITS, DIVIDENDS AND RETAINED EARNINGS

(Rs, in Crores)

PROFITS	2017	2016
a) Profit Before Tax	15502.96	14434.07
b) Tax Expense
- Current Tax	5285.65	4896.06
- Deferred Tax	16.41	209.64
c) Profit for the year	10200.90	9328.37
d) Other Comprehensive Income	77.00	(66.58)
e) Total Comprehensive Income	10277.90	9261.79
STATEMENT OF RETAINED EARNINGS
a) At the beginning of the year	16589.89	14257.63
b) Add: Profit for the year	10200.90	9328.37
c) Add: Other Comprehensive Income (net of tax)	(24.92)	(35.21)
d) Add: Transfer from share option on exercise and lapse	14.58	7.64
e) Less: Dividends
- Ordinary Dividend of '' 6.50 (2016: '' 6.25) per share. [Adjusted for Bonus Issue, Ordinary Dividend of'' 4.33 (2016 -'' 4.17) per share]	5230.68	5009.70
- Special Dividend of '' 2.00 (2016: '' Nil) per share. [Adjusted for Bonus Issue, Special Dividend of '' 1.33 (2016 - '' Nil) per share]	1609.44
- Income tax on Dividend paid	1333.52	968.84
f) Less: Transfer to General Reserve	1030.00	990.00
g) At the end of the year	17576.81	16589.89

FMCG Cigarettes

The legal cigarette industry continues to be severely impacted due to the cumulative impact of steep increase in taxation, intense regulatory pressures and the tight liquidity conditions - especially in the wholesale channel - prevailing in the market during the latter half of the year. While legal cigarette industry volumes remain under pressure, illegal trade continues to grow unabated resulting in significant revenue loss to the Exchequer.

Over the last five years, the incidence of Excise Duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 131% and 157% respectively, thereby exerting severe pressure on legal industry volumes. Due to the steep hike in taxation over the past several years, at levels well above the rate of inflation, duty-paid cigarettes have become less affordable in the country, leading to a drop in volumes.

Year	Total Domestic Consumption including Illegal Cigarettes (Million Kgs)	Legal Cigarette Consumption (Million Kgs)	% Share of Legal Cigarettes in Total Tobacco Consumption
1981/82	406	86	21%
2009/10	499	73	15%
2014/15	562	62	11%

Although legal cigarettes account for only about 11% of total tobacco consumption in the country, they

Research indicates that a significant number of cigarette consumers in India are dual consumers, in that they also consume some other tobacco product. The high incidence of taxation and a discriminatory regulatory regime on cigarettes in India have over the years only served to divert consumption of tobacco to lightly taxed or tax-evaded tobacco products like bidis, chewing tobacco, guthka and illegal cigarettes. In fact, India’s per capita cigarette consumption is amongst the lowest in the world and is significantly lower in comparison to Russia, Japan, China, United States, and even neighboring countries like Pakistan and Bangladesh.

Thus, while tobacco consumption has been growing steadily in the country over the years, the share of legal cigarettes in total tobacco consumption has been on the decline as would be apparent from the figures given in the table below.

contribute more than 87% of tax revenue from the tobacco sector. The other types of tobacco products contribute barely 13% of tax revenue from the tobacco sector despite accounting for 89% of total tobacco consumption. Since these products are predominantly manufactured in a fragmented manner in the unorganized sector, there is rampant tax evasion. Moreover, most of these products escape regulatory oversight as well and tend to be manufactured in unhygienic conditions with ingredients of questionable quality. Consequently, most of these products are of inferior quality and their growing volumes undermine the health objectives of tobacco control.

Further, the high rates of tax on cigarettes also provide attractive tax arbitrage opportunities to unscrupulous players. Consequently, the illegal cigarette market, consisting of duty-evaded cigarettes manufactured within the country and offered to consumers at '' 1 / '' 2 per stick and the contraband international brands of cigarettes have been growing rapidly over the years. The illegal cigarette segment is the only segment that has been growing year on year and currently accounts for one-fifth of the market. According to an independent study conducted by Euro monitor International, India is today the 4th largest market for illegal cigarettes in the world. It is estimated that almost 68% of the tobacco consumed in the country remains outside the tax net on account of evasion¹. The proliferation of these tax-evaded products have resulted in significant losses to the Exchequer, in excess of Rs, 9000 crores per annum according to an independent study conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI). Seizures of large quantum of smuggled cigarettes by enforcement agencies across the country over the past couple of years confirm the growing menace of illegal cigarette trade in the country.

A conducive policy framework, which effectively reduces the huge tax arbitrage opportunity enjoyed by

¹ Report on the impact of current tax framework on the tobacco sector in India and suggestions for its improvements - 2014, by ASSOCHAM and KPMG.

unscrupulous players presently, is critical to arrest the unabated growth of illegal cigarette trade in the country.

As reported last year, the significant decline in legal cigarette volumes and the consequent reduction in the utilisation of Indian Flue-cured Virginia (FCV) tobacco has adversely impacted the livelihoods of over 45 million tobacco farmers, farm workers and others dependent on the tobacco sector. Besides, the soft demand for Indian FCV tobacco has prompted consecutive reductions in the authorised tobacco crop size in 2015-16 and 2016-17. This, in turn, has also led to lower exports of tobacco. Consequently, the acute distress of the tobacco farming community continues unabated, particularly in Andhra Pradesh with an estimated drop of over Rs, 900 crores in earnings in 2016-17. This distress is expected to be aggravated by the unprecedented drought in Andhra Pradesh during the year.

Unfortunately, the taxation policy of the country is largely cigarette centric and based on western models of tobacco taxation. This policy is not suitable for India since duty-paid cigarettes account for only about 11% of tobacco consumption in the country as compared to the global average of more than 90%. Your Company continues to engage with policy makers for a tobacco taxation policy that is non-discriminatory, helps combat the problem of illegal cigarettes and addresses the issues of all stakeholders, particularly tobacco farmers, Exchequer and consumers. Such a policy will not only help maximization of the revenue potential of tobacco even in a shrinking basket of tobacco consumption but also address the tobacco control and health objectives of the Government.

The Goods and Services Tax (GST) is expected to be implemented with effect from 1st July 2017.

The Government has enunciated the principle of revenue neutrality for all products including cigarettes while transitioning to the GST regime. In this context, as per the schedule of rates published pursuant to the GST Council’s meeting on 18th May 2017, cigarettes are likely to be taxed at the peak rate of 28%. Additionally, a GST Compensation Cess, comprising a 5% ad-valorem component and a specific component based on cigarette length, is likely to be imposed.

It may be noted that the GST Council is yet to finalize the GST rate applicable for bidis. It would be imperative to implement an appropriate taxation structure for bidis under the GST framework, rectifying the discriminatory treatment meted out to the legal cigarette industry under the present tax regime. A level playing field for the legal cigarette industry would go a long way in realizing the revenue potential of the tobacco sector and supporting the millions of livelihoods that are dependent on it.

In addition to the punitive taxation landscape, the legal cigarette industry in India continues to grapple with an increasingly stringent regulatory framework. As reported last year, the proposal for increasing the size of the Graphic Health Warnings (GHW) from 40% of the surface area on one side of the cigarette package to 85% of the surface area of both sides of the cigarette package with effect from 1st April 2015 was kept in abeyance pending the recommendations of the Parliamentary Committee on Subordinate Legislation (PCOSL), which had been entrusted with the responsibility of examining the issues consequent to introduction of a larger GHW. However, even before the PCOSL submitted their final report on the matter, the larger health warnings were notified for implementation with effect from 1st April 2016. In the interim, on 15th March, 2016 the PCOSL, in its final report recommended that the size of the GHW should be restricted to 50% on both sides of the cigarette package and not 85% as proposed by the Government. Pursuant to the order of the Honorable Supreme Court, the Honorable High Court of Karnataka has heard your

Companies and other writ petitions challenging the revised GHW and has reserved its judgment.

The 85% GHW is excessively large, extremely gruesome and unreasonable. There is no evidence that cigarette smoking would cause the diseases depicted in the pictures or that large GHW will lead to reduction in consumption. As reported last year, this inadequacy of evidence prompted an appeals court in USA to hold the US FDA’s proposal for introduction of similar GHW in that country as unconstitutional. It is pertinent to note that the global average size of GHW is only about 30% coverage of the principal display area. Further, over 100 countries representing 60% of the signatories to the Framework Convention on Tobacco Control (FCTC) have not adopted GHW² . In fact, the three countries that account for about 51% of the world’s cigarette consumption viz. USA, Japan and China, have not adopted pictorial / graphic warnings and have prescribed only text-based warnings on cigarette packages. Moreover, several major tobacco producing countries, including the USA, are either not parties to the FCTC or are very recent signatories. These countries have taken into consideration the interests of their tobacco farmers in deciding whether or not to adopt large or excessive pictorial warnings.

The excessively large GHWs prevent consumers from making an informed choice in a competitive market, since they are denied adequate information about the brand on the cigarette packages. Your Company believes that such GHW also devalues the Intellectual Property Rights of brand owners and sub-optimizes the large investments made over the years in creating and nurturing the brands. Additionally, studies by independent market research agencies show that consumers tend to prefer the smuggled brands of international cigarettes which do not carry the GHWs mandated by Indian Laws. The absence of GHWs on packages of such contraband

² Canadian Cancer Society - Cigarette Package Health Warnings, International Status Report, Fourth Edition, September 2014.

cigarettes makes consumers perceive them to be a ‘safer alternative’ notwithstanding the fact that the origins and age of such contraband stocks are not determinable. The absence of GHWs along with the significantly lower cost of these contraband cigarettes, due to reasons of tax evasion, only serve to accelerate the growth of the illegal cigarette segment.

The unintended consequences of the extant tobacco taxation and regulatory framework may be summarized as follows:

- Progressive decline in legal cigarette volumes in favor of lightly taxed and tax-evaded tobacco products resulting in sub-optimization of the revenue potential of the tobacco sector and significant loss to the Exchequer.

- About 68% of the tobacco consumption in the country remaining outside the tax net.

- Availability of illegal cigarettes and other tobacco products of dubious quality and hygiene to consumers at extremely affordable prices.

- Adverse impact on the livelihood of tobacco farmers and others dependent on tobacco for their livelihood.

- Fillip to the growth of illegal cigarettes in the absence of statutory GHW on smuggled international brands.

Your Company continues to represent to the Government for the implementation of an equitable, evidence based and pragmatic tobacco taxation and regulatory framework that cognizes for the economic imperatives of the country whilst, simultaneously, supporting the tobacco control objectives of the Government.

Despite the extremely challenging operating environment, your Company retained its leadership position in the industry and improved its standing in key competitive markets across the country. This demonstrates the resilience of your Company’s strong

portfolio of brands, superior execution of competitive strategies, relentless focus on value creation through innovation and deep consumer insights. Some of the strategic initiatives during the year include the launch of Gold Flake Kings Blue Tropical Switch, Classic Citric Burst, Classic Tangy Burst, Classic Fine Taste Plus Low Smell, American Club, Players Fruity Cool Flavour, Flake Mint Capsule, Silk Cut Mint Capsule and Navy Cut Mint Capsule.

The Business continued to make investments in manufacturing facilities towards sustaining its competitive advantage. State-of-the-art, on-line quality oversight systems and cutting-edge technology for innovative packaging were inducted during the year. Long Term Agreements with the unionized workforce were concluded successfully for the Kidderpore and Munger cigarette factories during the year. In addition to grant of patents in previous years, the ongoing initiatives in research and development have resulted in your Company being granted two more international patents during the year in respect of cigarettes.

It is a matter of deep satisfaction that the Business won several awards during the year for its focus on manufacturing excellence, commitment to sustainability and superior standards in Environment, Health and Safety (EHS) in line with your Company’s commitment to the ‘Triple Bottom Line’. The Ranjangaon cigarette factory was awarded ‘Platinum Rating’ at the India Manufacturing Excellence Awards 2016 (IMEA) by Frost & Sullivan, a global consulting firm. This highly acclaimed award acknowledges Indian manufacturing capability and its global competitiveness. The Munger cigarette factory was awarded ‘Eminent Supply Chain and Logistics Unit’ at CII National Supply Chain and Logistics Excellence Awards 2016 in recognition of its consistent achievement of benchmark performances in supply chain and logistics. The Business received industry recognition and several accolades for its commitment towards excellence in sustainability. With the Kidderpore cigarette factory receiving the Indian Green Building Council (IGBC) Platinum Rating under Green Factory Building certification during the year, all cigarette factories of your Company are today IGBC Green Platinum rated. The Bengaluru and Munger factories also received the ‘Excellent Energy Efficiency Unit’ award under the CII National Awards for Excellence in Energy Management 2016 whilst the Saharanpur cigarette factory received the first prize in FICCI Water Awards under ‘Industrial Water Use Efficiency’ category.

In recognition of the growing trend of consumers seeking alternative sources of nicotine like Electronic Vaping Devices (EVD), your Company expanded its EON brand of EVDs to several new markets during the year. The rechargeable variant, ‘EON Charge’, launched in the previous year was extended to several new markets and a disposable variant, ‘EON ZIP’, was launched during the year. Initial consumer response to this variant has been positive. The market for this category is, however, at an embryonic stage globally and, as reported last year, the regulatory oversight is still evolving. Accordingly, your Company remains engaged with policy makers for an opposite regulatory framework for this emerging category.

In the Nicotine Gum category, the Business extended the KwikNic brand to several new markets and has received encouraging response from consumers.

The operating environment for the legal cigarette industry, marked by a punitive taxation and discriminatory & increasingly stringent regulatory regime, will undoubtedly test the resilience of all legitimate players in the industry. Your Company is, however, confident that the trust reposed on it by consumers together with its strong brand portfolio and robust strategic initiatives - based on excellence in product quality and innovation in manufacturing and operations - will enable it to sustain its leadership position in the market.

Corporate Social Responsibility (CSR)

Your Company’s overarching aspiration to create significant and sustainable societal value is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Towards this end, your Company adopted a comprehensive CSR policy in 2014-15 outlining programmes, projects and activities that your Company plans to undertake to create a significant positive impact on identified stakeholders. All these programmes fall within the purview of Schedule VII of the provisions of Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The key elements of your Company’s CSR interventions are to:

- Deepen engagement in identified core operational geographies to promote holistic development, designed to respond to the most prominent development challenges of your Company’s stakeholder groups.

- Strengthen capabilities of Non-Government Organizations (NGOs) / Community Based Organizations (CBOs) in all the project catchments for participatory planning, ownership and sustainability of interventions.

- Drive the Development agenda in a manner that benefits the poor and marginalized communities in our factory and agri-catchments thereby significantly improving Human Development Indices (HDI).

- Move beyond mere asset creation to behavior change through focus on demand generation for all interventions thereby enabling participation, contribution and asset creation for the community.

- Continue to strive for scale by leveraging government partnerships and accessing the most contemporary knowledge / technical know-how.

Your Company’s stakeholders are confronted with multi-dimensional and inter-related issues, at the core of which is the challenge of securing sustainable livelihoods. Accordingly, interventions under your Company’s Social Investments Programme (SIP) are appropriately designed to build their capacities and promote sustainable livelihoods.

The footprint of your Company’s projects is spread over 26 States / Union Territories covering 182 districts.

Social Forestry

Your Company’s pioneering afforestation initiative through the Social Forestry programme is currently spread across 19 districts in six States covering 2.55 lakh acres in 4,809 villages, impacting over 96,500 poor households. Together with your Company’s Farm Forestry programme, this initiative has greened over 6.20 lakh acres till date, and generated over 113 million person days of employment for rural households, including poor tribal and marginal farmers. Integral to the Social Forestry programme is the Agro-Forestry initiative, which currently extends to over 82,255 acres and ensures food, fodder and wood security. .

Besides enhancing farm level employment, generating incomes and increasing green cover, the Social and Farm Forestry initiative of your Company, through a multiplier effect, has led to improvement in pulpwood availability in Andhra Pradesh and Telangana. This initiative is also contributing meaningfully towards the nation’s Endeavour in creating additional carbon sinks for tackling climate change.

During the year, your Company’s Social Forestry programme was extended to West Tripura district and Malkangiri district (Odisha). In Tripura, your Company plans to promote bamboo plantations covering an area of 5,000 acres over the next five years, which would benefit around 2,000 families. In addition, your Company aims to promote 10,000 acres under Agro-Forestry in Malkangiri district of Odisha in order to provide livelihood opportunities to small and marginal farmers.

Soil and Moisture Conservation

The Soil and Moisture Conservation programme promotes the development and management of local water resources in moisture-stressed areas by facilitating village-based participation in planning and implementing such measures as well as building, reviving and maintaining water-harvesting structures. The coverage of this programme currently extends to 45 districts across 12 States. During the year, the area under watershed increased by 1.36 lakh acres taking the cumulative coverage area till 2016-17 to over 7.76 lakh acres. 2,101 water harvesting structures were built during the year, taking the total number of water harvesting structures to 10,099.

Biodiversity

The focus of the programme is on reviving ecosystem services provided to agriculture by nature, comprising natural regulation of pests, pollination, nutrient cycling, soil retention and genetic diversity, which have witnessed considerable erosion in recent decades. During the year, your Company’s biodiversity conservation initiative covered 2,060 acres, in seven States and 15 districts, taking the cumulative area under biodiversity conservation to 11,803 acres. While the conservation work is being carried out in select plots of village commons, this intervention significantly benefits agricultural activity in the vicinity of these plots through soil moisture retention, carbon sequestration and by acting as hosts to insects and birds.

Sustainable Agriculture

The Sustainable Agriculture programme attempts to de-risk farmers from erratic weather events through the promotion of climate smart agriculture premised on dissemination of relevant package of practices, adoption of appropriate mechanization and provision of institutional services. Spread in 60 districts across 16 States,

1,280 Farmer Field Schools (FFS) disseminated advanced agri-practices covering over 1.50 lakh acres under different crops. 326 Agri Business Centres (ABCs) delivered extension services, arranged agri-credit linkages and established collective input procurement and agricultural equipment on hire. In pursuit of your Company’s long-term sustainability objective of increasing soil organic carbon, a total of 3,931 compost units were constructed during the year taking the total number till date to 34,799 units. In addition, the ‘Choupal Pradarshan Khet’ programme promoted field demonstrations of improved seed varieties and effective production practices covering around 1.5 lakh acres and directly benefitting more than 69,000 farmers with a multiplier effect of 10X in terms of adoption by the farming community.

With the addition of 23 model villages during the year, the ‘Village Adoption Programme’ pioneered by your Company’s Leaf Tobacco Business presently covers 108 model villages. This initiative comprises several focused farm level interventions towards enhancing quality and productivity, promoting sustainable agriculture practices and community empowerment. The programme has resulted in generating significant economic surplus for the farming community including creating sustainable rural livelihoods.

Livestock Development

The programme provides an opportunity for farmers to convert an existing asset into a substantial supplementary income with the potential of growing into a sustainable source of livelihood. The programme provided extension services, including breeding, fodder propagation and training of farmers in order to increase their incomes through enhanced productivity of milch animals across 25 districts in seven States. During the year, 2.28 lakh Artificial Inseminations (AIs) were carried

out which led to the birth of 1.01 lakh cross-bred progeny. Cumulatively, the figures for AI and calving stand at 20.19 lakh and 6.72 lakh respectively.

In addition, pilot projects on indigenous breed promotion were initiated during the year in Madhya Pradesh in partnership with 13 existing gaushalas. Your Company has also implemented a project in Punjab to demonstrate to dairy farmers the commercial viability of having cattle farms with indigenous breeds with the intent of encouraging them to preserve indigenous cattle varieties.

Women Empowerment

This initiative is designed to provide a range of gainful entrepreneurial opportunities to poor women supported with financial assistance by way of loans and grants. Strong market linkages are attempted to ensure long-term sustainability.

Currently spread across eight districts in six States, the programme covers over 10,200 ultra-poor women who have been trained in entrepreneurial skills and provided with assets for income generation, taking the cumulative number of women impacted to 13,800. In addition, during the year 496 Self-Help Groups (SHGs) with 6,398 members were formed, in 11 states and 28 districts. Over 46,000 women were linked to individual bank accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and life insurance schemes under Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).

Education

The Primary Education Programme aims to provide children from weaker sections of society access to education with focus on learning outcomes and retention in your Company’s factory catchment areas in 19 districts across 11 States. Over 49,000 children were covered during the year under this initiative comprising ‘Read India Plus’ programme and 210 Supplementary Learning Centres to mainstream out-of-school children into regular schools. Till date, these programmes have reached out to over 5.14 lakh children in aggregate.

In addition, 160 government primary schools were provided infrastructure support comprising boundary walls, additional classrooms, sanitation units, and furniture, taking the total number of government primary schools covered till date to 1,482. To ensure sustainable operations and maintenance of infrastructure provided, School Management Committees were strengthened in 276 schools and 215 Child Cabinets and Water and Sanitation (WATSAN) Committees were formed in various schools with the active involvement of students and teachers.

Skilling & Vocational Training

The Skilling & Vocational Training Programme focuses on providing market-linked skills to young people to make potential job-seekers industry-ready and employable in the services and manufacturing sectors. During the year, 12,338 youth were enrolled for training under different courses like Hospitality, Bedside Assistance, Electricals, Industrial Sewing Machines etc., offered as part of this programme. Of the total students enrolled, 11,344 (92% of enrolled) completed training and 8,084 (71% of trained) students were provided placement. The students trained included a healthy mix of women and SC/ST candidates. The initiative is spread across 29 districts covering 17 States and has enrolled over 43,700 youth cumulatively.

Your Company continues to work with the Welcomgroup Graduate School of Hotel Administration (WGSHA) together with Dr. TMA Pai Foundation to cater to the ever growing need for professionally trained human resources in the hospitality industry. WGSHA has been recently rated by CEO World Magazine amongst the top 50 hospitality schools in the world. In addition, since the inception of ITC Culinary Skills Training Centre, Chhindwara in 2014, 63 trainee chefs in five batches have successfully completed the 6-months programme wherein cooking skills are imparted to youth from the disadvantaged sections of society.

Health & Sanitation

Your Company continues to adopt a multi-pronged approach to improve public health. To promote a hygienic environment through prevention of open defecation and reduce incidence of water-borne diseases, 8,550 household toilets were constructed during the year in collaboration with the Government’s Swachh Bharat

Abhiyan. With this, a total of 23,979 low-cost sanitary units have been constructed so far in your Company’s catchment areas covering 22 districts in 14 States. In areas with water quality problems, 85 Reverse Osmosis plants have been installed providing safe drinking water to nearly 1 lakh rural households in Andhra Pradesh.

Efforts to enhance awareness on various health issues continued through ‘Swasthya Choupal’, your Company’s e-Choupal Rural Health initiative. A network of 300 women Village Health Champions (VHCs) across seven Districts in Uttar Pradesh and three in Madhya Pradesh reached out to nearly two lakh women, adolescent girls and school children during the year. The VHCs conducted over 5,000 village meetings and participated in over 2,000 group events apart from making door-to-door visits focusing on aspects like sanitation, menstrual and personal hygiene, family planning, diarrhoea prevention and nutrition.

Through your Company’s ‘Savlon Swasth India Mission’, a mix of audio-visual aids, games and practical training was leveraged to encourage healthy hygiene habits. More than nine lakh children from around 1,900 schools in 23 cities were covered during the year. Under the ‘First Cry Programme’, 60,000 mothers were made aware of hygienic practices in 1,500 hospitals.

Solid Waste Management

Your Company’s solid waste recycling programme, ‘WOW - Well Being Out of Waste’, helps in the creation of a clean and green environment through awareness and education of citizens on source segregation and recycling of dry waste. It also promotes sustainable livelihoods for ragpickers and waste collectors. During the year, in addition to Hyderabad, Coimbatore, Chennai and Bengaluru, the programme was expanded to Delhi, Tirupati and Muzaffarpur. The quantum of dry waste collected aggregated 33,982 MT from 417 wards. The programme covers over 64 lakh citizens, 25 lakh school children and 2,000 Corporates and creates sustainable livelihoods for 13,500 ragpickers and waste collectors by propagating source segregation and facilitating effective collection in collaboration with municipal corporations. Besides, the intervention has also created over 60 social entrepreneurs who are involved in maximizing value capture from the dry waste collected.

In addition, another programme on solid waste management under the Mission Sunehra Kal initiative has spread to 10 districts of seven states covering 61,200 households and collected 6,033 MT of waste during the year. This programme focuses on home composting in addition to recycling of dry waste. Under this programme, 4,161 MT wet waste was composted and 459 MT of dry waste recycled in 2016-17.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA), which was established in 1977, is a true embodiment of your Company’s sustained commitment to a priceless national heritage. Your Company’s pledge towards ensuring enduring excellence in Classical Music education has helped ITC SRA uphold the age-old ‘Guru-Shishya Parampara’ - a model that has otherwise begun fading away owing to lack of patronage. Although methods of music education are now changing with the advent of digitisation, exceptionally gifted students, carefully handpicked across India receive full scholarships to reside and pursue their music education at the Academy’s campus. This has helped young talent who have limited access to the newer modes of music education, to train under the tutelage of the country’s most distinguished stalwarts who are helping create the next generation of musical masters.

Forging Partnerships with NGOs

The substantial progress made by your Company’s Social Investments Programme in contributing to address some of the country’s key development challenges, has been possible in significant measure, due to your Company’s partnerships with globally renowned NGOs such as BAIF, DB Tech, DSC, FES, MYRADA, Pratham, SEWA Bharat, Outreach, WASH Institute and Water for People amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilization skills of NGOs, will continue to provide innovative grassroots solutions to some of India’s most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities as required under Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company’s Environment, Health & Safety (EHS) strategies are directed towards achieving the greenest and safest operations across all your Company’s units by optimizing natural resource usage and providing a safe and healthy workplace. Systemic efforts continue to be made towards natural resource conservation by continuously improving resource-use efficiencies and enhancing the positive environmental footprint following a life-cycle based approach.

Your Company’s focus on inculcating a green and safe culture is supported through the adoption of EHS standards that incorporate best international standards, codes and practices and verified through regular audits.

Your Company is addressing the critical area of climate change mitigation through several innovative and pioneering initiatives. These include continuous improvement in energy efficiency, enhancing the renewable energy portfolio, integrating green attributes into the built environment, better efficiency in material utilization, maximizing water use efficiencies and rain water harvesting, maximizing reuse and recycling of waste and utilizing post-consumer waste as raw material.

Energy Conservation and Renewable Energy

Your Company is well positioned to benefit from India-specific energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. As a responsible corporate citizen, your Company has made a commitment to reduce dependence on energy from fossil fuels and to achieve 50% of its total energy requirements from renewable sources by 2020.

Significant progress has been made in enhancing the renewable energy portfolio and during 2016-17 over 48% of your Company’s total energy requirements was met from carbon neutral fuels such as biomass, and wind and solar. Your Company has drawn up action plans based on a feasible balance of energy conservation and renewable energy investments to progressively move towards meeting the foretasted target.

Water Security

With water scarcity increasingly becoming an area of serious concern, your Company continues to focus on an integrated water management approach that includes water conservation and harvesting initiatives at its units - while also working towards meeting the water security needs of all stakeholders at the local watershed level. These include interventions to improve water use efficiencies by adopting latest technologies and increasing reuse and recycling practices within the fence while also working with farmers and other community members towards improving agricultural water use efficiencies. The supply side interventions include enhanced capture and storage of rainwater (in soil and storage ponds) and recharging aquifers. These initiatives, have resulted in the creation of rainwater harvesting potential that is over three times the net water consumption of your Company’s operations.

Greenhouse Gases and Carbon Sequestration

The greenhouse gas (GHG) inventory of your Company for the year 2016-17 compiled as per the ISO 14064 standard, has been assured, as in the earlier years, at the highest ‘Reasonable Level’ by a third party assurance provider. During the year, your Company was determined as having achieved ‘Leadership’ position in the Climate Change disclosure of CDP. The CDP Global Climate Change Report ‘Out of the Starting Blocks’, has commended your Company for decoupling emission growth with financial growth (having reduced 10% or more GHG emission over five years while simultaneously growing revenue by 10%).

Reaffirming your Company’s commitment to the ethos of ‘Responsible Luxury’, all luxury hotels of your Company are LEED® Platinum certified, making it the ‘greenest luxury hotel chain’ in the world. In order to continually reduce your Company’s energy footprint, green features are integrated in all new constructions and also incorporated in existing hotels, manufacturing units, warehouses and office complexes.

Your Company’s Social and Farm Forestry initiatives enabled sequestration of over twice the amount of Carbon Dioxide emitted by its operations. Besides mitigating the impact of increasing levels of GHG emissions in the atmosphere, these initiatives help greening degraded wasteland, prevent soil erosion, enhance organic matter content in soil and enable ground water recharge.

Waste Recycling

Your Company continues to make significant progress in reducing specific waste generation through constant monitoring and improvement of efficiencies in material utilization and also in achieving almost total recycling of waste generated in operations. In this way, your Company has prevented waste reaching landfills and the associated problems of soil and groundwater contamination and GHG emissions, all of which can impact public health. In the current year, your Company has achieved over 99% waste recycling, with the Paperboards and Specialty Papers Business, which accounts for 90% of the total waste generated in your Company, recycling 99.9% of the total waste generated by its operations. During the year, this Business also recycled around 1,15,074 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Safety

Your Company’s commitment to provide a safe and healthy workplace to all has been reaffirmed by several national and international awards and certifications received by various units. Your Company’s approach is to institutionalize safety as a value-led concept with focus on inculcating a sense of ownership at all levels to drive behavioral change. In line with this approach, several of your Company’s operating units are progressively implementing behavioral-based safety initiatives and customized risk assessment programmes to strengthen their safety culture. Your Company continuously strives to improve on safety performance by incorporating best-in-class engineering standards in the design and project execution phase itself for all investments in the built environment, besides optimizing costs. During the year, the total number of on-site lost time accidents (LTA) reduced by 11.1% over the last year. Environment, Health & Safety audits before commissioning and during the operation of units are carried out to verify compliance with standards.

Promoting Thought Leadership in Sustainability

The ‘CII-ITC Centre of Excellence for Sustainable Development’, established by your Company in 2006 in collaboration with the Confederation of Indian Industry (CII), continues to focus on its Endeavour to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the 11th Sustainability Summit held on 14th-15th September 2016 in New Delhi. Some eminent personalities who addressed the delegates included Late Mr. Anil Madhav Dave, Minister for Environment, Forests and Climate Change, Mr. Piyush Goyal, Minister for Power, New & Renewable Energy, Coal and Mines, Mr. Amitabh Kant, CEO, NITI Aayog, Mr. Yuri Afanasiev, UN Resident Coordinator & UNDP Resident Representative in India.

The 11th CII-ITC Sustainability Awards were handed over by Mr. Prakash Javadekar, Union Minister of Human Resources to 23 winning companies for excellence in sustainable business in different categories. Your Company participated in the Business and Biodiversity Forum organized by Convention on Biological Diversity (CBD) COP 13, Mexico on 2nd - 3rd December 2016. The India Business & Biodiversity Initiative (IBBI) also released a case study publication ‘Reimagining Business for Biodiversity Enhancement: Case Studies from Indian Industry’ which featured your Company.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company continues to invest in a comprehensive Research & Development programme leveraging its world-class infrastructure, benchmarked processes, state-of-the-art technology and a business-focused R&D strategy.

ITC Life Sciences & Technology Centre (LSTC) has a mandate to develop unique sources of competitive advantage and build future readiness by harnessing contemporary advances in several relevant areas of science and technology, and blending the same with classical concepts of product development and leveraging cross-business synergies. This challenging task of driving science-led product innovation has been carefully addressed by appropriately identifying the required set of core competency areas of science. LSTC has evolved over the years and is presently resourced with nearly 350 highly qualified scientists, world-class measurement systems and state-of-the-art facilities to conduct experimental research, rapid prototyping and process development. Several Centres of Excellence have been established over the past few years in these areas in LSTC. In addition, a number of areas centred around these capabilities have secured global quality certifications of the highest order.

The Agrisciences R&D team continues to engage in evaluating and introducing several germplasm lines of identified crops including Casuarina and Eucalyptus to increase the genetic and trait diversities in these species. This intervention would facilitate the development of new varieties with higher yields, better quality and other traits relevant for your Company’s Businesses.

LSTC continues to evaluate and build research collaborations with globally recognized Centres of Excellence to remain contemporary and fast-track its journey towards demonstrating multiple ‘proofs of concept’. These collaborations, covering identified species, are designed in a manner that enables your Company in gaining fundamental insights into several technical aspects of plant breeding and genetics and the influence of agro-climatic conditions on the growth of these species. Such interventions will accelerate LSTC’s efforts in creating future generations of these crops with greater genetic and trait diversities leading to significant benefits for your Company’s Businesses. Further, these outcomes have a strong potential to contribute towards augmenting the nation’s ecological capital and biodiversity as well. Several ‘proof of concept’ studies have been accomplished at laboratory scale which are being advanced to large scale field trials in multiple locations. These initiatives are expected to produce significant business impact in the years to come. The Agrisciences team continues to focus on delivering world-class solutions using contemporary technologies in crops such as wheat, soya, potato and rice.

Recognising the unique construct of your Company in terms of its strong presence in Agri, Branded Packaged Foods and Personal Care Product Businesses, a convergence of R&D capabilities is being leveraged to deliver future products aimed at nutrition, health and well-being. Advances in biosciences are creating a convergence of these areas and it is likely that several future developments in these Businesses and their products are heavily influenced by this trend. In this context, LSTC has created a Biosciences R&D team to design and develop several long-term research platforms evolving multi-generation product concepts and associated claims that are fully backed by scientific evidence for the Branded Packaged Foods and Personal Care Products Businesses. Multiple value propositions have been identified in the area of functional foods, which are being progressed to products of the future with strong scientifically validated claims via clinical trials. Similar advances have been made in the area of skin care and hair care.

LSTC has a clear vision and road map for long-term R&D, backed by a well-crafted Intellectual Property strategy. With scale, speed, science and sustainability considerations, LSTC is poised to deliver long-term competitive advantage for your Company.

In line with your Company’s relentless focus on operational excellence and quality, each Business is mandated to continuously innovate on processes and systems to enhance their competitive position. During the year, your Company’s Hotels Business leveraged its ‘Lean’ and ‘Six Sigma’ programmes to improve business process efficiencies. This will further enhance capability to create superior customer value through a service excellence framework. The Paperboards, Paper & Packaging Businesses continued to pursue ‘Total Productive Maintenance’ (TPM) programmes in all units, resulting in substantial cost savings and productivity improvements.

All manufacturing units of your Company have ISO quality certification. All manufacturing units of the

Branded Packaged Foods Businesses (including contract manufacturing units) and hotels operate in compliance with stringent food safety and quality standards. Almost all Company owned units / hotels and contract manufacturing units of the Branded Packaged Foods Businesses are certified by an accredited third party in accordance with ‘Hazard Analysis Critical Control Points’ (HACCP) / ISO 22000 standards. Additionally, the quality of all FMCG products of your Company is regularly monitored through ‘Product Quality Ratings Systems’ (PQRS).

PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

In the proceedings initiated by the Enforcement Directorate in 1997, in respect of some of the show cause memoranda issued by the Directorate, after hearing arguments on behalf of your Company, the appropriate authority has passed orders in favour of your Company, and dropped those memoranda.

In respect of some of the remaining memoranda, your Company, has filed writ petitions before the Honorable Calcutta High Court challenging their validity. These petitions are pending. Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Honorable Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year, your Company’s treasury operations continued to focus on deployment of surplus liquidity and management of foreign exchange exposures within a well-defined risk management framework.

During the year, Reserve Bank of India (RBI), reduced policy interest rates by 50bps. This coupled with the surplus banking system liquidity, post demonetization of Specified Bank Notes, led to decline in market interest rates. Consolidation in Fiscal / Current Account Deficits and persistent decline in headline inflation during the year also contributed to the positive sentiment in Debt Markets.

All investment decisions relating to deployment of surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Proactive rebalancing of portfolio mix during the year in line with the evolving interest rate environment helped improve treasury performance. Your Company’s risk management processes ensured that all deployments were made with proper evaluation of underlying risk while remaining focused on capturing market opportunities.

The foreign exchange market remained stable for most part of the year barring periods of heightened volatility induced by global / domestic events such as the surprise outcome of UK referendum to exit the European Union, escalation of geo-political tensions with Pakistan,

US Presidential elections and demonetization of Specified Bank Notes. These events led to depreciation of the Indian Rupee (INR) to a lifetime low of '' 68.86 per US$ in November 2016. However, the INR recovered significantly in February and March 2017 to close the year at '' 64.84 per US$. During the year, INR outperformed most of its emerging market peers and appreciated by 2.1% vs. the US Dollar on the back of stability in domestic macro-economic and political environment and sharp increase in capital inflows mainly from foreign institutional investors. In this scenario, your Company adopted a proactive forex exposure management strategy, which included the use of foreign exchange forward contracts and plain vanilla options, to protect business margins and reduce risks / costs.

As in earlier years, commensurate with the large size of the temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including independent check of 100% of transactions, by your Company’s Internal Audit department.

DEPOSITS

Your Company’s erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2017, there were no deposits due for repayment except in respect of two deposit holders totaling to '' 20,000/- which have been withheld on the directives received from the government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company’s erstwhile Schemes.

Your Company has not accepted any deposit from the public / members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year.

DIRECTORS Changes in Directors

Mr. Yogesh Chander Deveshwar shed his executive role on completion of term as Chairman and Wholetime Director on 4th February, 2017. Mr. Deveshwar’s period of Executive Chairmanship witnessed transformation of your Company into one of India’s most admired and valuable corporations. His vision to make your Company an engine of growth for the Indian economy, keeping societal value creation as an integral part of business purpose, has led to the creation of multiple drivers of growth, world-class Indian Brands and recognition of your Company as a global exemplar in Sustainability. Your Directors would like to place on record their deep appreciation for Mr. Deveshwar’s invaluable contribution in the transformation of your Company under his leadership as Executive Chairman.

It may be recalled that Mr. Deveshwar, at the request of the Nomination & Compensation Committee and the Board of Directors of your Company (‘the Board’), recognizing the need for orderly transition in a company of ITC’s size and complexity, agreed to continue as Chairman in non-executive capacity and also play the role of Mentor to the new executive management.

Mr. Deveshwar was appointed Non-Executive Director, not liable to retire by rotation, and Chairman of the Company for a period of three years with effect from 5th February, 2017, as approved by the Members at the 105th Annual General Meeting (‘AGM’) held on 22nd July, 2016.

On the recommendation of the Nomination & Compensation Committee, the Board at the meeting held on 27th January, 2017 appointed Mr. Sanjiv Puri, Whole time Director, also as Chief Executive Officer of the Company with effect from 5th February, 2017 to take independent charge of the executive leadership of your Company.

Mr. Robert Earl Lerwill [representing Tobacco Manufacturers (India) Limited (‘TMI’), a subsidiary of British American Tobacco p.l.c.] resigned from the Board

on medical grounds with effect from 22nd June, 2016. Mr. Angara Venkata Girija Kumar [representing General Insurers’ (Public Sector) Association of India (‘GIPSA’)], on completion of his term, ceased to be Non-Executive Director of your Company on conclusion of the 105th AGM. Mr. Krishnamoorthy Vaidyanath, on completion of his term, also ceased to be Non-Executive Director of your Company with effect from close of business on 28th July, 2016. Mr. Anil Baijal ceased to be an Independent Director of your Company with effect from 30th December, 2016, consequent to his appointment as Lt. Governor of Delhi. Your Directors would like to record their appreciation for the services rendered by Messrs. Lerwill, Girija Kumar, Vaidyanath and Baijal.

On the recommendation of the Nomination & Compensation Committee, Mr. Zafir Alam (representing GIPSA), Mr. David Robert Simpson (representing TMI), and Mr. Ashok Malik (representing Specified Undertaking of the Unit Trust of India), were appointed by the Board as Additional Non-Executive Directors with effect from 26th October, 2016, 27th January, 2017 and 11th April, 2017, respectively.

By virtue of the provisions of Article 96 of the Articles of Association of your Company and Section 161 of the Companies Act, 2013 (‘the Act’), Messrs. Alam, Simpson and Malik will vacate office at the ensuing AGM of your Company.

On the recommendation of the Nomination & Compensation Committee, your Board at the meeting held on 26th May, 2017 recommended for the approval of the Members, the appointment of Messrs. Alam, Simpson and Malik as Non-Executive Directors of your Company, liable to retire by rotation.

Requisite Notices under Section 160 of the Act have been received for the appointment of Messrs. Alam, Simpson and Malik, who have filed their consents to act as Directors of the Company, if appointed.

Appropriate resolutions seeking your approval to the aforesaid appointments are appearing in the Notice convening the 106th AGM of your Company.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Act read with Article 91 of the Articles of Association of

the Company, Mr. Suryakant Balkrishna Mainak will retire by rotation at the ensuing AGM and being eligible, offers himself for re-election. Your Board has recommended his re-election.

Number of Board Meetings

Six meetings of the Board were held during the year ended 31st March, 2017.

Attributes, Qualifications & Independence of Directors and their Appointment

As reported in earlier years, criteria for determining qualifications, positive attributes and independence of Directors were approved by the Nomination & Compensation Committee pursuant to the Act and the Rules there under, in respect of Directors, including Independent Directors. The Corporate Governance Policy also, inter alia, requires that Non-Executive Directors be drawn from amongst eminent professionals with experience in business / finance / law / public administration & enterprises. The Board Diversity Policy of the Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The Articles of Association of the Company provide that the strength of the Board shall not be fewer than five nor more than eighteen.

Directors are appointed / re-appointed with the approval of the Members for a period of three to five years or a shorter duration, in accordance with retirement guidelines and as may be determined by the Board from time to time. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the Members. One-third of the Directors who are liable to retire by rotation, retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that they meet the criteria of independence as prescribed under Section 149 of the Act and Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company’s Policy on remuneration of Directors, Key Managerial Personnel and other employees is provided under the section ‘Report on Corporate Governance’ in the Report and Accounts.

Board Evaluation

As reported in earlier years, the Policy on Board evaluation, evaluation of Board Committees’ functioning and individual Director evaluation was approved by the Nomination & Compensation Committee. In keeping with ITC’s belief that it is the collective effectiveness of the Board that impacts Company performance, the primary evaluation platform is that of collective performance of the Board as a whole. Board performance is assessed against the role and responsibilities of the Board as provided in the Act and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with the Company’s Governance Policy. The parameters for Board performance evaluation have been derived from the Board’s core role of trusteeship to protect and enhance shareholder value as well as fulfill expectations of other stakeholders through strategic supervision of the Company. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by the respective Committee Chairman with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, in assisting the Board in realizing its role of strategic supervision of the functioning of the Company in pursuit of its purpose and goals.

While the Board evaluated its performance against the parameters laid down by the Nomination & Compensation Committee, the evaluation of individual Directors was carried out anonymously in order to ensure objectivity. Reports on functioning of Committees were placed before the Board by the Committee Chairmen.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section ‘Board of Directors and Committees’ in the Report and Accounts.

Statutory Auditors

The Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants (‘DHS’), were appointed with your approval at the 103rd AGM to hold such office till the conclusion of the 108th AGM. On the recommendation of the Audit Committee and pursuant to Section 139 of the Act, the Board recommended for the ratification of the Members, the appointment of DHS from the conclusion of the ensuing AGM till the conclusion of the 107th AGM. On the recommendation of the Audit Committee and pursuant to Section 142 of the Act, the Board also recommended for the approval of the Members, the remuneration of DHS for the financial year 2017-18. Appropriate resolution for the purpose is appearing in the Notice convening the 106th AGM of the Company.

Cost Auditors

Your Board, as recommended by the Audit Committee, appointed for the financial year 2017-18:

(i) Mr. P. Raju Iyer, Cost Accountant, for audit of Cost Records maintained by the Company in respect of ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

(ii) Messrs. Shome & Banerjee, Cost Accountants, for audit of Cost Records maintained in respect of all applicable products of the Company, other than ‘Paper and Paperboard’ and ‘Nicotine Gum’ products.

Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolutions seeking your ratification to the remuneration of the said Cost Auditors are appearing in the Notice convening the 106th AGM of the Company.

Secretarial Auditor

Your Board appointed Messrs. S. M. Gupta & Co., Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2017. The report of Messrs. S. M. Gupta & Co. is provided in the Annexure forming part of this Report, pursuant to Section 204 of the Act.

CHANGES IN SHARE CAPITAL

During the year, the following changes were effected in the Share Capital of your Company:-

a) Increase in Authorized Share Capital

The Authorized Share Capital of your Company was increased from Rs, 1000 crores to Rs, 2000 crores divided into 2000,00,00,000 Ordinary Shares of Rs, 1/- each, with effect from 27th June, 2016.

b) Issue of Bonus Shares

402,66,57,100 Ordinary Shares of Rs, 1/- each, fully paid-up, were issued and allotted as Bonus Shares, in the proportion of 1 (One) Bonus Share of Rs, 1/each for every existing 2 (Two) fully paid-up Ordinary Shares of Rs, 1/- each held on 4th July, 2016, being the Record Date determined by the Board for the purpose. The Bonus Shares were allotted on 7th July, 2016.

c) Issue of Shares under ITC Employee Stock Option Schemes 7,35,18,980 Ordinary Shares of Rs, 1/- each, fully paid-up, were issued and allotted during the year upon exercise of 73,51,898 Options under the Company’s Employee Stock Option Schemes.

Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2017, stands increased to Rs, 1214,73,83,071/- divided into 1214,73,83,071 Ordinary Shares of Rs, 1/- each.

The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Disclosures with respect to Stock Options, as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the Regulations’), are available in the Notes to the Financial Statements and can also be accessed on the Company’s corporate website ‘www.itcportal.com’ under the section ‘Shareholder Value’. During the year, there has not been any material change in the Company’s Employee Stock Option Schemes.

Your Company’s Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Employee Stock Option Schemes of the Company have been implemented in accordance with the Regulations and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre of your Company (‘ISC’), registered with Securities and Exchange Board of India as Category II Share Transfer Agent for providing in-house share registration and related services, maintains its position as an exemplar in investor servicing. ISC with its experienced team of professionals, supported by contemporary infrastructure, continues to provide best-in-class services to the investors.

During the year, the ISO 9001:2008 Quality Management System certification for investor servicing by ISC was renewed by Messrs. Det Norske Veritas, accredited agency for ISO certification, up to 15th September, 2018. ISC achieved the highest ‘Level 5’ rating for the eighth consecutive year - a testimony to the excellence achieved by ISC in providing quality investor services.

RELATED PARTY TRANSACTIONS

All contracts or arrangements entered into by the Company with its related parties during the financial year were in accordance with the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. All such contracts or arrangements have been approved by the Audit Committee. No material contracts or arrangements with related parties were entered into during the year under review. Further, the prescribed details of related party transactions of the Company in Form No. AOC-2, in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in the Annexure to this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act, 2013, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d) prepared the Annual Accounts on a going concern basis;

e) laid down internal financial controls to be followed by your Company and that such internal financial controls were adequate and operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company’s Board of Directors is responsible for the preparation of the consolidated financial statements of your Company & its Subsidiaries (‘the Group’), Associates and Joint Venture entities, in terms of the requirements of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under Section 133 of the Act.

The respective Board of Directors of the companies included in the Group and of its associates and joint venture entities are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of your Company, as foretasted.

OTHER INFORMATION Compliance with conditions of Corporate Governance

The certificate from your Company’s Auditors, Messrs. Deloitte Haskins & Sells, confirming compliance of the conditions of Corporate Governance as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed.

Compliance with requirements relating to downstream investments

Your Company’s Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Company and its subsidiaries are in compliance with the requirements relating to downstream investment as laid down in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India)

(Ninth Amendment) Regulations, 2013 and other applicable FEMA Regulations.

Going Concern status

There is no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of the Company or its future operations.

Extract of Annual Return

The information required under Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, is provided in the Annexure forming part of this Report.

Particulars of loans, guarantees or investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Notes 4, 5, 6, 9 and 27 (v) (a) (ii) to the Financial Statements.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

Employees

The total number of employees as on 31st March, 2017 stood at 25,883.

There were 59 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs, 102 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs, 8.5 lakhs per month or more during the financial year ended 31st March, 2017. The information required under Section 197(12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.

Dividend Distribution Policy

The Dividend Distribution Policy of the Company, adopted by your Board pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘will’ and other similar expressions as they relate to the Company and/or its Businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Inspired by the super ordinate purpose to serve national priorities, your Company redefined its Vision two decades ago to transform itself into a vibrant engine of growth that would make a substantial contribution to the Indian economy, whilst rewarding shareholders by creating growing value for the Indian society.

Over the last 21 years, your Company has created multiple drivers of growth by developing a portfolio of world-class businesses across all sectors of the national economy spanning agriculture, manufacturing and services. Your Company ranks amongst the top three in the private sector in terms of Contribution to the Exchequer. Over the last 21 years, your Company’s Value Addition aggregated Rs, 3.6 lakh crores of which nearly 75% accrued to the Exchequer at the Central and State levels. During this period, your Company’s Gross Revenue and Post-tax profit have recorded an impressive compound annual growth of 12.0% and 19.1% respectively. Total Shareholder Returns, measured in terms of increase in market capitalization and dividends, have grown at a compound rate of 23.6% per annum during this period, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital.

Your Company’s non-cigarette businesses have grown over 18-fold since 1996 and presently constitute 58% of net segment revenue. In aggregate, the non-cigarette businesses account for nearly 80% of your Company’s operating capital employed, about 90% of the employee base and over 80% of annual investments.

Your Company today, is the leading FMCG marketer in India, a pre-eminent hotel chain and a globally acclaimed icon in green hoteliering, the clear market leader in the Indian Paperboard and Packaging industry, a pioneering trailblazer in farmer and rural empowerment through its Agribusiness and a global exemplar in sustainable business practices. Additionally, its wholly-owned

subsidiary, ITC Infotech India Limited, is a player of promise in the field of Information Technology.

Aligned with the Government’s Make in India Vision, your Company is building national assets in the manufacturing and tourism sector. As stated earlier in this Report, around 20 world-class Integrated Consumer Manufacturing & Logistics facilities are being built to deliver sustainable competitive advantage to your Company’s FMCG businesses. In total, 65 projects with an outlay of Rs, 25,000 crores are in various stages of implementation / planning across the length and breadth of the country facilitating regional and national economic development. Recognizing that tomorrow’s world will belong to those who create, own and nurture intellectual capital, your Company continues to invest in augmenting the capability of its globally benchmarked Life Sciences and Technology Centre to ensure that its Businesses are future-ready and contribute to building intellectual property assets for the nation.

Your Company’s Board and employees are inspired by the Vision of sustaining ITC’s position as one of India’s most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. The vision of enlarging your Company’s contribution to the Indian economy is driven by its ‘Let’s Put India First’ credo anchored on the core values of Trusteeship, Transparency, Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of ITC’s Corporate Governance philosophy.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

On behalf of the Board

26th May 2017 Y C. DEVESHWAR

Chairman

Kolakta S. PURI Chief Executive Officer & Director

India R. TANDON Director & Chief Financial Officer

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Mar 31, 2015

The Directors submit their Report for the financial year ended 31st March, 2015.

SOCIO-ECONOMIC ENVIRONMENT

2014 marked yet another year of modest global economic growth. According to the International Monetary Fund's April 2015 World Economic Outlook, world output grew by 3.4% - at par with the growth recorded in 2013. While economic growth picked up in the Advanced Economies, the Emerging Market & Developing Economies witnessed further deceleration in growth. The US economy posted a strong performance during the year averaging an annualised growth of 4% in the last three quarters of 2014, driven by growth in consumption expenditure on the back of steady job creation and income growth, lower oil prices and improved consumer confidence. The Euro Area also displayed signs of recovery, growing by 0.9% during 2014 compared to a contraction of 0.5% in the previous year, aided by lower oil prices, higher net exports and supportive financial conditions. However, risks of prolonged deflationary conditions and low growth persist. The Emerging Market & Developing Economies slowed down further - from 5% in 2013 to 4.6% in 2014 with China recording a decline in growth rate - from 7.8% in 2013 to 7.4% in 2014. Other major constituent economies like Brazil, Russia, and South Africa also recorded deceleration in growth rates.

Global growth prospects remain moderate in 2015. As per IMF estimates, world GDP is projected to grow modestly from 3.4% in 2014 to 3.5% in 2015 and 3.8% in 2016 largely driven by the Advanced Economies, where growth is expected to increase from 1.8% in 2014 to 2.4% in 2015 and 2016. Within Advanced Economies, growth is likely to be strongest in the US at 3.1% in 2015 driven by lower energy prices, benign inflation, reduced fiscal drag and improving household, corporate and bank balance sheets. Building on the stronger growth momentum at the end of 2014, overall Euro Area growth is expected to increase to 1.5% in 2015, aided by lower oil prices, a weakening currency and the European Central Bank's massive asset purchase programme to unshackle the economy from its low growth and low inflation state. Emerging Market & Developing Economies are likely to see another year of deceleration in growth - from 4.6% in 2014 to 4.3% in 2015 - before recovering to 4.7% in 2016. GDP growth in China is projected to slow down further to 6.8% in 2015 with decline in investment growth.

Despite the improved prospects in certain sections of the world economy, global economic recovery remains fragile. Geopolitical tensions, stagnation and deflationary conditions in Advanced Economies, continued slowdown in growth rates in China and its consequent adverse impact on commodity exporting countries represent some of the key downside risks to global economic recovery.

While domestic macro-economic variables improved over the previous year, aided by the collapse of global crude oil prices, the Indian economy witnessed yet another challenging year with only a marginal pick-up in economic growth. The weakness in the broader economy was manifest in your Company's operating segments – particularly in the FMCG and Hospitality space. While the new data, rebased to 2011-12, released by the Central Statistics Office (CSO) has pegged GDP growth at 7.4% for 2014-15 compared to 6.9% in 2013-14, there appears to be a significant divergence between the reported growth rates and on-ground economic activity. While growth in Private Final Consumption Expenditure (PFCE) has been estimated at 7.1% for 2014-15 (Vs. 6.2% in 2013-14), leading indicators like rural demand headwinds, muted sales of tractors and two wheelers, depressed production of consumer goods and a marked deceleration in corporate sales growth point to a persistent weakness in private consumption demand. Similarly, while industrial growth based on the new data series is estimated at 5.9%, Index of Industrial Production (IIP) data reflects a relatively subdued performance. As stated by the RBI in its Monetary Policy Report of April 2015, while the new GDP data embodies better coverage and improved methodology as per international best practices, an accurate assessment of the state of the business cycle and forecasting is handicapped by the lack of sufficient historical data based on the new data series.

There was good news on the inflation front, which declined significantly aided by low global crude oil and commodity prices. While Wholesale Price Index (WPI) for 2014-15 stood at 2% as against 6% in 2013-14, Core CPI inflation also eased to 5.5% in 2014-15 as compared to 8.8% in 2013-14. The fall in inflation provided the much needed space for monetary accommodation, with the RBI reducing policy rates by a cumulative 50 bps in Q4 2014-15. Food inflation, however, has displayed an uptrend in recent months and remains a key monitorable given the adverse impact of unseasonal rains in March 2015 on the winter crop and early indications of the likelihood of El Nino weather conditions during the forthcoming south-west monsoon season.

There was significant improvement on the 'twin deficit' front as well. Fiscal Deficit was contained within target at 4.0% of GDP in 2014-15 driven by decline in oil subsidies, once-off proceeds from spectrum auctions and compression in Government expenditure. The Current Account Deficit narrowed further to an estimated 1.3% of GDP as compared to 1.7% in the previous year, primarily aided by a lower import bill on account of the steep fall in crude oil prices. Healthy capital flows on the back of improved investor sentiment and favourable global liquidity conditions helped shore up foreign exchange reserves leading to a relatively stable Rupee and propelling the Sensex to record highs.

The broad-based decline in retail inflation since September 2014, depressed commodity prices and the Government's plans to step up infrastructure investments and focus on improving the ease of doing business in India have improved the prospects for growth in 2015-16.

However, the pace of growth is unlikely to witness significant acceleration in the short term given the inherent time lag involved for business confidence and reforms to translate into higher levels of capital investment and a significant pick-up in Private Consumption Expenditure. As per median estimates, based on the Survey of Professional Forecasters conducted by RBI, the Indian economy is likely to grow by 7.9% in 2015-16 as compared to 7.4% in 2014-15 (based on 2011-12 data series). A sharp reversal in crude oil and global commodity prices, heightened geopolitical risks, low agricultural output due to sub-normal monsoons, and protracted stagnation in the Euro Area represent some of the key downside risks going forward. An accelerated rollout of policy reforms and fast track clearances of large projects would go a long way in stimulating the private investment cycle and turn around the manufacturing sector.

While India remains one of the fastest growing major economies in the world, the rate of economic growth in recent years has remained far below the desired levels and the country's potential. Given the low levels of per capita income and the fact that a significant proportion of our population lives below the poverty line, it is imperative that the economy reverts to a high growth trajectory sooner than later.

Domestic consumption remains one of the key growth engines of the Indian economy. With a large and growing population, rising affluence and literacy, and increasing urbanisation - the structural drivers for rapid growth in consumption are in place. Even so, the subdued growth in private consumption over the last few years is a cause for concern. Equally, given the significant additions to the working age population, there is an urgent need to focus on new job creation and skill development to address the unsustainable levels of unemployment especially amongst the youth. Stagnation in the manufacturing sector needs to be reversed at the earliest towards the creation of sustainable livelihoods and absorption of the increasing working age population of the country. In this context, the Government's 'Make in India' initiative to turn India into a global manufacturing hub is a step in the right direction as it seeks to enhance transparency, speed up the approvals process, resolve policy issues by working in tandem with the States and foster greater levels of value addition within the country. Boosting agricultural productivity and value addition to international standards while simultaneously improving market linkages remain critical for the growth of the Agricultural sector. Supportive policies in the areas of food processing and agro-forestry can significantly contribute to job creation, enhance rural incomes, help manage food inflation and promote sustainable agriculture.

For a country like India which has a disproportionately low share of global natural resources relative to its large population, where millions continue to live in abject poverty, and a young demographic profile which entails 12 million people entering the job market every year, the focus both at the national and corporate level should be on fashioning strategies that foster sustainable, equitable and inclusive growth. Policies and regulations must be aligned towards encouraging businesses to adopt a low-carbon growth path and support the creation of sustainable livelihoods and societal capital. Differentiated and preferential incentives, in the form of fiscal or financial benefits to companies that adopt sustainable business practices would act as a force multiplier towards achieving this critical national goal. It is your Company's belief that businesses can bring about transformational change by pursuing innovative business models that synergise the creation of sustainable livelihoods and the preservation of natural capital with enhancing shareholder value. This 'Triple Bottom Line' approach to creating larger 'stakeholder value', as opposed to merely ensuring uni-dimensional 'shareholder value', is the driving force that defines your Company's sustainability vision and its growth path into the future.

Your Company is a global exemplar in 'Triple Bottom Line' performance and is the only enterprise in the world of comparable dimensions to have achieved and sustained the three key global indices of environmental sustainability of being 'water positive' (for 13 years), 'carbon positive' (for 10 years), and 'solid waste recycling positive' (for 8 years).

The following sections outline your Company's progress in pursuit of the 'Triple Bottom Line'.

FINANCIAL PERFORMANCE

Your Company delivered another year of steady performance in the backdrop of continuing sluggishness in the macro-economic environment, exacerbated by a steep increase in taxes/duties on cigarettes which led to unprecedented pressure on legal cigarette industry sales volumes. Your Company also had to contend with start-up costs relating to the launch of new products and categories in the non-cigarette FMCG segment, input cost pressures in the Paperboards, Paper & Packaging Businesses and a weak demand and pricing environment in the Hotels Business.

Gross Revenue for the year grew by 7.0% to Rs. 49964.82 crores. Net Revenue at Rs. 36083.21 crores grew by 9.7% primarily driven by a 11.3% growth in the non-cigarette FMCG segment, 8.1% growth in the Agribusiness segment and 8.7% growth in the Cigarettes segment. Profit Before Tax registered a growth of 10.6% to Rs. 13997.52 crores while Net Profit at Rs. 9607.73 crores increased by 9.4%. After adjusting for liability written back in Q2 FY14 (towards Rates and Taxes and Interest thereon pertaining to earlier years, aggregating Rs. 192.68 crores) underlying growth in Profit Before Tax and Net Profit for the year grew by 12.3% and 11.0% respectively. Earnings Per Share for the year stood at Rs. 12.05 (previous year Rs. 11.09). Cash flows from Operations aggregated Rs.13534.65 crores compared to Rs. 10759.50 crores in the previous year.

Your Directors are pleased to recommend a Dividend of Rs. 6.25 per share (previous year Rs. 6.00 per share) for the year ended 31st March, 2015. Total cash outflow in this regard will be Rs. 6029.56 crores (previous year Rs. 5582.90 crores) including Dividend Distribution Tax of Rs. 1019.86 crores (previous year Rs. 810.99 crores).

Your Board further recommends a transfer to General Reserve of Rs. 970.00 crores (previous year Rs. 880.00 crores). Consequently, the Surplus in Statement of Profit and Loss as at 31st March, 2015 would stand at Rs. 8767.35 crores (previous year Rs. 6139.09 crores).

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All Businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The ITC Group's contribution to foreign exchange earnings over the last ten years aggregated nearly US$ 6.6 billion, of which agri exports constituted 57%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company's contribution to the rural economy.

During the financial year 2014-15, your Company and its subsidiaries earned Rs. 5901 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 5096 crores, mainly on account of exports of agri-commodities. Your Company's expenditure in foreign currency amounted to Rs. 1969 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1676 crores and import of capital goods at Rs. 293 crores. Details of foreign exchange earnings and outgo are provided in Note 31 to the Financial Statements.

PROFITS, DIVIDENDS AND SURPLUS

(Rs. in Crores) PROFITS 2015 2014

a) Profit Before Tax 13997.52 12659.11

b) Tax Expense

– Current Tax 4020.99 3791.13

– Deferred Tax 368.80 82.77

c) Profit for the year 9607.73 8785.21

SURPLUS IN STATEMENT OF PROFIT AND LOSS

a) At the beginning of the year 6139.09 3788.10

b) Less: Loss for the period from 1st April, 2013 8.01 – to 31st March, 2014 adjusted pursuant to the Scheme of Arrangement [Refer Note 31(x)]

c) Add: Unrecognised Net Deferred Tax 45.84 – assets as on 1st April, 2013 adjusted pursuant to the Scheme of Arrangement [Refer Note 31(x)]

d) Less: Depreciation on transition to 48.32 – Schedule II of the Companies Act, 2013 on Tangible Fixed Assets (Net of Deferred Tax Rs.24.88 crores) [Refer Note 31(xi)]

e) Add : Profit for the year 9607.73 8785.21

f) Less:

– Transfer to General Reserve 970.00 880.00

– Proposed Dividend [2015 Rs.6.25 5009.70 4771.91 (2014 - Rs. 6.00) per share]

– Income Tax on Proposed Dividend

- Current Year 1019.86 810.99

- Earlier year's provision no (30.58) (28.68) longer required

g) At the end of the year 8767.35 6139.09

BUSINESS SEGMENTS

A. FAST MOVING CONSUMER GOODS

FMCG - Cigarettes

The legal cigarette industry in India continues to be impacted by a punitive taxation and discriminatory regulatory regime. The operating environment for the legal cigarette industry in India was rendered even more challenging during the year, with two rounds of sharp increase in Excise Duty – in July 2014 and February 2015. This includes a cumulative increase of 115% on filter cigarettes of 'length not exceeding 65 mm', which has widened the price differential between legal and illegal cigarettes and made it extremely difficult for the legal cigarette industry to counter the unabated growth of illegal cigarettes in the country.

Over the last 3 years, the incidence of Excise Duty and VAT on cigarettes, at a per unit level, has gone up cumulatively by 98% and 104% respectively. It is pertinent to note that Kerala, Tamil Nadu and Assam, which together account for a significant portion of your Company's sales volumes, sharply increased VAT rate on cigarettes during the year.

The combined impact of the sharp increase in Excise Duty and VAT as stated above, is exerting unprecedented pressure on legal industry sales volumes. Besides adversely impacting the performance of the legal cigarette industry, this has led to sub-optimisation of the revenue potential from the tobacco sector.

High incidence of taxation and a discriminatory regulatory regime on cigarettes in India have over the years, led to a significant shift in tobacco consumption to lightly taxed or tax evaded tobacco products like bidi, khaini, chewing tobacco, gutkha and illegal cigarettes which presently constitute over 88% of total tobacco consumption in the country. Thus, the share of legal cigarettes in overall tobacco consumption has progressively declined from 21% in 1981-82 to below 12% in 2014-15 even as overall tobacco consumption has increased in India.

As per a recent independent study1, it is estimated that products representing 68% of overall tobacco consumption in the country escape taxation as they are manufactured in the unorganised sector with little statutory oversight. While India accounts for around 17% of world population and constitutes over 84% of global consumption of smokeless tobacco, it has a miniscule share of only 1.8% of global cigarette consumption. As a result, revenue collections from the tobacco sector are sub-optimised even as the overall tobacco control and health objectives remain substantially unfulfilled. The requirement therefore is an India-centric tax and policy framework for tobacco that cognises for the unique tobacco consumption pattern in the country.

The imposition of discriminatory and punitive VAT rates by some States provides an attractive tax arbitrage opportunity for illegal cigarette trade by criminal elements. The consequential decline in legal cigarette volumes in such States has led to stagnation / decline in revenue collections, even as illegal cigarettes gained significant traction. On the other hand, the pragmatic decisions of several State Governments to rationalise VAT on cigarettes have facilitated improvement in revenue buoyancy and arresting the growth of illegal trade.

According to an independent study conducted by Euromonitor International - a renowned global research organisation - India is now the 5th largest market for illegal cigarettes in the world. In fact, illegal trade comprising smuggled foreign and domestically manufactured tax-evaded cigarettes is estimated to constitute one-fifth of the overall cigarette industry in India resulting in a huge revenue loss of over Rs. 7000 crores per annum to the national exchequer.

To combat this menace, your Company continues to make representations to policy makers recommending compulsory licensing of all cigarette manufacturing units irrespective of size, increase in customs duty on imported cigarettes to WTO bound rate levels with suitable safeguards built-in to prevent undervaluation, ban on manufacture of tobacco and tobacco products in EOU and SEZ units, ban on cigarettes from personal baggage allowance and duty-free trade and exclusion of tobacco and tobacco products from preferential treatment under Free Trade Agreements that India is party to.

There is an urgent need for stability in tax rates on cigarettes to reverse the undesirable consequences of

a punitive and discriminatory tobacco taxation policy. It is also relevant to note that despite being one of the largest producers of tobacco in the world, India's share of global tobacco trade remains meagre at approx. 7%. A stable, fair and equitable cigarette taxation policy would be imperative to provide a strong domestic demand base to the Indian farmer, insulating him from the volatilities typically associated with international markets. Such a policy would be the key catalyst in realising the full economic potential of the tobacco sector in India and protect the interest of the Indian tobacco farmer. This assumes critical significance especially in view of the fact that there are few economically viable alternative crops to farmers in the regions where tobacco is grown in India.

Your Company continues to engage with the concerned authorities, both at the Central and State Government level, highlighting the need for moderation in tax rates on cigarettes to maximise the revenue potential from the tobacco sector and contain the growth of the illegal segment.

As per the draft Constitution Amendment Bill 2014 on Goods and Services Tax (GST), cigarettes are likely to come under the purview of the proposed GST framework while continuing to be subjected to the levy of Central Excise Duty. It is imperative that revenue sensitive goods like cigarettes are subjected to uniform standard rates of tax applicable to general category of goods to ensure revenue buoyancy and rein in the growth of the illegal segment. Further, the combined incidence of Excise Duty and GST should be revenue neutral i.e. maintained at current levels and all existing State level taxes should be subsumed into GST. Your Company, along with industry bodies and other stakeholders, continues to make representations to the Government in this regard.

A recent Government notification, originally proposed to be effective from 1st April 2015, mandates larger graphic health warnings covering 85% of the surface area of both sides of the pack as compared to the current requirement of covering 40% of the area of one side of the pack. The proposed graphic health warnings are amongst the most stringent in the world and far larger than those in the top 5 cigarette markets viz. China, Russia, Indonesia, USA and Japan. It is apprehended that the introduction of the new graphic health warnings would inter alia lead to a spurt in the sale of illegal cigarettes which will not carry the new warnings. Besides the consequential loss of revenue to the exchequer, this will also adversely impact the livelihoods of Indian tobacco farmers as illegal cigarettes either do not use Indian tobacco at all or use domestically sourced tobacco of dubious and inferior quality.

It is estimated that about 60% of the countries in the world which have ratified the WHO Framework Convention on Tobacco Control either do not have any health warnings on cigarette packets or prescribe a 'text only' warning (i.e. without any graphics). In fact, China, USA and Japan which together account for more than 51% of global cigarette sales volumes, prescribe 'text only' warnings.

The Committee on Subordinate Legislation, which is examining the issue of introduction of larger graphic health warnings on cigarette packs in India, has in its report dated 16th March 2015 stated that a large number of representations have been received from Members of Parliament as well as various people / organisations and stakeholders involved in the tobacco industry against the introduction of the new warnings and serious apprehensions have been expressed about the adverse impact of the modified rules on the livelihoods of a large number of people directly or indirectly involved in tobacco trade. The Committee has sought more time to review the issues in detail and has recommended to the Government to defer the implementation of the notification, till such time it finalises the examination of the subject and arrive at appropriate conclusions. The Government has accordingly deferred the implementation of the new graphic health warnings.

The Tobacco industry in India supports the livelihoods of over 41 million people including vulnerable sections of the society like farmers, farm labour, rural poor, women, tribals etc. and contributes around Rs. 28000 crores to the national exchequer apart from generating valuable foreign exchange earnings of around Rs. 6000 crores. It is pertinent to note that other tobacco producing countries have taken a balanced view keeping in mind their domestic interests and have not adopted over-sized and excessive health warnings.

The proposed graphic health warnings would impede the ability to compete in the market by leaving insufficient space for your Company's distinctive trademarks and pack designs besides depriving consumers of their valuable right to be informed about a legitimate product they intend to purchase and consume.

Notwithstanding the challenging regulatory and taxation environment, your Company strengthened its product portfolio across segments to reinforce its leadership position in the industry. During the year, specific emphasis was laid on developing and launching products with differentiated tobacco blends, special filters and flavour bouquets. Several innovative variants like 'Classic Blue Leaf with Jet Flo Filter', 'Gold Flake Gold with Quad Core Filter', 'Classic Ice Burst with Capsule Filter' and 'Classic Fine Taste with Triple Solid Filter' were launched during the year in line with your Company's philosophy to offer world-class products to the Indian consumer.

During the year, your Company expanded the market presence of KwikNic nicotine chewing gum adding the pharmaceutical channel to the product's distribution footprint. The year also saw your Company's foray into the Electronic Vaping Device (EVD) category under the 'EON' brand. After its initial launch in Hyderabad and Kolkata, the brand was progressively extended to Bengaluru, Delhi and Goa. EON is also available in the e-commerce channel.

Your Company's objective of providing consumers with a comprehensive range of world-class products has led to increasing complexity in manufacturing operations over the years. Towards this, your Company has focused on building flexibility and agility across the supply chain to ensure delivery of volume and variety in a timely and cost-effective manner. Structural interventions in the area of manufacturing network planning, technology and people systems have helped enhance responsiveness. During the year, the first phase of modernisation of the Kolkata factory was successfully completed. This involved induction of new technologies, automation of shop floor processes and introduction of new segments.

During the year, the Bengaluru and Saharanpur factories won the 'Platinum' and 'Gold' awards respectively in the prestigious 'India Manufacturing Excellence Awards' (IMEA) instituted by Frost & Sullivan and The Economic Times. These awards bear testimony to your Company's standing among India's best manufacturing organisations.

Your Company's manufacturing facilities continue to receive recognition for excellence in sustainability. During the year, the Bengaluru factory was awarded the 'Overall Leader Award' for Green Manufacturing Excellence by Frost & Sullivan, while the Munger, Ranjangaon and Bengaluru factories won the 'CII National Award for Excellence in Energy Management'.

In recognition of excellence in safety management at its factories, your Company received several awards during the year. These include the 'Suraksha Puraskar (Bronze)', under the manufacturing sector category from the National Safety Council of India for Ranjangaon Factory, first prize for Saharanpur factory from FICCI in the 'Safety Systems Excellence Awards for manufacturing sector – Large Scale' category and 'Safety Innovative Award 2014' by Institute of Engineers (India) for Kolkata Factory.

With steep increase in taxation, rising illegal trade and increasing regulatory pressures, the year ahead will indeed be challenging. Despite the severe pressures, your Company remains confident in sustaining its leadership position in the industry by leveraging its robust business strategies, a world-class product portfolio and superior execution capabilities.

FMCG - Others

The FMCG industry continued to grow at a muted pace during the year in the backdrop of a challenging macro-economic environment, with most of your Company's operating segments recording deceleration in growth rates. Categories involving discretionary spends or with relatively high penetration levels remained subdued during the year.

While there are incipient signs of revival of demand, it is expected to take a few more quarters for the industry to revert to a higher growth trajectory. The FMCG industry in India, however, is poised to bounce back over the medium-term driven by increasing affluence, urbanisation, a young workforce, and relatively low levels of penetration and per capita usage.

Your Company's FMCG-Others Businesses clocked Segment Revenue of Rs. 9038 crores during the year, representing a growth of 11% over the previous year. This was achieved in the backdrop of sluggish demand conditions as aforestated and intense competitive activity with industry players stepping up consumer and trade offers with a view to garnering volumes, offsetting the benefit accruing from benign inflation in input costs. Segment Results for the year stood at Rs. 34 crores after absorbing the start-up costs of two new categories viz., Juices and Gums, scale-up costs of Deodorants launched in 2013, besides a host of new launches in existing categories.

Your Company continued to make investments during the year towards enhancing brand salience and consumer connect while simultaneously focusing on implementing strategic cost management measures across the value chain and adopting a judicious pricing approach. Several initiatives were also implemented during the year towards leveraging the rapidly growing e-commerce channel for enhanced reach of your Company's products and harnessing digital and social media platforms for deeper consumer engagement.

Your Company continued to strengthen its formidable distribution highway comprising a large and diverse product portfolio, multiple brands, hundreds of SKUs covering over 1 lakh markets and directly servicing over 2 million retail outlets across trade channels. The Trade Marketing & Distribution vertical of your Company, based on customer and channel insight developed over the years, has crafted differentiated service packs customised for each type of retail outlet. Your Company remains a leader in the convenience channel and is rated as the benchmark supplier in premium grocery outlets. Extensive deployment of in-store merchandisers and consumer contact programmes to aid demand creation coupled with a relentless pursuit of execution excellence has resulted in your Company sustaining its position as one of the fastest growing FMCG companies in the Modern Trade channel. The scale and diversity of your Company's distribution network continues to be leveraged to enhance market presence and serve as a valuable source of consumer/trade insight, facilitating the seamless execution of new product and category launches. Technology enablement in the form of customised mobility solutions and predictive analytics are being increasingly leveraged towards enabling quick and accurate data capture, informed decision making in real time, and scientific designing of geography-specific trade promotion schemes. Supply chain optimisation and capability augmentation of customers (wholesale dealers) and their sales force remain key focus areas.

In addition to scaling up outsourced manufacturing capacity across key categories during the year, your Company progressed the construction of state-of-the-art owned integrated consumer goods manufacturing and logistics facilities across regions in line with long-term demand forecasts. Currently, over 20 projects are underway and in various stages of development – from land acquisition / site development to construction of buildings and other infrastructure.

The new FMCG Businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years, with Segment Revenue crossing the Rs. 9000 crores mark during the year.

Your Company's vibrant portfolio of brands viz., 'Aashirvaad', 'Sunfeast Dark Fantasy', 'Sunfeast Dream Cream', 'Sunfeast Delishus', 'Sunfeast Bounce', 'Bingo!', 'Yumitos', 'YiPPee!', 'Candyman', 'mint-o', 'GumOn', 'Kitchens of India' in the Branded Packaged Foods space; 'Classmate' and 'Paperkraft' in Education & Stationery products market; 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel', 'Superia' and 'Engage' in the Personal Care products segment; 'Wills Lifestyle' and 'John Players' in the Lifestyle Retailing Business; 'Mangaldeep' in Agarbattis, 'Aim' in Matches, amongst others continue to garner consumer franchise and enhance market standing. These brands, which represent an annual consumer spend of over Rs. 11000 crores in aggregate, have been built organically by your Company over a relatively short period of time - a feat perhaps unrivalled in the Indian FMCG industry. This includes 4 brands – Aashirvaad, Sunfeast, Classmate, Bingo! - which exceed Rs. 1000 crores each – and several brands that are more than Rs. 500 crores each in terms of annual consumer spend. These world-class Indian brands support the competitiveness of domestic value chains of which they are a part, ensuring creation and retention of value within the country.

In line with the corporate strategy of creating multiple drivers of growth, your Company seeks to rapidly scale up the FMCG Businesses leveraging its institutional strengths viz. deep consumer insight, proven brand building capability, a deep and wide distribution network, strong rural linkages and agri-commodity sourcing expertise, packaging knowhow and cuisine knowledge. In addition, your Company continues to make significant investments in Research & Development to develop and launch disruptive and breakthrough products in the market place.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Demand conditions in the Branded Packaged Foods industry remained subdued for the second year in succession with consumers seeking value-for-money offers and curbing discretionary spending. Against the backdrop of a sluggish demand environment, your Company sustained its position as one of the fastest growing branded packaged foods businesses in the country leveraging a robust portfolio of brands, differentiated range of products customised to regional tastes and preferences along with enhanced product visibility and availability in key markets.

While input cost inflation remained moderate during the year, the high intensity of consumer promos and trade schemes resorted to by industry players in a bid to garner volumes exerted pressure on margins. Your Company's Branded Packaged Foods Businesses mitigated such margin pressure by focusing on product mix enrichment, value engineering initiatives, dynamic sourcing based on close monitoring of market trends, structural interventions in manufacturing technology and supply chain optimisation.

The Branded Packaged Foods Businesses continue to invest in the areas of consumer insight discovery, R&D and product development and differentiated technology platforms to effectively address the diverse tastes and preferences of consumers across the country. Investments continue to be made towards augmenting the manufacturing and sourcing footprint across categories with a view to improving market responsiveness and reducing the cost of servicing proximal markets. During the year, an integrated manufacturing and logistics facility was commissioned at Malur, Karnataka. Significant progress was also made during the year towards setting up an integrated manufacturing facility at Uluberia, West Bengal, a Dairy plant at Munger, Bihar and a biscuit manufacturing factory at Mangaldoi, Assam (through a joint venture company viz., North East Nutrients Pvt. Ltd.). These facilities are expected to become operational in the ensuing year.

— In the Bakery and Confectionery Foods

Business, your Company increased the scale of its operations and improved its market standing. The Sunfeast range of biscuits was augmented during the year with the launch of 'Mom's Magic' in the premium cookies space in two variants - 'Rich Butter' and 'Cashew & Almond'. In addition to the several product development and brand enhancement initiatives undertaken during the year, the Business migrated the popular range of cream biscuits under a new sub-brand - 'Bounce' - which emerged as the largest cream brand in the industry and helped sustain your Company's leadership position in the overall creams segment. The Business also forayed into the Cakes segment with the launch of 'Yumfills Whoopie Pie'- a premium chocolate-enrobed cake - which has seen good traction.

In the Confectionery category, the Business continued to leverage the 'Candyman' and 'mint-o' brands and focused on premiumising its product portfolio by enhancing the share of variants priced at 'Re. 1 & above' in the sales mix. The Business augmented manufacturing capability in the hard boiled candy and jelly segment, which will facilitate introduction of innovative and premium products going forward. The year also marked your Company's foray into the Gums segment with the launch of 'GumOn' brand, which has garnered impressive consumer franchise in launch markets. The product is being rolled out to target markets.

— Your Company's Staples, Spices and Ready-to-Eat Foods Business posted a robust performance during the year, growing well ahead of the industry. In the Staples category, 'Aashirvaad' atta consolidated its leadership position in the industry and grew at a rapid pace driven by the value-added portfolio comprising the 'Multigrain', 'Select' and 'Superior MP' variants. The Business also augmented its product range during the year with the launch of 'Aashirvaad Atta with Methi' in the value-added segment. Brand salience was strengthened further on the back of impactful communication and marketing investments.

— In the Snack Foods Business, your Company recorded impressive gains in market standing in the Savoury Snacks, Noodles & Pasta categories. In the Noodles category, 'Sunfeast YiPPee!' clocked a healthy revenue growth far exceeding the industry growth rate. During the year, Sunfeast YiPPee! entered the league of Top 100 FMCG brands in India – a reflection of its growing stature in the fast growing Noodles category. With the commissioning of the new facility at Malur, Karnataka, the Business expanded its manufacturing footprint to all the four regions of the country which will facilitate more efficient servicing of demand going forward. Sunfeast YiPPee! Tricolor Pasta, a differentiated premium offering launched last year, continued to grow at a fast pace and gain consumer franchise.

In the Savoury Snacks category, the Business registered significant growth in its Bingo! range of finger snacks driven by the 'Mad Angles' and 'Tedhe Medhe' sub-brands through sustained expansion of distribution, activation of passive channels in the North and East markets and measured brand investments. In the potato chips portfolio, 'Bingo! Yumitos' also grew at a robust pace on the strength of region-specific interventions.

— Your Company forayed into the fast-growing Juices category during the year with the launch of 7 exciting variants under the 'B Natural' brand in January 2015. These highly innovative and differentiated products, including the unique offering 'Jamun Joy', have received promising consumer response. Your Company seeks to leverage its agri-sourcing expertise and deep distribution reach and rapidly scale up the B Natural brand in the years ahead.

Your Company is well positioned to establish itself as the 'most trusted provider of food products in the Indian market' leveraging a strong portfolio of world-class brands, deep understanding of the diverse tastes and preferences of Indian consumers, focus on best-in-class quality and operational excellence across the value chain. Your Company will continue to make investments towards establishing a distributed manufacturing footprint, structural interventions with a view to reducing operating costs and focus on supply chain optimisation to support the rapid and profitable growth of the Branded Packaged Foods Businesses. In line with this objective, your Company is in the process of implementing a new 'Strategy of Organisation' towards bringing about sharper focus, greater agility and responsiveness and facilitating the development of deeper specialisms in each operating category.

Personal Care Products

Your Company's Personal Care Products Business posted robust growth in revenue during the year driven by increasing consumer franchise for its products and a series of new launches and range extensions. During the year, the Business rolled out several differentiated product offerings in the Deodorants, Soaps, Shower Gel and Skin Care categories under the 'Engage', 'Fiama Di Wills', 'Vivel', and 'Superia' brands, and improved in-store brand salience of offerings under the 'Essenza Di Wills' brand.

In February 2015, your Company acquired the 'Savlon' and 'Shower to Shower' trademarks and other intellectual property rights for identified markets from the Johnson & Johnson group. Savlon is an established brand with a rich heritage and is associated with personal care products in the fast-growing antiseptic/anti-bacterial categories. Shower to Shower has a strong consumer franchise in the prickly heat talcum powder category. Your Company intends to leverage these assets to strengthen its position in the personal care space by expanding its existing product portfolio and gaining access to newer consumer segments and markets.

The year saw the successful introduction of a new range of soaps at the premium end under the 'Vivel' franchise with the launch of 'Vivel Love & Nourish' and 'Vivel Glycerin'. As part of a brand modernisation exercise, 'Superia Deluxe' and 'Superia Naturals' were launched to address the emerging needs of distinct consumer segments. The year also witnessed the launch of the next edition of the Signature series of 'Fiama Di Wills Shower Gels - Shower Jewel' designed by celebrity designer, Masaba Gupta. In the fast-growing Deodorants category, 'Engage' has emerged as the No.2 player in the country within a relatively short span of 2 years since launch. The year also saw the launch of '0% gas' variants of 'Engage Cologne Sprays' thereby providing consumers a wider repertoire of choice. These interventions have been well received by consumers strengthening your Company's presence in the Personal Care industry.

As in previous years, the Business received accolades for its product quality and innovation initiatives. 'Fiama Di Wills Shower Gel' was voted the best shower gel at the Nykaa.com Femina Beauty Awards. 'Vivel' won the Afaqs Buzziest Brand Award where it was ranked No. 1 in the Personal Care category. 'Superia Silk' was ranked as the No. 1 soap on quality and skin moisturising ability among Grade 1 toilet soaps by Consumer Voice, a Government of India recognised comparative product testing organisation. These awards, amongst others, bear testimony to your Company's relentless focus on quality and delivering world-class products to Indian consumers.

Industry growth remained subdued during the year, with leading players passing on the benefit of softening input prices - primarily of crude palm oil - to consumers with a view to reviving demand. Your Company outperformed the market by launching several value-added products, focusing on a richer product mix, managing costs by developing alternative sources of supply and further improving supply chain responsiveness.

The Indian Personal Care industry is poised for rapid growth given the relatively low levels of per capita consumption in the country as compared to other emerging economies, increasing urbanisation, rising disposable incomes and the increasing consumer preference for enhanced personal grooming. Your Company is well positioned to seize the emerging opportunities in this rapidly evolving industry with its unrelenting focus on creating vibrant brands, world-class product quality, development of innovative and consumer-centric products based on deep consumer understanding leveraging dedicated R&D capabilities as well as partnerships with key institutions in the scientific community.

Education & Stationery Products

Your Company consolidated its leadership position in the Education and Stationery products industry in India. In the Notebooks category, the Business fortified its market standing and expanded its product portfolio with the launch of several differentiated offerings under the 'Classmate', 'Classmate Pulse', 'Paperkraft' and 'Saathi' brands. The Business launched a premium 'Signature' range of products under the Paperkraft brand exclusively in the e-commerce space. The Classmate portfolio of notebooks was enriched with refreshing designs, finishes and binding styles. Complementary categories comprising writing instruments, art stationery and scholastic products witnessed robust growth during the year leveraging the strong equity of Paperkraft and Classmate brands.

The Business continued to focus on innovation and new product development with a dedicated product development cell working in tandem with your Company's Life Sciences & Technology Centre.

On the distribution front, the Business expanded the availability of its products through a multi-pronged approach of channel proliferation, market penetration and outlet coverage increase. The Business also implemented a specific distribution network to cater to the Saathi brand in the value segment and expanded presence amongst leading e-tailers.

In the area of supply chain, the focus was on strengthening the delivery, quality and cost competitiveness of outsourced manufacturers. During the year, the Business deployed state-of-the-art supply chain planning and optimiser tools that are expected to lower overall cost of servicing demand. Your Company continues to provide technical support and training to nearly 40 vendors in the small-scale sector, facilitating a majority of them being certified to ISO 9001:2008 standards.

The Classmate notebook is a manifestation of the environmental capital built by your Company in its paper business. While the notebook cover is made from recycled board sourced from your Company's Forest Stewardship Council (FSC) certified Kovai mill, the paper used in the notebooks leverages your Company's world-class fibre line at Bhadrachalam which is India's first ozone treated elemental chlorine free facility.

Growing literacy, increasing scale of government spend and public-private initiatives in education and higher corporate spends in the education sector are expected to drive rapid growth of the Indian Education & Stationery Products industry. Your Company, with its collaborative linkages with small & medium enterprises, a robust product portfolio and unparalleled distribution network, is well poised to strengthen its leadership position in the rapidly globalising Indian stationery market.

Lifestyle Retailing

During the year, the performance of your Company's Lifestyle Retailing Business was impacted by the continuing slowdown in discretionary consumption expenditure. The rise of online apparel retail, aided by heavy discounting and consumer offers, also impacted performance.

In the Premium segment, Wills Lifestyle with its high fashion imagery, increasing appeal and rich product mix, continues to enjoy strong market standing and consumer bonding. Brand equity was enhanced with heightened focus on premium product platforms. 'Wills Classic' 'Luxuria' and 'Regalia' - a finely crafted range of super premium formals - and the Wills Classic 'Ecostyle' collection in natural-fibre products such as linens, sharpened the premium imagery of the brand and aided higher value capture. The Wills Classic 'Modernist' range, 'Wills Sport' and 'Wills Clublife' attracted newer and younger franchise leveraging high-fashion imagery and design language. The women's collection was strengthened by offering an enhanced range of exclusive designer wear, co-created with India's leading designers. The Business also crafted a range of wardrobe essentials across categories to enhance sell through duly supported by robust replenishment infrastructure and processes. The Wills Lifestyle brand continued to receive industry recognition, including the 'Superbrand' certification. During the year, sales of Wills Lifestyle products to 'Club ITC' members increased significantly, reflecting the brand's enhanced bonding with premium consumers.

Retail presence of Wills Lifestyle was expanded during the year with the brand currently present in 104 exclusive stores in 44 cities and more than 500 'shop-in-shops' in leading departmental stores, regional chain stores and multi-brand outlets. The brand is also present in 6 Wills Lifestyle boutique stores in select ITC Hotels enhancing its availability to high-end and leisure travellers.

In the 'Youth fashion' segment, 'John Players' enhanced its market standing by driving fashion imagery anchored on bold and edgy fashion. John Players has emerged as a leading brand in this segment driven by youthful products such as denims, knits and jackets, earning the distinction of being featured amongst the top 5 brands in the apparel category in 'Brand Equity - The Most Exciting Brands' list published by The Economic Times.

During the year, the Business reformulated its retail presence towards enhancing brand reach and acquiring new consumers. Business processes for creation of winning designs and enhancing supply chain efficiency were further strengthened during the year along with implementation of several initiatives towards improving retail and manufacturing productivity.

Your Company's brands – Wills Lifestyle and John Players – continue to be driven on digital platforms to enhance reach, increase awareness and tap online sales potential including through social media and specific e-commerce portals.

The Business will continue to focus on enhancing the premium and fashion quotient of its offerings based on deep consumer insight, and delivering products of world- class quality. Further investments are being made in building brand salience, enhancing product vitality, implementing contemporary information technology solutions, improving supply chain responsiveness and delivering a superior shopping experience.

Safety Matches and Incense sticks (Agarbattis)

Your Company recorded yet another year of impressive revenue growth in the Agarbatti category, growing well ahead of the industry. Growing franchise for the 'Mangaldeep' brand, superior consumer experience and enhanced distribution reach contributed to a robust performance during the year. Product portfolio was strengthened during the year with a series of new launches and range extensions such as 'Mangaldeep – Flora' and 'Mangaldeep - Dhoop Cones' in the premium segment.

Mangaldeep continues to be the fastest growing agarbatti brand in the country driven by a well-crafted portfolio of offerings born out of deep consumer understanding and increasing brand salience. Your Company also consolidated its leadership position in the 'Dhoop' segment. Investments were made during the year to enhance quality, availability and improving supply chain responsiveness.

The manufacture of agarbattis was reserved for the small-scale & cottage sector in India considering its importance in employment generation. However, import of raw battis (the principal raw material) is still being allowed at low Customs Duty rates. This is resulting in bulk of the raw batti consumption in India being of imported origin leading to a loss of livelihood creation opportunities. Suitable policy changes in arresting this trend would go a long way in creating sustainable livelihoods especially among rural Indian women and tribals.

In the Safety Matches category, your Company sustained its market leadership leveraging a strong portfolio of offerings across market segments. However, sustained escalation in prices of raw materials on the one hand and proliferation of cheaper low quality products on the other, continued to exert severe pressure on sales volumes and margins. The Business implemented several measures such as value engineering, supply chain optimisation and developing alternate sources of supply to mitigate margin pressure. In this regard, the Business continues to focus on developing new products and growing the value-added segment towards enhancing the profitability of the business. Your Company's safety matches brand 'Aim' continues to be the largest selling brand in this industry.

During the year, pursuant to the scheme of demerger of the Non-Engineering Business of Wimco Limited being effective on 27th June 2014, the Safety Matches Business of Wimco Limited was seamlessly integrated with your Company's Safety Matches Business. The Business rationalised its manufacturing operations and implemented a Voluntary Separation Scheme at the Bareilly factory with all permanent workmen and trainees opting for the same. The Business scaled up sourcing from the small-scale sector to meet its requirements and progressively regionalised its sourcing footprint with the induction of units in the North and West towards more efficient servicing of the market.

Technology induction in manufacturing is crucial for the long-term sustainability of the Safety Matches Industry. A uniform taxation framework which provides a level playing field to all manufacturers is necessary to trigger the required investments for modernising this industry and creating a safer working environment for the workforce engaged in this industry. Introduction of GST is expected to create this supportive environment to enable the industry to become globally competitive.

B. HOTELS

The hospitality sector continues to be impacted by a weak pricing scenario in the backdrop of excessive room inventory in key domestic markets and sluggish macro-economic environment both in India and major source markets. While there was marginal improvement in occupancy rate, average room rates remained under pressure in the backdrop of the addition of 8000 rooms in the key markets of Delhi / National Capital Region, Mumbai, Bengaluru, and Chennai over the last 2 years.

Consequently, Segment Revenues recorded a modest increase of 4.8% during the year. Segment Results were impacted mainly on account of the relatively weak pricing scenario, higher depreciation charge for the year due to revision in the useful life of fixed assets in accordance with the provisions of Schedule II to the Companies Act, 2013 and gestation costs of the newly opened properties - ITC Grand Bharat, near Gurgaon and My Fortune Bengaluru.

Your Company's Hotels Business continues to be rated amongst the fastest growing hospitality chains in India, with over 100 properties across the country under 4 distinct brands - 'ITC Hotels' in the Luxury segment, 'WelcomHotel' in the upper-upscale segment, 'Fortune Hotels' in the upscale & mid-market space and 'WelcomHeritage' in the leisure & heritage segment. In addition to these brands, the Business has licensing and franchising agreements for two brands - 'The Luxury Collection' and 'Sheraton' - with Starwood Hotels & Resorts.

Your Company launched My Fortune Bengaluru, a flagship property under the Fortune banner in the 'upscale' segment, in May 2014 which has been well received by guests. In November 2014, the Business unveiled its latest offering in the super premium segment - ITC Grand Bharat near Gurgaon under a licensing arrangement from Landbase India Ltd. - a wholly-owned subsidiary of your Company. Uniquely

positioned as an 'oasis of unhurried luxury', this sprawling 'Luxury Collection' resort is situated in an idyllic expanse amidst the Classic Golf Resort - a 27-hole Jack Nicklaus designed signature golf course - surrounded by the majestic Aravalis and dotted with pristine lakes. ITC Grand Bharat delivers the finest luxury experience to guests with 100 Deluxe Suites and 4 Presidential Villas, a wide range of fine dining restaurants, signature spa 'Kaya Kalp - The Royal Spa', a host of recreational and cultural activities and a world-class meeting / banqueting venue. The resort has received glowing accolades in the domestic and international press including from CNN Travel which has rated the Classic Golf Resort among the Top 10 city golf clubs in the world, while ITC Grand Bharat received the Outlook Traveller Award for the 'Indian Hotel Debut of the year'.

In line with its 'asset-right' growth strategy, the Business commenced providing operating services at WelcomHotel Jodhpur from August 2014, taking the total number of rooms under the management contract model in the 5 Star category to 1200.

Your Company was declared the successful bidder for a 250-room luxury beach resort located in South Goa operating under the name Park Hyatt Goa Resort and Spa, following an auction held by IFCI Limited in February 2015 in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Subsequent to your Company making full payment of the bid amount, IFCI issued the requisite Sale Certificates in favour of your Company on 25th February, 2015. The erstwhile owners of the property have thereafter challenged the sale. The matter is pending before the Honourable Bombay High Court, and the hearing is in progress.

The Food & Beverage segment continues to be a major strength of your Company with some of the most iconic brands in the country. Your Company's prestigious brand 'Bukhara' once again featured in the 'S.Pellegrino Asia's Best 50' list while 'Dum Pukht' featured in the global selection of the 'World's 50 Best Restaurants Academy' list. During the year, the Business added

'Tian' – an Asian cuisine studio offering innovative flavours from East Asia and beyond – to its international food & beverage brand portfolio comprising 'West View', 'Pan Asian', 'Edo', 'Shanghai Club' and 'Ottimo'. 'The Royal Vega', a pan-Indian offering of delectable vegetarian food from the royal kitchens of India, continues to delight Indian and foreign travellers alike.

In line with your Company's commitment to the 'Triple Bottom Line', the Hotels Business targets a continuous reduction in energy and water consumption. Further, the Business continues to enhance usage of renewable energy sources which now stands at 58% of total energy requirements of the Business. The bespoke 'WelcomAqua' water programme has been extended to all properties in the Luxury Collection. These interventions stand testimony to the 'Responsible Luxury' positioning of your Company's Hotels Business and reinforce ITC Hotels' position as the 'greenest luxury hotel chain' in the world.

'Club ITC', your Company's pan-ITC consumer loyalty programme with a current membership base of 2.4 lakh premium consumers, continues to gain franchise amongst the premium clientele of ITC Hotels and Wills Lifestyle. A new dining loyalty programme – 'Club ITC Culinaire' – was launched during the year and is fast gaining popularity.

In view of the positive long-term outlook for the Indian Hotel industry coupled with the prospect of sustained growth in both global and domestic economy, your Company remains committed to its investment-led growth strategy. Steady progress is being made on construction of new hotels at Kolkata, Hyderabad and Coimbatore. Requisite clearances from the Sri Lankan authorities have been received by WelcomHotels Lanka (Private) Ltd., a wholly-owned subsidiary of the Company, to progress your Company's first overseas project in Colombo. Excavation and allied works commenced in November 2014.

The 'Fortune' brand which caters to the 'mid-market to upscale' segment continued to lead this segment and expanded its presence with the addition of 5 new hotels during the year, taking the overall number of operational hotels to 46 hotels across 34 cities. Plans are on the anvil to extend the upscale My Fortune brand to 9 more cities in addition to Chennai and Bengaluru. The 'WelcomHeritage' brand remains the country's most successful and largest chain of heritage hotels with 34 operational hotels.

Your Company's Hotels Business, with its world-class properties, globally benchmarked levels of service excellence and customer centricity, is well positioned to sustain its leadership status in the Industry and to emerge as the largest hotel chain in the country over the next few years.

C. PAPERBOARDS, PAPER AND PACKAGING

During the year, the Paperboards, Paper and Packaging segment was impacted by the continuing slowdown in the FMCG industry and input cost pressures. Consequently, the Segment Revenue and Profits grew a muted 2.2% and 3.3% respectively.

Paperboards & Specialty Papers

Global demand for Paper and Paperboard in 2014 remained stagnant at 401 million tonnes. While demand for Paperboard grew by 1.5% during the year, the Writing & Printing paper (W&P) and Newsprint segments continued to decline. During the period 2008 to 2013, global Paper and Paperboard demand grew marginally by 0.5% CAGR on the back of subdued economic growth and structural decline in W&P demand in developed economies like North America and Western Europe with the increasing adoption of digital media. Emerging economies in Asia, the Middle-East and Africa continue to grow at a faster pace. Over the next 5 years, overall demand is estimated to grow at a slightly faster pace of 1.1% per annum driven mainly by Paperboard on the back of economic recovery in developed economies and lower rate of decline in the W&P segment. In view of the subdued demand conditions as aforestated and significant surplus capacity in China – as a result of huge capacity additions since 2012 and declining economic growth rate – the pricing scenario is expected to remain weak over the medium term.

While India remains one of the fastest growing Paper and Paperboard markets in the world, overall industry demand was adversely impacted for a major part of the year in view of the weak economic environment prevailing in the country. Over the next 5 years, overall demand is expected to grow at 6.6% CAGR, with Paperboard (42% of the market) and W&P (31% of the market) estimated to grow at 7.5% CAGR and 6.2% CAGR respectively.

— Within Paperboards, demand for Value Added Paperboards (VAP) is expected to grow at 10% CAGR during this period. The faster rate of growth in VAP grades is expected to be driven by the increasing demand for branded packaged products, growth in organised retail and the use of packaging as a key differentiator, especially in the FMCG sector. Food, pharmaceuticals, publishing & notebooks and beverages are expected to be the major end-use segments driving demand growth.

— In the W&P paper segment, communication grades for notebooks, school stationery and publishing are likely to be the key drivers of growth fuelled by increasing investments in the education sector and rising literacy levels.

The huge market potential and relatively high rates of growth in India is attracting new capacities despite the recent raw material shortages and pressure on industry profitability. This is evidenced by the significant investments in capacity addition and technology upgradation by industry players over the last 5 years. In the VAP segment, capacity of about 3 Lakh tonnes per annum, representing 50% of the current market size of the segment, is expected to be commissioned over the next 12 to 18 months.

Reduction of import duties under various regional Free Trade Agreements (FTA), especially with ASEAN which became effective from 1st January 2014, continue to impact the profitability of the domestic Paper & Paperboard industry and the economic viability of small paper mills.

The current import policy as aforementioned and extant regulations governing commercial and social forestry in the country, put the Indian Paper and Paperboard industry at a disadvantage vis-à-vis imports. In order to provide a level playing field to the domestic industry and encourage farming of wood in India, there is clearly a need to review the current import duty structure on paper and paperboard and re-examine existing FTAs and the new ones under formulation. It is also recommended to open up commercial forestry on drylands and wastelands with appropriate environmental safeguards and put in place a suitable mechanism that incentivises environment-friendly operations and adoption of sustainable business practices.

Despite a challenging operating environment and heightened competitive intensity, your Company continued to drive volume growth, improve realisations and sustain its market standing during the year. This was achieved by focusing on identified end-use segments, investments in quality systems and processes, and enhancing customer service levels. The Business consolidated its clear market leadership position in the VAP segment with the entire capacity of the recently commissioned paperboard machine (PM7) being dedicated to the manufacture of VAP grades since the beginning of the year.

The Business expanded its presence in the hosiery, apparels and publishing segments during the year. Product portfolio was strengthened with the launch of new products which were developed to address the specific needs of end-users. In line with its 'Green India' approach, the Business sustained its leadership position in sales of eco-labelled products, which are certified to be environmentally friendly. The Business also strengthened its distribution network during the year with the addition of new distributors and stockists. Service levels also improved on the back of strategically located 'quick service centres'.

The Business has emerged as a leading player in the W&P paper segment leveraging strong forward linkages with your Company's Education and Stationery

Products SBU. In the Specialty Papers segment, your Company consolidated its leadership position in the Decor grades segment by focusing on product quality and mix enrichment.

Your Company continues to pursue the strategy of promoting farm forestry with a view to improving the availability of pulpwood. Over the last 2 years, your Company has stepped up plantation coverage, well in excess of its own requirements, leading to improvement of pulpwood availability during this year in Andhra Pradesh and Telangana. This has also led to enhanced farmer incomes and increase in green cover.

During the year, your Company sold / distributed high quality saplings and seeds to farmers that enabled planting of over 165 million saplings on 29,900 hectares of plantations. With this, your Company's bio-technology based research initiatives have cumulatively resulted in the planting of nearly a billion saplings leading to significant wasteland development, greening of over 195,000 hectares. This path-breaking initiative has generated nearly 90 million person days of employment for tribal and marginal farmers. The state-of-the-art clonal sapling production facility, which was commissioned recently towards accelerating the pace of plantation activity, is operating at full capacity. The facility is a critical enabler of your Company's objective to augment pulpwood availability and to meet the ever growing demand for high quality saplings from the farming community.

Your Company's research on clonal development has resulted in the introduction of high yielding and disease resistant clones which are adaptable to a wide variety of agro-climatic conditions. Your Company's Life Sciences & Technology Centre is actively collaborating with several expert agencies to further leverage bio-technology and site specific nutrient management systems for enhancing farm productivity, wood yields and improved fibre and pulp properties. Systems are also being developed to ensure integrated pest and disease management across your Company's forestry initiatives.

Your Company has the distinction of being the first in India to have obtained the Forest Stewardship

Council - Forest Management (FSC-FM) certification which confirms compliance with the highest international benchmarks of plantation management in terms of being environmentally responsible, socially beneficial and economically viable. Till date, your Company has received FSC-FM certification for more than 22,000 hectares of plantations involving over 25,000 farmers with another 2,500 hectares in the pipeline. During the year, more than 25,000 tonnes of FSC-certified wood were procured from these certified plantations. Plans are on the anvil to steadily increase coverage under FSC-FM certification. All four manufacturing units of your Company have obtained the FSC Chain of Custody certification. These certifications make your Company the leading supplier of FSC-certified paper and paperboard in India.

Your Company continues to focus on recycling initiatives including solid waste recycling. While all manufacturing units have already achieved near 100% solid waste recycling by its usage for making products like lime, fly ash bricks, grey boards, egg trays etc., the procurement and recycling of about 1,05,000 tonnes of waste paper during the year has further consolidated the Business's overall positive solid waste recycling footprint.

During the year, the Bhadrachalam and Kovai units received the 'Excellent Energy Efficient Unit 2014' award from the Confederation of Indian Industry (CII). The Kovai unit has received 'Green Award 2013 - 1st Place' from the Tamil Nadu Pollution Control Board. The Tribeni unit was awarded 'Certificate of merit in the Pulp & Paper Sector' (National Energy Conservation Award – 2014) by The Ministry of Power, Government of India.

Your Company continues to focus on various safety initiatives including induction of safety stewards, strengthening systems, spreading awareness and integrating Environment, Health and Safety (EHS) as part of the overall Total Productive Maintenance (TPM) initiative. With regard to energy and water consumption, strategies to contain usage across units continue to be pursued with good results.

In line with your Company's objective of meeting 50% of its energy requirements from renewable sources, the

Business has implemented several initiatives including investment in a green boiler, soda recovery boilers and solar & wind energy. The 7.5 MW wind energy unit in Coimbatore, continues to operate at optimum levels providing clean energy to the Kovai unit. The new 12 MW Turbine Generator and 72 tonnes per hour (TPH) Boiler commissioned at the Tribeni unit in the previous year is fully operational, catering to energy requirements of the facility at a reduced cost.

Your Company successfully commissioned a 46 MW wind energy project in Andhra Pradesh in July 2014, which has been generating wind power since then. However, due to the bifurcation of the state of Andhra Pradesh and the resultant need for inter-state wheeling of power – permissions for which have not been granted, the majority of the intended benefits from this large investment have not fructified. Consequently, only a minor proportion of the power generated from this wind energy unit is being used currently by your Company's units in Andhra Pradesh with the balance output being sold to the State power grid at nominal rates, leading to sub-optimal returns. Your Company has made several representations to the concerned authorities on this issue and has also approached the Central Electricity Regulatory Commission to secure inter-state wheeling permission. Your Company remains hopeful of an expeditious resolution of the matter.

The year under review witnessed severe cost pressures in major inputs such as wood, pulp and chemicals. Your Company, with its integrated operations and strategic cost management initiatives, was able to minimise the adverse impact of such cost escalations. The Business is in the process of setting up a Bleached Chemical Thermo Mechanical Pulp mill at its Bhadrachalam unit. Once commissioned, the mill will further reduce the dependence on imports besides reducing your Company's carbon footprint.

The integrated nature of the business model comprising access to high-quality fibre from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the-art manufacturing facilities coupled with robust forward linkage with the Education and Stationery

Products Business and focus on Value Added Paperboards - strategically positions the Business to further consolidate and enhance its leadership status in the Indian Paperboard and Paper industry.

Packaging and Printing

Your Company's Packaging and Printing Business continues to be a leading supplier of value-added packaging in the carton and flexibles formats leveraging state-of-the-art technology and processes. The Business provides strategic support to your Company's FMCG Businesses by facilitating faster turnaround of new pack designs, ensuring security of supplies and delivering benchmarked international quality at competitive cost.

Sales of flexibles and cartons packaging recorded healthy growth during the year, driven by increased offtake by existing customers and new business development. Your Company's world-class facility at Haridwar is operating at benchmark standards and has strengthened the Business's ability to service demand in the northern markets more effectively. During the year, the Business augmented in-house printing cylinder manufacturing capacity at the Haridwar unit for speedier customer order fulfilment and enhanced competitiveness.

As in previous years, the Business won several awards for operational excellence, innovation and creativity. These include 4 'World Star Awards' from the World Packaging Organisation, 4 'Asia Star Awards' from the Asian Packaging Federation and 17 'India Star Awards' from the Indian Institute of Packaging for excellence in packaging solutions.

The 14 MW wind energy farm in Tamil Nadu, set up in 2008, provides clean energy to your Company's packaging unit in Chennai, contributing towards reducing your Company's carbon footprint. Wind energy generation from this facility, however, continued to be affected during the year due to external infrastructural deficiencies impacting connectivity to the State power grid.

The factories at Chennai, Haridwar and Munger continued to maintain the highest standards in Quality and

Environment, Health & Safety (EHS). All the three units are certified as per the Integrated Management System, consisting of ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007. The Chennai and Haridwar units have also received Social Accountability certification (SA 8000:2008). During the year, the Haridwar unit received the 'Gold' rating from Indian Green Building Council for its sustainability features. Both the Chennai and Haridwar units received the highest 'Grade A' BRC / IOP certification (British Retail Consortium Institute of Packaging), for global standards in packaging and packaging materials - a key enabler for supplies to the packaged foods industry. The Business continues to be acknowledged as a key associate by several large FMCG companies in the country for providing packaging solutions.

With investments in world-class technology, best-in-class quality management systems, multiple locations and a wide packaging solutions portfolio, the Packaging and Printing Business has established itself as a one-stop shop offering superior packaging solutions. The Business is well positioned to rapidly grow its external business while continuing to service the requirements of your Company's FMCG Businesses.

D. AGRI BUSINESS

Leaf Tobacco

The global legal cigarette industry continues to be under pressure with cigarette consumption declining in most geographies. Production of global Flue Cured Tobacco varieties (excluding China), on the other hand, registered a growth of around 10% in 2014 with Zimbabwe, USA, India and Tanzania recording higher crop output. Driven by remunerative farm gate prices during 2013, Indian Flue Cured production grew by 14% to touch 317 Million Kgs. - the second highest crop output ever.

In the backdrop of a declining trend in cigarette consumption and record crop output, and high levels of uncommitted stocks globally and in India, leaf tobacco export from India is estimated to have degrown by 11% during 2014-15 to around 210 Million Kgs.

Despite the challenging business environment, your Company sustained its pre-eminent position as the leading exporter of unmanufactured tobacco from India through focused strategies aimed at strengthening trade with existing customers and robust new business development.

The Business continued to provide strategic sourcing support to your Company's Cigarette Business meeting all requirements at competitive prices. Large scale deployment of farm yield enhancing measures, extensive farmer training campaigns on agricultural best practices and sustainable agriculture, and customised growing programmes for non-Flue cured varieties were some of the key initiatives undertaken during the year. These interventions also contributed towards improving the competitive positioning of Indian leaf tobacco in international markets.

Your Company has built an enduring partnership with the farming community in the tobacco growing areas in India. Over several decades now, your Company has been actively engaging with growers and collaborating with key public institutions towards deployment of high yielding varieties, upgrading crop growing and curing practices and post-harvest product management technologies. Your Company continues to play a lead role in driving Research and Development in the areas of productivity enhancement, quality improvement, input cost reduction, process and product development.

Your Company is the single largest integrated source of quality Indian tobaccos, co-creating and delivering value at every stage of the leaf tobacco value chain. The Business continues to be at the forefront of facilitating the long-term sustainability of farming through focused interventions in sustainable agriculture, quality and productivity enhancement and community empowerment. These initiatives are anchored around the 6 dimensions of sustainability encompassing soil, water, labour, fuel, bio-diversity and community development with a specific focus on soil fertility management, soil moisture conservation, seedling production, micro irrigation, farm mechanisation, energy conservation and bio-diversity protection.

During the year, the Business designed and administered customised Sustainable Agricultural Practices (SAP) Certification Training programmes, aimed at progressive growers in Flue Cured and non-Flue Cured tobacco growing regions. The Business plans to scale up these training programmes in the years ahead.

The Business also launched Project Safal, an innovative web and mobile based platform, which seeks to enhance traceability and visibility of farm operations and provides customised crop advisory and farm extension support. The initiative won the prestigious 'Manthan Award' (runner-up) in the Agriculture & Ecology category at the 11th Manthan Awards for South Asia held in New Delhi.

The Business continues to focus on enhancing supply chain efficiency through structural interventions in the areas of network planning, warehousing and transportation. These initiatives continue to generate substantial savings in costs apart from enhancing the agility and responsiveness of the supply chain.

The Business continues to set benchmarks in leaf threshing operations through focused initiatives and innovative technological solutions. Investments continue to be made in your Company's Green Leaf Threshing plants (GLT) at Anaparti, Chirala and Mysuru towards delivering world-class quality and upgrading processing technology. In line with your Company's strategy to adopt a low-carbon growth path, the Chirala and Anaparti units commenced using energy generated by the wind energy farm set up in Anantapur, Andhra Pradesh from October 2014. With this, all three GLTs meet a significant portion of their energy needs from renewable sources.

Your Company's GLTs remain committed to the highest standards of Environment, Health & Safety and Quality and continue to win recognition in these areas. During the year, the Chirala unit won the 'Shreshtha Suraksha Puraskar' from the National Safety Council of India while the Anaparti unit won 'Gold' and 'Silver' awards from the Quality Circle Forum of India and the 'Gold' award at the International Convention for Quality Control Circles held in Sri Lanka.

The Anaparti unit also won the 1st prize at the 'National Productivity Competition' held by the Indian Institution of Industrial Engineering, Visakhapatnam. During the year, the Mysuru unit was assessed and accredited in accordance with the ISO / IEC17025:2005 standard by the National Accreditation Board for Testing and Calibration Laboratories (NABL) for moisture testing and chemical analysis. The Mysuru unit also received the 'Gold' rating from the Indian Green Building Council.

The Business has been awarded a 'Certificate of Compliance' for its Risk Management Framework as per the requirements of ISO 31000 - a global standard in risk management principles and procedures. The certificate has been issued based on an independent assessment by an external agency and covers the entire value chain covering crop development, procurement, processing and sales.

With its unmatched R&D capability, state-of-the-art facilities, crop development & extension expertise and a deep understanding of customer and farmer needs, your Company is well poised to leverage the emerging opportunities for Indian leaf tobacco and sustain its position as a world-class leaf tobacco organisation. The Business will continue to extend strategic support to your Company's Cigarette Business while sustaining its leadership position as the leading exporter of quality Indian tobacco, thereby catalysing the multiplier impact of increased farmer incomes to benefit the rural economy.

Other Agri Commodities

Food grain production in India is estimated to have declined by 3.2% in 2014-15 to 257 million tonnes. While wheat output at 96 million tonnes remained at previous year's level, rice output at 103 million tonnes was lower by 3.4% primarily due to the delayed onset of monsoons. Oilseeds production recorded a significant drop of 8.9% to 30 million tonnes mainly due to lower groundnut output. Soya production dipped by 1.9% to 11.6 million tonnes due to delayed monsoons.

During 2014-15, world wheat production increased by 9 million tonnes to about 725 million tonnes mainly due

to higher production in Russia and Canada. Increased production and surplus inventory in the global markets impacted wheat exports from India, which dropped to 1.8 million tonnes from 3.5 million tonnes in the previous year. Despite fewer opportunities for international trading, your Company's wheat exports grew strongly to 7 lakh tonnes as against 5 lakh tonnes in the previous year. This was achieved through competitive sourcing of premium varieties for key customers and by garnering volumes from new customers. On the domestic front, the Business continued to expand its presence amongst brand owners, private labels, food processors and millers.

Your Company's deep rural linkages and expertise in agri-commodity sourcing is a critical source of competitive advantage for the Branded Packaged Foods Businesses. Given the volatile market conditions caused by climatic variations, changes in Government policies and global demand-supply dynamics, your Company has invested significantly in building competitively superior agri-commodity sourcing expertise comprising multiple business models, wide geographical spread and customised infrastructure. These capabilities and infrastructure have created structural advantages that facilitate competitive sourcing of agri raw materials for your Company's Branded Packaged Foods Businesses. The Business continues to focus on increasing the efficiency of procurement and logistics operations by consistently pursuing cost optimisation initiatives including reducing distance travelled and eliminating non value-adding activities.

Towards scaling up wheat sourcing from areas that are in close proximity of atta manufacturing plants, the Business is collaborating with research organisations such as the Indian Agricultural Research Institute, Directorate of Wheat Research, Punjab Agricultural University and Agharkar Research Institute. As part of its wheat crop development programme, your Company has introduced location-specific new and improved seed varieties along with appropriate package of practices in over 50,000 acres across Rajasthan, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh, Maharashtra and Karnataka. With a view to supporting the future requirements of your Company, the Business continues to focus on building deeper capabilities in proprietary crop intelligence, sourcing & delivery network and crafting multiple customer-centric blends through cost-quality optimisation.

In the area of potato sourcing, the Business continued to source highest quality chip stock potato at competitive prices for your Company's Bingo! Yumitos brand. In addition, the Business is working closely with farmers towards improving quality and yield and introducing chip stock in newer geographies proximal to manufacturing centres.

Your Company recently forayed into the Juices category with the launch of 7 exciting variants under the 'B Natural' brand. The Business leveraged its widespread sourcing network, associated infrastructure in key growing areas and well-entrenched farmer linkages to source quality fruit pulp. The processed fruits business continued to focus on building its portfolio of organic and certified mango products, sustaining its leadership position in 'Fairtrade' mango pulp exports from India. The Business is working closely with small and marginal farmers across 5 States in building scale and sourcing options.

Your Company's Spices Business endeavours to provide food safe spices through quality differentiation across the value chain and leverage export opportunities in the US, EU and South-East Asian countries. The Business also provides sourcing support to your Company's Aashirvaad range of spices. Over the last few years, the Business has developed robust Chilli crop development programmes, designed to 'produce the buy' along with IT driven traceability systems. Your Company's world- class processing unit in Guntur is certified to the highest grade of global food safety standards under the BRC (British Retail Consortium) Food certification regime while the quality lab is certified to the ISO 17025 standard.

Your Company believes that it is imperative to take an integrated and holistic view of the agricultural value chain towards stimulating agricultural growth in the country. This requires a participatory approach from all stakeholders such as farmers, input vendors, traders, processors and the government agencies. More than a decade ago, your Company conceptualised and rolled out the e-Choupal network as a platform towards empowering the farming community by dis-intermediating the value chain, making available accurate weather related information, enabling price discovery in a transparent manner and disseminating best practices relating to farming. Your Company continues to focus on providing various services in rural areas towards enhancing the competitiveness of Indian agriculture and plays a critical enabling role in integrating farmers, input vendors and government agencies besides facilitating the necessary market linkages.

The unique 'Choupal Haat' platform seeks to create awareness and improve access of the rural community to a broad range of areas - ranging from financial services and pharmaceuticals to commercial vehicles and white goods. Along with Choupal Saagars (integrated rural services hubs), this platform fosters round-the-year and large scale engagement with the rural community thereby enhancing the vitality of your Company's e-Choupal network.

The Business will continue to leverage its deep rural linkages and agri-commodity sourcing expertise towards providing your Company's Branded Packaged Foods Businesses a distinct competitive advantage. The e-Choupal platform will also be increasingly leveraged to provide rural marketing and agri services and serve as a unique delivery mechanism towards enhancing agricultural growth and productivity, and fostering sustainable rural development.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements prepared in accordance with Accounting Standard 21. Shareholders desirous of obtaining the report and accounts of your Company's subsidiaries may obtain the same upon request. Further, the report and accounts of the subsidiary companies will also be available under the 'Shareholder Value' section of your Company's website, www.itcportal.com, in a downloadable format.

During the year, no company became or ceased to be your Company's subsidiary, joint venture or associate company.

ITC Global Holdings Pte. Limited, Singapore ('Global'), a subsidiary of your Company, is under winding up in terms of the Order of the High Court of the Republic of Singapore dated 30th November, 2007. Consequently, your Company is not in a position to consolidate the accounts of Global for the financial year ended 31st December, 2014.

The Policy for determining Material Subsidiaries, adopted by your Board, in conformity with Clause 49 of the Listing

Agreement with Stock Exchanges, can be accessed on the Company's corporate website at http://www.itcportal.com/about-itc/policies/policy-on- material-subdidiaries.aspx. Presently, the Company does not have any material subsidiary.

Surya Nepal Private Limited

Nepal's GDP growth accelerated to 5.2% during the fiscal year ended July 2014 compared to 3.5% a year earlier, primarily on the strength of a favourable monsoon that boosted agricultural output and a marked increase in inward remittances that fuelled increased spending in the Services sector. Growth in Agriculture and Services stood at 4.7% and 6.1% respectively – the highest in the last 6 years. The Industry sector, however, grew only marginally by 2.7% as long hours of power outages and other supply side constraints weighed on domestic manufacturing, leading to higher import-led consumer spending in the economy.

Overall economic progress of the country is likely to be halted over the short to medium term, in the aftermath of the severe earthquakes in April and May 2015 which have affected 8 million people including the loss of over 8000 precious lives. Initial estimates peg the economic loss to the country at US$ 20 billion - equivalent to the country's annual GDP - with reconstruction costs of around US$ 5 billion over the next 5 years.

The employees and other assets of the company have remained largely protected from the extreme effects of the disaster. Minor damages to the company's properties have been reported to insurance companies for survey. Technical assessment of post-earthquake structural stability of company's owned/leased buildings is being conducted to take corrective measures, if required.

While the Government of Nepal along with its relief partners are focusing on rescue operations, public safety and health, economic activity in the country is gradually returning to normalcy. The company and its employees are committed to work closely with the Government of Nepal and its relief partners in this hour of crisis in order to overcome the effects of this large scale disaster.

During the year under review, the legal cigarette industry in Nepal continued to be adversely impacted by increased tax incidence and regulatory pressures, and the unabated rise in illegal trade. While Excise Duty on cigarettes was increased by 10% during the year, the regulatory environment turned harsher for the legal cigarette industry with the implementation of Tobacco Products (Control & Regulation) Act, Rules & Directives. This has led to a decline in legal cigarette industry volumes with consumption shifting to tax-evaded tobacco products from the unorganised sector including illegal cigarettes, which do not carry the mandatory graphic health warnings on packs. Consequently, the tobacco industry's contribution to the Government exchequer declined during the year.

Punitive taxation combined with excessive tobacco regulations focused on cigarettes, have led to livelihood related concerns and anxieties for tobacco farmers, farm labour, retailers and other stakeholders who are dependent on the tobacco industry. Further, the Ministry of Health and Population, Government of Nepal, has proposed to revise the existing tobacco legislation and introduce further measures in the near future which, due to their arbitrary, unreasonable and impractical nature, are likely to disrupt more than 4 lakh livelihoods directly/indirectly dependent on the industry. All stakeholders of the industry have been representing to the Government for reconsideration or withdrawal of the new measures. The company supports effective, evidence based regulations that meet public health objectives, which enable differentiation of its products vis-à-vis competition, recognise its legal rights and do not lead to unintended consequences such as increased illegal trade.

Amidst this challenging business environment, the company recorded Gross Revenue of Nepalese Rupees (NRs.) 2033 crores (previous year – NRs. 1957 crores) and Profit After Tax (PAT) of NRs. 451 crores (previous year – NRs. 425 crores) representing a growth of 3.9% and 6.1% respectively. The company improved its market standing in all major operating segments viz. Cigarettes, Branded Apparel, Safety Matches and the recently launched Agarbatti business.

The company continues to be one of the largest contributors to the national exchequer, accounting for about 14% of excise collections and approximately 3% of the total revenues of the Government of Nepal. The company constitutes approximately 17% of manufacturing GDP of the country, making it the largest private sector manufacturing company in Nepal.

In the Cigarettes business, the company consolidated its market standing by focusing on delivering world-class quality and strengthening its product portfolio.

The new state-of-the-art cigarette factory near Pokhara commenced operations in May 2014. The design of the factory incorporates best-in-class features in ergonomics, energy efficiency, usage of natural light and management of ambient conditions. Machines based on leading-edge technology are being leveraged through contemporary manufacturing practices, systems and people processes. The factory is being developed as a benchmark facility in terms of productivity, quality and sustainability. The new leaf redrying plant, which was commissioned at Simara during the year, will strengthen the company's domestic leaf operations by improving productivity and quality of processed leaf. The plant's environmentally sustainable design enables it to harness green energy sources for ventilation, lighting and waste treatment processes. The company successfully commissioned a 20 kWp solar roof top project at the Simara cigarette factory, thereby expanding its green footprint.

In line with Company's proactive approach to employee relations management, the company successfully concluded a Long Term Agreement with the workmen at the Simara cigarette factory, thus ensuring harmonious and efficient operations.

In the Branded Apparel business, the company's brands 'John Players' and 'Springwood' sustained their position as the preferred choice of consumers in the premium and economy segments. In the Safety Matches business, the company's brand 'Tir' sustained its market leadership position in the wax matches segment. The year also marked the company's entry into the Agarbatti market, with the launch of the 'Mangaldeep' brand – licensed from ITC Ltd. - in the premium and popular segments. The company leveraged its marketing and distribution infrastructure to make the brand available across the country in a relatively short span of time. The products have been well received by consumers and plans are on the anvil to scale up the business in the forthcoming years.

The company is focusing on further strengthening processes and improving productivity in all areas of its operations to reduce costs and improve profitability. As part of this initiative, the company has rolled out an Enterprise Resource Planning system during the year.

The company continues to support and invest in initiatives that enhance the social and economic capital of the nation. These initiatives are aligned with the stated priorities of the Government of Nepal and are based on identified societal needs. Accordingly, the company continues to:

- partner tobacco farmers in Nepal to enhance productivity and improve quality at the farm level through the induction of agricultural best practices. The adoption of such practices and other inputs provided by the company has led to consistent improvement in quality of domestic grades of tobacco thereby improving marketability of the crop and enhancing farmer returns.

- assist farmers in cultivating high quality Poplar saplings in the vicinity of the Simara factory. Under the 'Grow Wood, Grow Food' programme that this initiative promotes, farmers are encouraged to adopt agro-forestry while simultaneously inter-cropping with traditional crops.

- support the animal husbandry extension services initiative with a view to driving yield improvement and enhancing returns of underprivileged farmers.

- partner the Nepal Tourism Board in hosting Nepal's premier professional golf tournament - the 'Surya Nepal Private Limited Masters' with the objective of promoting Nepal as an attractive tourism destination.

- focus on building local supply chain capability towards sourcing its agarbatti requirements from domestic small and medium enterprises, thereby providing employment and skill building opportunities to the economically deprived sections of society, especially women.

The company declared a dividend of NRs. 200.00 per equity share of NRs. 100/- each for the year ended 16th July 2014 (32nd Ashad 2071).

ITC Infotech India Limited and its subsidiaries

2014-15 witnessed the beginnings of major shifts in how businesses use and deploy technology to better understand and service their customers, and use the growing volume, variety and velocity of data flow to gain competitive advantage. With corporates increasingly crafting newer digital business models, business users are replacing the Chief Information Officer (CIO) as the key decision-maker for purchase of information technology products and services. Similarly, the traditional software licensing model is being challenged by 'subscription-based' and 'as-a-service' revenue models.

Against this backdrop, the global IT industry grew by 4.6% in 2014 – significantly higher than the preceding two years.

During the year, the company's Consolidated Total Revenue grew by 15% to Rs. 1476.40 crores, while Net Profit grew by 23% to Rs. 106.30 crores. The company's strategies and operating approach are anchored on the following key elements: (i) focusing sharply on domain expertise, delivery excellence, digital and data towards achieving meaningful, differentiated and specialised scale (ii) building solutions and capabilities around products of global software vendors and partnering with them to take these products to market (iii) focusing on geographical expansion to develop new markets and acquire customers, (iv) driving cost management and resource optimisation while balancing growth-led investment imperatives and (v) creating future-ready business verticals while improving overall profitability.

For the year under review:

a) ITC Infotech India Limited recorded Total Revenue of Rs. 1006 crores (previous year Rs. 926 crores) and Net Profit of Rs. 122 crores (previous year Rs. 101 crores). For the year under review, the company paid a dividend of Rs. 9.00 per Equity Share of Rs. 10/- each aggregating Rs. 76.68 crores (previous year: Nil);

b) ITC Infotech Limited, UK, (ITC Infotech UK), a wholly-owned subsidiary of the company, recorded Total Revenue of GBP 28.69 million (previous year GBP 25.29 million) and Net Profit of GBP 0.68 million (previous year GBP 1.18 million). For the year under review, ITC Infotech UK declared a dividend of GBP 4.25 (previous year GBP 3.00) per Ordinary Share of GBP 1/- each on 685,815 shares, amounting to GBP 2,914,714 (previous year GBP 2,057,445);

c) ITC Infotech (USA), Inc., (ITC Infotech USA), a wholly-owned subsidiary of the company, together with its wholly-owned subsidiary Pyxis Solutions LLC, recorded Total Revenue of US$ 81.62 million (previous year US$ 70.61 million) and Net Profit of US$ 0.82 million (previous year US$ 0.17 million).

During the year, the company implemented a new organisation structure for better alignment with the company's strategic direction. A new Independent

Business Unit (IBU) focused on Product Engineering Services and Data Analytics was also set up during the year. The IBU has seen significant growth within a short span of time with a healthy pipeline of customers.

During the year, the company witnessed robust growth in the Asia-Pacific region aided by a combination of partner-driven initiatives as well as a direct sales approach. The company also gained traction in the Middle-East region during the year and generated significant interest amongst prospective clients in that region.

The company continues to expand its service lines, sales channels and presence in Europe and USA. Robust business traction in the USA over the past few years has made that region the highest contributor to the consolidated revenues of the group.

The company's superior service delivery capability continued to earn global recognition. The company featured for the 9th consecutive year in the 'Leaders Category' in the '2015 Global Outsourcing 100' list compiled by the International Association of Outsourcing Professionals (IAOP). The company won the 2014 European Outsourcing award (under the category 'Delivering Business Value in European Outsourcing') from the European Outsourcing Association in recognition of its long-term engagement with the Banking sector.

With enhanced focus on encompassing newer technologies and driven by domain knowledge and delivery excellence, the company is poised to garner a higher share of India-based IT exports and sustain its growth trajectory. Towards attracting high quality human resources, the company has broadened its channels for sourcing quality talent and has strengthened its capability building processes through college affiliations, technology incubation cells and employee ideation panels, thereby ensuring seamless and scalable business operations.

The outlook for the Indian IT industry remains buoyant with NASSCOM forecasting a growth of 12% to 14% in 2015-16. The company is poised to leverage its leadership in knowledge-centric IT services and increasing global presence in attaining its strategic and financial objectives.

Technico Pty Limited and its subsidiaries

The company continues to focus on upgradation and commercialisation of TECHNITUBER® seed technology and customising its application across various geographies. Besides, the company is engaged in the marketing of TECHNITUBER® seeds to global customers from the production facilities of its subsidiaries in India and China. The Indian and Canadian subsidiaries of the Company are also engaged in field multiplication of seeds.

Technico's leadership in production of early generation seed potatoes and strength in agronomy continue to be leveraged for sourcing chip stock for the 'Bingo! Yumitos' range of potato chips and servicing the seed potato requirements of the farmer base of your Company's Agri Business.

For the year under review:

a) Technico Pty Limited, Australia registered Turnover of Australian Dollar (A$) 2.2 million (previous year A$ 2.2 million) and Net Profit of A$ 0.78 million (previous year A$ 0.44 million).

b) Technico Agri Sciences Limited, India registered Net Revenue of Rs. 105.08 crores (previous year Rs. 73.24 crores) and Net Profit of Rs. 45.25 crores (previous year Rs. 14.09 crores). During the year, potato prices rose sharply primarily due to lower crop output. Consequently, demand for good quality seed potato increased significantly. This coupled with the strength of its brand, superior product quality, better on-field performance and strong trade and customer relationships enabled the company to realise better prices during the year.

c) Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China – There were no significant events to report with respect to the above companies.

Srinivasa Resorts Limited

The company's hotel ITC Kakatiya in Hyderabad continued to be impacted by a challenging economic environment exacerbated by sluggish demand conditions in the city pursuant to the bifurcation of the State of Andhra Pradesh.

The company recorded Total Revenue of Rs. 52.74 crores (previous year Rs. 53.28 crores) during the year ended 31st March, 2015 and Net Loss of Rs. 0.72 crores (previous year Net Profit of Rs. 3.33 crores). Included in the Net Loss for the year is an incremental depreciation charge of Rs. 2.74 crores on account of revision in the useful lives of fixed assets in accordance with the provisions of Schedule II to the Companies Act, 2013.

During the Year, ITC Kakatiya received the 'Times Food Guide' awards for 'Dakshin' (Best South Indian Fine Dining), Kebabs & Kurries (Best Indian Barbeque), and Marco Polo (Best Bar). TripAdvisor, a renowned hotel review site, also recognised Dakshin and Kebabs & Kurries as the best restaurants in Hyderabad, ranking them No.1 and No.2 respectively. During the year, the hotel was also awarded the '3 Star Rating for Appreciation in EHS Practices' by CII.

Last year, a land parcel measuring about 4.27 acres in Amritsar was assigned to the company by ITC Ltd. towards the development and operation of a full service hotel. During the year, the company obtained the necessary approvals from various authorities and has commenced civil works at the site. Excavation of the site to construct a 100-key full service hotel was completed during the year.

Fortune Park Hotels Limited

During the year ended 31st March, 2015, the company recorded Total Revenue of Rs. 27.19 crores (previous year Rs. 24.85 crores) and earned Net Profit of Rs. 5.74 crores (previous year Rs. 6.25 crores).

The company, which caters to the 'mid-market to upscale' segment through a chain of Fortune hotels, continues to forge new alliances and expand its footprint. Currently, the company has an aggregate inventory of nearly 6,000 rooms spread over 76 properties of which 46 are operating hotels. Of the balance 30 properties,

5 hotels are slated to be commissioned in the ensuing year and 25 hotel projects are under various stages of development.

Two hotels have already been operationalised under the flagship 'My Fortune' brand at Chennai and Bengaluru. Plans are on the anvil to launch 9 more hotels under the My Fortune brand over the next few years.

During the year, the company bagged the Travel

6 Hospitality Award 2014 for the 'Most Outstanding Mid- Market Hotel Chain', Today's Traveller Award

2014 for the 'Best First Class Business Hotel Chain',

Safari India Award 2014 for the 'Best First Class Business Hotel Chain', Hotel Build India Award 2014 in the 'Best Mid-Market Hotel' category by Hotelier India and ITP Publishing Group India and Hospitality India Award 2014 for the 'Best First Class Hotel Chain'.

The company has established 'Fortune' as the premier 'value' brand in the Indian hospitality sector. The brand remains a frontrunner in its operating segment and is well positioned to sustain its leadership position in the industry.

The Board of Directors of the company has recommended a dividend of Rs. 12.50 per equity share of Rs. 10/- each for the year ended 31st March, 2015.

WelcomHotels Lanka (Private) Limited

WelcomHotels Lanka (Private) Limited (WLPL), a wholly-owned subsidiary of your Company, was incorporated in Sri Lanka with the objective of developing and operating a mixed-use development project ('Project') including a luxury hotel on 5.86 acres of prime sea-facing land in Colombo, which was allotted by the Board of Investment of Sri Lanka on a 99-year lease to the company for this purpose.

The Project has been accorded 'Strategic Development Project' status entitling the company to various fiscal benefits in Sri Lanka. Further, the Project is also exempt from Sri Lankan foreign exchange regulations.

During the year, the company obtained necessary approvals to commence construction activity and all major consultants and architects have been appointed. The ground breaking ceremony for the Project was held on 19th November, 2014 and excavation and allied works, which were commenced immediately thereafter, are progressing satisfactorily.

Your Company's investment in WLPL stood at US$ 82.8 million as at 31st March, 2015.

Bay Islands Hotels Limited

Fortune Resort Bay Island, the company's hotel in Port Blair, with its great location, excellent architectural design and superior service quality, continues to offer a unique gateway to the Andamans. The company has commenced a comprehensive renovation and expansion programme with a view to enhancing the market standing of the hotel.

During the year ended 31st March, 2015, the company recorded Total Revenue of Rs. 1.58 crores (previous year Rs. 1.62 crores) and Net Profit of Rs. 0.99 crores (previous year Rs. 1.03 crores).

The Board of Directors of the company has recommended a dividend of Rs. 70.00 per equity share of Rs. 100/- each for year ended 31st March, 2015.

Landbase India Limited

During the year, the company completed the construction of a 104-key luxury hotel, the 'ITC Grand Bharat', at the Classic Golf Resort.

The hotel, which has been licensed to ITC Ltd., commenced operations in November 2014. The company also owns and operates the Classic Golf & Country Club, a 27-hole Jack Nicklaus Signature Course.

During the year ended 31st March 2015, the company recorded Total Revenue of Rs. 17.40 crores (previous year Rs. 12.85 crores) and Net Profit of Rs. 1.07 crores (previous year Net Loss Rs. 2.76 crores). During the year, the company issued and allotted to ITC Ltd., 2,80,00,000 Equity Shares of Rs. 10/- each for cash at par, aggregating Rs. 28 crores. The proceeds from the share issue were utilised by the company for the construction of the destination luxury resort hotel.

King Maker Marketing, Inc.

King Maker Marketing, Inc. (KMM) is a wholly-owned subsidiary of your Company registered in the State of New Jersey, USA. Its main business is to import and distribute tobacco products to licensed wholesalers and retailers throughout the USA. Your Company is KMM's sole supplier of tobacco products.

Despite the continuing decline in consumption in the US market, the company's Net Sales grew by 9% during the year, driven by robust growth in volumes on the back of focused market interventions. The company recorded Net Sales of US$ 29.3 million (previous year US$ 26.9 million) and earned a Net Income of US$ 0.14 million (previous year US$ 0.07 million) during the financial year ended 31st March, 2015. During the year, KMM also paid a dividend of US$ 2.0 million to your Company.

Increasing presence of major cigarette manufacturers in the discount segment – in direct competition with KMM, illicit trade driven by tax differentials between various States in USA, non-compliant cigarette imports and Native American manufacture continue to pose significant challenges for the company.

Wimco Limited

The scheme of arrangement involving the demerger of the company's Non-Engineering Business into ITC Ltd. with effect from 1st April 2013, became effective from 27th June 2014.

Pursuant to the demerger as aforestated, the company's business activities are mainly focused on fabrication and assembly of machinery for tube filling, cartoning, wrapping, material handling and conveyor solutions for the FMCG and Pharmaceutical industry.

The company's order book remained subdued during the year with customers holding back capital expenditure in view of the sluggish demand conditions prevailing in the FMCG and Pharmaceutical industry in India.

Consequently, the company's Net Revenue for the year declined to Rs. 12.90 crores (previous year Rs. 17.17 crores on a comparable basis) and reported a Net Loss of Rs. 0.48 crores (previous year Net Profit Rs. 1.67 crores on a comparable basis).

The company is focusing on building a robust business model, widening its customer base and developing superior solutions towards addressing customer requirements.

North East Nutrients Private Limited

Your Company holds 76% of the equity stake in North East Nutrients Private Limited (NENPL), a company formed with the objective of setting up a food processing facility in Mangaldoi, Assam to cater to the fast-growing biscuits market in Assam and other north-eastern States. Construction work on the manufacturing facility is currently in progress and commercial production is expected to start in the ensuing year.

Your Company's investment in NENPL stood at Rs. 48.13 crores as at 31st March 2015.

Russell Credit Limited

During the year, the company registered Total Revenue of Rs. 70.81 crores (previous year Rs. 65.52 crores) and Net

Profit of Rs. 56.38 crores (previous year Rs. 34.57 crores). The company paid a dividend of Rs. 1.40 per equity share aggregating Rs. 90.51 crores for the year ended 31st March, 2015.

Temporary surplus liquidity of the company is mainly deployed in debt mutual funds and bank fixed deposits. The company continues to explore opportunities to make strategic investments for the ITC group.

Gold Flake Corporation Limited

The company registered Total Revenue of Rs. 4.20 crores during the year under review (previous year Rs. 4.37 crores). The company paid a dividend of Rs. 9.00 per equity share aggregating Rs. 14.40 crores for the year ended 31st March, 2015.

The company holds 50% equity stake in ITC Essentra Ltd. – a joint venture with Essentra group, UK.

Wills Corporation Limited

The company recorded Total Revenue of Rs. 0.89 crore during the year (previous year Rs. 0.93 crore). The company paid a dividend of Rs. 7.00 per equity share aggregating Rs. 3.42 crores for the year ended 31st March, 2015.

Greenacre Holdings Limited

During the year, the company recorded Total Revenue of Rs. 3.51 crores (previous year Rs. 3.31 crores) and Net Profit of Rs. 1.04 crores (previous year Rs. 0.87 crore). The company continues to provide maintenance services for commercial office buildings.

ITC Investments & Holdings Limited

The company, a Core Investment Company within the meaning of the Core Investment Companies (Reserve Bank) Directions, 2011, recorded Total Revenue of Rs. 0.48 crore during the year (previous year Rs. 0.32 crore) and Net Profit of Rs. 0.33 crore (previous year Rs. 0.31 crore).

During the year, the company purchased the entire shareholding (50,000 equity shares) of MRR Trading & Investment Company Limited from BFIL Finance Limited, a fellow subsidiary, at an aggregate consideration of Rs. 4.52 crores. Consequently, MRR Trading & Investment Company Limited became a wholly-owned subsidiary of the company with effect from 30th March, 2015.

BFIL Finance Limited

The company registered Total Revenue of Rs. 0.34 crore during the year (previous year Rs. 0.81 crore). Net Loss for the year stood at Rs. 4.37 crores (previous year Net Profit Rs. 0.61 crore) mainly on account of payment of interest on loan from the parent entity. The company is actively pursuing various legal cases initiated against defaulting clients for recoveries.

MRR Trading & Investment Company Limited

The company holds tenancy rights in a commercial building located in Mumbai and also provides estate maintenance services. During the year, the company recorded Total Revenue of Rs. 0.07 crore (previous year Rs. Nil).

Pavan Poplar Limited

The scheme of arrangement involving the demerger of Wimco Limited's Non-Engineering Business into ITC Ltd. with effect from 1st April 2013, became effective from 27th June 2014. As a result, the company, which was earlier a wholly-owned subsidiary of Wimco Ltd., became a direct wholly-owned subsidiary of ITC Ltd. with effect from 27th June 2014.

The operations of the company remained impacted during the current year pursuant to the order of the Uttarakhand High Court in February 2014 dismissing the writ petition filed by the company against the order of the District Magistrate authorising State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated order was admitted in April 2014 and the matter is pending before the Honourable High Court.

Consequently, the company's Total Revenue declined from Rs. 0.96 crore in the previous year to Rs. 0.02 crore in the current year. The company reported a Net Loss of Rs. 0.47 crore during the year (previous year Net Loss of Rs. 4.47 crores after considering an aggregate provision of Rs. 4.55 crores made towards inventory and fixed assets).

Prag Agro Farm Limited

The scheme of arrangement involving the demerger of Wimco Limited's Non-Engineering Business into ITC Ltd. with effect from 1st April 2013, became effective from 27th June 2014. As a result, the company, which was earlier a wholly-owned subsidiary of Wimco Ltd., became a direct wholly-owned subsidiary of ITC Ltd. with effect from 27th June 2014.

The operations of the company remained impacted during the current year pursuant to the order of the Uttarakhand High Court in February 2014 dismissing the writ petition filed by the company against the order of the District Magistrate authorising State authorities to take possession of the land leased to the company. The appeal filed by the company against the aforestated order was admitted in April 2014 and the matter is pending before the Honourable High Court.

Consequently, the company's Total Revenue declined from Rs. 0.70 crore in the previous year to Rs. 0.04 crore during the current year. The company reported a Net Loss of Rs. 0.08 crore during the year (previous year: Net Loss of Rs. 4.05 crores after considering an aggregate provision of Rs. 4.00 crores made towards inventory and fixed assets).

ITC Global Holdings Pte. Limited

As has been stated in the previous years' reports, the Judicial Managers had been conducting the affairs of ITC Global Holdings Pte. Limited ('Global') since 8th November, 1996, under the authority of the High Court of Singapore.

Pursuant to the application of the Judicial Managers, the Singapore High Court on 30th November, 2007 ordered the winding up of Global, appointed a Liquidator and discharged the Judicial Managers.

The Judicial Managers commenced proceedings against your Company in November 2002 before the Singapore High Court claiming approximately US$ 18.10 million. Pursuant to legal advice, your Company has filed its defence in the proceedings.

On 22nd July, 2013, the Liquidator filed an application, to amend the Statement of Claim filed in the proceedings to include an additional claim of US$ 1.03 million against your Company, which was dismissed by the Assistant Registrar. The Liquidator's appeal against the said dismissal was also dismissed on 29th May, 2014, by the Singapore High Court.

Your Company is contesting the claims contending that the same are not sustainable and your Company does not accept any liability in this regard. The proceedings are pending.

NOTES ON JOINT VENTURES

ITC Essentra Limited

The company recorded Gross Revenue of Rs. 328.60 crores (previous year Rs. 292.74 crores) and Net Profit of Rs. 12.22 crores (previous year Rs. 13.77 crores) for the financial year ended 31st December, 2014. During the year, the company consolidated its leadership position in the backdrop of a challenging operating environment which saw increasing taxation and regulatory pressures on the cigarette industry. The company countered the challenges posed by these difficult market conditions by focusing on innovation, superior execution, consistent delivery and world-class quality. Although the company garnered additional volumes, adverse sales mix and higher interest cost impacted the performance for the year. During the year, the company fully operationalised its new state-of-the-art manufacturing line at Doddaballapur, Karnataka.

Given that a significant portion of the company's sales are to customers in the domestic cigarette industry which is facing unprecedented pressure on volumes due to steep increase in taxes/duties, the year ahead will indeed be challenging. In this context, the company is also focusing on growing exports with best-in-class delivery of high quality products to customers at competitive prices. Besides, the company continues to diversify the sourcing base for its principal raw material - acetate tow - towards ensuring security of supplies and optimising costs.

A sustained drive to develop contemporary and value added cigarette filter solutions coupled with integrated online quality control systems have enabled the company to consolidate its position as the preferred supply chain partner for several well-known national and international brands. The company remains focused on sustaining its position as the innovation and quality benchmark in the cigarette filter market.

The Board of Directors of the company has recommended a dividend of Rs. 9.00 per Ordinary Share of Rs. 10/- each for the year ended 31st December, 2014.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 34 heritage properties across 13 States in India. The company, with its WelcomHeritage brand portfolio comprising 'Legend Hotels', 'Heritage Hotels' and 'Nature Resorts', provides uniquely differentiated offerings to guests in the cultural, heritage and adventure tourism segments respectively.

During the year ended 31st March, 2015, the company recorded Total Revenue of Rs. 3.80 crores (previous year Rs. 3.46 crores) and Net Profit of Rs. 0.24 crores (previous year Rs. 0.10 crores).

The 'WelcomHeritage Hotels' brand was awarded the 'Best Heritage Hotel Chain' by Today's Traveller Awards 2014.

Espirit Hotels Private Limited

Espirit Hotels Private Limited (EHPL) is a joint venture between your Company and the Ambience Group, Hyderabad for developing a luxury hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in EHPL and will, inter alia, provide hotel operating services under an Operating Services Agreement, upon commissioning of the hotel.

The Ambience Group has expressed its desire to review the timing of further investments in EHPL, citing concerns about the viability of the project in view of the challenging economic environment and the sluggish demand conditions currently prevailing in Hyderabad pursuant to the bifurcation of the State of Andhra Pradesh. In this regard, your Company is examining the way forward under the Joint Venture Agreement.

Your Company's investment in EHPL stood at Rs. 46.51 crores as at 31st March, 2015.

Logix Developers Private Limited

Logix Developers Private Limited (LDPL) is a joint venture between your Company and Logix Estates Private Ltd., NOIDA for developing a luxury hotel-cum-service apartment complex at Sector 105 in NOIDA. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in LDPL and will, inter alia, provide hotel operating services under an Operating Services Agreement, upon commissioning of the hotel.

Pursuant to an equity cash call aggregating Rs. 14.87 crores made by LDPL during the year, your Company invested Rs. 3.87 crores in LDPL. However, the JV partner did not subscribe to its share of the cash call. Consequently, your Company's total investment in LDPL increased to Rs. 41.95 crores as at 31st March 2015, taking its equity stake to 27.9% in the company.

Logix Estates Private Ltd., the JV partner, has communicated to your Company that it would like to explore alternative project development plans, failing which, it proposes to exit the joint venture by selling its shareholding in LDPL to your Company. Your Company is exploring its options in this regard.

NOTES ON ASSOCIATES

International Travel House Limited

During the financial year ended 31st March, 2015, the company recorded Total Revenue of Rs. 183.48 crores (previous year Rs. 176.44 crores) and Net Profit of Rs. 18.38 crores (previous year Rs. 18.11 crores).

The Company offers a full range of travel services including air ticketing, car rentals, inbound and outbound tourism, domestic holidays, conferences, events and exhibition management and foreign exchange services to travellers.

The Board of Directors of the company has recommended a dividend of Rs. 4.25 per equity share of Rs. 10/- each for the year ended 31st March, 2015.

Gujarat Hotels Limited

During the financial year ended 31st March, 2015, the company recorded Total Revenue of Rs. 4.31 crores (previous year Rs. 4.51 crores) and Net Profit of Rs. 2.73 crores (previous year Rs. 3.27 crores).

The company's hotel, 'WelcomHotel Vadodara' at Vadodara is operated by ITC Ltd. under an Operating License Agreement.

The Board of Directors of the company has recommended a dividend of Rs. 3.50 per equity share of Rs. 10/- each for the year ended 31st March, 2015.

ATC Limited (an associate of Gold Flake Corporation Limited)

The company is a contract manufacturer of cigarettes. During the year, the company recorded Total Revenue of Rs. 23.16 crores (previous year Rs. 21.95 crores) and Net Profit of Rs. 0.91 crore (previous year Rs. 0.84 crore).

During the year, the company exhibited robust operational performance with benchmark scores in product quality

and material utilisation. The company won the 'Platinum Award' from The Economic Times for manufacturing excellence, a 'Certificate of Appreciation' from FICCI for excellence in quality systems and various safety awards for outstanding track record in safety.

Associates of Russell Credit Limited

Classic Infrastructure & Development Limited

The company recorded Total Revenue of Rs. 0.45 crore during the year (previous year Rs. 0.41 crore) and Net Profit of Rs. 0.20 crore (previous year Rs. 0.35 crore).

The company continues to explore growth opportunities.

Russell Investments Limited

During the year, the company recorded Total Revenue of Rs. 5.66 crores (previous year Rs. 2.42 crores) and Net Profit of Rs. 5.42 crores (previous year Net Loss Rs. 0.20 crore).

The company continues to explore opportunities to make investments.

Divya Management Limited

During the year, the company recorded Total Revenue of Rs. 0.24 crore (previous year Rs. 0.23 crore) and Net Profit of Rs. 0.08 crore (previous year Rs. 0.10 crore).

The company continues to explore opportunities to make investments.

Antrang Finance Limited

During the year, the company recorded Total Revenue of Rs. 0.30 crore (previous year Rs. 0.28 crore) and Net Profit of Rs. 0.20 crore (previous year Rs. 0.20 crore).

The company continues to explore opportunities to make investments.

INTERNAL FINANCIAL CONTROLS

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The ITC Code of Conduct commits management to financial and accounting policies, systems and processes. The Corporate Governance Policy and the ITC Code of Conduct stand widely communicated across the enterprise at all times, and, together with the 'Strategy of Organisation', Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Company's Financial Statements.

Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across the Company. The Accounting Policies are reviewed and updated from time to time. These, in turn are supported by a set of divisional policies and Standard Operating Procedures (SOPs) that have been established for individual businesses.

Your Company uses ERP Systems as a business enabler and also to maintain its Books of Account. The SOPs in tandem with transactional controls built into the ERP Systems ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation.

Your Company has in place adequate internal financial controls with reference to the Financial Statements. Such controls have been tested during the year and no reportable material weakness in the design or operation was observed. Nonetheless your Company recognises that any internal financial control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an ongoing basis.

RISK MANAGEMENT

As a diversified enterprise, your Company continues to focus on a system-based approach to business risk management. The management of risk is embedded in the corporate strategies of developing a portfolio of world-class businesses that best match organisational capability with market opportunities, focusing on building distributed leadership and succession planning processes, nurturing specialism and enhancing organisational capabilities through timely developmental inputs. Accordingly, management of risk has always been an integral part of the Company's 'Strategy of Organisation' and straddles its planning, execution and reporting processes and systems. Backed by strong internal control systems, the current Risk Management Framework consists of the following key elements:

— The Corporate Governance Policy approved by the Board, clearly lays down the roles and responsibilities of the various entities in relation to risk management covering a range of responsibilities, from the strategic to the operational. These role definitions, inter alia, provide the foundation for your Company's Risk Management Policy and Framework that is endorsed by the Board and is aimed at ensuring formulation of appropriate risk management procedures, their effective implementation across your Company and independent monitoring and reporting by Internal Audit.

— The Corporate Risk Management Cell, through focused interactions with businesses, facilitates the identification and prioritisation of strategic and operational risks, development of appropriate mitigation strategies and conducts periodic reviews of the progress on the management of identified risks.

— A combination of centrally issued policies and divisionally-evolved procedures brings robustness to the process of ensuring that business risks are effectively addressed.

— Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with unique / relatively high risk profiles.

— A strong and independent Internal Audit function at the Corporate level carries out risk focused audits across all businesses, enabling identification of areas where risk management processes may need to be strengthened. The Audit Committee of the Board reviews Internal Audit findings, and provides strategic guidance on internal controls. The Audit Compliance Review Committee closely monitors the internal control environment within your Company including implementation of the action plans emerging out of internal audit findings.

— At the Business level, Divisional Auditors continuously verify compliance with laid down policies and procedures, and help plug control gaps by assisting operating management in the formulation of control procedures for new areas of operation.

— A robust and comprehensive framework of strategic planning and performance management ensures realisation of business objectives based on effective strategy implementation. The annual planning exercise requires all businesses to clearly identify their top risks and set out a mitigation plan with agreed timelines and accountability. Businesses are required to confirm periodically that all relevant risks have been identified, assessed, evaluated and that appropriate mitigation systems have been implemented.

The combination of policies and processes as outlined above adequately addresses the various risks associated with your Company's businesses.

The Company during the year has also constituted a Risk Management Committee, as required by revised Clause 49 of the Listing Agreement.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances. Your Company remains committed to ensuring an effective internal control environment that inter alia provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information.

Your Company's independent and robust Internal Audit processes, both at the Business and Corporate levels, provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements.

The Internal Audit function consisting of professionally qualified accountants, engineers and IT Specialists is adequately skilled and resourced to deliver audit assurances at highest levels. In the context of the IT environment of your Company, systems and policies relating to Information Management are periodically reviewed and benchmarked for contemporariness. Compliance with the Information Management policies receive focused attention of the Internal Audit team. Qualified engineers in the Internal Audit function review the quality of planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate and yield 'value for money'.

Processes in the Internal Audit function have been continuously improved for enhanced effectiveness and productivity including the deployment of best-in-class tools for analytics in the Audit domain, certification as complying with ISO 9001:2008 Quality Standards in its processes, ongoing knowledge improvement programmes for staff, etc.

The Audit Committee of your Board met eight times during the year. The Terms of Reference of the Audit Committee inter alia included reviewing the adequacy and effectiveness of the internal control environment, monitoring implementation of the action plans emerging out of Internal Audit findings including those relating to strengthening of your Company's risk management systems and discharge of statutory mandates.

HUMAN RESOURCE DEVELOPMENT

Your Company believes that it is the quality and dynamism of its human resource that enables it to make a significant contribution to enhancing stakeholder value. In order to sustain its position as one of India's most valuable corporations, your Company works relentlessly towards being customer-focused, competitively-superior, performance-driven and future-ready.

The talent management strategy of your Company strives to deliver its unique talent promise - 'Building Winning Businesses. Building Business Leaders. Creating Value for India.' Your Company is guided by a holistic approach to talent management - focusing on synchronising the multiple elements of talent sourcing, work design, performance management, remuneration, individual growth and development – to deliver breakthrough outcomes. Human Resource Development practices in your Company are guided by the principles of relevance, consistency and fairness based on the premise that 'what' is done is as critical as 'how' it is done. Taken together, these initiatives and processes have made a significant impact on talent attraction, retention and commitment.

Your Company has assiduously built a culture of continuous learning, innovation and collaboration across the organisation by judiciously leveraging cutting-edge learning and development practices with coaching, mentoring and on-the-job training. Based on the premise that action learning is a more effective approach to development of human resources, learning and development interventions stress less on classroom learning and more on workplace projects. These interventions are therefore fashioned along the lines of longer term journeys rather than short term events.

Your Company's strategic Learning and Development agenda is geared to building front-line managerial capability, middle-management functional leadership and strategic leadership capability of senior management. Apart from this, your Company's 'Strategy of Organisation' serves as an excellent platform to build distributed leadership. This two-pronged approach to leadership development has ensured that each of your Company's businesses is managed by a team of competent, passionate and inspiring leaders, capable of building a high-performance and future-ready organisation.

Your Company continues to invest in the time-tested approach of progressive employee relations based on the core principles of trusteeship, fairness, equity, industrial democracy and partnership with enlightened trade unions. This has enabled your Company consistently set a fine record of industrial harmony, highlighted not merely by the absence of strife, but by the more positive outcome of high productivity and superior quality. A productive and innovative workplace is a key requirement of successful business performance. Hence the push for embracing commitment-enhancing people processes that seek and nurture employee participation and involvement in managing the shop floor. Your Company's belief in the mutuality of interests of key stakeholders, aligns all employees to a shared purpose and vision, thus providing it with the vital force to win in the market and enhance value creation.

Your Company has been able to galvanise its human resource to become more agile, leverage change, stay ahead of competition and win in the market. Your Company's employees relentlessly strive to deliver world-class performance and discharge their role as 'trustees' of all stakeholders with true faith and in the spirit of allegiance. Over 25,000 of your Company's employees have collectively envisioned the future with commitment to realising your Company's vision of creating enduring value - for the nation and for the institution that is ITC.

WHISTLEBLOWER POLICY

The Company's Whistleblower Policy encourages Directors and employees to bring to the Company's attention, instances of unethical behaviour, actual or suspected incidents of fraud or violation of the ITC Code of Conduct that could adversely impact the Company's operations, business performance and / or reputation. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that the requisite standards of professional and ethical conduct are always upheld. It is the Company's Policy to ensure that no employee is victimised or harassed for bringing such incidents to the attention of the Company. The practice of the Whistleblower Policy is overseen by the Audit Committee of the Board and no employee has been denied access to the Committee. The Whistleblower Policy is available on the Company's corporate website www.itcportal.com.

SUSTAINABILITY – CONTRIBUTION TO THE 'TRIPLE BOTTOM LINE'

Your Company's vision to sub-serve larger national priorities and create enduring societal value is the inspiration behind its multi-dimensional sustainability initiatives that are today acknowledged as global exemplars. Your Company's sustainability strategy aims to significantly enhance value creation for the nation through superior 'Triple Bottom Line' performance that builds and enriches the country's economic, environmental and societal capital. The sustainability strategy is premised on the belief that the transformational capacity of business can be very effectively leveraged to create significant societal value through a spirit of innovation and enterprise.

It is a matter of immense satisfaction that your Company's models of sustainable development and value chains designed to promote livelihoods, have supported the creation of around 6 million sustainable livelihoods, largely among the marginalised sections of society. Your Company has sustained its position of being the only Company in the world of comparable dimensions to have achieved the global environmental distinction of being carbon positive (for 10 consecutive years), water positive (for 13 years in a row) and solid waste recycling positive (for 8 years in succession).

Your Company's renewable energy portfolio ensures that over 43% of its total energy requirements are met from renewable energy sources - a remarkable achievement given the large manufacturing base of your Company. Further, premium luxury hotels, several office complexes and factories of your Company are LEED® (Leadership in Energy & Environmental Design) certified at the highest level by the US Green Building Council/Indian Green Building Council and the Bureau of Energy Efficiency (BEE) under its star rating scheme.

Your Company has adopted a comprehensive set of sustainability policies that are being implemented across the organisation in pursuit of its 'Triple Bottom Line' agenda. The broad objectives with which your Company has rolled out these policies include strengthening the mechanisms of engagement with key stakeholders, the identification of material sustainability issues and the efforts towards monitoring and mitigating the impacts along the value chain of each Business, wherever relevant.

Your Company's 11th Sustainability Report, published during the year detailed the progress made across all dimensions of the 'Triple Bottom Line' for the year 2013-14. Your Company's Sustainability Report in conformance with the new Global Reporting Initiative (GRI) G4 Guidelines was amongst the first in India under "In Accordance - Comprehensive" category with "Materiality Matters" confirmation from GRI and also the first in India that has been third party assured at the highest criteria of "reasonable assurance" as per International Standard on Assurance Engagements (ISAE) 3000. The 12th Sustainability Report, covering the sustainability performance of your Company for the year 2014-15, is being prepared in accordance with the GRI guidelines – G4 and will be available to you shortly.

In addition, the Business Responsibility Report (BRR), as mandated by the Securities & Exchange Board of India (SEBI), was brought out as an annexure to the Report and Accounts 2014, mapping the sustainability performance of your Company against the reporting framework suggested by SEBI. The BRR for the year under review is annexed to this Report and Accounts.

Corporate Social Responsibility (CSR)

Your Company's overarching aspiration to create significant and sustainable societal value, inspired by a vision to sub-serve a larger national purpose and abide by the strong value of trusteeship, is manifest in its CSR initiatives that embrace the most disadvantaged sections of society, especially in rural India, through economic empowerment based on grassroots capacity building. Towards this end, the Company adopted a comprehensive CSR policy in 2014-15 that defines the framework for your Company's Social Investments Programme.

Your Company's Social Investments Programme has identified three important stakeholder groups: (a) Rural communities in the Company's operational areas who seek viable solutions to some of the major challenges that threaten the sustainability of their farming systems; (b) Communities residing in close proximity to our production units who expect help in the creation of the necessary socio-economic infrastructure for the emergence of a healthy, educated and skilled work force and the promotion of entrepreneurship, especially amongst women, to generate additional income streams; and (c) Central and State governments, which encourage Public Private Partnerships to demonstrate scalable and replicable models of development. Your Company's stakeholders are confronted with multiple, but inter-related, issues at the core of which is the challenge of securing sustainable livelihoods. Interventions therefore are appropriately designed to respond to their unique multi-dimensional development challenges in order to accomplish the goal of empowering stakeholder communities to promote sustainable livelihoods.

The footprint of your Company's CSR projects promoted under the Social Investments Programme is spread over 14 states covering 71 districts. The interventions reach out to over 6,70,000 households in more than 10,600 villages.

Social Forestry

Your Company's pioneering initiative of wasteland development through the Social Forestry Programme cumulatively covers 67,536 hectares in 3,720 villages, impacting over 70,000 poor households. This is part of the Social and Farm Forestry initiative that has together greened nearly 200,000 hectares to date and generated nearly 90 million person days of employment for rural households, including poor tribal and marginal farmers. The agro-forestry initiative, that ensures food, fodder and wood security, cumulatively covered about 9,800 hectares during the year and 17,600 hectares till date.

Soil and Moisture Conservation

The coverage of your Company's Soil and Moisture Conservation programme, designed to assist farmers in identified moisture-stressed areas, increased by an additional 51,397 hectares taking the total area covered under the watershed programme to 200,186 hectares. 1,490 water-bodies were built during the year, taking the total number of water harvesting structures to 6,464.

Bio Diversity

In the catchments of your Company's agri-business operations, your Company scaled up bio-diversity conservation in 57 plots covering 504 hectares with the objective of protecting native flora and fauna and providing other eco-system services. Cumulatively, the area under bio-diversity now stands at 3,191 hectares. Reports of some of the bio-diversity conservation initiatives were published in the International Journal of Biodiversity & Endangered Species – Spain 2014 and also featured as a case study in the India Business & Biodiversity Initiative (IBBI) report published by the CII-ITC Centre of Excellence for Sustainable Development and the Ministry of Environment, Forests & Climate Change. Your Company has promoted bio-diversity conservation on 22 hectares in Telangana and Andhra Pradesh. Your Company has also collaborated with the Telangana Government to strengthen and benchmark bio-diversity conservation in the KBR National Park in Hyderabad covering an area of 140 hectares, thereby enabling FSC certification of the said park.

Sustainable Agriculture

Your Company's sustainable agriculture programme aims to introduce advanced knowledge and technology through different packages of farm practices and increase awareness of farmers on optimum use of natural resources in order to increase farm productivity and minimise cost of cultivation. During the year, 521 farmer field schools disseminated advanced agri-practices to over 21,000 farmers through 7,736 demonstration plots covering over 18,000 hectares under different crops.

In pursuit of your Company's long term sustainable objective of increasing soil organic carbon, a total of 3,668 compost units were constructed during the year taking the total number till date to 23,554 units. In addition, the 'Choupal Pradarshan Khet' promoted field demonstrations of seed varieties and production practices for improved yield and quality in soybean, wheat, rice, summer pulses and horticultural crops in more than 1,200 villages covering around 21,000 hectares and more than 60,000 farmers with focus on sustainable farm practices like moisture conservation, promotion of bio-fertilisers, zero-tillage, prophylactic pest management, etc.

Livestock Development

Livestock development remains a key focus area of your Company's CSR initiatives. The programme for genetic improvement of cattle through artificial insemination to produce high-yielding crossbred progenies is implemented through 256 Cattle Development Centres (CDCs) covering over 10,000 villages. These CDCs facilitated 2,24,000 artificial inseminations during the year, taking the total to 15,61,000 artificial inseminations performed till date. Your Company's CSR initiatives aimed at enhancing milk production, increasing dairy farm productivity and ensuring remunerative prices to farmers in multiple locations continued to make good progress. The Dairy Development programme is currently sourcing an average of 32,000 litres per day (lpd) of milk, with a peak of 57,000 lpd, in Munger and Saharanpur from 6,470 farmers. As part of this initiative, an end-to-end mobile enabled farm automation and IT solution for productivity enhancement, real-time management of cattle herds' health, fertility, milk quality, productivity and providing farm management inputs to farmers was piloted during the year and currently covers 1,000 animals.

Women Empowerment

The women's micro-enterprise programme was specifically designed for women from economically weaker sections to provide a range of gainful employment opportunities and support with financial assistance by way of loans and grants. Over 23,000 women have been covered through 2,057 Self-Help Groups (SHG) with total savings of over Rs. 4 crores. A major thrust was given to financial inclusion of women members by opening bank accounts for 1,335 women this year. Cumulatively, over 40,000 women were gainfully employed either through micro-enterprises or assisted with loans to pursue income generating activities.

Education

The Primary Education programme is designed to provide children from weaker sections, access to education with focus on quality and retention. During the year, 36,000 children were covered by the 'Read India Programme' and another 34,000 children were covered by Supplementary Learning Centres, taking the cumulative total of children covered to 4,06,000. A total of 147 government primary schools (including Anganwadis) were provided infrastructure support comprising boundary walls, additional classrooms, sanitation units, furniture and electrical fittings, thus taking the total number of government primary schools covered till date to 1,158.

Skilling & Vocational Training

Given the inadequate availability of skilled manpower and the Government's efforts to promote vocational education and training, your Company's Vocational Training programme played an active role in building and upgrading skills of marginalised youth to better meet the emerging needs of the job market. 13,180 youth were enrolled for training under different courses during the year. Of the total students enrolled, 10,378 (79% of enrolled) completed training and 3,280 (32% of trained) students were provided placement. The students trained included a healthy mix of women and SC/ST candidates.

To cater to the ever growing need for professionally trained human resources in the hospitality industry, your Company continues to work with the Welcomgroup Graduate School of Hotel Administration together with Dr. TMA Pai Foundation. This institution continues to be ranked among the top educational institutions in the sector. Graduates of the institution are today part of several leading hotel chains of the world. In addition, your Company also opened a Culinary Institute at Chhindwara in 2014, where cooking skills are imparted to youth from disadvantaged sections of society.

Leveraging its core competencies in the FMCG sector, your Company launched an employability programme to skill unemployed youth in FMCG sales and distribution across various locations of the country. Candidates who successfully completed the programme were certified by the National Skill Development Corporation and have been gainfully employed in the FMCG sector.

A programme to promote entrepreneurship for self-help groups from economically weaker sections of society was launched in select districts of Odisha. This initiative targeted to equip unemployed rural youth to become entrepreneurs and small businessmen capable of generating independent earnings by selling products on a direct-to-home sale model. This initiative has resulted in generating a sustained supplementary income for economically disadvantaged youth and will be further scaled up in the future.

Health & Sanitation

Your Company invested in impacting public health through multiple routes. To promote a hygienic environment through prevention of open defecation and reduce incidence of water-borne diseases, 3,578 individual household toilets were constructed during the year. With this, a total of 8,254 low-cost sanitary units have been constructed so far in your Company's factory catchment areas. In areas with water quality problems, 19 plants providing safe drinking water to about 28000 rural households have been installed in the state of Andhra Pradesh. 'Swasthya Choupal', your Company's e-Choupal Rural Health initiative was consolidated in 7 districts of Uttar Pradesh and expanded to 3 new districts in Madhya Pradesh with a coverage of over 450 villages.

Solid Waste Management

Your Company's Solid Waste Management programme, christened 'WOW – Wellbeing Out of Waste' inculcates the habit of source segregation and recycling among school children, housewives and general public as well as industries and business enterprises. The WOW movement today extends to Hyderabad, Chennai, Bengaluru, Coimbatore and some towns of Telangana, enjoying the support of over 3 million citizens, 500,000 school children, 350 corporates, more than 1,000 commercial establishments and around 200 industrial plants.

On the occasion of the 3rd anniversary of National Recycling Day, your Company launched a novel pilot programme in 12 selected wards of Bengaluru with the support of the Bruhat Bengaluru Mahanagara Palike (BBMP) and a similar programme in 30 wards of

Coimbatore to create sustainable livelihoods for rag pickers and waste collectors by propagating source segregation at each household and facilitating effective collection mechanisms in collaboration with Municipal corporations.

ITC Sangeet Research Academy

The ITC Sangeet Research Academy (ITC SRA), which was established in 1977, is a true embodiment of your Company's sustained commitment to a priceless national heritage. Your Company's pledge towards ensuring enduring excellence in Classical Music education has helped ITC SRA adhere to the age-old 'Guru-Shishya Parampara' – a model that has otherwise begun fading away owing to lack of patronage. Although methods of music education are now changing with the advent of digitisation, exceptionally gifted students, carefully handpicked across India receive full scholarships to reside and pursue their music education at the Academy's campus. This has helped young talent who have limited access to the newer modes of music education, to train under the tutelage of the country's most distinguished stalwarts who are helping create the next generation of musical masters.

Forging Partnerships with NGOs

The substantial progress made by your Company's Social Investments Programme in contributing to address some of the country's development challenges, has been possible in significant measure, to your Company's partnerships with globally renowned NGOs like BAIF, DB Tech, DSC, FES, MYRADA, Pratham, LabourNet, SEWA, SRIJAN and Outreach, amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilisation skills of NGOs, will continue to provide innovative grassroots solutions to some of India's most challenging problems of development in the years to come.

CSR Expenditure

The annual report on Corporate Social Responsibility activities as required under Sections 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is provided in the Annexure forming part of this Report.

Environment, Health & Safety

Your Company's Environment, Health & Safety (EHS) strategies are directed towards achieving the greenest and safest operations across all your Company's units by optimising natural resource usage and providing a safe and healthy workplace. Systemic and structured efforts continue to be made towards natural resource conservation by continuously improving resource-use efficiencies and enhancing the positive environmental footprint following a life-cycle based approach.

Your Company's focus on inculcating a green and safe culture is supported through the adoption of EHS standards that incorporate best international codes and practices and verifying compliance through regular audits.

Your Company has addressed the critical area of climate change mitigation through several innovative and pioneering initiatives. These include continuous improvement in energy efficiency, enhancing the renewable energy portfolio, integrating green attributes into the built environment, better efficiency in material utilisation, maximising water use efficiencies and rain water harvesting, maximising reuse and recycling of waste and increasing use of post-consumer waste as raw material.

Energy Conservation and Renewable Energy

Your Company is well positioned to benefit from India-specific energy conservation and renewable energy promotion schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India. As a responsible corporate citizen, your Company has made a commitment to reduce dependence on energy from fossil fuels. Substantial progress has been made in enhancing the renewable energy portfolio and during 2014-15 over 43% of your Company's total energy requirements was met from carbon neutral fuels such as biomass, and wind and solar. Your Company has developed a strategic approach and drawn up action plans based on a feasible balance of energy conservation and renewable energy investments to progressively move towards meeting at least 50% of its total energy requirements from renewable sources by 2020.

Water Conservation

With water scarcity increasingly becoming an area of serious concern, your Company continues to focus on integrated water management including water conservation and harvesting initiatives at its units – while also working towards meeting the water security needs of all stakeholders at the local watershed level. These include adopting latest technologies to reduce fresh water intake and increase reuse and recycling practices, best practices to achieve zero effluent discharges, rainwater harvesting, etc. These initiatives, along with your Company's CSR interventions in the area of integrated watershed management, have resulted in the creation of rainwater harvesting potential that is over twice the net water consumption of your Company's operations.

Greenhouse Gases and Carbon Sequestration

During the year, your Company improved its 'disclosure score' in the Climate Disclosure Leadership Index 2014 published under the aegis of the Carbon Disclosure Project from 85% in 2013-14 to 94% in 2014-15, placing it amongst the top 10 Indian organisations who have been so evaluated. The greenhouse gas (GHG) inventory of your Company for the year 2014-15 compiled as per the ISO 14064 standard, has been assured at the highest 'Reasonable Level' by an independent 3rd party assurance provider, a significant achievement considering the scale and spread of your Company's operations. This is also evidence of the importance accorded to GHG management by your Company.

Reaffirming your Company's commitment to the ethos of 'Responsible Luxury', all luxury hotels of your Company are LEED® Platinum certified (certification in progress for ITC Grand Bharat which was opened recently) making it the 'greenest luxury hotel chain' in the world. In order to continually reduce your Company's energy footprint, green features are integrated in all new constructions and are also being incorporated in existing hotels, manufacturing units, warehouses and office complexes during retrofits.

Your Company's Social & Farm Forestry initiatives enable sequestration of over twice the amount of Carbon Dioxide emitted by its operations. Besides mitigating the impact of increasing levels of GHG emissions in the atmosphere, these initiatives help greening degraded wasteland, prevent soil erosion, enhance organic matter content in soil and enable ground water recharge.

Waste Recycling

Your Company has made significant progress in reducing specific waste generation through constant monitoring and improvement of efficiencies in material utilisation and also in achieving almost total recycling of waste generated in operations. In this way, your Company has prevented waste reaching landfills and associated problems such as soil and groundwater contamination and GHG emissions, all of which can impact public health. In the current year, your Company has achieved over 99% waste- recycling, with the Paperboards and Specialty Papers Business, which accounts for 91.2% of the total waste generated in your Company, recycling 99.8% of the total waste generated by its operations. During the year, this Business also recycled around 114,563 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Safety

Your Company's commitment to provide a safe and healthy workplace to all has been reaffirmed by the significant reduction in the number of accidents and several national and international awards and certifications received by various units. Your Company's approach is to institutionalise safety as a value-led concept with focus on inculcating a sense of ownership at all levels and driving behavioural change leading to the creation of a safety culture. In line with this approach, several behavioural based safety initiatives and custom-made risk based training programmes were rolled out at your Company's operating units, resulting in a noticeable improvement in safety performance. Your Company incorporates established engineering standards in the design and project execution phase itself for all investments in the built environment, with a view to ensuring the highest levels of safety besides optimising costs. Environment, Health & Safety audits before commissioning and during the operation of units are carried out to verify compliance with standards. 2014-15 was a zero fatal accident year and there was also a 56% drop in Loss Time Accidents, over the previous year. These statistics cover all categories of employees working on-site at ITC premises, including employees of service providers.

Promoting Thought Leadership in Sustainability

The 'CII–ITC Centre of Excellence for Sustainable Development' (the Centre), established by your Company in 2006 in collaboration with the Confederation of Indian Industry (CII), continues to focus on its endeavours to promote sustainable business practices amongst Indian enterprises. The major highlights during the year include the annual Sustainability Summit, held on 16th & 17th September 2014 in New Delhi, which was inaugurated by Shri Prakash Javadekar, Minister of Environment, Forests and Climate Change (MoEFCC), and chaired by Shri Y C Deveshwar. The Summit was attended by over 300 participants.

On 19th December 2014, the 9th CII-ITC Sustainability Awards were handed over by Shri Prakash Javadekar to the 27 winning companies as India's Most Sustainable.

On the invitation of the MoEFCC, the Centre is hosting the India Business & Biodiversity Initiative (IBBI) with the support of German International Cooperation. Launched on the occasion of International Day for Biological Diversity on 22nd May 2014 in New Delhi, the IBBI serves as a national platform for business and its stakeholders for dialogue, sharing and learning, ultimately leading to mainstreaming sustainable management of biological diversity into businesses. On the sidelines of the 12th meeting of the Conference of the Parties (COP) to the Convention on Biological Diversity (CBD), the IBBI launched the publication "Business and Biodiversity in India: 20 Illustrations" in Pyeongchang, Republic of Korea. The report features initiatives of 20 companies across diverse sectors in biodiversity management.

The Centre has introduced integrated reporting to India by setting up a business network called Lab India with mentorship of International Integrated Reporting Council. The objective of Lab is to build capacities of companies in India on integrated reporting and to represent concerns of Indian business to the International Integrated Reporting Council (IIRC).

The Centre has been building capacities of companies on the new CSR legislation as per the Companies Act, 2013. In 2014, the Centre conducted 7 open workshops in New Delhi, Mumbai, Lucknow, Bhubaneswar, Chennai, Visakhapatnam and Goa. The Centre is also offering services to companies in baseline studies, measurement of human development indicators, and social return on investments.

R&D, QUALITY AND PRODUCT DEVELOPMENT

The ITC Life Sciences & Technology Centre (LSTC) has a mandate to develop unique sources of competitive advantage and build future-readiness by harnessing contemporary advances in several relevant areas of science and technology, and blending the same with classical concepts of product development and leveraging cross-business synergies. This challenging task of driving science-led product innovation has been carefully addressed by appropriately identifying the required set of core competency areas of science. Presently, the LSTC team has evolved with over 350 world-class scientists augmented by world-class experimental and measurement system capabilities. During the year, LSTC's capability was further enhanced with the operationalisation of state-of-the-art facilities for performing experimental research. In addition to the several Centres of Excellence that have been created over past few years, a number of areas centred around these capabilities have secured global quality certifications of the highest order.

The Agrisciences R&D team has continued its efforts in evaluating and introducing several germplasm lines of identified crops including Casuarina and Eucalyptus to increase the genetic and trait diversities in these species, towards developing new varieties with higher yields, better quality and other relevant traits for your Company's businesses. LSTC continues to evaluate and build research collaborations with globally recognised centres of excellence to remain contemporary and fast-track its journey towards demonstrating multiple 'proofs of concept'. These collaborations, covering identified species, are designed in a manner that enables your Company in gaining fundamental insights into several technical aspects of plant breeding and genetics and the influence of agro-climatic conditions on the growth of these species. Such interventions will accelerate LSTC's efforts in creating future generations of these crops with greater genetic and trait diversities leading to significant benefits for your Company's businesses. Further, these outcomes have a strong potential to contribute towards augmenting the nation's ecological capital and biodiversity as well. Several proof of concept studies have been accomplished at the laboratory scale and which are being advanced to large scale field trials in multiple locations.

Recognising the unique construct of your Company in terms of its strong presence in agriculture, Branded Packaged Foods and Personal Care Products Businesses, a convergence of R&D capabilities is being leveraged to deliver future products aimed at nutrition, health and well-being. Advances in biosciences are creating a 'convergence' of these areas and it is likely that several future developments in these businesses and their products are heavily influenced by this trend. In this context, LSTC has created a Biosciences R&D team to design and develop several long-term research platforms evolving multi-generation product concepts and associated claims that are fully backed by scientific evidence for the Branded Packaged Foods and Personal Care Products Businesses. Multiple value propositions have been identified in the area of functional foods, which are being progressed to products of the future with strong scientifically validated claims via clinical trials. Similar advances have been made in the area of personal care products. In addition, LSTC has evolved a strategy in building a new value chain called, 'Nutrition' with a special focus on 'Indianness' and 'health and well-being' founded on the basis of Value Added Agriculture (VAA) and Medicinal and Aromatic Plants. The initial activities related to VAA have already commenced with a focus on soya.

LSTC has a clear vision and a road map for long-term R&D, to ensure an outstanding journey backed by a well-crafted Intellectual Property strategy. With scale, speed, science and sustainability considerations, LSTC is poised to deliver long-term competitive advantage and play a lead role in creating significant business impact for your Company.

Pursuing your Company's relentless commitment to quality, each Business is mandated to continuously innovate on processes and systems to enhance their competitive position. During the year, your Company's Hotels Business leveraged its 'Lean' and 'Six Sigma' programmes to improve business process efficiencies. This will further enhance capability to create superior customer value through a service excellence framework. The Paperboards, Paper & Packaging Businesses continued to pursue 'Total Productive Maintenance' (TPM) programmes in all units, resulting in substantial cost savings and productivity improvements.

All manufacturing units of your Company have ISO quality certification. All manufacturing units of the Branded Packaged Foods Businesses (including contract manufacturing units) and hotels operate in compliance to stringent food safety and quality standards. Almost all Company owned units/hotels and contract manufacturing units of the Branded Packaged Foods Businesses are certified by an accredited 'third party' in accordance with 'Hazard Analysis Critical Control Points' (HACCP) / ISO 22000 standards. Additionally, the quality of all FMCG products of your Company is regularly monitored through 'Product Quality Ratings Systems' (PQRS).

RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

As mentioned in the previous years' Reports of the Directors, your Company had secured from the District Court of New Jersey, USA, a decree for US$ 12.19 million together with interest and costs against Suresh and Devang Chitalia of USA and their companies, and the Chitalias had filed Bankruptcy Petitions before the Bankruptcy Court, Orlando, Florida, which are yet to be determined. Last year, the US Trustee of EST Fibers Inc., USA, a Chitalia group entity, made a small interim distribution of estate funds to your Company.

Though your Company has written off the export dues in foreign exchange from the Chitalias with the approval of the Reserve Bank of India, your Company continues with its recovery efforts by a suit filed in India against some associates of the Chitalias. The suit is in progress.

In the proceedings initiated by the Enforcement Directorate, in respect of some of the show cause memoranda issued by the Directorate, after hearing arguments on behalf of your Company, the appropriate authority has passed orders in favour of your Company, and dropped those memoranda. Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Honourable Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year, your Company's treasury operations continued to focus on deployment of temporary surplus liquidity and management of foreign exchange exposures within a well-defined risk management framework.

The year under review was characterised by falling interest rates on the back of improvement in the domestic macro-economic environment. Easing inflation and improvement on the Fiscal and Current Account deficit front, enabled the Reserve Bank of India to reduce policy rates by a cumulative 50 basis points in Q4 2014-15. However, muted growth in bank deposits and intermittent tightness in banking liquidity brought about spikes in market interest rates.

All investment decisions in deployment of temporary surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. Proactive management of portfolio duration helped improve treasury performance. During the year, investment portfolio mix was continuously rebalanced in line with the evolving interest rate environment. Further, the quantum of investment in Bank Fixed Deposits was increased towards the year end, taking advantage of spikes in market interest rates and in line with expectations of lower interest rates going forward. Your Company's risk management processes ensured that all deployments were made with proper evaluation of underlying risk while remaining focused on capturing market opportunities.

In the foreign exchange market, the US Dollar witnessed unprecedented strength against all major global currencies during the year on the back of strengthening US economic recovery amidst persistent weakness in the other major economies like the Euro Area, Japan and China. Divergence in monetary policy stance between the US and rest of the developed economies coupled with rising geopolitical tensions in Ukraine/Russia and the Middle-East added to US Dollar strength. Against this backdrop, the Indian Rupee remained relatively range bound, with a depreciating bias. In this scenario, your Company adopted an appropriate forex management strategy, which included the use of foreign exchange forward contracts and plain vanilla options, to protect business margins and reduce risks / costs.

As in earlier years, commensurate with the large size of temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including an independent check of 100% of transactions, by your Company's Internal Audit department.

DEPOSITS

Your Company's erstwhile Public Deposit Scheme closed in the year 2000. As at 31st March, 2015, there were no deposits due for repayment except in respect of 2 deposit holders totalling Rs. 20,000 which have been withheld on the directives received from government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company's erstwhile Schemes.

Your Company has not accepted any deposit from the public/members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year.

DIRECTORS

Changes in Directors

Mr. Anthony Ruys [representing Tobacco Manufacturers (India) Limited, a subsidiary of British American Tobacco p.l.c., the ultimate holding company] ceased to be Non-Executive Director of your Company with effect from 24th July, 2014, on completion of his term. Your Directors would like to record their appreciation of the services rendered by Mr. Ruys.

Messrs. Anil Baijal, Arun Duggal, Serajul Haq Khan, Sunil Behari Mathur, Pillappakkam Bahukutumbi Ramanujam and Sahibzada Syed Habib-ur-Rehman and Ms. Meera Shankar were appointed by the Members with effect from 15th September, 2014 as Independent Directors of the Company under Section 149 of the Companies Act, 2013 ('the Act').

Retirement by Rotation

In accordance with the provisions of Section 152 of the Act read with Article 91 of the Articles of Association of the Company, Mr. Kurush Noshir Grant and Mr. Krishnamoorthy Vaidyanath will retire by rotation at the ensuing Annual General Meeting ('AGM') of your Company and being eligible, offer themselves for re-election. The Board of Directors of your Company ('the Board') has recommended their re-election.

Number of Board Meetings

During the year ended 31st March, 2015, seven meetings of the Board were held.

Attributes, Qualifications & Independence of Directors and their Appointment

The Nomination & Compensation Committee of the Board approved the criteria for determining qualifications, positive attributes and independence of Directors in terms of the Act and the Rules thereunder, both in respect of Independent Directors and other Directors as applicable. The Governance Policy of the Company also inter alia requires that Non-Executive Directors, including Independent Directors, be drawn from amongst eminent professionals with experience in business / finance / law / public administration & enterprises. The Board Diversity Policy of the Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The Articles of Association of the Company provide that the strength of the Board shall not be fewer than five nor more than eighteen.

Directors are appointed / re-appointed with the approval of the members for a period of three to five years or a shorter duration, in accordance with retirement guidelines as determined by the Board from time to time. The initial appointment of Executive Directors is normally for a period of three years. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the members or provided under any statute. One-third of the Directors who are liable to retire by rotation, retire every year and are eligible for re-election.

The Independent Directors of your Company have confirmed that they meet the criteria of independence as prescribed under Section 149(6) of the Act and the Listing Agreement with Stock Exchanges.

The Company's Policy relating to remuneration of Directors, Key Managerial Personnel and other employees is provided under the section 'Report on Corporate Governance' in the Report and Accounts.

Board evaluation

The Nomination & Compensation Committee has approved the Policy on Board evaluation, evaluation of Board Committees' functioning and individual Director evaluation. In keeping with ITC's belief that it is the collective effectiveness of the Board that impacts Company performance, the primary evaluation platform is that of collective performance of the Board as a whole. Board performance is assessed against the role and responsibilities of the Board as provided in the Act and the Listing Agreement read with the Company's Governance Policy. The parameters for Board performance evaluation have been derived from the Board's core role of trusteeship to protect and enhance shareholder value as well as fulfil expectations of other stakeholders through strategic supervision of the Company. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by each Committee Chairman with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, in assisting the Board in realising its role of strategic supervision of the functioning of the Company in pursuit of its purpose and goals.

While the Board evaluated its performance against the parameters laid down by the Nomination & Compensation Committee, the evaluation of individual Directors was carried out anonymously in order to ensure objectivity. Reports on functioning of Committees were placed by the respective Committee Chairman before the Board.

Key Managerial Personnel

During the year there was no change in the Key Managerial Personnel of your Company.

AUDIT COMMITTEE & AUDITORS

The composition of the Audit Committee is provided under the section 'Board of Directors and Committees' in the Report and Accounts.

Statutory Auditors

The Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants (DHS), were appointed with your approval at the 103rd AGM to hold such office till the conclusion of the 108th AGM. The Board, in terms of Section 139 of the Act, on the recommendation of the Audit Committee, has recommended for the ratification of the Members the appointment of DHS from the conclusion of the ensuing AGM till the conclusion of the 105th AGM. The Board, in terms of Section 142 of the Act, on the recommendation of the Audit Committee, has also recommended for the approval of the Members the remuneration of DHS for the financial year 2015-16. Appropriate resolution in respect of the above is appearing in the Notice convening the 104th AGM of the Company.

Cost Auditors

Your Board, on the recommendation of the Audit Committee, appointed -

(i) Messrs. Shome & Banerjee, Cost Accountants, for audit of cost records maintained by the Company

– in respect of 'Soyabean Oil' and 'Face wash' for the financial year 2014-15, and

– in respect of all applicable products of the Company, other than 'Paper and Paperboard' for the financial year 2015-16.

(ii) Mr. P. Raju Iyer, Cost Accountant, for audit of cost records maintained by the Company in respect of 'Paper and Paperboard' for the financial year 2015-16.

In terms of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate resolution seeking your ratification of the remuneration of Messrs. Shome & Banerjee and Mr. P. Raju Iyer is appearing in the Notice convening the 104th AGM of the Company.

Secretarial Auditors

Your Board, during the year, appointed Messrs. S. M. Gupta & Co., Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2015. The Report of Messrs. S. M. Gupta & Co. in terms of Section 204 of the Act is provided in the Annexure forming part of this Report.

CHANGES IN SHARE CAPITAL

During the year the following changes were effected in the Share Capital of your Company:- a) Issue of Shares under the ITC Employee Stock Option Schemes:

6,22,48,830 Ordinary Shares of Rs. 1/- each, fully paid-up, were issued and allotted during the year upon exercise of 62,24,883 Options under your Company's Employee Stock Option Schemes.

b) Issue of Shares upon Demerger of the Non- Engineering Business of Wimco Limited into the Company:

87,761 Ordinary Shares of Rs. 1/- each, fully paid- up, were issued and allotted on 29th August, 2014

pursuant to the Scheme of Arrangement for demerger of the Non-Engineering Business of Wimco into the Company.

Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2015, stands increased to Rs. 801,55,19,541/- divided into 801,55,19,541 Ordinary Shares of Rs. 1/- each.

The Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

EMPLOYEE STOCK OPTION SCHEMES

Your Company's Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Company's Employee Stock Option Schemes have been implemented in accordance with the erstwhile SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 as replaced by the SEBI (Share Based Employee Benefits) Regulations, 2014 and the resolutions passed by the Members in this regard.

INVESTOR SERVICE CENTRE

The Investor Service Centre (ISC) of your Company, backed by state-of-the-art infrastructure and experienced team of professionals, caters to the increasing expectations of investors by keeping its services contemporary and efficient.

ISC achieved the highest 'Level 5' rating for the sixth consecutive year, accorded by Messrs. Det Norske Veritas – a testimony to the excellence achieved by ISC in providing quality investor services.

RELATED PARTY TRANSACTIONS

All contracts or arrangements with related parties, entered into or modified during the financial year, were on an arm's length basis and in the ordinary course of business. All such contracts or arrangements have been approved by the Audit Committee. No material contracts or arrangements with related parties were entered into during the year under review. Accordingly, no transactions are being reported in Form No. AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014.

Your Company's Policy on Related Party Transactions, as adopted by your Board, can be accessed on the corporate website at http://www.itcportal.com/about- itc/policies/policy-on-rpt.aspx.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134 of the Companies Act, 2013, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d) prepared the Annual Accounts on a going concern basis;

e) laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and were operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company's Board of Directors is responsible for the preparation of the consolidated financial statements of your Company, its Subsidiaries, Associates and Joint Venture entities ('the Group'), in terms of the requirements of the Companies Act, 2013 and in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

The respective Board of Directors of the companies included in the Group and of its associates and joint venture entities are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of your Company, as aforestated.

OTHER INFORMATION

Compliance with Clause 49 of the Listing Agreement - Corporate Governance

The certificate of the Auditors, Messrs. Deloitte Haskins & Sells, confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

Compliance with requirements relating to downstream investments

Your Company's Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Company and its subsidiaries are in compliance with the requirements relating to downstream investment as laid down in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2013 and other applicable FEMA Regulations.

Going concern status

There is no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of the Company or its future operations.

Extracts of Annual Return

The information required under Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, is annexed.

Particulars of loans, guarantees or investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in Notes 11, 12, 13, 17 and 31 (iv) (a) (ii) to the Financial Statements.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

Employees

The total number of employees as on 31st March, 2015 stood at 25787.

There were 143 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 60 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 5 lakhs per month or more during the financial year ended 31st March, 2015. The information required under Section 197(12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'will' and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Your Company's Board and employees are inspired by the Vision of sustaining ITC's position as one of India's most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. The vision of enlarging your Company's contribution to the Indian economy is inspired by its 'Let's Put India First' credo as well as the core values of Trusteeship, Transparency, Empowerment, Accountability and Ethical Citizenship, which are the cornerstones of ITC's Corporate Governance philosophy.

The Directors and employees look forward to the future with confidence, powered by your Company's world- class brands, spirit of innovation, focus on game changing R&D, strong rural linkages that have earned the trust of millions of farmers, unique strengths in trade marketing & distribution, world-class manufacturing, superior service delivery and its track record as a global exemplar in sustainable business practices.

On behalf of the Board

22nd May, 2015 Y. C. DEVESHWAR Chairman

Kolkata

India K. N. GRANT Director

---

Mar 31, 2014

The Directors submit their Report for the financial year ended 31st March, 2014.

FINANCIAL PERFORMANCE

Your Company continued to deliver strong financial performance with healthy growth in revenues and high quality earnings. This performance is particularly commendable when viewed against the backdrop of the extremely challenging business context in which it was achieved, namely, a sluggish macro-economic environment which saw GDP growth remaining below 5% for the second year in succession, high inflation and a marked deceleration in the rate of growth of Private Final Consumption Expenditure; steep increase in taxes/duties on Cigarettes for two years in a row; weak demand conditions in the FMCG industry; gestation costs relating to the new FMCG businesses; sharp escalation in input costs in the Paperboards, Paper & Packaging Businesses and a weak demand & pricing environment in the Hotels business.

Gross Revenue for the year grew by 11.7% to Rs. 46712.62 crores. Net Revenue at Rs. 32882.56 crores grew by 11.1% primarily driven by a 16.0% growth in the non-cigarette FMCG segment, 14.7% growth in Paperboards, Paper and Packaging segment and 10.6% growth in the Cigarettes segment. Profit Before Tax registered a growth of 18.5% to Rs. 12659.11 crores while Net Profit at Rs. 8785.21 crores increased by 18.4%. Earnings Per Share for the year stood at Rs. 11.09 (previous year Rs. 9.45). Cash flows from Operations aggregated Rs. 10759.50 crores compared to Rs. 9596.24 crores in the previous year.

Your Company is one of India''s most admired and valuable corporations with a current market capitalisation of over Rs. 270000 crores and has consistently featured amongst the top 10 private sector companies in terms of market capitalisation and profits. Over the last 18 years, your Company''s Net Revenue and Profit After Tax recorded an impressive compound annual growth rate of 15.3% and 21.6% respectively. During this period, Return on Capital Employed improved substantially from 28.4% to 45.8% while Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compound annual rate of 25.9%, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital.

Your Directors are pleased to recommend a Dividend of Rs. 6.00 per share (previous year Rs. 5.25 per share) for the year ended 31st March, 2014. Total cash outflow in this regard will be Rs. 5582.90 crores (previous year Rs. 4853.49 crores) including Dividend Distribution Tax of Rs. 810.99 crores (previous year Rs. 705.03 crores).

Your Board further recommends a transfer to General Reserve of Rs. 880.00 crores (previous year Rs. 750.00 crores). Consequently, the Surplus in Statement of Profit and Loss as at 31st March, 2014 would stand at Rs. 6139.09 crores (previous year Rs. 3788.10 crores).

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The ITC Group''s contribution to foreign exchange earnings over the last ten years amounted to nearly US$ 6.0 billion, of which agri exports constituted 57%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Company''s contribution to the rural economy.

During the financial year 2013-14, your Company and its subsidiaries earned Rs. 5068 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 4290 crores, mainly on account of exports of agri-commodities. Your Company''s expenditure in foreign currency amounted to Rs. 2073 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1343 crores and import of capital goods at Rs. 730 crores. Details of foreign exchange earnings and outgo are provided in Note 31 to the Financial Statements.

PROFITS, DIVIDENDS AND SURPLUS

(Rs. in Crores)

PROFITS 2014 2013

a) Profit Before Tax 12659.11 10684.18

b) Tax Expense

- Current Tax 3791.13 2934.79

- Deferred Tax 82.77 331.00

c) Profit for the year 8785.21 7418.39

SURPLUS IN STATEMENT OF PROFIT AND LOSS

a) At the beginning of the year 3788.10 1972.59

b) Add : Profit for the year 8785.21 7418.39

c) Less:

- Transfer to General Reserve 880.00 750.00

- Proposed Dividend 4771.91 4148.46 [Rs. 6.00 (2013 - Rs. 5.25) per share]

- Income Tax on Proposed Dividend

- Current Year 810.99 705.03

- Earlier year''s provision no (28.68) (0.61) longer required

d) At the end of the year 6139.09 3788.10

TAXATION

As mentioned in the Report of the Directors of earlier years, your Company had obtained Stay Orders from the Honourable Calcutta High Court against re-opening of past assessments for the period 1st July, 1983 to 30th June, 1986. The Honourable Calcutta High Court has now held in your Company''s favour by allowing the concerned Writ Petitions and the impugned notices & the proceedings thereunder have been quashed.

Also, as stated in the Report of the Directors of earlier years, in respect of similar Income Tax notices for re-opening the past assessments for the period 1st April, 1990 to 31st March, 1993, the Honourable Calcutta High Court had admitted the Writ Petitions and ordered that no final assessment orders be passed without the leave of the Court. This status remains unchanged.

PUBLIC DEPOSITS

Your Company''s Public Deposit Scheme closed in the year 2000. As at 31st March, 2014, there were no deposits due for repayment except in respect of 2 deposit holders totalling Rs. 20,000 which have been withheld on the directives received from government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Company''s erstwhile Schemes.

INVESTOR SERVICE CENTRE

The Investor Service Centre (ISC) of your Company maintains its position as an exemplar in investor servicing.

During the year, SEBI granted your Company a Certificate of Permanent Registration to act as Category II Share Transfer Agent for providing in-house share registration and related services.

The ISO 9001:2008 Quality Management System Certification for investor servicing by ISC was renewed during the year by Messrs. Det Norske Veritas (DNV) for a further period of three years. ISC achieved the highest ''Level 5'' rating for the fifth consecutive year – a testimony to the excellence achieved by ISC in providing quality investor services.

During the year, a Shareholder Satisfaction Survey was conducted by your Company. An overwhelming number of Members who participated in the Survey responded that they were extremely satisfied with the services provided by ISC.

DIRECTORS

Mr. Hugo Geoffrey Powell [representing Tobacco Manufacturers (India) Limited, a subsidiary of British American Tobacco p.l.c., the ultimate holding company], Dr. Basudeb Sen, Mr. Balakrishnan Vijayaraghavan and Mr. Dinesh Kumar Mehrotra (representing the Life Insurance Corporation of India) ceased to be Non-Executive Directors of your Company with effect from 30th July, 2013, 27th August, 2013, 27th August, 2013 and 27th October, 2013, respectively, on completion of their terms. Mr. Shilabhadra Banerjee (representing the Specified Undertaking of the Unit Trust of India) resigned as Non-Executive Director of your Company with effect from 26th March, 2014. Your Directors would like to record their appreciation of the services rendered by Mr. Powell, Dr. Sen, Mr. Vijayaraghavan, Mr. Mehrotra and Mr. Banerjee.

Mr. Nakul Anand and Mr. Pradeep Vasant Dhobale, Wholetime Directors of your Company since 3rd January, 2011, completed their terms on 2nd January, 2014. Mr. Anand and Mr. Dhobale, on the recommendations of the erstwhile Nominations Committee and the Compensation Committee, were appointed by the Board of Directors of your Company (the ''Board'') as Additional Directors with effect from 3rd January, 2014, and subject to the approval of the Members, also as Wholetime Directors, liable to retire by rotation, for a period of five years from 3rd January, 2014.

Mr. Robert Earl Lerwill [representing Tobacco Manufacturers (India) Limited, a subsidiary of British American Tobacco p.l.c., the ultimate holding company], on the recommendation of the erstwhile Nominations Committee, was appointed by the Board as Additional Non-Executive Director of your Company with effect from 18th November, 2013. Mr. Suryakant Balkrishna Mainak (representing the Life Insurance Corporation of India), on the recommendation of the Nomination & Compensation Committee, was appointed by the Board as Additional Non-Executive Director of your Company with effect from 25th April, 2014. Mr. Shilabhadra Banerjee, on the recommendation of the Nomination & Compensation Committee, was also appointed by the Board as Additional Non-Executive Director of your Company with effect from 24th July, 2014. By virtue of the provisions of Article 96 of the Articles of Association of your Company and Section 161 of the Companies Act, 2013, Messrs. Lerwill, Mainak and Banerjee will vacate office at the ensuing Annual General Meeting (''AGM'') of your Company.

Your Board at its meeting held on 23rd May, 2014, on the recommendation of the Nomination & Compensation Committee, has recommended for the approval of the Members the appointment of Mr. Banerjee as an Independent Director in terms of Section 149 of the Companies Act, 2013, with effect from the date of the ensuing AGM of your Company. Your Board at the said meeting, on the recommendation of the Nomination & Compensation Committee also recommended for the approval of the Members the appointment of Mr. Lerwill and Mr. Mainak as Non-Executive Directors of the Company, liable to retire by rotation, with effect from the date of the ensuing AGM of your Company.

Notices under Section 160 of the Companies Act, 2013, have been received for the appointment of Messrs. Anand, Dhobale, Banerjee, Lerwill and Mainak who have filed their consents to act as Directors of the Company, if appointed.

Appropriate resolutions seeking your approval to the aforesaid appointments are appearing in the Notice convening the 103rd AGM of the Company.

In accordance with the provisions of Article 91 of the Articles of Association of the Company, Mr. Krishnamoorthy Vaidyanath will retire by rotation at the ensuing AGM of your Company and being eligible, offers himself for re-election. The Board has recommended his re-election.

Messrs. Anil Baijal, Serajul Haq Khan, Sunil Behari Mathur, Pillappakkam Bahukutumbi Ramanujam, Sahibzada Syed Habib-ur-Rehman and Ms. Meera Shankar, by virtue of being Independent Directors of your Company in terms of the provisions of the Companies Act, 2013, will not be liable to retire by rotation for the residual period of their respective terms of appointment approved by the Members of the Company.

AUDITORS

Statutory Auditors

Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, retire at the ensuing AGM and, being eligible, have offered themselves for re-appointment. The Board, on the recommendation of the Audit Committee, has recommended the re-appointment of Messrs. Deloitte Haskins & Sells for a period of five years in accordance with Section 139 of the Companies Act, 2013. Appropriate resolution seeking your approval to the said re-appointment is appearing in the Notice convening the 103rd AGM of the Company.

Cost Auditors

Your Company had appointed (i) Messrs. Shome & Banerjee, Cost Accountants, Kolkata, for audit of cost records in respect of ''Paper'' products other than the cost records maintained by the Paperboards and Specialty Papers Business. They were also appointed as the Cost Auditors in respect of Plastics & Polymers, Apparel, Edible Oil Seeds & Oil and Plantation products; (ii) Messrs. S. Mahadevan & Co., Cost Accountants, Chennai, as Cost Auditor for audit of cost records maintained in respect of Packaged Food Products; and (iii) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost records maintained by the Paperboards and Specialty Papers business for the financial year ended 31st March, 2013. The Cost Audit Report was filed by the Cost Auditor on 20th September, 2013 within the due date of 27th September, 2013.

In respect of the financial year ended 31st March, 2014, your Company has appointed (i) Messrs. Shome & Banerjee, Cost Accountants, Kolkata, for audit of cost records in respect of ''Paper'' products other than the cost records maintained by the Paperboards and Specialty Papers business. They are also appointed as the Cost Auditors in respect of Plastics & Polymers, Apparel, Edible Oil Seeds & Oil, Plantation products and Personal Care products including Soap; (ii) Messrs. S. Mahadevan & Co., Cost Accountants, Chennai, as Cost Auditor for audit of cost records maintained in respect of Packaged Food Products; and (iii) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost records maintained by the Paperboards and Specialty Papers business and for all other additional applicable product groups. The due date for filing the Cost Audit Reports is 27th September, 2014.

EMPLOYEE STOCK OPTION SCHEME

Under your Company''s Employee Stock Option Schemes, 5,13,49,840 Ordinary Shares of Rs. 1/- each, were issued and allotted during the year upon exercise of 51,34,984 Options; such shares rank pari passu with the existing Ordinary Shares of your Company. Consequently, the Issued and Subscribed Share Capital of your Company as at 31st March, 2014 stands increased to Rs. 795,31,82,950/- divided into 795,31,82,950 Ordinary Shares of Rs. 1/- each.

Details of the Options granted up to 31st March, 2014 and other disclosures as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the ''SEBI Guidelines'') are set out in the Annexure to this Report.

Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Company''s Employee Stock Option Schemes have been implemented in accordance with the SEBI Guidelines and the resolutions passed by the Members in this regard.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

d) prepared the Annual Accounts on a going concern basis.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, ITC Group

Accounts form part of this Report & Accounts. These Group Accounts also incorporate the Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures as notified under the Companies (Accounting Standards) Rules, 2006. These Group accounts have been prepared on the basis of audited financial statements received from Subsidiary, Associate and Joint Venture Companies, as approved by their respective Boards.

OTHER INFORMATION

The total number of employees as on 31st March, 2014 stood at 25917.

The certificate of the Auditors, Messrs. Deloitte Haskins & Sells, confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

Your Company''s Auditors, Messrs. Deloitte Haskins & Sells, have certified that the Company and its subsidiaries are in compliance with the requirements relating to downstream investment as laid down in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2013 and other applicable FEMA Regulations.

Particulars as required under Section 217(1)(e) of the Companies Act, 1956 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

There were 135 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 60 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 5 lakhs per month or more during the financial year ended 31st March, 2014. The information required under Section 217(2A) of the Companies Act, 1956 and the Rules thereunder, in respect of the aforesaid employees, is provided in the Annexure forming part of this Report.

CONCLUSION

Your Company is today, the leading FMCG marketer in India, a trailblazer in ''green hoteliering'' and the second largest Hotel chain in India, the clear market leader in the Indian Paperboard and Packaging industry, the country''s foremost Agri business player and a global exemplar in sustainable business practices. Your Company''s wholly-owned subsidiary, ITC Infotech India Limited, is one of India''s fast-growing Information Technology companies in the mid-tier segment.

Your Company''s Board and employees are inspired by the Vision of sustaining ITC''s position as one of India''s most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. The vision of enlarging your Company''s contribution to the Indian economy is manifest in the creation of unique business models that foster international competitiveness not only of its businesses but also the entire value chain of which they are a part.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

On behalf of the Board

23rd May, 2014 Y. C. DEVESHWAR Chairman New Delhi India P. V. DHOBALE Director

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Mar 31, 2013

To The Members

FINANCIAL PERFORMANCE

The Company posted another year of strong performance across all financial parameters, leveraging its corporate strategy of creating multiple drivers of growth. This performance is even more encouraging when viewed against the backdrop of the extremely challenging business context in which it was achieved, namely, the continued economic slowdown, steep increase in taxes /duties on Cigarettes, gestation costs relating to the new FMCG businesses and recent investments in the Paperboards, Paper and Packaging and Hotels businesses.

Gross Revenue for the year grew by 19.9% to Rs. 41809.82 crores. Net Revenue at Rs. 29605.58 crores grew by 19.4% primarily driven by a 26.4% growth in the non-cigarette FMCG segment, 26.4% growth in Agri business segment and 13.4% growth in the Cigarettes segment. Profit before tax increased by 20.1% to Rs. 10684.18 crores while Net Profits at Rs. 7418.39 crores registered a growth of 20.4%. Earnings Per Share for the year stands at Rs. 9.45 (previous year Rs. 7.93). Cash flows from Operations aggregated Rs. 9596.24 crores compared to Rs. 8333.56 crores in the previous year.

Continuing with your Companys chosen strategy of creating multiple drivers of growth, your Company is today, the leading FMCG marketer in India, a trailblazer in green hoteliering and the second largest Hotel chain in India, the clear market leader in the Indian Paperboard and Packaging industry and the countrys foremost Agri business player. Your Companys wholly-owned subsidiary, ITC Infotech India Limited, is one of Indias fast growing Information Technology companies in the mid-tier segment. Your Company is one of Indias most admired and valuable corporations with a current market capitalisation of over Rs. 260000 crores and has consistently featured amongst the top 10 private sector companies in terms of market capitalisation and profits.

Additionally, over the last 17 years, your Companys Net Revenue and Net Profit recorded an impressive compound growth of 15.6% and 21.8% per annum respectively. During this period, Return on Capital Employed improved substantially from 28.4% to 45.7% while Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compound annual growth rate of over 26%, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital.

Such an impressive performance track record, delivered consistently over a long period of time, won global recognition during the year with the Harvard Business Review ranking your Companys Chairman Mr. Y.C.Deveshwar - under whose stewardship this was achieved - as the 7th best performing CEO in the world.

Your Directors are pleased to recommend a Dividend of Rs. 5.25 per share (previous year Rs. 4.50 per share) for the year ended 31st March, 2013. Total cash outflow in this regard will be Rs. 4853.49 crores (previous year Rs. 4089.04 crores) including Dividend Distribution Tax of Rs. 705.03 crores (previous year Rs. 570.75 crores).

Your Board further recommends a transfer to General Reserve of Rs. 750.00 crores (previous year Rs. 650.00 crores). Consequently, your Board recommends leaving a surplus in Statement of Profit and Loss of Rs. 3788.10 crores (previous year Rs. 1972.59 crores).

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The ITC groups contribution to foreign exchange earnings over the last ten years amounted to nearly US$ 5.4 billion, of which agri exports constituted 56%. Earnings from agri exports, which effectively link small farmers with international markets, are an indicator of your Companys contribution to the rural economy.

During the financial year 2012-13, your Company and its subsidiaries earned Rs. 4388 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 3807 crores, mainly on account of exports of agri-commodities. Your Companys expenditure in foreign currency amounted to Rs. 1966 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1345 crores and import of capital goods at Rs. 621 crores. Details of foreign exchange earnings and outgo are provided in Note 31 to the Financial Statements.

PROFITS, DIVIDENDS AND SURPLUS

(Rs. in Crores)

PROFITS 2013 2012

a) Profit Before Tax 10684.18 8897.53

b) Tax Expense

- Current Tax 2934.79 2664.29

- Deferred Tax 331.00 70.87

c) Profit for the year 7418.39 6162.37

SURPLUS IN STATEMENT OF PROFIT AND LOSS

a) At the beginning of the year 1972.59 548.67

b) Add : Profit for the year 7418.39 6162.37

c) Less:

-Transfer to General Reserve 750.00 650.00

- Proposed Dividend for the financial year

- Ordinary Dividend of Rs. 5.25 per ordinary share of Rs. 1/- each (previous year Rs. 4.50 per share) 4148.46 3518.29

- Income Tax on Proposed Dividends

- Current Year 705.03 570.75

- Earlier years provision no (0.61) (0.59) longer required

d) At the end of the year 3788.10 1972.59

BUSINESS SEGMENTS A. FAST MOVING CONSUMER GOODS FMCG - Cigarettes

Discriminatory and punitive taxation coupled with a growing incidence of smuggling and illegal manufacture are the biggest challenges confronted by the domestic cigarette industry. These challenges were further compounded during the year by the steep increase of 22% in cigarette Excise Duty rates announced in the Union Budget 2012 and the arbitrary increases in Value Added Tax (VAT) on cigarettes by some States. Such increases not only undermine the legal domestic cigarette industry and sub-optimise revenue potential from this sector but also fail to achieve the objective of tobacco control in the country.

The pattern of tobacco consumption in India is unique and is dominated by non-cigarette products which are not only cheaper but also revenue inefficient. With over 17% of the world population, India has a miniscule share of only 1.8% of global cigarette consumption but accounts for about 90% of the global consumption of smokeless tobacco. According to the Global Adult Tobacco Survey, 2010 conducted by Ministry of Health and Family Welfare, Government of India, while 34.6% of all adults in India use tobacco in some form, only 5.7% of the adult population consume cigarettes. It is also pertinent to note that while cigarettes account for less than 15% of the overall tobacco consumption (by weight) in the country, they contribute about 75% of the total tax revenue from the tobacco sector accruing to the exchequer. In contrast, other forms of tobacco are lightly taxed in India, and in some cases are even tax exempt, leading to a high degree of potential tax loss.

According to various independent reports, there is a high degree of dual consumption with an estimated 60% of cigarette consumers in India also consuming other forms of tobacco. The high incidence of taxation on cigarettes coupled with a large differential in Excise Duty rates between cigarettes and other tobacco products has rendered the demand for cigarettes highly price elastic and are driving consumers to shift to cheaper and revenue-inefficient forms of tobacco leading to sub-optimal revenue collections. The fact that cigarette consumption is price elastic, while consumption of tobacco per se is not, is borne out by the fact that the total tobacco consumption in the country increased from 406 million kg in 1981-82 to 475 million kg in 2010-11 even as the tobacco consumption in the form of cigarettes declined from 86 million kg to 72 million kg during the same period. Thus, while overall tobacco consumption is increasing in India, the share of cigarettes in overall tobacco consumption has declined from 21% to 15%.

In fact, Indias annual per capita consumption of cigarettes is amongst the lowest in the world.

The requirement therefore is an India-centric tax and policy framework for tobacco that cognises for the unique consumption pattern in the country.

A cross-country study of cigarette prices and affordability based on evidence from the Global Adult Tobacco Survey, and published in Tobacco Control (British Medical Journal), found that the price of cigarettes was the highest in India relative to its income (in terms of Purchasing Power Parity).

Interestingly, the Study also established the fact that bidis in India were extremely affordable with a large price differential of more than 8 times as compared to cigarettes on account of the high levels of taxation on cigarettes. At 2.25% of per capita GDP, cigarette taxes (per 1000 cigarettes in most popular price category) in India are the highest in the world. In comparison, tax incidence on cigarettes (per 1000 cigarettes in most popular price category) as a percentage of per capita GDP in other countries such as Japan (0.37%), Germany (0.62%), China (0.81%), Pakistan (0.85%), Thailand (1.20%) is much lower. Such high taxes make cigarettes unaffordable to a large number of consumers.

The policy of high taxation narrowly focused on cigarettes has also led to the rapid growth of the illegal cigarettes segment. This segment has grown exponentially from 11 billion sticks in 2004 to 22 billion sticks in 2012, of which, 2 billion sticks have been added in the last one year alone. The illegal segment now accounts for 18% of cigarette trade and India is now the 5th largest market in the world for illegal cigarettes comprising smuggled foreign as well as domestic duty-evaded cigarettes. Most of these illegal regular sized filter cigarettes are offered to consumers at a convenient and low price of Rs. 1 per stick. Such low consumer prices are feasible only if taxes are evaded, as the Excise Duty component alone on a regular size filter cigarette is significantly higher than the price point.

Increasing volumes of smuggled foreign cigarettes also result in the decline in demand for Indian tobaccos since these cigarettes do not use any tobacco grown by Indian farmers. On the other hand, illegal cigarettes produced in India, use tobacco of dubious and inferior quality. Consequently, the proliferation of duty-evaded cigarettes leads to a drop in demand for high quality Indian tobaccos thereby adversely impacting the incomes of farmers engaged in the cultivation of tobacco in the country.

In addition, various media reports have highlighted the link between cigarette smuggling and organised criminal syndicates as well as terrorist organisations, which utilise the funds for anti-social and unlawful activities. If not reined in quickly, illegal cigarette trade has the potential of destroying the countrys social fabric.

The introduction of a new segment of filter cigarettes of length not exceeding 65 mm announced in the Union Budget 2012, was a positive step towards arresting the growth of illegal cigarette trade. The industry has responded swiftly making significant investments and launched several offerings in the new segment. While initial response from the market has been encouraging, the high central Excise Duty rate of Rs. 689 per thousand cigarettes applicable to this segment coupled with a steep increase in the rate and incidence of VAT, have made it difficult for the legitimate industry to fully counter the menace of illegal cigarettes.

An appropriate policy framework will enable the domestic legal cigarette industry to offer viable products at competitive price points to consumers. It is a well-established principle of fiscal policy that moderate taxes enable widening of the tax base and higher compliance leading to enhanced buoyancy in tax collection. Your Company along with other stakeholders and industry bodies will continue to engage with relevant authorities to ensure the implementation of a pragmatic and equitable tax policy for the tobacco industry.

The imposition of discriminatory and punitive VAT rates by some States provides an attractive tax arbitrage opportunity resulting in illegal inter-State diversion of stocks by criminal elements thus depriving the State Governments of their legitimate revenue share. Punitive tax rates on cigarettes have proved detrimental to revenue collection and have led to multi-fold increase in illegal trade of cigarettes without any visible decrease in overall tobacco consumption.

Till the introduction of VAT in 2007, cigarettes were subject to single point taxation by the Central Government. As per the provisions of Additional Excise Duty (Goods of Special Importance) Act, 1957, apart from Basic Excise Duty, tobacco products were subject to an Additional Excise Duty (AED) in lieu of State level taxation. The proceeds from this component were exclusively distributed among States.

For a revenue sensitive product like cigarettes, a revenue efficient single point taxation system would provide the highest levels of certainty in tax collection. In addition, it would help in removing inter-State trade distortions and barriers and is aligned to the principles of the proposed National Competition Policy which seeks to create a single unified national market. Several expert committees such as the Taxation Reform Committee headed by Dr. Raja Chelliah and Indirect Tax Reform Committee headed by Dr. Vijay Kelkar have recommended the single point taxation model for cigarettes.

If State level taxation of cigarettes needs to continue, it would be appropriate to implement and adhere to the original principle enunciated by the Empowered Committee of State Finance Ministers on VAT where all goods (other than goods that were exempt or subjected to concessional rate) were to be taxed at a common Revenue Neutral Rate. Going forward, the implementation of the proposed Goods and Service Tax (GST) should ensure that revenue sensitive goods like cigarettes are subjected to uniform standard rate of tax applicable to general category of goods. The combined incidence of Excise Duty and GST should be revenue neutral i.e. maintained at current levels.

Despite such a challenging business scenario, your Company has successfully enhanced its market standing through robust strategies and excellence in execution. Your Company will continue to invest in development of products that are best-in-class and offer superior and differentiated value propositions to consumers.

As part of its efforts to continuously ensure product integrity and consistently deliver superior quality, your Company has deployed advanced tools like Six Sigma and template based quality predictor systems. Modernisation of the factory in Kolkata is also at an advanced stage and is expected to be completed during 2013-14.

With the long-term objective of enhancing skill availability, your Company has established an in-house technical training centre in collaboration with experts in the field of technical education. The first batch of trainees has commenced training at the centre during the year.

This intervention is expected to create a ready pool of technical talent for your Companys operations in the years to come.

In line with your Companys pursuit of proactive employee relations management, Long Term Agreements were successfully concluded at the Bengaluru and Kolkata factories during the year. Systemic improvements were made in the areas such as grievance resolution and better work practices were introduced in the factories to ensure harmonious and efficient operations.

Your Companys relentless focus on Safety, Health and Sustainability in its operations led to several recognitions during the year. Your Companys Bengaluru, Saharanpur, Kolkata and Ranjangaon factories have received the British Safety Councils Sword of Honour award.

The Munger factory received the Shreshta Suraksha Puraskar from the National Safety Council of India, Mumbai. The Bengaluru factory was conferred the award for Industrial Water Efficiency at the prestigious Federation of Indian Chambers of Commerce and Industry (FICCI) Water Awards. The Munger factory also received the Energy Efficient Unit award for excellence in energy management from the Confederation of Indian Industry (CII).

Your Company is committed to the socio-economic upliftment of the farming community through various Social Investments / Corporate Social Responsibility programmes primarily in the economic vicinity of its operations towards making a meaningful contribution to sustainable and inclusive growth. Fragmented land holding, poor infrastructure, restricted access to scientific knowledge and endemic inefficiencies of the market have engulfed the farmers in a vicious cycle of low risk taking ability, low productivity and low margins. To address some of these challenges confronted by the farming community, your Company has been involved in the creation of on and off-farm sustainable livelihood opportunities which empower stakeholder communities to conserve and manage their resources. A recent initiative in this direction has been the dairy development programme in Munger, Bihar. This initiative focuses on enhancing milk production in the area, increasing productivity by adopting scientific techniques and ensuring remunerative prices to farmers by creating marketing opportunities for milk and milk products. A total of 87 Milk Producer Groups (MPGs) with over 2,800 members were involved in the initiative during the year. The dairy development programme also delivers a comprehensive package of extension services such as veterinary care, breeding, supply of quality cattle feed and feed supplement, fodder propagation and training to farmers.

The pilot has been well received by the community in Munger. In order to scale-up the Dairy initiative, your Company is in the process of setting up a state-of-the- art Milk Processing Plant at Munger with a capacity to handle upto 2 lakh litres of milk per day.

With steep Excise Duty hikes, discriminatory VAT taxes by various States, rising illegal trade and heightened competitive intensity, the year ahead will indeed be challenging. To serve the interests of all stakeholders, your Company, will continue to engage with policy makers for a balanced regulatory and fiscal framework for tobacco, equitable and harmonious VAT rates across States and implementation of a uniform GST rate.

Your Company remains confident that despite the severe pressures, its robust product portfolio, world-class quality, innovation in processes and investments in cutting-edge technology and superior execution of competitive strategies will enable it to sustain and reinforce its market standing in the years to come.

FMCG - Others

The size of the Indian FMCG industry is estimated at around Rs. 250000 crores representing nearly 2.5% of the countrys GDP. The industry has tripled in size over the last 10 years and has grown at approximately 17% CAGR in the last 5 years driven by rising income levels, increasing urbanisation, strong rural demand and favourable demographic trends. These growth drivers, coupled with the low levels of penetration and per capita usage in India, are expected to result in robust industry growth in excess of 15% per annum over the medium-term.

Your Company continues to rapidly scale up its new FMCG businesses leveraging its institutional strengths viz. deep consumer insight, proven brand building capability, a deep & wide distribution network, strong rural & agri-sourcing linkages, paper and packaging expertise and cuisine knowledge.

The new FMCG businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches have grown at an impressive pace over the past several years, crossing Rs. 7000 crores mark during the year. Your Companys new FMCG businesses have been rated to be the fastest growing among top consumer goods companies operating in India as per a recent Nielsen report.

Within a relatively short span of time, your Company has established several vibrant consumer brands such as Aashirvaad, Sunfeast, Bingo!, Yippee!, Candyman, mint-o, Kitchens of India in the Branded Packaged Foods space; Essenza Di Wills, Fiama Di Wills, Vivel and Superia in the Personal Care products segment; Classmate and Paperkraft in Education & Stationery products market; Wills Lifestyle and John Players in the Lifestyle Retailing business; Mangaldeep in Agarbattis, Aim in Matches and so on. In terms of annualised consumer spend, Aashirvaad and Sunfeast are today over Rs. 2000 crores each, Classmate at around Rs. 1000 crores while Bingo!, Candyman and Vivel are more than Rs. 500 crores each. These world-class Indian brands, which continue to gain increasing consumer franchise, support the competitiveness of domestic value chains of which they are a part and create and retain value within the country.

The year under review saw a 26.5% growth in Segment Revenues and a significant improvement in profitability as reflected by the positive swing of Rs. 114 crores at the PBIT level. Segment Results reflect the gestation costs of these businesses largely comprising costs associated with brand building, product development, R&D and infrastructure creation.

Your Companys relentless focus on quality, innovation and differentiation backed by deep consumer insights, world-class R&D and an efficient and responsive supply chain will further strengthen its leadership position in the Indian FMCG industry.

Highlights of progress in each category are set out below.

Branded Packaged Foods Businesses

Your Companys Branded Packaged Foods businesses continued on a high growth trajectory recording impressive growth in market shares and enhanced market standing across segments. The businesses accelerated investments in distributed capacities and capabilities to meet anticipated growth and develop a differentiated and distinctive range of products. Significant investments in R&D and product development coupled with deep consumer insight have enabled launch of successful innovative products catering to the varied regional tastes and preferences of consumers across the country. Your Companys products continue to be best-in-class in terms of product quality.

During the year, the Branded Packaged Foods businesses had to contend with high levels of input costs. Global demand-supply dynamics, policy uncertainties and adverse currency movement led to steep hike in prices of key commodities such as wheat, maida, edible oils, packaging material and industrial fuels particularly during the first half of the year.

These cost pressures were however mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives.

In the Bakery and Confectionery Foods business, the Biscuits and Confectionery categories gained significant scale and market standing during the year. Sunfeast biscuits sustained its robust growth trajectory, especially at the value-added and premium end. Product range stood significantly augmented with the launch of several first-to-market variants including Dark Fantasy Choco Fills - Coffee, Dark Fantasy Choco Meltz, Butterscotch Zing, Kaju Badam Cookies. During the year, the brand emerged as the clear market leader in the highly competitive premium cream biscuits segment. In the Confectionery category, Candyman and mint-o continued to register strong growth during the year. The business launched Creme Lacto and mint-o Ultramintz - a sugar-free extra-strong mint in select markets. These products have met with encouraging consumer response.

In the Snack Foods business, your Company continued to enhance market standing and expand scale in the fast growing Savoury Snacks, Noodles and Pasta categories. In the Savoury Snacks category, the market standing of your Companys Bingo! brand has significantly improved, leveraging an innovative product range, enhanced brand building efforts, use of digital media to spur word-of-mouth and clutter-breaking advertising campaigns. Your Companys new-to-market format of Snacks, Bingo! Tangles, has been well received in target markets and is gaining impressive consumer traction. In the Instant Noodles and Pasta category, your Companys brand Sunfeast Yippee! has been well received by consumers and is the second largest brand in the market. Focused market research, deep consumer insights and innovative product formats under the Sunfeast Yippee! brand are expected to further strengthen consumer franchise in this fast growing and highly competitive category.

In the Staples, Spices and Ready to Eat Foods business, your Companys Staples and Ready to Eat categories continued to grow rapidly. In the Staples category, Aashirvaad atta consolidated its leadership position aided by the strong performance of Aashirvaad Multi-grain atta. The premium Multi-grain and Select variants continued to grow rapidly with an increasing proportion of consumers shifting to these value-added offerings.

The Branded Packaged Foods businesses continue to invest in manufacturing and distribution infrastructure to support larger scale in view of the growing demand for their products and maximise the benefits of distributed manufacture for efficient servicing of proximal markets.

Buoyed by increasing consumer franchise for your Companys brands, it is expected that the accelerated growth of the Branded Packaged Foods businesses will be sustained in the years ahead. Your Company will continue to rapidly scale-up the Branded Packaged Foods businesses drawing upon the agri-sourcing strength of the e-Choupals, in-house cuisine knowledge, product development capabilities, packaging expertise and branding, sales & distribution competencies to establish itself as the most trusted provider of food products in the Indian market.

Personal Care Products

Your Companys Personal Care Products business continued to gain consumer franchise during the year aided by a slew of new product launches in the Personal Wash, Skin Care, Face Wash and Deodorants categories. The business continues to leverage the umbrella brands, namely, Essenza Di Wills, Fiama Di Wills, Vivel and Superia and is focused on addressing various consumer benefits with the introduction of new variants.

The launch of the Couture Spa range of soaps under the Fiama Di Wills brand was one of the key interventions during the year. The signature series, created in alliance with fashion guru Wendell Rodricks, provides consumers an invigorating bathing experience. The business also launched a Collectors Edition soap series in association with the Lonely Planet Magazine under the Fiama Di Wills Mens range. The six exciting Collectors Edition packs are inspired by various water sports and destinations renowned for rejuvenating and revitalizing experiences, in line with the brands value proposition of rejuvenation. The year also marked your Companys foray into the high growth Deodorants market with the launch of Aqua Pulse Deodorant Spray under the Fiama Di Wills Men franchise. The Skin Care range was also expanded during the year with the launch of Vivel Cell Renew Body Lotion, Hand Creme / Moisturizer and Vivel Perfect Glow Skin Toner in target markets. The new product launches have received encouraging consumer response.

The business continues to increasingly leverage Laboratoire Naturel - the state-of-the-art consumer and product interaction centre located in Bengaluru - to connect the R&D and brand teams to the Indian consumer with a view to launching products with unique and differentiated benefits. As in previous years, in recognition of excellence in product quality and innovation, two of your Companys products - Fiama Di Wills Men Aqua Pulse De-Stressing & Brightening Face Wash, and Vivel Cell Renew Fortify & Repair Moisturiser - were voted Product of the Year in their respective categories.

Innovative consumer engagement continues to be at the centre of your Companys personal care strategy. Several new initiatives such as launch of the Couture Spa gel bathing bar, and a unique consumer engagement programme - christened The Fabulous Hair Show - were undertaken during the year. Your Company is at the forefront of leveraging new age media for enhanced consumer engagement pioneering campaigns such as Fiama Di Wills Men website launch via Google+ Hangout and Fiama Di Wills Men - Face of the Year campaign, to name a few. A greater presence of your Companys brands on traditional as well as digital media, direct consumer interaction initiatives, and improved market presence contributed to your Companys products being tried by over 7 crore households during the year (as per IMRB Household Panel survey - January 2013). In addition, Vivel was voted as one of the Top 5 Most Exciting Brands in Personal Care in India by Brand Equity and Nielsens Annual Survey for Most Exciting Brands.

Your Companys Personal Care Products business continued to grow at a fast clip, distinctly ahead of industry despite competitive pressures from entrenched players. This was achieved through a combination of innovative and differentiated offers and by leveraging the distribution network of your Company to reach target consumers.

Input materials, especially palm oil, witnessed significant levels of price volatility during the year. The depreciation of the Indian Rupee against the US Dollar added to inflationary pressure on other input materials for a major part of the year. The business managed its raw material costs effectively by adopting a proactive sourcing strategy based on deep understanding of market trends, developing alternate sources of supply, leveraging enhanced scale of operations and prudent inventory management.

The Personal Care industry in India continues to be on a long-term growth path driven by rising disposable incomes and changing consumer preference for enhanced personal grooming. Your Company is well poised to seize the emerging opportunities in this rapidly evolving industry and continues to invest in creation of vibrant brands, cutting-edge products, flexible and responsive manufacturing and supply chain operations, and development of high quality human capital to build sustainable competitive advantage.

Education & Stationery Products

The Stationery business recorded robust growth in revenues during the year, consolidating your Companys position as the leading and fastest growing player in the Indian Stationery market. Your Companys flagship brands - Classmate for the student community and Paperkraft for office and executive requirements - continue to gain increasing consumer franchise.

Continuing investments in a superior product range, effective consumer engagement and an efficient and responsive supply chain network has enabled Classmate gain significant market share. During the year, brand Classmate was strengthened through a series of interventions resulting in improvement in brand health and market standing. A new television commercial backed by on-ground activation and social media inputs, repositioned Classmate as a brand that celebrates the uniqueness in every child. The business also made good progress during the year in the non-paper categories comprising pens, wood-cased & mechanical pens, mathematical instruments, art stationery & scholastic products. Such complementary products are helping position Classmate as a complete student stationery brand.

Your Companys Social Investments Programme in primary education, that has cumulatively benefited over 300,000 children, is showcased on the back cover of every Classmate notebook. The Classmate notebook is itself an embodiment of the environmental capital built by your Company in its paper business. While the cover is made from recycled board sourced from your Companys Forest Stewardship Council (FSC) certified Kovai mill, the inner pages are made from virgin pulp sourced from your Companys social & farm forestry programme that has greened over 142,000 hectares - including substantial tracts of private waste lands belonging to poor tribals and marginal farmers - and provided 64 million person days of employment. Further, used notebooks are collected from schools in the catchment areas of your Companys paper mill under the Wealth Out of Waste (WOW) programme where they are converted to recycled board. This sets in motion a virtuous cycle that continuously re-generates environmental capital. Additionally, the collaborative supply chain established by the business comprising 800 customers and 30 outsourced manufacturers provides indirect employment to over 5,000 people. The small-scale manufacturers, with support from your Company, have built impressive quality and delivery capability, resulting in a majority of them being certified to ISO 9001:2008 standards.

The education & stationery products industry is poised for exponential growth driven by large investments in the education sector, growing literacy and the increasing scale of government initiatives in education. Your Company with its collaborative linkages with small & medium enterprises and a strong product portfolio of notebooks & writing instruments, is well poised to strengthen its leadership position in the Indian stationery market.

Lifestyle Retailing

During the year, your Companys Lifestyle Retailing business posted high growth in revenues and continued to strengthen its position in the branded apparel market. While revenue growth was impacted in the initial part of the year due to weak consumer sentiment, there was a marked improvement as the year progressed. The restoration of exemption of excise duty on branded readymade garments as announced in the Union Budget 2013, is expected to provide the much needed impetus for the industry.

In the Premium segment, Wills Lifestyle further strengthened its consumer franchise on the back of significant improvements in product variety, enhanced availability and impactful visibility. The retail footprint of the brand was expanded to 90 Exclusive stores across 40 cities and more than 500 shop-in-shops in leading departmental stores and multi-brand outlets. During the year, the premium imagery of the brand was reinforced through the association with Wills Lifestyle India Fashion Week, the countrys most prestigious fashion & lifestyle event.

With the addition of a boutique store at the ITC Grand Chola, the brand is now available in five ITC Hotels, thereby enhancing brand availability to high-end business and leisure travellers. The Club ITC loyalty program, with over 1 lakh members, leveraged synergies between Wills Lifestyle and ITC Hotels to target and strengthen bonding with the premium consumer.

Product appeal was enhanced through the introduction of differentiated offerings across several premium product platforms. The Wills Classic formal range now offers Wonderpress wrinkle-free shirts, Regalia superfine fabrics, premium Ecostyle organic collection and Creme de Cotton supersoft cottons. The Luxuria range of high-end formals with luxurious fabrics and superior craftsmanship continued to receive positive consumer response. The Wills Sport range, with its vibrant and fashionable portfolio, strengthened its appeal amongst the youth segment, widening the consumer franchise. The Womens offering witnessed strong growth energised by an extensive high-end range, stylised formals, trendy silhouettes and premium accessories. The exclusive designer-wear offering, Wills Signature, co-created with Indias leading designers, was strengthened with the launch of Ritu Kumar creations, adding to the product equity.

In the Youth segment, John Players has established a strong pan-India presence with availability in over 350 stores and 1,400 multi-brand outlets and departmental stores. Brand reach was further augmented during the year with the launch of nearly 100 stores, penetrating more markets and acquiring new franchise. The casual portfolio registered strong growth as a result of an enhanced range, premium differentiated washes and contemporary fits. The John Players Jeans brand strengthened its positioning as a vibrant and fashionable denim offering with impactful communication and the launch of exclusive John Players Jeans stores and improved availability through shop-in-shops. Social media and e-commerce platforms were activated to engage with the youth and expand reach to new consumers seeking affordable fashion.

Product portfolio was strengthened with new designs in the core range and region-specific collections, robust replenishment infrastructure and processes. During the year, the business operationalised its new state-of-the-art product development facility in Manesar, Haryana. Initiatives were undertaken to enhance range vitality, supply chain responsiveness and superior customer service for a delightful shopping experience.

The business continued to receive industry recognition during the year. While Wills Lifestyle was accorded

Superbrand status, John Players was rated amongst the top 10 Most Trusted Apparel Brands 2012 by The Economic Times.

The business continues to focus on enhancing the premium quotient of its offerings and strengthen processes for creation of winning designs and enhancing supply chain responsiveness on the basis of a deep understanding of consumer preferences.

Safety Matches and Incense sticks (Agarbattis)

The Agarbatti category recorded an impressive growth in revenues well ahead of the industry, driven by increasing consumer franchise for the Mangaldeep brand and enhanced distribution reach. Product portfolio was augmented during the year with the launch of variants such as Fragrance of Temple series and Dhoop 4-in-1, under the umbrella brand Mangaldeep.

The business maintained its market leadership in the Safety Matches category aided by continued consumer preference for its strong brand portfolio across all market segments.

The Matches & Agarbatti business continues to contribute to your Companys commitment to the Triple Bottom Line supporting over 18,000 livelihoods, mainly amongst rural women. The business sources its products from over 50 small-scale and cottage sector units as well as womens self-help groups. It continues to provide support to such units through the introduction of scientific methods to enhance productivity and product quality. Business initiatives of introducing enabling tools and technology in the rural communities continue to enhance product quality and increase the earning potential of agarbatti rollers. These initiatives, along with the continuing association with various State Governments for setting up sourcing centres, are creating sustainable livelihood opportunities for rural women through agarbatti rolling. Your Company continues to partner the small-scale sector by sourcing a significant portion of its Safety Matches requirement from multiple units in this sector. Your Company is helping improve the competitive ability of these units by providing technical inputs towards strengthening systems and processes.

While the manufacture of Agarbattis is reserved for the small-scale & cottage sector in India considering its importance in employment generation, imports of raw battis (the principal raw material) are freely allowed at low Customs Duty rates. This is resulting in bulk of the raw batti consumption in India being of imported origin leading to a loss of livelihood creation opportunities. Suitable policy changes in arresting this trend would go a long way in creating sustainable livelihoods especially among rural Indian women and tribals in the North-East.

B. HOTELS

The domestic tourism industry remained sluggish during the year in the backdrop of a weak global and domestic economic environment. While growth in foreign tourist arrivals slowed down to 2.8% during the year versus 9.9% in 2011-12, domestic air travel recorded de-growth. Industry performance was also affected due to the significant increase in room inventory in some of the key domestic markets.

Such a challenging business environment adversely impacted business performance leading to a muted growth in Segment Revenues during the year. While your Companys Hotels business maintained its leadership position in terms of operating margins, Segment Results were adversely impacted largely by the relatively weak pricing scenario and the gestation costs relating to ITC Grand Chola, which commenced operations in September 2012.

Your Companys Hotels business continues to be rated amongst the fastest growing hospitality chains with 93 properties at 64 locations in India operating under 4 brands - ITC Hotel at the luxury end, WelcomHotel in the 5 star segment, Fortune in the mid market to upscale segment and WelcomHeritage in the heritage leisure segment. In addition, the business has licensing and franchising agreements for two brands - The Luxury Collection and Sheraton with the Starwood Hotels & Resorts.

During the year, your Company unveiled its latest offering in the super premium segment - ITC Grand Chola in Chennai. The hotel is part of the ITC Hotel brand and has 522 plush hotel rooms and suites, 78 service apartments, 60,000 sq. ft. of conference & banqueting facilities, 10 Food & Beverage outlets and the award winning spa Kaya Kalp. The hotel has achieved the distinction of being the worlds largest Leadership in Energy and Environmental Design (LEED) Platinum rated hotel under the New Construction category and Indias first 5 Star Green Rating for Integrated Habitat Assessment (GRIHA) rated luxury hotel by the Ministry of New and Renewable Energy, thereby bolstering the unique positioning of ITC Hotels as the greenest luxury hotel chain in the world. The Food & Beverage segment remains a major strength of your Company and its iconic brands Bukhara, Dum Pukht and Dakshin continue to garner coveted international awards and accolades. Other signature F&B brands viz. West View, Kebabs & Kurries, Edo and Pan Asian have firmly established themselves and continue to sustain leadership position in their respective cities. During the year, the business launched 2 new signature F&B offerings - Ottimo and Royal Vega - focusing on exquisite Italian cuisine and delectable vegetarian food from the magnificent royal kitchens of India, respectively.

In line with your Companys commitment to the Triple Bottom Line, investments have been made in renewable energy to provide clean power to your Companys hotels in Bengaluru (ITC Windsor and ITC Gardenia), Chennai (ITC Grand Chola), Mumbai (ITC Maratha) and Jaipur (ITC Rajputana). With these investments, your Companys Hotels business met over half of its energy requirements from clean and renewable sources.

During the year, the business leveraged the recently launched pan-ITC consumer loyalty programme - Club ITC to enhance revenues. The business seeks to position Club ITC - targeted at the premium clientele of Wills Lifestyle and ITC Hotels - as the greenest and most admired customer loyalty programme over the next few years.

In view of the positive long-term outlook for the Indian Hotel industry, your Company continues to sustain its investment-led growth strategy. Construction activity of two new luxury properties at Kolkata and at Classic Golf Resort near Gurgaon is progressing satisfactorily. During the year, your Company invested in a newly formed wholly-owned subsidiary incorporated in Sri Lanka which acquired a prime plot of land in Colombo on a 99-year lease from the Government of Sri Lanka, for developing a mixed-use project including a 5-star luxury hotel. Further, several new projects, including joint ventures and management contracts, are on the anvil to rapidly scale up the business across all brands.

The Fortune brand which caters to the mid-market to upscale segment continued its expansion by forging new alliances, taking the total number of hotels in its fold to 69 with an aggregate inventory of over 5,000 rooms. Of these, 30 properties are under various stages of development with 3 hotels slated for commissioning in the coming year. The WelcomHeritage brand continues to be the countrys most successful and largest chain of heritage hotels with 39 operating properties, spread across 13 States in India.

Your Companys Hotels business, with its globally benchmarked levels of product and service excellence and customer centricity, is well positioned not only to sustain its leadership status in the industry, but also emerge as the largest hotel chain in the country over the next few years.

C. PAPERBOARDS, PAPER AND PACKAGING

During the year, the Paperboards, Paper and Packaging segment recorded a growth of 9% in revenues aided by higher volumes and product mix enrichment. The relatively lower growth in Segment Results during the year, reflects the steep hike in input prices particularly of wood, coal and chemicals.

Paperboards & Specialty Papers

Global demand for paper & paperboard de-grew by 0.5% in 2012 primarily due to the continuing weak economic environment prevailing in Western Europe and the US. The domestic market also recorded a slowdown with demand decelerating to around 5.9% during 2012-13 against 6.1% in the previous year.

The global paper market continues to witness a structural shift with emerging economies, particularly in Asia such as China and India, driving the demand growth. While such structural shift in demand and the relatively low levels of per capita consumption in India offers attractive opportunities going forward, the Indian market is also getting increasingly competitive drawing large investments especially from global players. Though growth in demand is expected to absorb the additional capacity, increasing market share and sustaining margins will be a challenge in the short-term.

Further, reduction of import duties under various Regional Free Trade Agreements especially with ASEAN is impacting the profitability of the domestic paper industry and the economic viability of the small paper mills. With the US and EU imposing anti-dumping duties against import of paper / paperboards from China / Indonesia to protect their domestic industries, the additional capacities created in these countries are increasingly finding their way into India given the lower levels of import duty. Clearly, there is a need to ensure that the current duty structures are, at the very least, kept unchanged.

The domestic paperboard industry is expected to grow at around 7.5% per annum over the medium-term. During the year, your Company consolidated its pre-eminent position in the industry through new product launches like Carte Lumina with best-in-class whiteness suited for high-end FMCG and over-the-counter products and Nanobev for the small paper cups segment. Paperboards developed for high-end cigarette packaging needs are running seamlessly on the high speed packaging machines at your Companys cigarette factories. The business also strengthened its distribution network with the addition of new distributors, authorised stockists and market development partners for improved market servicing.

Your Company continues to focus on the value-added product segment in which it is a clear market leader. The market for value-added paperboard is expected to grow faster at a compound annual growth rate of 12% driven by higher demand for branded packaged products in the FMCG and Pharma sectors, increasing number of product categories catering to aspirational lifestyles, higher rural demand, higher penetration of organized retail and increasing salience of packaging in driving brand awareness. Towards this end, your Company successfully commissioned a state-of-the-art and highly energy efficient paper machine with an installed capacity of over 1 lakh tonnes per annum at the Bhadrachalam plant during the year. With this, the total capacity of the Bhadrachalam plant stands at over 5.5 lakh tonnes per annum, thereby sustaining its position as the single largest integrated pulp and paperboard/paper unit in the Indian industry. Your Company has also invested in a new 25 MW Turbine Generator and 130 tonnes per hour (TPH) Boiler to meet the energy requirements of this expansion.

The Writing and Printing paper segment, currently estimated at 3.8 million tonnes per annum, is projected to grow at a compound annual growth rate of around 7% over the medium term. Growth in the value-added writing and printing paper segment will continue to be fuelled by initiatives like Sarva Shiksha Abhiyan and Right of Children to Free and Compulsory Education as well as by rising literacy levels, changing demographic profiles and GDP growth. The business, with its strong forward linkages with your Companys Education and Stationery Products, has emerged as a leading player in this segment.

Your Company continues with its strategy of promoting social forestry plantations for pulpwood as access to adequate supplies of pulpwood at competitive prices remains a major challenge for the paper industry.

The industry is currently facing an acute shortage of pulpwood especially in Andhra Pradesh, which is largely attributable to the enhanced demand from new pulp capacities that have been set up without adequate investments in pulpwood plantations and diversion of supplies for alternative usage such as commercial poles, bio-fuel etc. With demand far exceeding supplies, pulpwood procurement prices witnessed steep hikes during the year, adversely impacting industry margins.

Your Company expects the current demand-supply skew to be corrected over the next couple of years on the back of additional plantations by farmers due to the prevailing remunerative price levels and renewed efforts by pulp mills in promoting plantations in their core areas. In the short to medium term, the business is exploring several options including procurement of wood from other states, use of bamboo in a limited scale etc. with a view to mitigating the cost pressure.

Your Company remains focused on promoting pulpwood plantations in its core area of operations. During the year, the business sold / distributed high quality saplings/seeds to farmers that enabled planting of over 110 million saplings in 17500 hectares of plantations. With this, your Companys bio-technology based research initiatives have cumulatively resulted in the planting of about 656 million saplings leading to significant wasteland development and greening of over 142,000 hectares and generation of over 64 million person days of employment for poor tribals and marginal farmers. With a view to accelerating the pace of plantation activity, the business commissioned a state-of-the-art clonal sapling production facility during the year. The facility has a capacity to produce 25 million saplings with improved survival rates and higher productivity and will go a long way in supporting your Companys endeavour to augment pulpwood availability.

Your Companys research on clonal development has resulted in the introduction of high yielding and disease resistant clones which are adaptable to a wide variety of agro-climatic conditions. Besides securing the long-term supply of fibre at competitive costs, this initiative also assists in generating farm incomes by utilisation of marginal wastelands. Your Companys continued focus on clonal plantations in core areas is expected to yield significant competitive advantage in the years to come. Your Companys Life Sciences & Technology team is actively collaborating with several expert agencies to further leverage bio-technology for enhancing farm productivity, wood yields and improving fibre and pulp properties.

Your Company continues to promote agro-forestry in pulpwood plantations on wasteland as well as on land where mono-cropping is practised. In Andhra Pradesh, mono-cropping is currently practised in cultivation of cotton, tobacco, maize and pulses in more than 30 lakh hectares. During the year under review, your Company facilitated the introduction of agro-forestry models, in about 1,800 hectares, incorporating inter-cropping practices where eucalyptus trees are grown adjacent to agricultural crops. By integrating tree growing with crop production, the problems of poor agricultural production, worsening wood shortages and environmental degradation can be simultaneously addressed. Furthermore, inter-cropping technologies / practices also help in reducing the pressure on the remaining natural forests and increases the diversity of vegetation on existing farms. Your Companys initiatives under this model currently extend to nearly 2,500 hectares assuring wood and food security to the farmer from the same unit of land addressing long-term sustainability. The area covered under this model is proposed to be substantially increased in the years to come.

Hitherto, in India, the subject domain of Biodiversity has remained with the Ministry of Environment and Forests. For the first time in the Indian paper industry, your Company has proactively attempted a biodiversity conservation project on private lands. On a pilot basis, 11.52 hectares of farmer lands in Andhra Pradesh were selected and afforestation, reforestation, reclamation, rehabilitation, protection and conservation of biological resources were attempted. Further, your Company promoted natural regeneration, enrichment planting with native species and conserved threatened and endemic species. In order to sustain these efforts, your Company is promoting local stewardship for biodiversity through awareness programmes which will go a long way in reversing the impact created by anthropogenic pressures, integrating it with agriculture, pulpwood plantations, fishery, apiculture, medicinal plants and creating sustainable livelihood to the tribal farmers. As a responsible Corporate Citizen, your Company is willing to participate in initiatives of this nature towards preserving biodiversity on an ongoing basis.

In India only 25% of the paper consumed is recovered for recycling as against about 70% in the western countries. Your Companys collaborative initiative, christened Wealth Out of Waste (WOW), continues to promote and facilitate waste paper recycling, with a view to conserving scarce natural resources. The waste paper industry is largely unorganised and a lot of effort has gone into establishing processes and systems in the operational areas of collection, sorting and grading of waste paper as well as on accounting, compliances and controls. It is expected that such efforts would assist in the availability of quality fibre on a sustainable basis at competitive prices. About 48,000 tonnes of waste paper were collected during the year and with continued focus on building capability it is expected that the entire waste paper requirements of the business would be sourced through this initiative within the next few years. In this context, the second anniversary of National Recycling Day was celebrated in Chennai on 1st July 2012 with widespread participation of the general public and 14,000 school children. This initiative won CIIs Best environmental project of the year 2012 and Most Useful Environmental Project awards.

Your Company has the distinction of being the first paper company in India to have obtained the Forest Stewardship Council - Forest Management (FSC-FM) certification covering 8,000 hectares of social forestry plantations involving about 9,000 farmers with another 14,000 hectares awaiting certification. FSC-FM certifies that the plantation activities of an organisation are economically, socially and environmentally viable.

To the extent of pulp produced from such certified plantations, your Company will be able to commit to its customers, FSC certified paper & paperboard. Environmentally conscious customers are already beginning to show keenness to source such green products which in turn will further increase the competitiveness of the business. Plans are afoot to steadily increase coverage over the next few years.

All four manufacturing units of your Company have obtained the FSC Chain of Custody certification.

Your Company has made significant investments in contemporary technologies including environment-friendly Elemental Chlorine-Free (ECF) and Ozone bleaching for pulp thereby improving the environmental standards of its manufacturing operations. Such investments are expected to provide customers with sophisticated products, way ahead of legislation, thereby creating new benchmarks in environmental stewardship. The Industry would welcome policies that lay down environmental benchmarks in tune with other industries such as automotives etc. and suitably reward those who achieve or exceed such parameters.

Your Company continues to focus on recycling initiatives including solid waste recycling. While all manufacturing units have already achieved near 100% solid waste recycling by its usage for making products like lime, fly ash bricks, grey boards, egg trays etc., the procurement and recycling of about 120,000 tonnes of waste paper during the year has further consolidated the businesss overall positive solid waste recycling footprint. The Bhadrachalam unit is the first in India to have been awarded the GreenCo Gold certificate by CII in June 2012. The unit also won the Excellent Energy Efficient, Excellent Water Efficient and Appreciation prize - State Energy Conservation awards. The Bollaram unit won Silver for FICCI Safety System Excellence award in manufacturing while the Kovai unit won Best Water Efficient award at 9th National Water Management meet. The business also won IPMA Environmental award for Cleaner Technologies.

The above have been made possible as a result of continuous focus on various safety initiatives including induction of safety stewards, strengthening systems, spreading awareness and integrating environment, health and safety (EHS) as part of the overall Total Productive Maintenance (TPM) initiative. With regard to energy consumption, strategies to contain usage across units continue to be pursued. Further, the business is also investing in a new high pressure fuel efficient boiler in its Tribeni unit, which will enable significant reduction in coal consumption and usage of lower grades of coal.

The 7.5 MW wind energy farm in Coimbatore, continues to operate at optimum levels providing clean energy to the Kovai unit. It is expected that energy efficiency coupled with greater use of renewable sources of energy will enable your Company to derive benefits from sale of Renewable Energy Certificates (RECs) under the Electricity Act 2003 as well as obtain benefits from newer initiatives like Perform, Achieve and Trade (PAT) under the Energy Conservation Act 2001.

The year under review witnessed steep hikes in the cost of chemicals and coal as well as curtailment in supplies of coal by the Government through the reduction of allocations, forcing the industry to buy high cost coal in the open market. These factors, together with the sharp depreciation of the Indian Rupee, adversely impacted the industry. However, your Company with its integrated operations and strategic cost management actions was able to minimise the adverse impact of such cost escalations.

The integrated nature of the business model - access to high-quality fibre from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the-art manufacturing facilities, focus on value-added paperboards and a robust forward linkage with the Education and Stationery Products business - strategically positions your Company to further consolidate and enhance its leadership status in the Indian paperboard and paper industry.

Packaging and Printing

Your Companys Packaging and Printing business continues to provide contemporary and superior packaging solutions facilitated by its state-of-the-art technology and processes. The business provides strategic support to your Companys FMCG businesses through innovative packaging solutions, faster speed-to-market for new launches and security of supplies in addition to delivering benchmarked international quality at competitive costs.

The business continued to leverage its multiple packaging platforms to offer a wide range of packaging solutions and expand business both in domestic and export markets. Your Company continues to be a leading supplier of value-added packaging in cartons and flexibles.

During the year, the business augmented the capacity and capability of its Haridwar plant with the successful commissioning of a new state-of-the-art line for cigarette packaging, expansion of carton line capacity and other downstream conversion facilities towards meeting the growing demand from the northern markets. The business also made investments in backward integration for key raw materials in the flexibles segment, thereby enhancing competitiveness. These in-house capabilities have enabled quicker turnaround of designs, pack changes and reduced product launch timelines for your Companys FMCG businesses, thereby providing a source of competitive advantage in the market place.

The business won several awards during the year for operational excellence, innovation and creativity. These include three World Star Awards from the World Packaging Organisation, several India Star Awards from the Indian Institute of Packaging and Golden Peacock Award instituted by Institute of Directors for innovative product / services.

The 14.1 MW wind energy farm in Tamil Nadu, set up in 2008, continues to operate at optimum levels providing clean energy to the Chennai unit. This initiative is a certified project under the Clean Development Mechanism of the Kyoto Protocol and is in line with your Companys commitment to reduce the carbon footprint of its operations.

The factories at Chennai, Haridwar and Munger continued to maintain the highest standards in Environment, Health and Safety (EHS). The Chennai unit was certified for BRC IoP (British Retail Consortium, Institute of Packaging, global food packaging standard), SA 8000 (Social Accountability Certification), and FSC (Forest Stewardship Council Certification - Sustainable Forestry Practices). The Haridwar unit was accredited with ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 for the new plant within six months of commissioning and also received the 13th Annual Greentech Environment Award in the Silver category. The Munger unit won the Suraksha Puraskar at the National level from National Safety Council and International Safety Award with Merit from British Safety Council.

With substantial investments in world-class technology & quality systems, and distributed & diversified manufacturing capability, the business is well poised to sustain its position as one of the foremost packaging houses in the country.

D. AGRI BUSINESS Leaf Tobacco

While overall global leaf tobacco crop output saw a decline in 2012, the prevalent high levels of uncommitted inventory continued to limit demand for the fresh crop. Global cigarette demand remained muted due to the weak global economic scenario, regulatory pressures, enhanced levels of taxation and growth in illegal trade. Cigarette-type tobacco crop production in India was lower during 2012 mainly on account of the severe drought that adversely impacted Mysore crop output and quality. Your Companys focused crop development efforts at the farm level towards ensuring adequate availability of seedlings, educating the farmers on crop management and post harvest product management techniques helped revive the crop substantially thereby improving livelihoods particularly in the drought affected areas in rural Karnataka.

Notwithstanding a sluggish global demand scenario, your Company recorded robust growth in export volumes and revenues by servicing customers based on their specific needs and leveraging strengths in crop development, superior sourcing and processing capabilities. The business not only strengthened its presence in existing markets but also accessed customers in new markets. The business also made progress during the year in growing the smokeless tobacco segment through customized offerings.

The business continued to provide strategic sourcing support to your Companys cigarette business.

Achieving enhanced productivity continues to be a focus area of research and crop development initiatives of the business. Substantial progress has been made in strengthening the pipeline of new hybrid combinations for deployment in growth zones.

Your Company continues to engage in a pioneering role in promoting sustainable agriculture practices in the tobacco growing regions in Andhra Pradesh and Karnataka. Key interventions such as farm mechanisation, soil health management, water conservation and seedling production technologies through well researched dissemination models continue to support the farmer towards enhancing quality of produce and optimising costs. Your Companys efforts in this area have been recognised in a number of international forums. The approach on dissemination models of farm mechanisation has been published in the International Journal of Sustainability Japan, while the float seedling production initiative has been recognised by the World Academy of Science, Engineering & Technology (WASET), Amsterdam for its sustainability features & economic suitability to the farming community. These efforts are not only helping secure global demand for Indian leaf tobacco by providing enhanced value to global customers but also in improving the socio-economic status of the small / tribal farmer. Capitalising on your Companys R&D efforts on varietal improvement, the area under coverage of flue-cured virginia hybrids was substantially increased in collaboration with the Central Tobacco Research Institute and the Tobacco Board of India.

Your Companys newly commissioned Green Leaf Threshing plant in Mysore has stabilized and exceeded benchmarks on all operating parameters of throughput, processing yield and quality. This investment has enhanced the processing capability of the business and reduced transportation costs given the factorys proximity to the tobacco growing areas in Karnataka. The business is also actively engaged in augmenting its warehousing capacities and re-engineering its supply chain towards driving operational efficiencies and reducing costs.

Further, in line with your Companys commitment to sustainable business practices, the business is investing in wind energy in Karnataka to increase usage of renewable sources of energy. With this, 100% of the energy requirements of the newly commissioned plant at Mysore will be met through renewable energy sources.

Your Company with its unmatched R&D capability, state-of-the-art facilities, unique crop development and extension expertise, deep understanding of customer and farmer needs, is well poised to leverage emerging opportunities for Indian leaf tobacco and sustain its position as a world-class leaf tobacco organisation.

Other Agri Commodities

Food grain production in India is estimated to have declined by around 1.5% to about 255 million tonnes during 2012-13 as compared to the record 259 million tonnes in 2011-12. Output of major food grain items such as rice and wheat are expected to be lower in 2012-13. While wheat output is estimated to be lower by 1% at 94 million tonnes, rice output at about 104 million tonnes represents a decline of 1% over the previous year. While overall oilseed production during 2012-13 is expected to remain at about 31 million tonnes, soya production is expected to be higher at 14 million tonnes vis-a-vis 12 million tonnes in 2011-12.

Adverse weather conditions in the major global wheat producing regions of Black Sea (Ukraine, Russia), South America (Brazil, Argentina) and Australia led to a dip in world production by about 40 million tonnes to about 656 million tonnes. Given the shortage in global markets as aforementioned, the business successfully leveraged the wheat export opportunity recording robust growth in revenues and asset turns. On the domestic front, the business continued to expand its presence with brand owners, private labels, food processors and millers.

Global soya bean production, estimated at 270 million tonnes during the current season, represents an increase of 12.5% over the previous season. The increase is mainly attributable to higher output in South American origins offset by a reduction in output in the United States. Such a global oversupply situation coupled with higher domestic crop production led to a steep correction in domestic soya prices. Consequently, market arrivals of the domestic crop remained weak with farmers holding back sale of soya bean in anticipation of improved realisations.

Your Companys uniquely structured commodity sourcing business model with strong competencies in multi-location sourcing, logistics and supply chain management enabled achieving enhanced scale and value capture in the wheat and soya market.

The business continued to source identity preserved and special varieties of wheat through its e-Choupal network for your Companys Branded Packaged Foods businesses. The continuous focus on cost-quality optimisation through varietal and geographical arbitrage and driving supply chain and logistics efficiencies provided a competitive advantage to your Companys Aashirvaad Atta brand.

In the area of potato sourcing, the business continued to support your Companys Bingo! brand of potato chips by procuring the highest quality chip stock potatoes at competitive prices. The endeavour of partnering with farmers to source locally grown potatoes in close proximity to manufacturing units helped minimise logistics costs. The business continued to engage with the farming community towards enhancing the quality and variety of chip stock seed usage, adoption of best farming practices and improving yields.

India is the worlds largest producer, consumer and exporter of spices. The growing concerns around food safety and product integrity have resulted in the increased demand for suppliers with end-to-end capabilities having complete custody of the supply chain, supported by appropriate technology, quality assurance and traceability management systems. Your Company is well poised to garner an increasing share of the fast growing domestic and export spices market leveraging its processing unit which is certified to the highest grade of global food safety standards under the BRC (British Retail Consortium) Food certification regime and an embedded IT enabled farm to fork traceability system. The business continues to provide support to your Companys Aashirvaad range of spices.

An integrated and holistic view of the agricultural value chain is essential towards providing the necessary fillip to stagnating agricultural growth in the country. This requires a joint participatory approach from all stakeholders such as farmers, input vendors, traders, processors and the government agencies. Your Company plays a critical role as a catalyst in integrating farmers, input vendors and government agencies besides facilitating the necessary market linkages. Through its Choupal Pradarshan Khet initiative, the business works with various government and private bodies to promote new seed varieties, adoption of farm technologies and practices among farmers towards improving productivity of crops (food grains, oilseeds, cereals etc.) while deepening relationship with the farming community. During the year, new soya seed varieties with high yield, high protein and high oleic acid were identified by your Companys Life Sciences & Technology Centre in association with the Directorate of Soybean Research, India. A number of farmer training programmes along with farm field demonstration of new technology (seed varieties and process) were conducted in more than 730 villages covering over 22,000 farmers towards yield enhancement in soybean, barley and wheat. Promotion of sustainability practices through the use of bio-fertilizers in paddy and bajra in western UP were also taken up.

Your Company will continue to leverage the unique e-Choupal platform towards achieving the superordinate goal of enhancing agricultural growth and productivity in the country enmeshed with a strong socio-economic model for rural development and sustainability even as it provides structural and sustainable competitive advantage to the Branded Packaged Foods businesses.

NOTES ON SUBSIDIARIES

The following may be read in conjunction with the Consolidated Financial Statements enclosed with the Accounts, prepared in accordance with Accounting Standard 21. In view of the general exemption granted by the Ministry of Corporate Affairs, the report and accounts of subsidiary companies are not required to be attached to your Companys Accounts. Shareholders desirous of obtaining the report and accounts of your Companys subsidiaries may obtain the same upon request. The report and accounts of the subsidiary companies will be kept for inspection at your Companys registered office and those of the subsidiary companies. Further, the report and accounts of the subsidiary companies will also be available under the Shareholder Value section of your Companys website, www.itcportal.com, in a downloadable format.

ITC Global Holdings Pte. Limited, Singapore (Global), a subsidiary of your Company, is under winding up in terms of the Order of the High Court of the Republic of Singapore dated 30th November, 2007. Consequently, your Company is not in a position to consolidate the accounts of Global for the financial year ended 31st December, 2012 or to make available copy of the same for inspection by shareholders.

Surya Nepal Private Limited

During the year the operating environment in Nepal continued to remain uncertain with the Constituent Assembly being dissolved in May 2012. The caretaker Government has since made way for a new Council of Ministers headed by the Chief Justice of Nepal, entrusted with the mandate of conducting the Constituent Assembly elections.

On the economic front, the GDP for the year ended 15th July 12 grew by 4.6% against 3.8% in the previous year on the strength of increased agricultural production and growth in the services sector. However, there was a marked slowdown in industrial production which decelerated to 1.6% from 2.9% in the previous year. The company continues to engage with policy makers for a pragmatic and purposeful policy and regulatory framework that will fuel long-term investment and growth in the countrys industrial sector including the operating segments of the company.

Despite these challenging circumstances, the company continued to make good progress and deliver superior performance. In the twelve-month period ended 13th March 2013 (30th Falgun 2069), the company recorded a 15% growth in sales with Gross Turnover (net of VAT) increasing to Nepalese Rupees (NRs.) 1665 crores from NRs. 1443 crores in the previous year. Profit after Tax at NRs 370 crores increased by 29% over the previous year. The company continues to be one of the largest contributors to the exchequer accounting for about 16% of excise collections and 3.3% of the total revenues of the Government of Nepal.

The company further consolidated its leadership position in the cigarette market through continued investment in product quality and value addition to its product portfolio. Its focus on remaining contemporary through the induction of new generation technology platforms and the enhancement of internal capabilities has strengthened the competitiveness of the business and reinforced market standing. A Long Term Agreement with employees of the Simara factory, premised on the companys philosophy of harmonious employee relations management, was concluded during the year. The second cigarette factory near Pokhara is in an advanced stage of construction and will improve market servicing in the long-term.

In the branded apparels business, the company focused on enhancing its market standing, distribution infrastructure and supply chain of John Players and Springwood. In the safety matches business, the companys brand Tir continued to gain consumer franchise.

The company remains committed to supporting and investing in endeavours that augment social and economic capital in alignment with the stated priorities of the Government of Nepal. Consistent with such commitment, several initiatives that are expected to provide long-term multiplier benefits have been initiated and sustained during the year. Accordingly, the company:

(a) Continued to partner with Tobacco farmers in Nepal to ensure higher productivity and quality enhancement at the farm level through the induction of agricultural best practices. The adoption of such practices and other inputs provided by the company has led to a consistent improvement in quality of domestic grades of tobacco thereby improving marketability of the crop and farmer returns.

(b) Initiated a programme to assist village farmers, proximate to the Simara factory, in the plantation of high quality Poplar saplings to improve farmer earnings.

(c) Supported an initiative in the animal husbandry sector by providing extension services that will drive yield improvement and higher returns for underprivileged farmers.

(d) Partnered with Nepal Tourism Board in hosting Nepals premier professional golf tournament - the Surya Nepal Private Limited Masters, with the objective of promoting Nepal as an attractive golfing destination.

(e) Continued to sponsor the Surya Nepal Private Limited Asha Social Entrepreneurship Awards, to recognize entrepreneurs who have created employment opportunities amongst local communities.

The company declared a dividend of NRs. 139/- per equity share of NRs. 100/- each for the year ended 15th July 2012 (31st Ashad 2069).

ITC Infotech India Limited

A weak global economic scenario, particularly in the US and Europe, continued to impact technology spends during the year. Although growth of the Indian IT industry has slowed down in recent years given the economic uncertainties, favourable exchange rates and market share gains during the year enabled it to grow ahead of earlier estimates.

The companys consolidated Total Revenue grew well above the industry average, clocking a growth of 23% to Rs. 1017.80 crores while its Net Profit grew by 33% to Rs. 66.93 crores. This robust performance is an outcome of the successful strategies adopted by the company in

(i) building world-class capabilities in each of its service lines, (ii) investing in new technologies, (iii) building solutions and capabilities around the products of global software vendors and partnering with them to take the products to the market, and (iv) rapidly growing the high potential accounts by putting in place geographical and technological expansion plans.

For the year under review:

(a) ITC Infotech India Limited registered a Total Revenue of Rs. 706.65 crores (previous year Rs. 566.23 crores) and a Net Profit of Rs. 68.73 crores (previous year Rs. 28.69 crores);

(b) ITC Infotech Limited, UK, (I2B) a wholly owned subsidiary of the company, registered a Total Revenue of GBP 25.03 million (previous year GBP 24.35 million) and a Net Profit of GBP 1.86 million (previous year GBP 2.13 million). During the year, I2B paid an Interim Dividend of GBP 3 (previous year : Nil) per Ordinary Share of GBP 1 each on 685,815 shares, amounting to GBP 2,057,445 (previous year: Nil) to the company;

(c) ITC Infotech (USA), Inc., (I2A) a wholly owned subsidiary of the company, together with its wholly owned subsidiary Pyxis Solutions LLC, registered Total Revenues of US$ 63.20 million (previous year US$ 49.85 million) and a Net Profit of US$ 0.91 million (previous year US$ 0.30 million).

During the year, the company achieved an all-time high and best-in-class Customer Satisfaction Score based on a survey conducted by a reputed external agency. Such a rating validates the companys world-class quality of service and stands testimony to its commitment to continuously raise the levels of service to meet growing market expectations.

Apart from expanding the companys existing in-house domain solution capabilities, specific development programmes were implemented to embrace disruptive technologies such as cloud computing, social media and mobile computing.

The company continued to enhance and strengthen its partnerships with leading Independent Software Vendors (ISVs) by building niche solutions to address white spaces and joint go-to-market initiatives. In this regard, a number of initiatives were progressed during the year including the launch of operations in new geographies, offering of turnkey services - from licence sales to implementation, becoming Authorised Training Partner in India and a consortium partner in Customer Experience and Comprehensive Trade Management area.

During the year the companys renewed focus on Middle- East, Africa, India and the larger Asia-Pacific region resulted in significant traction in new customer acquisition, particularly in India and Middle-East. The company has set up a branch office in Dubai to increase market penetration in the region. The company is also extending its service lines to specific markets in Western Europe.

In addition, as an important milestone in the evolution of its delivery capability, the company commissioned a new Development Centre at Trivandrum during the year.

The service delivery capability of the company continued to earn global recognition. The company has featured for the 7th consecutive year amongst the Leaders Category in the 2012 Global Outsourcing Top 100 by the International Association of Outsourcing Professionals (IAOP). The company also featured for the 8th consecutive year in the Global Services 100 survey, conducted by Global Services and Neo Advisory.

The company achieved ISO 9001:2008 re-certification for all its locations with its Pune centre getting certified within six months of its commissioning.

On the talent management front, the approach and strategy were continuously refined, realigned and revitalised in line with changing business dynamics and the enhanced global operating footprint of the company. Employee engagement, in particular, continues to receive the necessary thrust and impetus to enable an interactive and knowledge pooling environment. The company also embarked on development of new centres in the country with a view to accessing specific skills and talent and driving efficiencies in service delivery.

Going forward, the company will continue to review and reinforce its strategies and action plans to rapidly scale up its global footprint. Building additional technology niches remains a key focus area, and SMAC (Social media, Mobility, Analytics and Cloud computing) is currently at the forefront of this technology ecosystem. The company, accordingly, continues to invest in SMAC technologies and in a new industry leading Testing Framework.

While the outlook for the IT industry remains soft in the near term, the company is poised for significantly superior growth in the coming years aided by its strategies to expand to new markets, offer a portfolio of differentiated solutions, provide superior customer experience and deliver through strong project management capabilities, knowledge management, solution accelerators and a robust quality system.

Russell Credit Limited

During the year, the company registered a Total Revenue of Rs. 69.66 crores (previous year Rs. 40.58 crores) and a Net Profit of Rs. 58.96 crores (previous year Rs. 31.43 crores).

As stated in the Report of the Directors of the previous years, a petition was filed by an individual in the High Court at Calcutta, seeking an injunction against the companys counter offer to the shareholders of VST Industries Limited, made in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares & Takeovers) Regulations, 1997, as a competitive bid to a Public Offer made by an Acquirer in 2001.

During the year, the High Court at Calcutta, vide Order dated 22nd June, 2012, dismissed the aforesaid petition. Similar petitions filed in the High Court of Delhi at New Delhi and High Court of Judicature of Andhra Pradesh at Hyderabad had earlier been dismissed by the respective High Courts.

The company, post dismissal of the aforesaid petition by the High Court at Calcutta, sold its entire holding in VST Industries Limited to your Company.

Wimco Limited

The company achieved a Net Revenue of Rs. 165.62 crores during the year (previous year Rs. 169.70 crores) and posted a Net Profit for the year of Rs. 1.90 crores against Rs. 45.99 crores loss in the previous year which included a one-time cost of Rs. 36.87 crores primarily towards restructuring its operations. During the year, the company allotted to Russell Credit Limited the unsubscribed portion of the Rights Issue of shares made in the previous year, thereby raising Rs. 1.69 crores.

Margins in the Safety Matches business continued to remain under pressure mainly due to escalation in prices of raw materials like wood, splints, paperboard, key chemicals and the continuing high tax differential between the mechanised and non-mechanised sector. The company continues to focus on cost rationalisation and margin improvement.

During the year, the Agri (Forestry) business revenues grew by around 25%. Availability of critical raw materials like wood at competitive prices remain crucial for the success of the Safety Matches business. Towards this end, the Agri (Forestry) business supplied high quality poplar ETPs (Entire Transplants) and eucalyptus saplings to farmers in northern India to enhance availability at competitive prices. Apart from creating a long-term sustainable supply of a critical raw material, the companys initiative is helping create employment and livelihood opportunities while improving the green cover in the region.

The Engineering business revenues grew by 6% during the year driven mainly by improved value capture through continuous product development in packaging machinery. The company plans to leverage new and improved product design to offer superior packaging solutions to its customers.

The initiatives taken by the company during the past few years to restructure its operations are expected to enhance operating performance in the years to come.

Srinivasa Resorts Limited

During the financial year ended 31st March, 2013, the company recorded a Total Revenue of Rs. 50.62 crores (previous year Rs. 57.66 crores) and a Profit Before Tax of Rs. 5.54 crores (previous year Rs. 11.89 crores). Net Profit for the year stood at Rs. 4.44 crores (previous year Rs. 9.40 crores).

The challenging environment in the State of Andhra Pradesh continues to have an adverse impact on the performance of the companys hotel ITC Kakatiya, Hyderabad. The hotel continued to focus on superior guest experience and strategic cost management to sustain market standing and protect margins.

For the fourth time in a row, the hotel received the Times Food Guide awards for Kebabs & Kurries (Best North Indian) and Dakshin (Best South Indian) - with both being rated as the best restaurants in their respective categories. During the year, the hotel also received the Best Landscaping Management Award from the Department of Horticulture, Andhra Pradesh.

The Board of Directors of the company has recommended a dividend of Rs. 1.00 per equity share of Rs. 10/- each for the year ended 31st March, 2013.

Fortune Park Hotels Limited

During the financial year ended 31st March, 2013, the company recorded a Total Revenue of Rs. 23.22 crores (previous year Rs. 20.78 crores) and earned a Net Profit of Rs. 5.97 crores (previous year Rs. 4.96 crores).

The companys Fortune hotel chain that caters to the mid-market to upscale segment continued its expansion by forging new alliances, taking the total number of hotels in its fold to 69 with an aggregate room inventory of over 5,000. The Fortune brand now has 39 operating hotels and another 3 hotels are slated to be commissioned in the next financial year. The remaining 27 hotel projects are under various stages of development. The brand remains a frontrunner in its operating segment and is well positioned to sustain its leadership position in the industry.

The company is well known for providing quality products and services which have helped position Fortune as the premier value brand in the Indian hospitality sector. The My Fortune brand, representing a stylish lifestyle with efficient personalised service, is the latest addition to the bouquet of brands offered by Fortune Hotels.

During the year, the company bagged the Best First Class Business Hotel Chain award at the Todays Traveller Awards 2012, SATTE Award for leading Mid Market Hotel Chain and Best First Class Full Service Business Hotel Chain in India by PATWA, ITB Berlin.

The Board of Directors of the company has recommended a dividend of Rs. 12.50 per equity share of Rs. 10/- each for the year ended 31st March, 2013.

Bay Islands Hotels Limited

During the financial year ended 31st March, 2013, the company recorded a Total Revenue of Rs. 1.52 crores (previous year Rs. 1.37 crores) and Net Profit of Rs. 0.97 crores (previous year Rs. 0.92 crores).

The companys hotel, Fortune Resort Bay Island in Port Blair, commands patronage in the city primarily due to its fabulous location, excellent architectural design and superior service quality. The company is in the process of undertaking a comprehensive renovation and expansion programme with a view to enhancing the market standing of the hotel.

The Board of Directors of the company has recommended a dividend of Rs. 70.00 per equity share of Rs. 100/- each for the year ended 31st March, 2013.

Landbase India Limited

The company owns and operates the Classic Golf Resort, a Jack Nicklaus Signature Course, near Gurgaon. As reported in the previous years, golf based resorts present attractive long-term prospects in view of their growing popularity all over the world. The work towards creating a destination luxury resort hotel at the Classic Golf Resort is now underway and the project is progressing satisfactorily.

During the financial year ended 31st March, 2013, the company recorded a Total Revenue of Rs. 11.82 crores (previous year Rs. 10.57 crores) and Net Loss of Rs. 3.81 crores (previous year Rs. 3.22 crores). During the year, the company issued and allotted to your Company, 30,00,000 Redeemable Preference Shares of Rs. 100/- each for cash at par, aggregating Rs. 30 crores. The proceeds from the Preference Share issue are being utilised by the company for the construction of the destination luxury resort.

WelcomHotels Lanka (Private) Limited

During the year, WelcomHotels Lanka (Private) Limited (WLPL) was incorporated in Sri Lanka as a wholly-owned subsidiary of your Company with the objective of constructing, building and operating a mixed-use development project (Project) including a luxury hotel at Colombo. The Board of Investment of Sri Lanka provided about 5.86 acres of prime sea facing land in Colombo to the company on a 99-year lease for this purpose. The Project has been declared as a Strategic Development Project under the Strategic Development Projects Act No. 14 of 2008 of Sri Lanka.

Your Company has invested about US$ 75 million in WLPL by way of equity and loan and WLPL is in the process of finalizing the design and product configuration of the proposed Project.

Technico Pty Limited

The company continued to focus on upgradation and commercialisation of TECHNITUBER® Technology and field multiplication through its wholly owned subsidiaries in different geographies. The company is also engaged in the marketing of TECHNITUBER® seeds to global customers from the production facilities of its subsidiaries in India, China and Canada.

The companys leadership in the production of early generation seed potatoes and strength in agronomy continue to be leveraged by your Company not only for sourcing chip stock for the Bingo! brand of your Companys Branded Packaged Foods businesses but also for servicing the seed potato requirements of the farmer base of your Companys Other Agri Commodities business.

For the year under review:

a) Technico Pty Limited, Australia registered a Turnover of Australian Dollar (A$) 1.39 million (previous year A$ 1.13 million) and a Net Profit of A$ 0.14 million (previous year A$ 0.11 million). Turnover and Net Profit have improved due to higher TECHNITUBER® seed volumes and better price realization.

b) Technico Agri Sciences Limited, India registered a Net Revenue of Rs. 64.04 crores (previous year Rs. 48.20 crores) and a Net Profit of Rs. 17.48 crores (previous year Rs. 7.83 crores). Strong demand and firm prices coupled with the strength of the companys brand, product quality, on field performance and trade and customer relationships drove a 33% increase in Net Revenue and 75% improvement in Profit Before Tax. The company has taken credit for deferred tax assets of Rs. 3.80 crores in the year under review (previous year : Nil).

c) Technico Asia Holdings Pty Limited, Australia, Technico Technologies Inc., Canada and Technico Horticultural (Kunming) Co. Limited, China - There were no significant events to report with respect to the above companies.

King Maker Marketing, Inc.

King Maker Marketing Inc. (KMM) is a wholly owned subsidiary of your Company registered in the State of New Jersey, USA. It is engaged in the distribution of your Companys tobacco products in the US market.

During the year, the cigarette industry in the US continued to witness persistent volume decline compounded by tax increases and the continuing growth of Other Tobacco Products, several of which are as yet unregulated by the US Food and Drug Administration (FDA). A larger thrust by major cigarette manufacturers into the value segment coupled with increase in illicit sales driven by tax differentials between the States, contributed further to an extremely challenging business environment for the company. During the year, the company maintained steady volumes through enhanced sales and marketing inputs while Revenue declined by 2% due to pricing pressure. The resultant higher costs of sales and marketing were offset by lower contributions under the Master Settlement Agreement (MSA). Further, a favourable Arbitral Award, memorializing a Partial Settlement between certain states and the Participating Manufacturers to the MSA, on payments disputed in previous years, increased the companys earnings during this year.

As a result, the company recorded Net Sales of US$ 26.37 million (previous year US$ 26.95 million) and earned a Net Income of US$ 1.20 million (previous year US$ 0.48 million) during the financial year ended 31st March 2013. During the year, KMM paid a Dividend of US$ 1.0 million to your Company.

Government regulations in the tobacco sector continue to take shape and it is expected that the industry will consolidate further as US Food and Drug Administration regulations evolve, including in the Other Tobacco Product categories like Pipe Tobaccos and Cigars.

The company will continue to customise its strategies based on emerging regulations in the market.

ITC Global Holdings Pte. Limited

The Judicial Managers had been conducting the affairs of ITC Global Holdings Pte. Limited (Global) since 8th November, 1996 under the authority of the High Court of Singapore. Pursuant to the application of the Judicial Managers, the Singapore Court on 30th November, 2007 ordered the winding up of Global, appointed a Liquidator and discharged the Judicial Managers.

As stated in the previous years Reports, the Judicial Managers of Global had filed a Writ against your Company in November 2002 before the Singapore High Court claiming approximately US$ 18.10 million. Based on legal advice, your Company filed an appropriate application for setting aside the said Writ. On 2nd March, 2006 the Assistant Registrar of the Singapore High Court set aside the service of Writ of Summons on your Company and some individuals. Subsequently in November 2006, your Company received a set of papers purportedly sent by Global including what appeared to be a copy of the earlier Writ of Summons. Your Company filed a fresh Motion in the Singapore High Court praying for setting aside the said Writ of Summons, which was upheld by the Assistant Registrar of the Singapore Court on 13th August, 2007. Global filed an Appeal against this Order before the High Court of Singapore, which on 30th January, 2009, set aside the order giving leave to Global to serve the Writ out of Singapore against your Company and also dismissed the said appeal. Thereafter on 14th December, 2009, your Company received a binder purportedly sent by Global including what appeared to be a copy of the same old Writ of Summons. Based on legal advice, your Company again filed a Motion in the Singapore High Court praying for setting aside the said Writ of Summons. On 18th November, 2010, the Assistant Registrar of the Singapore High Court passed an order dismissing your Companys motion to set aside the Writ of Summons. Your Company filed an appeal against the Assistant Registrars decision which appeal was dismissed by the Singapore High Court. Pursuant to legal advice, your Company has since filed its defence in the trial proceedings.

BFIL Finance Limited

The company continues to focus its efforts on recoveries through negotiated settlements including property settlements and pursuit of legal cases against various defaulters. The company has no external liabilities outside the ITC group. The company will examine options for further business opportunities at the appropriate time.

Gold Flake Corporation Limited, Wills Corporation Limited, Greenacre Holdings Limited, ITC Investments & Holdings Limited and MRR Trading & Investment Company Limited

There were no major events to report with respect to the above companies.

NOTES ON JOINT VENTURES ITC Filtrona Limited

For the year ended 31st December 2012, ITC Filtrona Limited recorded a Gross Revenue of Rs. 229.40 crores (Rs. 180.99 crores in 2011) and Pre-tax profits of Rs. 19.39 crores (Rs. 15.63 crores in 2011). While the Cigarette Filter industry had to contend with a steep hike in raw material prices and adverse foreign exchange rates, the company saw an overall improvement in sales volume along with a better product mix. Continuous investment in filter making technology has enabled the company maintain its leadership position, enhance its technological edge over competition and cater to growth both in terms of product mix and volumes.

In continuation with its philosophy of balancing the need to scale up capacity and capability to service the growing demand and the return expectation of shareholders, the Directors of the company have recommended a dividend of Rs. 9.00 per ordinary share of Rs. 10/- each for the year ended 31st December, 2012.

The company strives to be the quality benchmark in cigarette filters, offer superior filter solutions to its customers and be the most preferred supplier to its customers. With excellent product and market development support from its joint venture partners, the company is well positioned for the future.

Maharaja Heritage Resorts Limited

Maharaja Heritage Resorts Limited, a joint venture of your Company with Jodhana Heritage Resorts Private Limited, currently operates 39 heritage properties across 13 States in India. The companys brand portfolio comprising Legend, WelcomHeritage Hotels and Nature Resorts, provides uniquely differentiated propositions to guests in the cultural, heritage and adventure tourism segments respectively.

During the financial year ended 31st March, 2013, the company recorded a Total Revenue of Rs. 3.86 crores (previous year Rs. 3.36 crores) and Net Profit of Rs. 0.44 crores (previous year Net Loss Rs. 0.26 crores).

The company has 9 properties under the upmarket Legend brand which has carved a niche for itself on the basis of superior service delivery and brand standards. The company also has 11 properties under the Nature Resorts brand and 19 properties under the WelcomHeritage Hotels brand which was recently awarded the Best Heritage Hotel Chain by Todays Traveller Awards 2012.

Espirit Hotels Private Limited

In July 2010, your Company had entered into a joint venture for developing a luxury hotel complex at Begumpet, Hyderabad. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in the joint venture company, Espirit Hotels Private Ltd. (EHPL) and will, inter-alia, provide hotel operating services to EHPL under an Operating Services Agreement upon commissioning of the hotel. Your Companys investment in EHPL stood at Rs. 46.51 crores as at 31st March, 2013.

While the site preparatory activity is underway, the company is in the process of finalising the design and product configuration of the proposed development.

Logix Developers Private Limited

In September 2011, your Company entered into a joint venture for developing a luxury hotel-cum-service apartment complex at Sector 105 in NOIDA. Under the terms of the Joint Venture Agreement, your Company acquired 26% equity stake in the joint venture company, Logix Developers Private Ltd. (LDPL) at an initial investment of Rs. 36.84 crores. Your Company will, inter-alia, provide hotel operating services to LDPL under an Operating Services Agreement, upon commissioning of the hotel.

The company is in the process of finalising the design and product configuration of the proposed development.

RISK MANAGEMENT

As a diversified enterprise, your Company has always had a system-based approach to business risk management. Backed by strong internal control systems, the current risk management framework consists of the following elements:

- The Corporate Governance Policy clearly lays down the roles and responsibilities of the various entities in relation to risk management. A range of responsibilities, from the strategic to the operational, is specified in the Governance Policy. These role definitions, inter-alia, are aimed at ensuring formulation of appropriate risk management policies and procedures, their effective implementation and independent monitoring and reporting by Internal Audit.

- The Corporate Risk Management Cell works with the businesses to establish and monitor the specific profiles including both strategic risks and operational risks. The process includes the prioritisation of risks, selection of appropriate mitigation strategies and periodic reviews of the progress on the management of risks.

- A combination of centrally issued policies and divisionally-evolved procedures brings robustness to the process of ensuring business risks are effectively addressed.

- Appropriate structures have been put in place to proactively monitor and manage the inherent risks in businesses with unique / relatively high risk profiles.

- A strong and independent Internal Audit function at the Corporate level carries out risk focused audits across all businesses, enabling identification of areas where risk management processes may need to be improved. The Audit Committee of the Board reviews Internal Audit findings, and provides strategic guidance on internal controls. The Audit Compliance and Review Committee closely monitors the internal control environment within your Company and ensures that Internal Audit recommendations are effectively implemented.

- At the business level, Divisional Auditors continuously verify compliance with laid down policies and procedures, and help plug control gaps by assisting operating management in the formulation of control procedures for new areas of operations.

- A robust and comprehensive framework of strategic planning and performance management ensures realisation of business objectives based on effective strategy implementation. The annual planning exercise requires all businesses to clearly identify their top risks and set out a mitigation plan with agreed timelines and accountability. Businesses are required to confirm periodically that all relevant risks have been identified, assessed, evaluated and that appropriate mitigation systems have been implemented.

The combination of policies and processes as outlined above adequately addresses the various risks associated with your Companys businesses. The senior management of your Company periodically reviews the risk management framework to maintain its contemporariness so as to effectively address the emerging challenges in a dynamic business environment.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances. Your Company remains committed to ensuring an effective internal control environment that provides assurance on the efficiency of operations and security of assets.

Well established and robust internal audit processes, both at business and corporate levels, continuously monitor the adequacy and effectiveness of the internal control environment across your Company and the status of compliance with operating systems, internal policies and regulatory requirements. In the networked IT environment of your Company, validation of IT security continues to receive focused attention of the internal audit team which includes IT specialists.

The Internal Audit function consisting of professionally qualified accountants, engineers and IT specialists reviews the quality of planning and execution of all ongoing projects involving significant expenditure to ensure that project management controls are adequate to yield value for money.

Your Companys Internal Audit function is certified as complying with ISO 9001:2008 quality standards in its processes.

The Audit Committee of your Board met nine times during the year. It reviewed, inter-alia, the adequacy and effectiveness of the internal control environment and monitored implementation of internal audit recommendations including those relating to strengthening of your Companys risk management policies and systems. It also engaged in overseeing financial disclosures.

HUMAN RESOURCE DEVELOPMENT

Your Companys unique talent brand - Building Winning Businesses. Building Business Leaders. Creating Value for India - backed by its strong corporate equity, has enabled the attraction and retention of high quality talent. This talent pool and its strong alignment with your Companys Vision, has contributed to enhancing your Companys standing as one of Indias most valuable corporations. The innovative engagement initiatives with premier campuses and effective use of social media has enabled your Company showcase the career and leadership opportunities available and has attracted both high quality entry-level talent from premier technology and management institutes as well as talent from the market for middle and senior-level opportunities. Your Companys unique Management Trainee programme has over the years, developed a robust talent and leadership pipeline that has enabled rapid growth of existing businesses and entry into new businesses as well. In addition, your Companys comprehensive talent development strategy has enabled the enhancement of the competitive capability of each business.

Your Company believes that the achievement of its growth objectives will depend largely on the ability to innovate continuously, connect closely with the customer, and create and deliver superior and unmatched customer value. Towards this end, your Company has assiduously built a culture of continuous learning, innovation and collaboration across the organisation by providing cutting-edge learning and development inputs to its employees, along with a judicious blend of coaching, mentoring and on the job training. Your Company has been able to galvanise its human resource to become more agile, leverage change, stay ahead of competition and win in the market.

Your Companys human resource management systems and processes are designed to empower employees and enable them adopt innovative approaches to creating enduring value. These processes aim to create a responsive, customer-centric and market-focused culture that enhances organisational capability and vitality, so that each business is internationally competitive and equipped to exploit emerging market opportunities.

The strategy of organisation lays great emphasis on developing and supporting distributed leadership and this has ensured that each of your Companys businesses is managed by a team of competent, passionate and inspiring leaders, capable of building an organisation anchored in a culture of learning, innovation and world-class execution. Your Companys performance management system has been instrumental in creating a strong performance culture.

Your Company firmly believes that alignment of all employees to a shared vision and purpose is vital to win in the market. Your Company also recognizes the mutuality of interests of key stakeholders and is committed to building harmonious employee relations. During the year under review, your Company successfully concluded long-term agreements at several of its manufacturing units and hotel properties and also ensured smooth commencement of operations at greenfield locations. The collaborative spirit across all sections of employees has resulted in significant enhancement in quality and productivity, further bolstered by continuous investment in contemporary management practices and manufacturing systems.

Your Companys human resource believes that the drive for progress is in being never satisfied with the status quo. Your Company is confident that every one of its over 25,900 employees will relentlessly strive to deliver world-class performance, innovate newer and better ways of doing things, uphold human dignity and foster team spirit and discharge their role as trustees of all stakeholders with true faith and allegiance. Your Company is committed to perpetuate this vitality of ITC - its growth in physical terms and also its growth as a great institution - so that your Company will continue to grow and succeed in its never-ending pursuit of value creation.

SUSTAINABILITY - CONTRIBUTION TO THE TRIPLE BOTTOM LINE

Your Companys Vision to subserve larger national priorities and create enduring societal value is the inspiration for its multi-dimensional sustainability initiatives that are today acknowledged as global exemplars. Your Companys sustainability strategy aims to significantly enhance national wealth through superior Triple Bottom Line performance that builds and enriches the countrys economic, environmental and societal capital. It is premised on the belief that the transformational capacity of business can be very effectively leveraged to create significant societal value through a spirit of innovation and enterprise. Your Companys Triple Bottom Line contribution is manifest in the creation of innovative business models that not only generate new sources of competitive advantage for its businesses, but also in the process enables the replenishment of natural capital and augmentation of sustainable livelihoods.

It is a matter of humble pride that your Companys sustainable business models and value chains have supported the creation of 5 million sustainable livelihoods, a majority of them for the weakest in society. It has sustained its position as the only company in the world to have achieved the global environmental distinctions of being carbon positive (for 8 consecutive years), water positive (for 11 years in a row) and solid waste recycling positive (for 6 years successively). Your Companys renewable energy portfolio enables over 41% of its power requirements to be met from such clean sources - a significant achievement given the large manufacturing base of your Company. Further, all the premium luxury hotels and several factories of your Company are LEED (Leadership in Energy & Environmental Design) certified at the highest Platinum level by the US Green Building Council / Indian Green Building Council.

Your Company published its 9th consecutive Sustainability Report during the year that detailed the progress made across all dimensions of the Triple Bottom Line for the year 2011-12. The report which is independently assured by Ernst & Young, is in accordance with the G3 Guidelines of the Global Reporting Initiative (GRI) and is validated by GRI at the highest A+ level. The 10th Sustainability Report covering the sustainability performance of your Company for the year 2012-13 is in an advanced stage of finalisation and will be available to you shortly. This report also supports your Companys first Securities Exchange Board of India (SEBI) mandated Business Responsibility Report, which forms part of this Report and Accounts.

Social Investments/Corporate Social Responsibility (CSR)

Your Company believes that Corporate Social Responsibility delivered in the context of its businesses makes it more effective, impactful, scalable and sustainable. Your Companys overarching aspiration to create meaningful societal value is manifest in your Companys strategy to enhance the competitiveness of value chains of which it is a part. It is therefore a conscious strategy to design and implement Social Investments / CSR programmes in the context of your Companys businesses, by enriching value chains that encompass the most disadvantaged sections of society, especially those residing in rural India, through economic empowerment based on grass-roots capacity building.

It is your Companys policy:

- To pursue a corporate strategy that enables realisation of the twin goals of shareholder value enhancement and societal value creation in a mutually reinforcing and synergistic manner.

- To align and integrate Social Investments / CSR programmes with the business value chains of your Company and make them outcome oriented. To support creation of on and off-farm sustainable livelihood sources thereby empowering stakeholder communities to conserve and manage their resources.

- To implement Social Investments / CSR programmes primarily in the economic vicinity of your Companys operations with a view to ensuring the long-term sustainability of such interventions.

- To contribute to sustainable development in areas of strategic interest through initiatives designed in a manner that addresses the challenges faced by the Indian society especially in rural India.

- To collaborate with communities and institutions to contribute to the national mission of eradicating poverty and hunger, especially in rural areas, through agricultural research and knowledge sharing, superior farm and agri-extension practices, soil and moisture conservation and watershed management, conservation and development of forest resources, empowering women economically, supplementing primary education and participating in rural capacity building programmes and such other initiatives.

- To align your Companys operations with the national objective of inclusive growth and employment generation by leveraging your Companys diversified portfolio, manufacturing bases, supply chains and distribution channels, to infuse an appropriate mix of capital and technology to further social business initiatives such as e-Choupal, animal husbandry, agarbatti rolling etc. and support organisations / institutions engaged in building linkages with local, regional and urban communities and markets.

- To sustain and continuously improve standards of Environment, Health and Safety through the collective endeavour of your Company and its employees at all levels towards attaining world-class standards and support other programmes and initiatives, internal or external, for the prevention of illness and combating of diseases as may be considered appropriate from time to time.

- To encourage the development of human capital of the Nation by expanding human capabilities through skills development, vocational training etc. and by promoting excellence in identified cultural fields.

In the social sector, the two most important stakeholders for your Company are: (a) the rural communities with whom your Companys agri-businesses have forged a long and enduring partnership through their crop development and procurement activities. These households operate in rain-fed conditions in some of the most moisture-stressed regions of the country; and

(b) the communities residing in close proximity of your Companys production units, who are unable to realise their full potential due to poor social infrastructure in the areas of education and health.

In line with the stakeholder needs, the thrust of your Companys social sector investment is on the following:

(a) Diversification of farming systems of the rural communities by broad-basing the farm and off-farm based livelihoods portfolio of the poor through an integrated approach that includes the development of wastelands, watersheds, agriculture and animal husbandry, and

(b) In the catchment habitations of manufacturing units, the focus is on the economic empowerment of women and developing social capital to prepare the beneficiaries for relevant and contemporary skills.

The footprints of your Companys Social Investments Programme now extends to 60 districts in the States of Andhra Pradesh, Bihar, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal.

Your Companys pioneering initiative of wasteland development through the Social Forestry Programme currently covers 33,448 hectares in 1,717 villages, impacting nearly 40,000 poor households. This is an integral part of your Companys overall Social & Farm Forestry initiative that covers a total of over 142,000 hectares today. This initiative is aligned to the pulpwood supply chain to create a sustainable source of raw material for your Company and also to meet the energy requirements of rural households. The highlight of this year was the incorporation of bio-diversity conservation as an integral part of the Social Forestry programme, which aims for in situ conservation of the local flora and fauna by protecting and improving production conditions in the selected plots.

The coverage of your Companys Soil and Moisture Conservation programme, designed to assist farmers in identified moisture-stressed districts, increased by an additional 26,637 hectares. 470 water-bodies were created during the year. The total area covered under the watershed programme cumulatively stands at 116,127 hectares. Your Company signed three new MOUs with the Government of Rajasthan for promoting sustainable livelihoods through watershed development in the districts of Bundi, Jhalawar and Pratapgarh under the governments Integrated Watershed Management Programme. With this, the total area to be brought under soil and moisture conservation through public-private-partnership projects has increased to over 144,000 hectares.

With the objective of providing a major thrust to creating a sustainable agricultural base, the year saw significant increases in all major interventions in this area. The number of Farmer Field Schools increased from 37 to 162. There was an almost three-fold increase in the number of farmers (5,129) and the demonstration plots (4,733) covered. The number of compost units increased nearly four-fold (503 in 2012-13) during the year.

18 new Agri Business Centres were formed during the year, taking the total to 51, to provide extension services to farmers. These centres provided agri-inputs worth Rs. 85.61 lakhs to nearly 3,211 farmers during the year.

Your Company gave equal emphasis to milch animals, the other important asset of rural households. The programme for genetic improvements of cattle through artificial insemination to produce high-yielding crossbred progenies is implemented through 303 Cattle Development Centres (CDCs) covering nearly 5,000 villages. These CDCs provided 2.75 lakh artificial inseminations during the year, thus taking the total to 10.82 lakh artificial inseminations performed till date.

Taking the next step in the development of a viable livestock economy, Dairy Development in Munger was a major focus area this year. Project Gomukh was launched in Munger to cater to the needs of veterinary services and to provide comprehensive techno- management support to dairy farmers. The overarching objectives of the Project are to achieve significant improvement in milk productivity and quality, thereby raising farm incomes. The milk procurement network was increased to 87 Milk Producer Groups (MPGs) with over 2,800 members. The average procurement in Munger was nearly 10,000 litres per day (lpd) with a peak of over 17,000 lpd. Dairy development in Saharanpur was initiated in two hubs. Comprehensive milk mapping studies have been completed at two other locations to enable planning for expansion of the dairy-led CSR in other locations.

The Womens Empowerment Programme covered over 18,791 women through 1,557 self-help groups (SHG) with total savings of Rs. 340 lakhs. Cumulatively, over 40,000 women were gainfully employed either through micro-enterprises or assisted with loans to pursue income generating activities. Agarbatti production received further impetus during the year with the introduction of 1,326 pedal machines in the states of Bihar, Uttar Pradesh, Tamil Nadu, Rajasthan, Andhra Pradesh, Madhya Pradesh and Maharashtra. This has led to high productivity gains, translating into significant increase in incomes for poor rural women. As a result, raw agarbatti production more than doubled from the previous year to 834 tonnes during 2012-13, and helped create livelihoods for more than 3,300 women. The agarbatti scenting unit located at Munger, owned and managed by women, also saw a significant increase in dispatches - up from 235 million sticks in 2011-12 to 367 million sticks in 2012-13 - thus enabling women to capture even greater value from this micro-enterprise.

Over 40,000 new students were covered through Supplementary Learning Centres and Anganwadis. Of these, 264 first generation learners were enrolled into formal schools for the first time in their lives. 964 government primary schools have so far been provided infrastructure support, which includes benches, classrooms, toilets, electrical fixtures, compound walls and gates. 627 youths were covered this year by the skills development initiative. In the area of sanitation, a total of 3,847 low cost sanitary units have been constructed cumulatively by the end of 2012-13.

The advances made towards contributing to Indias sustainable development goals have been possible, in large measure, due to your Companys partnerships with some globally renowned NGOs like BAIF, Dhan, FES, MYRADA, Pratham, SEWA, SRIJAN, DSC and WOTR amongst others. These partnerships, which bring together the best-in-class management practices of your Company and the development experience and mobilisation skills of NGOs, will continue to provide innovative grassroots solutions to some of Indias most challenging problems of development in the years to come.

Environment, Health & Safety

The strategic objective of your Companys Environment, Health & Safety programmes is to move towards greenest and safest operations across all ITC Units, optimisation of natural resource usage, sustainability measurement and monitoring as well as safety of all its people and assets. Towards this, significant efforts are targeted towards ensuring resource security through optimisation of resource-use and replenishment of natural resources, aligning strategy with the National Action Plan on Climate Change to help create sustainable livelihoods, enable adaptation and mitigation in agriculture whilst safeguarding operations and assets. Your Companys proactive processes for inculcating a safe and green culture are supported by regular audits based on EHS Audit guidelines that incorporate the latest standards and regulatory requirements.

Your Company is committed to ensuring a safe and healthy workplace for all employees, guests and visitors, by maintaining the highest levels of safety and occupational health standards. All units of your Company have best-in-class infrastructure, competent resources, management systems based on international standards as well as state-of-the-art fire and life safety measures, which are regularly monitored through rigorous audits. Your Companys approach entails consideration of safety as a value-led concept which drives behaviour change and supports the creation of a safety culture fully integrated with business improvement processes. In line with this philosophy, Behavioural Safety Culture Programs have been initiated in several of your Companys units which have already brought about tangible change in behaviour and perceptions on safety. Accordingly, this initiative will be rolled out across other business units in a progressive manner. The progress and commitment made by your Company in this vital area to protect its valued human resources have been reaffirmed by numerous national and international safety awards and certifications.

Your Company has addressed the critical area of climate change mitigation and adaptation through several innovative and pioneering initiatives. These include continuous improvement in energy conservation and efficiency, enhanced usage of renewable energy, creating a green built environment, waste reduction, maximising its reuse and recycling and increasing use of post consumer waste as raw material. Extensive integrated watershed development programmes, promotion of sustainable agricultural practices, and carbon sequestration through large-scale forestry initiatives extend these efforts down the value chain.

Several projects of your Company earn carbon credits leveraging the market-based mechanism for mitigating climate change, namely, the Clean Development Mechanism developed by United Nations Framework Convention on Climate Change (UNFCCC). Your Company is also well positioned to benefit from India specific schemes such as Perform, Achieve and Trade (PAT) and Renewable Energy Certificates (RECs) promoted by the Government of India.

In line with your Companys commitment to reduce dependence on fossil fuel based energy, significant progress has been made in enhancing the renewable energy portfolio. Improved utilisation of biomass and additional wind mills have led to over 41% of your Companys total energy requirements being met from renewable sources, compared to 38.5% during the year 2011-12. A systemic approach is being developed to ensure that your Company progressively moves towards a benchmark of utilising at least 50% of its total energy requirements from renewable sources in the near future.

Recognising that water resources will increasingly become an area of serious concern, your Company has made significant investments in water conservation and harvesting initiatives to enhance its positive water footprint. These include adopting best available technologies and benchmarked practices to achieve zero effluent discharges, providing treated wastewater for irrigation as an alternative for farmers in water stressed areas and enhancing rainwater harvesting both within units and across watershed catchment areas. All these initiatives have resulted in the creation of rainwater harvesting potential that is over two times the net water consumption of your Companys operations. Sustained efforts are made to ensure that your Company achieves the best international practices in this critical area as well as aligns itself with the National Water Policy that is presently under finalization.

Reaffirming your Companys commitment to the ethos of Responsible Luxury, all luxury Hotels of your Company are LEED Platinum certified making it the greenest luxury hotel chain in the world. ITC Grand Chola, the newly launched premium luxury hotel in Chennai, has secured a 5 Star Green Rating for Integrated Habitat Assessment (GRIHA) - the highest national rating for Green Buildings in India. The ITC Grand Chola is also the worlds largest LEED Platinum certified (Indian Green Building Council) green Hotel. All new constructions by your Company incorporate green / sustainability standards and existing buildings are also progressively implementing validated green attributes.

The Bombay Stock Exchange recently instituted 2 indices titled GREENEX & CARBONEX evaluating several green operational parameters as well as carbon performance. It is a matter of immense pride that your Company has been assigned the highest weightage in both the indices. Further, during the year, a detailed computation of greenhouse gas (GHG) inventory was carried out as per ISO 14064 standards, which was then assured at the highest Reasonable Level by Lloyds Register Quality Assurance Ltd. - a unique achievement considering the scale and spread of your Companys operations.

All units of your Company have made significant progress in achieving total recycling of waste generated by their operations, making your Company attain over 99.8% of waste recycling in 2012-13. The Paperboards and Specialty Papers business, which accounts for nearly 91% of the total waste generated in your Company, recycled 99.9% of the total waste generated by its operations. This business also recycled an additional 118,462 tonnes of externally sourced post-consumer waste paper, thereby creating yet another positive environmental footprint.

Your Companys Wealth Out of Waste (WOW) programme continues to create significant awareness amongst the public on the benefits of the Reduce- Reuse-Recycle paradigm. This initiative, which also contributes to the protection of environment, improvement in civic amenities, public health and hygiene, has received rich accolades from the Government, NGOs, commercial institutions and the public at large. Your Company thereby supports the generation of sustainable raw material inputs for its processes, whilst generating considerable livelihood opportunities for the underprivileged.

During the year, an Integrated Sustainability Data Management System was implemented for effective monitoring & review of business specific Key Performance Indicators whilst providing a single platform across your Company for all reporting requirements such as Global Reporting Initiative, SEBI Business Responsibility Report and Carbon Disclosure Project. This System will improve management of sustainability issues and drive increasing efficiencies across your Companys business units.

Creating Thought Leadership in Sustainability

The CII - ITC Centre of Excellence for Sustainable Development, set up by your Company jointly with the apex national chamber Confederation of Indian Industry (CII) in 2006, continues its endeavours to promote sustainable business practices amongst corporates across the country. During the year, the Centre trained and raised awareness of over 2,000 business managers on various sustainability issues. It has expanded its gamut of activities to meet the core objectives of creating awareness, promoting thought leadership and building capacity amongst Indian enterprises in their quest for sustainable growth and business solutions. The 7th Sustainability Summit, held in October 2012, continued its legacy of bringing together thought provoking leaders to share the challenges, long-term strategies and best practices for sustainable and inclusive development.

It featured senior politicians, bureaucrats, best brains of Indian industry and MNCs around the globe. The Summit and Exhibition were attended by over 300 participants. The CII - ITC Sustainability Awards, instituted to recognise excellence in sustainability performance, have honoured a large number of leading Indian companies and provided encouragement to many others. The winners of the Sustainability Awards 2012 were announced at an imposing function in Vigyan Bhawan, New Delhi on January 14, 2013 amongst an audience of 1,500 people. The occasion was graced by the Honble President of India Shri Pranab Mukherjee as the Chief Guest.

The Centre is today playing a major role in engaging with policy makers to create an environment that encourages the adoption of sustainable business practices. The Centre has been engaged with various stakeholders for advocacy on Clause 135 of the new Companies Bill 2012, which refers to the CSR activities of a company. The Centre is a consulting partner in several policy interventions such as Green Guidelines for Public Procurement, Low Carbon Expert Group of the Planning Commission, National Innovation Council, Ministry of Corporate Affairs on CSR Policy, National Awards for Prevention of Pollution, Rajiv Gandhi Environment Awards for Clean Technology and Technology and Finance Committee under the Montreal Protocol. It is also represented on the Board of the Central Pollution Control Board and other bodies.

Societal Capacity Enhancement

In line with its core value of trusteeship, your Company supports various initiatives that build the capability of Indias rich human resource pool thereby empowering the nations fast growing working-age population. It also helps preserve Indias rich cultural heritage, enhancing the spirit embodied in its credo of Lets Put India First.

To cater to the need for professionally trained human resources in the fast growing hospitality industry, your Company contributed to setting up the Welcomgroup Graduate School of Hotel Administration (WGSHA) together with the Dr. TMA Pai Foundation in 1987. WGSHAs training and development activities are recognised by the International Hotel Association, Paris. The college has been ranked amongst the top educational institutions in the sector over the years. Graduates of the college are today part of several leading hotel chains of the world. WGSHAs mission is to mould young men and women into competent and responsible professionals with the potential to emerge as future leaders in the hospitality industry. As part of its efforts to remain contemporary, WGSHA faculty members are positioned in ITC Hotels to understand Best Practices employed at the hotels. A significant number of WGSHA students are sent for 6-month internships to various ITC Hotels. The college started with an annual intake of 30 students which has increased to 100 students over the years.

The ITC Sangeet Research Academy (ITC SRA) is a true embodiment of sustained corporate commitment to a priceless national heritage. It is a unique institution recognised for being the finest repository of Hindustani classical music. With a commitment that has remained consistent for over 35 years, ITC SRA is the worlds first and only professionally managed modern Gurukul, blending modern day research methods with the purity of the age old "Guru-Shishya" tradition. ITC SRA has as its mission the preservation and propagation of Hindustani Classical Music. With a galaxy of 9 pre- eminent Gurus and 50 scholars, the Academy is presently engaged in carrying the message of Hindustani Classical Music across our country from the metros to rural India. Recent forays into neighbouring Bangladesh have brought home another dimension of the shared sub- continental heritage.

Your Company also supports a number of initiatives for vocational training within the catchment areas of its operations that have proven to be effective in empowering youth with requisite skills to increase their employability in the market. Employment opportunities have also been created for differently-abled people suited to their capabilities.

R&D, QUALITY AND PRODUCT DEVELOPMENT

Your Company continues to invest in a comprehensive Research & Development programme leveraging its world-class infrastructure, benchmarked processes, state-of-the-art technology and a business-focused R&D strategy.

As your Company moves into its second century, your Company seeks not only to create world-class products but also improve the quality of life and deliver care and wellness to consumers. In order to reflect this change your Companys erstwhile ITC R&D Centre has been transformed into ITC Life Sciences & Technology Centre.

ITC Life Sciences & Technology Centre (LSTC) has a mandate to develop unique sources of competitive advantage and build future readiness by harnessing contemporary advances in several relevant areas of science and technology and blending the same with classical concepts of product development and leveraging cross business synergies. This challenging task of driving science-led product innovation has been carefully addressed by appropriately identifying the required set of core competency areas of science such as Plant Breeding and Genetics, Agronomy, Microbiology, Cell Biology, Genomics, Proteomics, Silviculture and several disciplines of Chemistry. Presently, the LSTC team has evolved with over 250 world-class scientists and is creating Centres of Excellence in these areas. LSTC is carrying out research and securing proprietary technologies for your Companys businesses.

The Agrisciences R&D team has continued its efforts in evaluating and introducing several germplasm lines of identified crops including Casuarina and Eucalyptus to increase the genetic and trait diversities in these species, towards developing new varieties with higher yields, better quality and other relevant traits for your Companys businesses. LSTC has initiated several research collaborations with globally recognized Centres of Excellence to remain contemporary and fast track its journey towards demonstrating multiple proofs of concept. These collaborations, covering identified species, are designed in a manner that enables your Company in gaining fundamental insights into several technical aspects of plant breeding and genetics and the influence of agro-climatic conditions on the growth of these species. Such interventions will accelerate LSTCs efforts in creating future generations of these crops with greater genetic and trait diversities and leading to significant benefits for your Companys businesses. Further, these outcomes have a strong potential to contribute towards augmenting the nations ecological capital as well.

Recognising the unique construct of your Company in terms of its strong presence in agriculture, food and personal care businesses, a convergence of R&D capabilities is being leveraged to deliver future products aimed at nutrition, health and well-being. Advances in biosciences are creating a convergence of these areas and it is likely that several future developments in these businesses and their products are heavily influenced by convergence. In this context, LSTC has created a Biosciences R&D team to design and develop several long-term research platforms evolving multi-generation product concepts and associated claims that are fully backed by scientific evidence for the Foods and Personal Care businesses. In addition, LSTC has evolved a strategy in building a new value chain called, Nutrition with a special focus on Indianness and health and well-being founded on the basis of value added agriculture (VAA). The initial activities related to VAA have already commenced with a focus on Soya.

LSTC has a clear vision and a road map for long-term R&D, to ensure an outstanding journey in to the next century backed by a well-crafted Intellectual Property Strategy. With scale, speed, science and sustainability considerations, LSTC is poised to deliver long-term competitive advantage and play a lead role in creating significant business impact for your Company.

Pursuing your Companys relentless commitment to quality, each business is mandated to continuously innovate on processes and systems to deliver superior competitive capabilities. During the year, your Companys Hotels business leveraged its Lean and Six Sigma programmes to improve business process efficiencies. This will further enhance capability to create superior customer value through a service excellence framework. The Paperboards, Paper & Packaging business continued to pursue Total Productive Maintenance (TPM) programmes in all units, resulting in substantial cost savings and productivity improvements.

All manufacturing units of your Company have ISO quality certification. All manufacturing units of the Branded Packaged Foods businesses (including contract manufacturing units) and hotels have stringent food safety and quality systems. All Company owned units / hotels and almost all contract manufacturing units of the Branded Packaged Foods businesses are certified by an accredited third party in accordance with Hazard Analysis Critical Control Points (HACCP) methodology. Additionally, the quality of all FMCG products of your Company is regularly monitored through Product Quality Ratings Systems (PQRS).

EXCISE

As mentioned in the previous years Report of the Directors, a demand for Rs. 27.58 crores made by Central Excise Department, Bengaluru, in respect of a period prior to March 1983, was set aside by the Commissioner (Appeals), Bengaluru, by his Order dated 22nd November, 1999, which order was confirmed by the CEGAT, Chennai vide its order dated 18th December, 2003. The Department has filed an appeal before Supreme Court, which is pending.

With respect to the Munger factory, proceedings for finalisation of assessments for the period prior to March 1983 resulted in the Deputy Commissioners Orders dated 29th August, 2002 and 8th October, 2002 demanding Rs. 13.09 crores and Rs. 1.73 crores for clearances of cigarettes and smoking mixtures respectively. These were confirmed by the Commissioner (Appeals), Patna vide his orders dated 22nd December, 2004, against which your Company has preferred appeals before CESTAT, Kolkata, which are pending. Your Company had made pre-deposits of Rs. 2 crores and Rs. 0.55 crores against the aforesaid demands at the stage when its appeals were pending before Commissioner (Appeals), Patna.

Although your Company, in a spirit of settlement, paid the differential Excise Duty that arose out of an Order of the Director General dated 10th April, 1986, as early as in March, 1987, and although the Excise Departments aforesaid Demands had either been quashed or stayed, the Collectorates in Meerut, Patna and Bengaluru, during the year 1995, filed criminal complaints in the Special Court for Economic Offences at Kanpur, Patna and Bengaluru, charging your Company and some of its Directors and employees who were employed with your Company during the period 1975 to 1983 with offences under the Central Excises & Salt Act, 1944, purportedly on the basis of the Order of the Director General dated 10th April, 1986. Your Directors are advised that no prosecution would lie on the basis of the aforesaid Order of the Director General dated 10th April, 1986. As earlier reported, the criminal case in respect of the Bengaluru factory was quashed by the Court. In the proceedings relating to Saharanpur and Munger factories, the individuals concerned have been discharged.

In all the above instances, your Directors are of the view that your Company has a strong case and the Demands and the Complaints are not sustainable.

Since your Company is contesting the above cases and contending that the Show Cause, the Demand Notices and the Complaints are not sustainable, it does not accept any liability in this behalf. Your attention is drawn to the Note 31(iv) in the Notes to the Financial Statements and Note 28(iv) in the Notes to the Consolidated Financial Statements.

LUXURY TAX

As mentioned in earlier years, the Honble Supreme Court declared the various State luxury tax levies on cigarettes and other goods as unconstitutional. The Court further directed that if any party, after obtaining a stay order from the Court, had collected any amount towards luxury tax from its customers / consumers, such amounts should be paid to the respective State governments. Since your Company had not charged or collected any amounts towards luxury tax during the relevant period, there is no liability on your Company in this regard. However, the State of Andhra Pradesh has filed a contempt petition in the Supreme Court claiming a sum of about Rs. 323.25 crores towards luxury tax, and a further sum of about Rs. 261.97 crores towards interest, on the allegation that your Company had charged and collected luxury tax from its customers, but in view of a stay order passed by the Court on 1st April, 1999, did not pay the tax to the government. The States contention is baseless, contrary to facts and is also contrary to the assessment orders passed by the State luxury tax authorities consistently holding that your Company, right from 1st March, 1997, did not charge or collect any amount towards luxury tax from its customers. Accordingly, the States petition is being contested.

RECOVERY OF DUES FROM THE CHITALIAS AND PROCEEDINGS INITIATED BY THE ENFORCEMENT DIRECTORATE

You are aware that your Company had secured from the District Court of New Jersey, U.S.A, a decree for US$ 12.19 million together with interest and costs against Suresh and Devang Chitalia of U.S.A and their companies, and that the Chitalias had filed Bankruptcy Petitions before the Bankruptcy Court, Orlando, Florida, which are yet to be determined.

As explained in the previous reports of the Directors, though your Company has written off the export dues in foreign exchange from the Chitalias with the approval of the Reserve Bank of India, your Company continues with its recovery efforts in the Indian suit against the Chitalia associates. The suit is in progress.

In the proceedings initiated by the Enforcement Directorate, in respect of some of the show cause memoranda issued by the Directorate, after hearing arguments on behalf of your Company, the appropriate authority has passed orders in favour of your Company, and dropped those memoranda.

Meanwhile, some of the prosecutions launched by the Enforcement Directorate have been quashed by the Calcutta High Court while others are pending.

TREASURY OPERATIONS

During the year, your Companys treasury operations continued to focus on deployment of temporary surplus liquidity and manage the foreign exchange exposures within a well-defined risk management framework.

The year under review was characterized by falling interest rates with the Reserve Bank of India reducing Policy rates by a cumulative 100 basis points. However, tight liquidity conditions in the Banking system brought about intermittent spikes in money market interest rates. In this environment your Company, by appropriately managing portfolio duration continued to improve its treasury performance.

All investment decisions in deployment of temporary surplus liquidity continued to be guided by the tenets of Safety, Liquidity and Return. The portfolio mix during the year was constantly rebalanced in line with changing interest rate scenario which helped enhance yields. Further, by the year end, in line with expectations of lower interest rates, the portfolio was rebalanced with exposures in long-dated Fixed Maturity Plans and Bank Fixed Deposits. Your Companys risk management processes ensured that all deployments were made with proper evaluation of underlying risk while remaining focused on capturing market opportunities.

In the foreign exchange market, the Indian Rupee depreciated during the year and was witness to bouts of high volatility. In a scenario where Rupee was under continuous pressure, your Company adopted an appropriate forex management strategy, which included use of foreign exchange forward contracts and plain vanilla options, to protect business margins and reduce risks / costs.

As in earlier years, commensurate with the large size of the temporary surplus liquidity under management, treasury operations continue to be supported by appropriate control mechanisms, including an independent check of 100% of transactions, by your Companys Internal Audit department.

TAXATION

As mentioned in the Report of the Directors of earlier years, your Company had obtained Stay Orders from the Honble Calcutta High Court in respect of the Income Tax notices for re-opening the past assessments for the period 1st July, 1983 to 30th June, 1986. This status remains unchanged.

As stated in the Report of the Directors of earlier years, in respect of similar Income Tax notices for re-opening the past assessments for the period 1st April, 1990 to 31st March, 1993, the Honble Calcutta High Court had admitted the Writ Petitions and ordered that no final assessment orders be passed without the leave of the Court. This status also remains unchanged.

PUBLIC DEPOSITS

Your Companys Public Deposit Scheme closed in the year 2000. As at 31st March, 2013, there were no deposits due for repayment except in respect of 2 deposit holders totalling Rs. 20,000 which have been withheld on the directives received from government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Companys erstwhile Schemes.

INVESTOR SERVICE CENTRE

The Investor Service Centre (ISC) of your Company, accredited with ISO 9001:2008 certification, provides best-in-class investor services through an experienced team of professionals. ISC continues to upgrade its infrastructure, systems and processes to provide exemplary services to the shareholders and investors of the Company. The level 5 rating, the highest possible rating, accorded by Messrs. Det Norske Veritas for the fourth consecutive year, stands testimony to the excellence achieved by ISC in providing quality investor services.

ISC, in its constant endeavour to further improve its services, requests feedback on your experience as a shareholder or investor. The Shareholder Satisfaction Survey questionnaire for this purpose is being sent to the Members. This questionnaire can also be accessed from the Companys corporate website www.itcportal.com under the section Investor Relations and can be submitted online.

DIRECTORS

Mr. Kurush Noshir Grant, a Wholetime Director of your Company since 20th March, 2010, completed his term on 19th March, 2013. The Board of Directors of your Company (the Board) at its meeting held on 18th January, 2013, appointed Mr. Grant as Additional Director with effect from 20th March, 2013, and subject to the approval of the Members, also as Wholetime Director for a period of five years from 20th March, 2013.

Ms. Meera Shankar and Mr. Sahibzada Syed Habib-ur- Rehman were appointed by the Board at its meeting held on 27th July, 2012 as Additional Non-Executive Directors of your Company with effect from 6th September, 2012 and 27th July, 2012, respectively.

By virtue of the provisions of Article 96 of the Articles of Association of your Company and Section 260 of the Companies Act, 1956, Ms. Shankar and Mr. Rehman will vacate office at the ensuing Annual General Meeting (AGM) of your Company.

Your Board at its meeting held on 17th May, 2013, recommended for the approval of the Members the appointment of Ms. Shankar and Mr. Rehman as Non- Executive Directors of the Company, liable to retire by rotation, with effect from the date of the ensuing AGM of your Company.

Mr. Dinesh Kumar Mehrotra, Mr. Sunil Behari Mathur and Mr. Pillappakkam Bahukutumbi Ramanujam were appointed as Non-Executive Directors of your Company with effect from 30th July, 2008 and their present term will expire on 29th July, 2013. Your Board at its meeting held on 17th May, 2013 recommended for the approval of the Members the re-appointment of Messrs. Mehrotra, Mathur and Ramanujam as Non-Executive Directors of the Company, liable to retire by rotation, with effect from 30th July, 2013.

Notices, under Section 257 of the Companies Act, 1956, have been received from Members of the Company for the appointment / re-appointment of Ms. Shankar, Messrs. Grant, Rehman, Mehrotra, Mathur and Ramanujam, who have filed their consents to act as Directors of the Company, if appointed.

Appropriate resolutions seeking your approval to the aforesaid appointments / re-appointments are appearing in the Notice convening the 102nd AGM of your Company.

In accordance with the provisions of Article 91 of the Articles of Association of the Company, Mr. Shilabhadra Banerjee, Mr. Angara Venkata Girija Kumar, Mr. Hugo Geoffrey Powell, Dr. Basudeb Sen and Mr. Balakrishnan Vijayaraghavan will retire by rotation at the ensuing AGM of your Company and being eligible, offer themselves for re-election. The Board has recommended their re-election.

AUDITORS

Statutory Auditors

Your Companys Auditors, Messrs. Deloitte Haskins & Sells, retire at the ensuing AGM and, being eligible, offer themselves for re-appointment. Since not less than 25% of the Subscribed Share Capital of your Company is held collectively by Public Financial Institutions, the re-appointment of Auditors is being proposed as a Special Resolution in accordance with Section 224A of the Companies Act, 1956.

Cost Auditors

Your Company had appointed (i) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost records maintained by the Paperboards and Specialty Papers business and (ii) Messrs. Shome & Banerjee, Cost Accountants, Kolkata, for cost records in respect of Paper products other than the cost records maintained by the Paperboards and Specialty Papers business for the financial year ended 31st March, 2012. The Cost Audit Report was filed by the Cost Auditor on 23rd January 2013 within the due date of 28th February 2013.

In respect of the financial year ended 31st March, 2013, your Company, has appointed (i) Mr. P. Raju Iyer, Cost Accountant, Chennai, as Cost Auditor for audit of cost records maintained by the Paperboards and Specialty Papers business (ii) Messrs. Shome & Banerjee, Cost Accountants, Kolkata, for cost records in respect of Paper products other than the cost records maintained by the Paperboards and Specialty Papers business. They were also appointed as the Cost Auditors in respect of Plastics & Polymers, Apparel, Edible Oil Seeds & Oil, and Plantation products. (iii) Messrs.

S.Mahadevan & Co., Cost Accountants, Chennai, were appointed as the Cost Auditors for Packaged Food products. The due date for filing the Cost Audit Reports is 27th September, 2013.

EMPLOYEE STOCK OPTION SCHEME

Under your Companys Employee Stock Option Schemes, 8,34,08,810 Ordinary Shares of Rs. 1/- each, were issued and allotted during the year upon exercise of 83,40,881 Options; such shares rank pari passu with the existing Ordinary Shares of your Company. Consequently, the Issued and Subscribed Share Capital of your Company as at 31st March, 2013 stands increased to Rs. 790,18,33,110/- divided into 790,18,33,110 Ordinary Shares of Rs. 1/- each.

Details of the Options granted up to 31st March, 2013 and other disclosures as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the SEBI Guidelines) are set out in the Annexure to this Report.

Your Companys Auditors, Messrs. Deloitte Haskins & Sells, have certified that your Companys Employee Stock Option Schemes have been implemented in accordance with the SEBI Guidelines and the resolutions passed by the Members in this regard.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

d) prepared the Annual Accounts on a going concern basis.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, ITC Group Accounts form part of this Report & Accounts.

These Group Accounts also incorporate the Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures as notified under the Companies (Accounting Standards) Rules, 2006. These Group accounts have been prepared on the basis of audited financial statements received from Subsidiary, Associate and Joint Venture Companies, as approved by their respective Boards.

OTHER INFORMATION

The total number of employees as on 31st March, 2013 stood at 25,959.

The certificate of the Auditors, Messrs. Deloitte Haskins & Sells confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

Particulars as required under Section 217(1)(e) of the Companies Act, 1956 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

There were 83 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 60 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 5 lakhs per month or more during the financial year ended 31st March, 2013. The information required under Section 217(2A) of the Companies Act, 1956 and the Rules thereunder, in respect of the aforesaid employees, is provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words anticipate, believe, estimate, expect, intend, will and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Your Companys Board and employees are inspired by the Vision of sustaining ITCs position as one of Indias most admired and valuable companies, creating enduring value for all stakeholders, including the shareholders and the Indian society. Your Company has created multiple drivers of growth by developing a portfolio of world-class businesses which have synergised to deliver Total Shareholder Returns at a compound annual growth rate of over 26% during the 17 year period from 1996 to 2013. Each business within the portfolio is continuously engaged in upgrading strategic capability to effectively address the challenge of growth in an increasingly competitive market scenario. Effective management of diversity enhances your Companys adaptive capability and provides the intrinsic ability to effectively manage business risk. The vision of enlarging your Companys contribution to the Indian economy is manifest in the creation of unique business models that foster international competitiveness of not only its businesses but also the entire value chain of which they are a part.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

17th May, 2013 On behalf of the Board

Virginia House

37 J L Nehru Road

Kolkata 700071 Y. C. DEVESHWAR Chairman

India P. V. DHOBALE Director

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Mar 31, 2012

The Directors submit their Report for the financial year ended 31st March, 2012.

The following sections outline your Company's progress in pursuit of the 'Triple Bottom Line' objectives.

FINANCIAL PERFORMANCE

Your Company posted yet another year of impressive results with strong topline growth and high quality earnings, reflecting the robustness of its corporate strategy of creating multiple drivers of growth. This performance is particularly remarkable when viewed against the backdrop of the extremely challenging business context in which it was achieved, namely, a slowdown in the economy, high levels of inflation and the continuing cascading impact of arbitrary increases in VAT on cigarettes.

Gross Revenue for the year grew by 14.2% to Rs 34871.86 crores. Net Revenue at Rs 24798.43 crores grew by 17.2% primarily driven by a 23.6% growth in the non-cigarette FMCG businesses, 20.0% growth in Agri business and 16.6% growth in the Cigarettes segment. Profit before tax increased by 22.4% to Rs 8897.53 crores while Net Profits at Rs 6162.37 crores registered a growth of 23.6%. Earnings Per Share for the year stands at Rs 7.93 (previous year Rs 6.49). Cash flows from Operations aggregated Rs 8334 crores compared to Rs 7528 crores in the previous year.

Continuing with your Company's chosen strategy of creating multiple drivers of growth, your Company is today, the leading FMCG marketer in India, the second largest Hotel chain, the clear market leader in the Indian Paperboard and Packaging industry and the country's foremost Agri business player. Your Company's wholly owned subsidiary, ITC Infotech India Limited, is one of India's fast growing Information Technology companies in the mid-tier segment. Additionally, over the last sixteen years, your Company's Gross Revenues and Net Profits recorded an impressive compounded growth of 12.7% and 21.8% per annum respectively. During this period, Return on Capital Employed improved substantially from 28.4% to 45.4% while Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compounded annual growth rate of 25.7% during this period, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital. Your Company today is one of India's most admired and valuable corporations with a market capitalisation of nearly Rs 180000 crores and has consistently featured, over the last sixteen years, amongst the top 10 private sector companies in terms of market capitalisation and profits.

Your Directors are pleased to recommend a Dividend of Rs 4.50 per share (previous year - Rs 4.45 per share including a Special Dividend Rs 1.65 per share) for the year ended 31st March, 2012. Total cash outflow in this regard will be Rs 4089.04 crores (previous year Rs 4002.09 crores) including Dividend Distribution Tax of Rs 570.75 crores (previous year Rs 558.62 crores) representing an increase in the payout over last year that included Rs 1484 crores as Special Dividend, including Dividend Distribution Tax, declared to commemorate your Company's 100th AGM.

Your Board further recommends a transfer to General Reserve of Rs 650.00 crores (previous year Rs 498.76 crores). Consequently, your Board recommends leaving a surplus in Statement of Profit and Loss of Rs 1972.59 crores (previous year Rs 548.67 crores).

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The ITC group's contribution to foreign exchange earnings over the last ten years amounted to nearly US$ 4.9 billion, of which agri exports constituted 56%. Earnings from agri exports are an indicator of your Company's contribution to the rural economy through effectively linking small farmers with international markets.

During the financial year 2011/12, your Company and its subsidiaries earned Rs 3072 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs 2621 crores, mainly on account of exports of agri-commodities. Your Company's expenditure in foreign currency amounted to Rs 1859 crores, comprising purchase of raw materials, spares and other expenses of Rs 1153 crores and import of capital goods at Rs 706 crores. Details of foreign exchange earnings and outgo are provided in Note 28 to the Financial Statements.

PROFITS, DIVIDENDS AND SURPLUS

(Rs in Crores)

PROFITS 2012 2011

a) Profit Before Tax 8897.53 7268.16

b) Tax Expense

- Current Tax 2664.29 2263.71

- Deferred Tax 70.87 16.84

c) Profit for the year 6162.37 4987.61

SURPLUS IN STATEMENT OF PROFIT AND LOSS

a) At the beginning of the year 548.67 61.31

b) Add : Profit for the year 6162.37 4987.61

c) Less:

-Transfer to General Reserve 650.00 498.76

- Proposed Dividend for the financial year

- Ordinary Dividend of Rs 4.50 per ordinary share of Rs 1/- each (previous year - Rs 2.80 per share) 3518.29 2166.68

- Special Dividend of Nil per ordinary share of Rs 1/- each

(previous year - Rs 1.65 per share) - 1276.79

- Income Tax on Proposed Dividends

- Current Year 570.75 558.62

- Earlier year's provision no (0.59) (0.60) longer required

d) At the end of the year 1972.59 548.67

BUSINESS SEGMENTS

A. FAST MOVING CONSUMER GOODS FMCG

- Cigarettes

The cigarette industry in India continues to be impacted by a discriminatory taxation and regulatory policy framework. The steep increase in the tax rates on cigarettes, both at the Central and at the State level, has led to the undesirable consequence of shifting consumption to lightly taxed or tax evaded tobacco products like Bidi, Khaini, Chewing Tobacco and Gutkha which are the most dominant forms of tobacco consumption in India and constitute as much as 85% of total usage. The twin objectives of revenue maximisation and tobacco control have been severely compromised by this lopsided tax policy on cigarettes which now contributes over 74% of tax revenue, whilst accounting for less than 15% of tobacco consumption. Further, the tax arbitrage opportunities have fuelled the rampant growth of illegal cigarettes.

The steep hike in Excise Duty rates announced in the Union Budget 2012 will further exacerbate the problem of discriminatory and high taxation on cigarettes within the tobacco industry.

The year under review also witnessed arbitrary and steep hikes in VAT rates on cigarettes by many States. This is a complete departure from the principles of uniform VAT rates enunciated by the Empowered Committee in its White Paper on State level Value Added Tax. Further, several States continued to levy discriminatory and higher rates of VAT on cigarettes compared to other tobacco products, thereby widening the tax gap amongst tobacco products. A plethora of 29 different tax rates are currently applicable on cigarettes across States in India which has forced manufacturers to adopt State specific pricing. Not only will this result in unproductive costs in managing supply chain complexities but also lead to potential disputes in the assessment of ad-valorem taxes. The imposition of non-uniform VAT rates by States also goes against the tenets of the draft National Competition Policy, which recommends a 'single national market' in line with the principle that fragmented markets impede competition. In addition, the resultant attractive tax arbitrage opportunity promotes illegal inter-State diversion of stocks by unscrupulous elements thus depriving the Government of revenue and diverting trade away from legitimate distribution channels.

The findings reported in the Global Adult Tobacco Survey (GATS) India, 2009-10 study, conducted under the aegis of the Ministry of Health & Family Welfare, shows that whilst the consumer base of tobacco in India stands at 34.6% of all adults, the cigarette share is only 5.7%. About 75% of Indian tobacco consumers consume non- smoking tobacco products mainly in the form of oral chewing products which constitutes the single largest consumer base for tobacco products in India. It may be noted that India, with 17% of the world population, accounts for 89% of global tobacco consumption in smokeless form. Cigarette consumption in India, on the other hand, constitutes only 1.9% of global consumption. This pattern of tobacco consumption is contrary to global trends, including that of our neighbouring countries, where cigarettes are the dominant form of tobacco consumption.

The domestic legal cigarette industry is faced with the growing menace of illegal cigarettes. Independent research indicates that, in India, whilst there is a fall in volumes of 'duty paid' cigarettes by 4.4% during the period 2005 to 2010, the 'duty-not-paid' volumes grew by 49.3% during the same period. India has now been recognised as one of the leading destinations for illegal cigarettes.

Attractive tax arbitrage opportunities, as a result of high level of taxes on the legal domestic cigarette industry in India, incentivises illegal flow of cigarettes into the country, especially of internationally advertised and known brands.

Another dangerous outcome of the increasing volume of illicit trade is that it encourages the entry of organised criminal syndicates, which can have serious law and order consequences for the country. Internationally, it has been reported that illegal profits from cigarette smuggling have been used to fund terrorist activities.

Coupled with our porous borders, cigarette imports under Open General License (OGL) make it extremely difficult to monitor and regulate the inflow of illegal stocks. Further, with the domestic cigarette industry being strictly regulated, including compulsory licensing under the Industrial (Development & Regulation) Act, 1951, a liberal import policy is contrary to the Government's tobacco control policies. This is also detrimental to the interests of Indian tobacco farmers, as it directly impacts the demand for indigenous tobacco by the domestic industry.

The demographic construct of India's population calls for multiple price points to meet the needs of the country's diverse consumer segments. The growth of illegal cigarettes is also aided by the vacuum created at lower price points, where legal industry has been unable to operate, due to a disproportionately high tax burden. Further, the lacunae in the provisions of the Industrial (Development & Regulation) Act, 1951 encourages 'fly by night' operators to manufacture illegal cigarettes without obtaining requisite licenses and clandestinely clear them without payment of taxes.

The industry had recommended that the Excise Duty rate at the entry level segment be reduced to Rs 200 per thousand cigarettes to enable the domestic legal industry to effectively counter illegal cigarettes with competitively priced products. Whilst, the length prescribed for the filter cigarette segment at the lowest end has been revised from 'length < 60mm' to 'length < 65mm', the Excise Duty on the segment has been retained at Rs 689 per thousand cigarettes. Coupled with alarmingly high State VAT and local taxes, the legitimate, duty paid, industry will still be unable to match the prices of product offers of the illegal industry, at the current Excise Duty level.

The implementation of Goods and Services Tax (GST) with a unitary standard rate of tax across the Indian common market will be an important milestone in the near future. As stated earlier, cigarettes, by virtue of being very highly taxed, offers a lucrative tax arbitrage opportunity and is vulnerable to large scale smuggling. Consequently, it is imperative that GST on cigarettes is levied in an appropriate manner i.e. at the uniform standard rate applicable to the general category of goods across the country, with availability of input tax credit. Central Excise Duty should continue to be levied only at specific rates. It is critical to note that any increase in the overall tax rate on cigarettes, will widen the arbitrage opportunity between legitimate cigarettes and illegal, tax evaded cigarettes. It is, therefore, critical that the combined incidence of Excise Duty and GST on cigarettes remains revenue neutral (i.e., kept at current levels).

Your Company, along with other stakeholders and industry bodies continues to represent to the regulatory authorities seeking a non-discriminatory tax and regulatory policy on tobacco products in the interest of the Government exchequer, domestic farmer community and industry.

Despite a difficult operating environment in the market place, it is gratifying to report that your Company further improved its market standing during the year. Your Company's uncompromising commitment to continuous and consistent offerings of value-added, world class products has been reinforced through innovations in product development and launch of differentiated offers. The portfolio continues to be strengthened through strategic investments in product quality and technology.

A premium line of hand-rolled cigars launched by your Company in 2010 under the brand name 'Armenteros' has gained significant consumer franchise, competing against world renowned Cuban and other cigar brands. The Armenteros range of cigars is now available in premium outlets across key cigar markets and is expected to further consolidate and grow its franchise.

During the year, a state-of-the-art, flexible, Primary Plant designed to cater to future product development requirements was successfully commissioned at Ranjangaon, Pune. The uncompromising focus on quality, investments in best-in-class technology and embedding of best practices has ensured the continued delivery of products of international quality. Structured problem solving methodologies like Six Sigma and several initiatives that foster innovation have been deployed to ensure sustained improvements in quality and productivity of all resources.

In line with your Company's commitment to building sustainable environmental capital, the business continues to invest in renewable sources of energy. A 6.3 megawatts (MW) wind energy facility has been commissioned in Maharashtra during the year. Solar panels have been installed for boiler feed water and furnace oil preheating systems at Bengaluru and Munger factories respectively. All units also maintained the highest standards of Environment Health and Safety (EHS) and won recognition by way of numerous awards. Saharanpur and Bengaluru factories were the first in India to obtain Platinum Green Factory Building Rating from the Indian Green Building Council as part of a holistic approach towards sustainability. Munger, Bengaluru, Saharanpur and Kidderpore factories have won the RoSPA Gold Award for Occupational Health and Safety. Munger factory was awarded the 'Shreshtha Suraksha Puraskar' from National Safety Council of India under Safety Award scheme 2010 (Manufacturing sector), and Certificate of Appreciation at the CII Eastern Region Energy Conservation Awards. The Bengaluru factory won the Energy Efficient Unit award under CII National Energy Award 2011, Energy Conservation Initiative Award by Centre for Sustainable Development, Innovative Rainwater Harvesting Project in the National Awards for Excellence in Water Management by CII, 'Unnatha Suraksha Puraskara' by National Safety Council- Karnataka Chapter, Karnataka Renewable Energy Development Limited (KREDL) award for achievements in Energy Conservation and Certificate of Appreciation under CII Southern Region Excellence Award in Environment, Health & Safety. The Kidderpore factory won the Water Efficient Unit Award under CII National Award for Excellence in Water Management 2011 and Certificate of Appreciation under CII Eastern Region Safety, Health and Environment (SHE) Award.

Your Company's Cigarettes business faces the daunting challenges of an unprecedented high incidence of taxation, complex tax structure, rising illegal trade and a discriminatory regulatory climate. Despite these challenges, the relentless pursuit of excellence in building robust, world class brands, innovation in processes and investment in world class technologies will enable your Company to further consolidate its market standing. Your Company believes that both the objectives of maximisation of the economic potential of tobacco and the tobacco control can be achieved through rationalisation of taxes on cigarettes, minimisation of discriminatory taxes between different classes of tobacco products and a regulatory framework that addresses the genuine concerns of all the stakeholders of the tobacco industry. The need is for a balanced agenda on tobacco, both fiscal and regulatory.

FMCG - Others

The Indian FMCG industry is estimated to be over Rs 160000 crores in size and accounts for nearly 2.2% of the GDP of the country. The industry has tripled in size over the last 10 years and has grown at approximately 17% CAGR in the last 5 years, driven by robust economic growth, rising income levels, increasing urbanisation and favourable demographic trends. These growth drivers are expected to continue to favourably impact the industry which is estimated to reach Rs 400000 crores by 2020 (Source: CII, FMCG Roadmap to 2020). According to a recent study by the consultancy firm Boston Consultancy Group, the Indian consumer market is poised to grow at a compounded annual growth rate of 15% between 2010 and 2020, faster than most other emerging markets.

Given these positive fundamentals, your Company has been rapidly scaling up its new FMCG businesses comprising Branded Packaged Foods, Personal Care Products, Education and Stationery Products, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches with Segment Revenues growing at an impressive compound annual growth rate of nearly 40% since 2005-06.

Within a relatively short span of time, your Company has established several strong consumer brands in the Indian FMCG market. Segment Results reflect the gestation costs of these businesses largely comprising costs associated with brand building, product development, R&D and infrastructure creation. The year under review saw a 24% growth in Segment Revenues and a significant improvement in Segment Results which recorded a positive swing of Rs 102 crores at the PBIT level.

Your Company's unwavering focus on quality, innovation and differentiation backed by deep consumer insights, world class R&D and an efficient and responsive supply chain will further strengthen its leadership position in the Indian FMCG industry.

Highlights of progress in each category are set out below.

Branded Packaged Foods

Your Company's Branded Packaged Foods business grew significantly during the year, recording growth in market shares and enhanced market standing across segments. A robust range of well-differentiated products, supported by significant investments in product development, innovation, manufacturing technology and unmatched distribution infrastructure continue to enhance the market standing and consumer franchise of your Company's brands. Continuing investments in R&D and product development have enabled your Company launch successful and innovative products. The quality of your Company's products continues to be 'best-in- class' in the industry across all segments. Value capture was improved through cost optimisation across the supply chain and optimal capital deployment.

During the year, the business witnessed inflationary pressures on input costs. Supply side constraints coupled with growing demand caused prices of edible oil, packaging material and industrial fuel to remain at inflated levels. These cost pressures were mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives.

Your Company ventured into the Instant Noodles category towards the end of 2010. The product has been well received by consumers and is already the second largest Instant Noodle brand in the country. Focused market research, deep consumer insights and innovative product formats under the 'Sunfeast Yippee!' brand is expected to further strengthen consumer traction in a fast growing and highly competitive industry segment.

In the Staples category, 'Aashirvaad' atta consolidated its leadership position aided by the strong performance of Aashirvaad 'Multi-grain' atta. Premium offerings of Aashirvaad 'Multi-grain' and 'Select' brands continued to grow rapidly aided by an increasing proportion of consumers shifting to these value-added propositions.

The Biscuits industry witnessed impressive growth during the year and your Company's 'Sunfeast' brand continued to do well across product platforms. Portfolio enrichment was driven through the launch of Sunfeast Dark Fantasy Choco Fills and Sunfeast 'Dual' Dream Cream. These two innovative, 'first to market' flavours created excitement amongst consumers and significantly enhanced the consumer franchise of the 'Sunfeast' brand.

In the Confectionery category, 'Candyman' and 'mint-o' continued to register strong growth during the year. The category witnessed two launches with mint-o GOL Green and mint-o Strong. The continued success of Toffichoo, Lacto and Choco-Double eclairs provided further impetus to the overall growth of the Confectionery business.

In the Savoury Snacks segment, the market standing of your Company's 'Bingo!' brand has significantly improved through enhanced brand building efforts. Use of digital media, word of mouth and clutter breaking advertisements improved brand salience. The product portfolio was further strengthened during the year with the launch of a new product format - 'Tangles' and a new innovative variant - 'Mad Angles Masti Chaat'.

The business continues to invest in manufacturing and distribution infrastructure to support larger scale and improve reach and availability. Supply Chain improvements to enhance product freshness, optimal servicing of proximal markets and margin expansion continue to receive significant attention.

Buoyed by increasing consumer franchise for your Company's brands, it is expected that the accelerated growth of the Branded Packaged Foods business will be sustained in the years ahead. The growth momentum of the Foods business will continue to be driven by focus on product quality, innovative product development, multi-point contact with consumers and high quality of service to all segments of trade.

Personal Care Products

Your Company's Personal Care Products business continued to make significant strides in strengthening its portfolio through a slew of new launches and extensions in the Soaps, Shampoos and Skin Care categories. The business continues to roll out its product offerings under the 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands across new geographies and is focused on addressing various consumer benefits with the introduction of new variants.

The year saw the successful introduction of a new range of soaps under the 'Vivel' franchise with the launch of 'Vivel Luxury Creme' variant and a new offering 'Vivel Clear 3-in-1' in the transparent soap segment. Your Company continues to receive accolades for its product innovation initiatives. In continuation of previous years' trends, this year, the 'Vivel Clear 3-in-1' transparent soap was voted 'Product of the Year' in the soaps category.

The business entered the Talcum Powder category during the year with the launch of 3 variants under the Fiama Di Wills brand. During the year, the business also made a foray into the fast growing Face Wash category with offerings under the Fiama Di Wills and Vivel brands. The fairness cream portfolio was augmented with the introduction of a new variant under the Superia brand. The new product launches as aforementioned have received encouraging consumer response and are being rolled out across target markets.

The business continued to grow at a healthy rate despite the high degree of competitive intensity especially from entrenched players. The strategy of developing products on the basis of deep consumer insights and superior quality has helped your Company gain market standing in a short span of time.

The year under review witnessed sharp escalation and volatility in the prices of key inputs. Your Company used a mix of smart sourcing strategies, value engineering and cost control measures to mitigate the impact thereof and enhance margins.

During the year, the factory at Manpura received certifications for ISO 9001 (Quality Management System), ISO 14001 (Environment Management System) and OHSAS 18001 (Occupational Health & Safety Assessment System) from Messrs. Det Norske Veritas (DNV). With this, the main production units of the business are certified for their quality management systems. A business-wide programme using 'Lean' and 'Six Sigma' methodologies, which was launched last year, was further broad-based during the current year in pursuit of process excellence.

Sustained investment in R&D over the years has resulted in a healthy pipeline of new and innovative products. Product innovation and quality continue to be focus areas that are expected to provide the requisite competitive advantage and impetus for growth in the near future. These interventions, together with investments in world class manufacturing processes and technology will enable the business to further strengthen its portfolio of value-added products.

The Personal Care industry in India continues to be on a long term growth path, with rising disposable incomes and changing consumer preference for enhanced personal grooming. The business is well poised to actively participate in the emerging growth opportunities in this sector and continues to leverage its strengths in the rapidly transforming landscape of beauty and personal care products in India.

Education & Stationery Products

Your Company is the leading and fastest growing player in the Indian stationery market. The flagship brand 'Classmate' is India's leading student notebook brand with a distribution footprint of over 75,000 stationery retail outlets across the country. Besides notebooks, the 'Classmate' brand offers a wide range of products that includes ball and gel pens, wood cased and mechanical pencils, mathematical instruments, erasers, sharpeners and scales. 'Classmate' also endorses 'Colour Crew', an art stationery brand, with a range of wax crayons, colour pencils and sketch pens for children.

The Classmate range of products is sourced from small scale manufacturers, who have over the years continuously improved their delivery and quality capabilities. A majority of them, with your Company's assistance, are ISO 9001:2008 certified. Paper and recycled board are sourced from your Company's mills at Bhadrachalam and Kovai respectively. The paper used in Classmate notebooks leverages your Company's world class fibre line at Bhadrachalam which is India's first ozone treated elemental chlorine free facility. Every Classmate notebook also carries a powerful social message that reflects your Company's commitment to improving the quality of primary education in rural India.

During the year, the business took significant steps to strengthen 'Paperkraft', its executive and office supplies stationery brand. Working in tandem with the Paperboards & Specialty Paper business, your Company has positioned 'Paperkraft' as the finest green paper for business applications viz. copy-scan-print-fax. Paperkraft's green credentials are supported, among other factors, by your Company's membership of the prestigious Global Forest & Trade Network.

The education and stationery products industry continues to grow on the back of massive government and private investments in the education sector. The government's flagship Sarva Shiksha Abhiyan programme coupled with the mid-day meals initiative is successfully enhancing enrolment and reducing dropouts at the primary school level. Likewise, it is expected that enrolment ratios at the secondary and tertiary levels will also improve. Progressive reforms will enable flow of private sector investments into capacity building and quality enhancement in education delivery. Further, the Right of Children to Free and Compulsory Education Act, 2009, will further accelerate growth in the education and stationery supplies sectors. Your Company's strong brands - 'Classmate' and 'Paperkraft' - with increasing consumer franchise, widening high quality product range and excellent distribution infrastructure is advantageously positioned to respond to this opportunity.

Lifestyle Retailing

During the year, your Company's Lifestyle Retailing business posted strong growth in revenues and continued to strengthen its position in the branded apparel market. After a buoyant first half, industry growth moderated in the second half due to the slowing down of the domestic economy and price increases effected by most industry players consequent to the introduction of Excise Duty on branded apparel in the Union Budget 2011 and rising input costs. The business's focus on strategic cost management actions and improvements in operational efficiencies helped to partly offset the adverse impact of tax and cost increases.

In the Premium segment, Wills Lifestyle with its superior product variety and richer product mix continued to enjoy strong consumer franchise. The retail footprint of the brand was expanded to 86 exclusive stores across 40 cities and more than 300 'shop-in-shops' in leading departmental stores and multi-brand outlets. Significant improvements were achieved during the year in terms of product range, enhanced availability and impactful visibility resulting in volume growth across channels.

Product appeal was enhanced through the introduction of differentiated offerings across several premium product platforms - 'Wonderpress' wrinkle free fabrics, 'Ecostyle' organic collection and 'Creme de Cotton' supersoft cottons. The 'Luxuria' range of Men's super-premium formals, finely crafted from luxurious Egyptian cotton with high-end trims and superior garmenting continued to receive positive consumer response. The Women's range was energised by offering an extensive, high-end designer wear range, stylised formals, a variety of trendy silhouettes and a premium range of accessories.

In the Popular segment, 'John Players' has established a strong pan-India presence with over 340 flagship stores and 1,100 multi brand outlets and departmental stores. During the year, the retail footprint was expanded significantly, with nearly 100 new stores being launched, increasing brand reach, penetrating more markets and acquiring new franchise. The denims category registered strong growth as a result of an enhanced range, premium differentiated washes and contemporary fits while continuing to receive positive consumer and trade response.

Wills Lifestyle continued to receive recognition from the industry, including the 'Superbrand' certification, and is the first Indian brand to receive the prestigious 'Oeko-Tex Standard 100 Certification'.

Business processes for creation of winning designs and efficient supply chain were strengthened during the year.

Improving retail and manufacturing productivity were pursued vigorously with continued focus on strengthening capability through training, knowledge and skill inputs.

The business will continue to increase the premium quotient of its offerings on the basis of deeper understanding of consumer preferences, and delivering products benchmarked to world class quality standards. Further investments are planned to enhance range vitality, supply chain responsiveness and superior customer service to delight the customer with an international shopping experience.

Incense sticks (Agarbattis)

Your Company's Agarbatti business recorded an impressive growth in revenues and enhanced market standing during the year, driven by increasing consumer franchise for the 'Mangaldeep' brand combined with deeper distribution reach and innovative consumer offerings. Mangaldeep is the second largest national brand in the industry.

During the year, the business launched several new variants under the umbrella brand 'Mangaldeep'. These variants have received wide consumer acceptance and are being rolled out across India.

The business continues to contribute to your Company's commitment to the 'Triple Bottom Line' by providing livelihood opportunities to more than 12,000 people through small and medium scale entrepreneurs and NGOs / Self Help Groups across India. Business initiatives of introducing enabling tools and technology in the rural communities continue to enhance product quality and increase the earning potential of agarbatti rollers. These initiatives, along with the continuing association with various State Governments for setting up sourcing centres, are creating sustainable livelihood opportunities for rural women through agarbatti rolling.

Safety Matches

Your Company's Safety Matches business maintained its market leadership aided by continued consumer preference for its strong brand portfolio across all market segments.

With sustained escalation in the prices of raw materials like wood, paperboard and key chemicals, industry margins remained under severe pressure during the year. Your Company mitigated the adverse impact of these input costs through a series of strategic cost management actions. Your Company continues to focus on enhancing market standing through the launch of high quality and value-added products.

Your Company continues to partner the small scale sector by sourcing a significant portion of its requirement from multiple units in this sector. Your Company is helping to improve the competitive ability of these units by providing technical inputs to strengthen their systems and processes.

Technology induction in manufacturing is crucial for the long term sustainability of this industry. A uniform taxation framework which provides a level playing field to all manufacturers is necessary to enable the required investments for modernising this industry. This would not only help the industry in improving its competitiveness but also provide a safer working environment for the large number of people employed in this industry.

B. HOTELS

The hospitality industry in India continued to be impacted by the slowdown in the domestic economy and adverse economic environment in the international feeder markets of the US and Europe. While the US market appears to be on the path of slow recovery, the European market is yet to come out of its debt problems and recession. As a result, both international and domestic business segments for the luxury hotels remained muted.

In the backdrop of these challenging circumstances, your Company's Hotels business registered a marginal growth in revenues and profits, while maintaining its leadership position in terms of operating margins.

Your Company's Hotels business continues to be rated amongst the fastest growing hospitality chains with 94 properties at 67 locations in India operating under 4 brands - 'ITC Hotel' at the luxury end, 'WelcomHotel' in the 5 star segment, 'Fortune' in the mid market to upscale segment and 'WelcomHeritage' in the heritage leisure segment. In addition, the business has licensing and franchising agreements for two brands - 'The Luxury Collection' and 'Sheraton' with the Starwood Hotels & Resorts.

Recognising the changing preferences of the business traveller, your Company launched a new brand under the 'Fortune' brand this year viz. 'My Fortune' which is designed to cater to the upscale business traveller. The first 'My Fortune' hotel was launched in Chennai during the year and further expansion is on the anvil.

During the year, your Company's premier hotel at Jaipur has been upgraded to an 'ITC Hotel' with 'The Luxury Collection' co-branding. The hotel is now known as 'ITC Rajputana' in line with other luxury properties of the chain.

Food and Beverage (F&B) remains a major strength of your Company and its iconic brands 'Bukhara', 'Dum Pukht' and 'Dakshin' continue to garner coveted international awards and accolades. The renovated Dum Pukht Restaurants at ITC Maurya and ITC Maratha have been highly appreciated by its patrons and generated healthy business during the year. Other signature F&B brands viz. 'West View', 'Kebabs & Kurries' and 'Pan Asian' have firmly established themselves and continue to sustain leadership position in their respective cities. The business's first Japanese cuisine brand 'Edo' has established itself as the benchmark for traditional Japanese cuisine in Bengaluru and is fast gaining recognition.

In pursuit of your Company's 'Triple Bottom Line' commitment, investments have been made in renewable energy to provide clean power to your Company's hotels in Bengaluru (ITC Windsor and ITC Gardenia), Mumbai (ITC Maratha) and Jaipur (ITC Rajputana). During the year, further investments in wind energy were made in Tamil Nadu to cater to the needs of the newly built ITC Grand Chola at Chennai. With these investments, your Company's Hotels business will meet nearly two-thirds of its energy requirements from clean and renewable sources.

Your Company remains committed to its 'Responsible Luxury' ethos and is the greenest luxury hotel chain in the world. With ITC Rajputana having obtained the 'Leadership in Energy and Environment Design' (LEED) Platinum rating during the year, all premium ITC Hotels now have this coveted rating.

During the year, your Company launched a unique pan-ITC consumer loyalty programme - 'Club ITC' - targeted at the premium clientele of 'Wills Lifestyle' and 'ITC Hotels'.

In view of the positive long term outlook for the Indian Hotel industry, your Company continues to sustain its investment-led growth strategy. Construction of the new super luxury property, ITC Grand Chola, at Chennai is now complete and slated to open in early 2012-13. The hotel is part of the 'ITC Hotel' brand and has 522 plush hotel rooms and suites, 78 service apartments, 60,000 sq. ft. of conference and banqueting facilities, 10 Food and Beverage outlets and the award-winning spa brand 'Kaya Kalp'. Construction activity of two new luxury properties at Kolkata and at Classic Golf Resort near Gurgaon is progressing satisfactorily. In addition, several new projects, including joint ventures and management contracts, are on the anvil to rapidly scale up the business across all brands.

The 'Fortune' brand which caters to the mid market to upscale segment continued its expansion by forging new alliances, taking the total number of hotels in its fold to 67 with an aggregate room inventory of over 5,000. Of these, 27 properties are under various stages of development. The 'WelcomHeritage' brand continues to be the country's most successful and largest chain of heritage hotels with 40 operating properties, spread across 13 States in India.

Your Company's Hotels business, with its globally benchmarked levels of product and service excellence and customer centricity, represented by its four brands is well positioned to sustain its leadership status in the industry and poised to emerge as the largest hotel chain in the country over the next few years.

C. PAPERBOARDS, PAPER AND PACKAGING

The Paperboards, Paper and Packaging segment recorded yet another year of steady growth in revenues and profits. Segment Revenues grew by 13% over the previous year to touch Rs 4130 crores. Segment Results at Rs 937 crores reflect a growth of 14%.

Paperboards & Specialty Papers

The global demand for paper & paperboard slowed down to 1% in 2011 as against a 6% growth in 2010. Even in India, demand decelerated to around 6.5% during 2011-12 against 7.1% in the previous year.

The global paper market continued to witness a structural shift with emerging economies, particularly in Asia such as China and India, driving the demand growth.

Though India has 17% of the world's population, it consumes only about 2% of global paper production. Per capita consumption in India is very low at only 9 kgs compared to a global average of 55 kgs, 65 kgs in China and 215 kgs in Japan.

Shift in demand to Asia and the low levels of per capita consumption in India offers Indian paper manufacturers exciting opportunities in the years to come. Though there is considerable scope for growth in the Indian paper market, competition, including from key global players, has also increased and the industry is witnessing large capital investments. Though growth in demand is expected to absorb the increased capacity, increasing and maintaining market share as well as protecting margins will be challenging.

Further, reduction of import duties under various Regional Free Trade Agreements especially with ASEAN has started impacting the profitability of the domestic paper industry. In line with the representations made by the Indian Paper Manufacturers Association, it is imperative that the current duty structures are kept unchanged.

The domestic paper and paperboard industry is currently estimated at 11.6 million tonnes per annum, out of which paperboards is 2.2 million tonnes per annum which is expected to grow at around 8% per annum aided by value-added paperboard at 12% per annum. The growth potential of the paperboard industry is anchored on expectations of higher GDP growth, increase in demand from rural markets, branded packaged products and organised retail. Further, the need for differentiated packaging coupled with change in lifestyles will continue to drive demand for paperboard. Your Company is the market leader in the paperboard segment with focus on the value-added products. To further consolidate its pre-eminent position in the industry, the business has invested in a state-of-the-art machine which is expected to be operational by early 2013.

The 'Writing and Printing' paper segment, estimated at 3.1 million tonnes, grew by 6.2% in the year under review. This segment produces papers for use in copiers, desktop printers, advertising and promotional materials, notebooks, books and annual reports. The growth in the value-added writing and printing paper segment will continue to be fuelled by initiatives like Sarva Shiksha Abhiyan and Right of Children to Free and Compulsory Education Act, 2009 as well as by increasing literacy levels, changing demographic profiles and GDP growth. This segment is expected to grow at around 8% per annum during the next 5 years, with higher growth expected in the Copier and Fine Paper categories at 16% per annum. The business with its strong forward linkages with your Company's Education and Stationery Products business has emerged as a leading player in the segment.

Specialty papers, with an estimated market size of 4.7 lakh tonnes, is expected to grow at 9.4% per annum over the next 5 years, with increased spends on infrastructure and construction driving demand for quality decor and insulating grades. Your Company is a market leader in decor grades and is the largest manufacturer of cigarette tissue in India.

Given that pulpwood availability is a major challenge for the paper industry, your Company continues with its policy of promoting social forestry plantations for pulpwood. During the year, over 57 million high quality saplings were sold/distributed to farmers. Research on clonal development has resulted in the introduction of high yielding and disease resistant clones which are adaptable to a wide variety of agro-climatic conditions.

This initiative, besides securing the long term supply of fibre at competitive costs, also assists in generating farm incomes through utilisation of marginal wastelands. Enhanced R&D activity has resulted in the development of high yielding eucalyptus and subabul clones and your Company's continued focus on clonal plantations in core areas is expected to yield significant competitive advantage in the years to come. Your Company's R&D team is actively collaborating with several expert agencies to further leverage bio-technology for enhancing farm productivity and wood yields.

In the last 15 years, your Company's bio-technology based research initiatives have resulted in the planting of about 545 million saplings covering nearly 1,25,000 hectares of plantations, including around 11,000 hectares planted during the year. These pioneering initiatives have generated over 56 million person days of employment opportunities over this period for small farmers and poor tribals. Your Company plans to accelerate the plantation activity and is in the process of setting up a new state-of-the-art clonal saplings production capacity in Bhadrachalam to facilitate the same.

Your Company continues to promote agro-forestry in pulpwood plantations on waste land as well as on land where mono-cropping is practised. This will generate additional income to farmers, provide wood security for the industry and also help in conservation of the environment. In Andhra Pradesh, mono-cropping is currently practised in cultivation of cotton, tobacco, maize and pulses in more than 30 lakh hectares. During the year under review, your Company facilitated the introduction of agro-forestry models which incorporate inter-cropping practices where eucalyptus trees are grown adjacent to agricultural crops. By integrating tree growing with crop production, the problems of poor agricultural production, worsening wood shortages and environmental degradation can be simultaneously addressed. Furthermore, inter-cropping technologies/practices also help to take pressure off the remaining natural forests and increases the diversity of vegetation on existing farms. During the year under review, a small beginning was made by your Company by promoting agro-forestry plantations in 600 hectares and this is proposed to be substantially increased in the years to come.

Your Company continues to represent to policy makers on the need to introduce appropriate amendments to the Forest (Conservation) Act, 1980 and related Rules, to permit industry to use degraded forest land for afforestation linked to the end-use of such wood.

An enabling policy framework that encourages public- private partnerships for the development of degraded forestlands would serve the multiple objectives of enhancing the competitiveness of the Indian paper and paperboard industry, reducing import dependence, creating sustainable livelihoods in rural India and contributing to the national objective of enhancing the country's green cover.

In India only 15% of the paper consumed is recovered for recycling as against about 70% in the western countries. Your Company's collaborative initiative called 'Wealth out of Waste' (WOW) continues to promote and facilitate waste paper recycling, with a view to conserving scarce natural resources. The waste paper industry is largely unorganised and a lot of effort has gone into establishing processes and systems in the operational areas of collection, sorting and grading of waste paper as well as on accounting, compliances and controls. It is expected that this effort would assist in the availability of quality fibre on a sustained and long term basis at competitive prices.

During the year about 26,000 tonnes of waste paper was collected and with continued focus on building capability it is expected that the entire waste paper requirements of the business would be sourced through this initiative over time. The first anniversary of National Recycling Day was celebrated in Hyderabad on 1st July 2011 with large participation from school children and general public. Your Company also launched the 'Save 100000 Trees' initiative during the year.

During the year, your Company achieved the distinction of being the first paper company in India to obtain the Forest Stewardship Council - Forest Management (FSC-FM) certification covering 8,000 hectares of social forestry plantations involving about 9,000 farmers.

FSC-FM certifies that the plantation activities of an organisation are economically, socially and environmentally viable. To the extent of pulp produced from such certified plantations, your Company will be able to commit to its customers, FSC certified papers & paperboards. Environmentally conscious customers are already beginning to show keenness to source such 'green' products which in turn will further increase the competitiveness of the business.

During the year, the Tribeni and Bollaram units also obtained the FSC Chain of Custody Certification ensuring that all four paper manufacturing units of your Company now have this certification.

Your Company has made significant investments in contemporary technologies including environment-friendly Elemental Chlorine-Free (ECF) and Ozone bleaching for pulp thereby improving the environmental standards of its manufacturing operations. Such investments are expected to provide customers with sophisticated products, way ahead of legislation, thereby creating new benchmarks in environmental stewardship. The Industry would welcome policies that lay down environmental benchmarks in tune with other industries such as automotives etc. and suitably reward those who achieve or exceed such parameters.

Your Company continues to focus on recycling initiatives including solid waste recycling. While all manufacturing units have already achieved near 100% solid waste recycling by its usage for making products like lime, fly ash bricks, grey boards, egg trays etc., the procurement and recycling of about 1,10,000 tonnes of waste paper during the year has further consolidated the business's overall positive solid waste recycling footprint.

Your Company continues to work on various Clean Development Mechanism (CDM) projects. Your Company's unique social forestry project is the first of its kind in India to be registered with the United Nations Framework Convention on Climate Change (UNFCCC) as a CDM project. About 3,100 hectares of social forestry plantations involving around 3,400 farmers have already been covered and the net benefits from this project will be passed on to the partnering farming communities.

During the year, the following awards of the British Safety Council were received by respective units - The 'Sword of Honour' by Tribeni and Bollaram units, the 'Globe of Honour for Environment' by Bhadrachalam and Kovai units, 5 Star rating for Safety & Health by Kovai, Tribeni and Bollaram units and 5 Star rating for Environment by Bhadrachalam and Kovai units. In addition, Bhadrachalam unit won the CII - National Award for Excellence in Energy Management and Kovai unit won the CII - National award for Excellence in Water Management. The business also won the CII - Environmental Best Practices Award 2012 for its 'WOW' initiatives.

The above have been made possible as a result of continuous focus on various safety initiatives including induction of safety stewards, strengthening systems, spreading awareness and integrating environment, health and safety (EHS) as part of the overall Total Productive Maintenance (TPM) initiative. In addition, all units have taken proactive steps to comply with the revised norms expected to be announced by the Central Pollution Control Board for water consumption and effluent discharge. With regard to energy consumption, strategies to contain usage across units continue to be pursued. Further, the business is also investing in a new high pressure fuel efficient boiler in its Tribeni unit, which will enable use of inferior grades of coal and also significantly reduce coal consumption. Your Company is also committed to increasing the share of energy consumed from non-conventional and renewable sources and towards this has commissioned 5 windmills close to Coimbatore to generate 7.5 MW of electricity for use at the Kovai unit. It is expected that energy efficiency coupled with greater use of renewable sources of energy will enable your Company to derive benefits from sale of Renewable Energy Certificates (RECs) under the Electricity Act 2003 as well as obtain benefits from newer initiatives like Perform, Achieve and Trade (PAT) under the Energy Conservation Act 2001.

The TPM initiative has now been extended to all units and apart from yielding significant financial benefits will also help institutionalise best-in-class systems, processes and work methods. The success of this initiative is attributable to the whole hearted support and participation of all employees across the business.

The year under review witnessed steep hikes in the cost of chemicals and coal as well as curtailment in supplies of coal by the government through the reduction of allocations, forcing the industry to buy high cost coal in the open market. These factors, together with the sharp depreciation of the Indian Rupee, adversely impacted the industry. However, your Company with its integrated operations and strategic cost management actions was able to minimise the adverse impact of these cost escalations.

The integrated nature of the business model - access to high-quality fibre from the economic vicinity of the Bhadrachalam mill, in-house pulp mill and state-of-the- art manufacturing facilities, focus on value-added paperboards and a robust forward linkage with the Education and Stationery Products business strategically positions your Company to further consolidate and enhance its leadership status in the Indian paperboard and paper industry.

Packaging and Printing

Your Company's Packaging and Printing business continues to provide contemporary and superior packaging solutions facilitated by its state-of-the-art technology and processes. The business continues to provide strategic support to your Company's FMCG businesses by providing innovative packaging solutions and security of supplies in addition to delivering benchmarked international quality at competitive costs.

The business continued to leverage its multiple packaging platforms to expand business in the domestic and export markets, and grew volumes both from existing customers as well as from enlargement of its customer base. Your Company continues to be a leading supplier of value- added packaging to the Consumer Electronics and FMCG sectors.

During the year, the business continued to invest in contemporary technologies in flexibles and paperboard packaging at the Haridwar and Chennai facilities. These in-house capabilities have enabled quicker turnaround of designs, pack changes and reduced product launch timelines for your Company's FMCG businesses, thereby providing a source of competitive advantage in the market place.

Your Company undertook expansion projects at Haridwar and Chennai, during the year, to address growing opportunities in external trade and to enable manufacture of a full range of packaging solutions from both locations. The expansion programme includes the addition of a carton line for meeting the growing needs of customers based in the northern region and balancing investment in flexibles packaging for enhancing competitiveness.

The business won several awards during the year for operational excellence, innovation and creativity. These include two 'World Star Awards' from the World Packaging Organisation, three 'Asia Star Awards' from the Asian Packaging Federation and thirteen awards instituted by Indian Flexible Packaging and Carton Manufacturers Association (IFCA) for excellence in packaging solutions.

The 14.1 MW wind energy farm in Tamil Nadu, set up in 2008, continues to operate at optimum levels providing clean energy to the Chennai unit. This initiative, flowing from your Company's commitment to the 'Triple Bottom Line', is a certified project under the Clean Development Mechanism of the Kyoto Protocol. Further, this initiative is generating carbon credits and contributing to a reduction in your Company's carbon footprint.

The factories at Chennai, Haridwar and Munger continued to maintain the highest standards in Environment, Health and Safety (EHS). Also, the Munger unit won the British Safety Council's International Safety Award during the year.

Continuing investments in world class technology, best- in-class quality management systems and processes, dispersed manufacturing footprint and a diversified packaging solutions portfolio, the business is well poised to service all the requirements of your Company's FMCG businesses and to rapidly grow its external trade.

D. AGRI BUSINESS

Cigarette Leaf Tobacco

While the end of 2010 marked a significant shift in the global supply-demand scenario triggered by declining sales of major global cigarette manufacturers and excess leaf production in major origins, 2011 witnessed a further continuation of this declining trend of global cigarette production, impacted by the downturn in the global economy. The downward correction in leaf tobacco demand led to world supplies moving to a surplus situation and a rapid build up of uncommitted stocks. Consequently, farm and export prices of Indian flue- cured crop witnessed significant declines. In line with subdued trends across the globe, Indian unmanufactured leaf exports degrew by about 20% in volume terms since 2009.

The position for Indian flue-cured virginia tobaccos gets further vitiated by the decrease in domestic demand due to high differential taxes on the end use products, namely, cigarettes vis-a-vis other types of tobacco. This gets further aggravated by the large scale import of cigarettes, both legal and contraband, into India which do not use domestic flue-cured virginia tobaccos.

In the short term, supply side corrections are anticipated in key origins after a period of consecutive increases in global flue-cured leaf production driven by muted demand and manufacturers seeking to lower their inventory durations. In the medium term, demand is expected to pick up gradually with the anticipated revival of the global economy coupled with growing consumption in Asia, Middle East, parts of Europe and Africa. It is also estimated that the consumption of other forms of tobacco like Roll-Your-Own (RYO), Snus and Hubble Bubble will grow at a faster rate, albeit on a smaller base.

Despite these adverse conditions, your Company was able to sustain the demand for Indian tobaccos through focused strategies leveraging its sources of competitive advantage in crop development, product integrity, strategic sourcing and superior processing capability. Significant volumes of flue-cured tobaccos were garnered through superior understanding of customer requirements and delivering committed quality and value to the customer. Your Company continues to focus on superior quality and varietal offerings to customers in the burley segment through collaborative and customised programmes. The business also engaged with potential customers across the globe and actively explored market opportunities in the growing smokeless tobacco segment through customised offerings.

The business continued to provide strategic sourcing support to your Company's Cigarettes business.

Achieving enhanced productivity continues to be a focus area of research and crop development initiatives of the business. Substantial progress has been made in strengthening the pipeline of new hybrid combinations for deployment in growth zones. Significant milestones were achieved in the development of a new curing regime for tobacco and further experimental trials are underway to create a unique product portfolio.

Your Company's pioneering R&D efforts on varietal improvements in leaf tobacco were further fortified with the development of various burley and oriental type tobaccos. These initiatives such as improved nursery management designed for higher efficiencies in seed use, optimised usage of crop production chemicals and other agronomic practices are helping improve the potential of newly developed varieties. These efforts are not only helping secure global demand for Indian leaf tobacco by providing enhanced value to global customers but also in improving the socio-economic status of the small/tribal farmer. Capitalising on your Company's R&D efforts on varietal improvement, the area under coverage of flue-cured virginia hybrids was substantially increased in collaboration with the Central Tobacco Research Institute and the Tobacco Board of India.

Your Company continues to focus on maintaining the highest quality and safety standards at all its units. During the year, the Chirala and Anaparti factories received the International Safety Award from the British Safety Council for ensuring 'Best Safety Management' systems and the Anaparti unit was awarded the 'National Level Excellence in Water Management Award', as 'Excellent Water Efficient Unit' by CII.

To further enhance quality and improve supply chain efficiencies, your Company commissioned a new facility in Karnataka with a capacity of 35 million kgs per annum. This investment will not only enhance in-house processing capacity but is also expected to reduce supply chain costs given the factory's proximity to the tobacco growing regions in Karnataka. The business is also actively engaged in augmenting its warehousing capacities and reengineering its supply chain from a strategic cost management perspective.

Your Company with its unmatched R&D capability, state- of-the-art facilities, unique crop development and extension expertise, deep understanding of customer and farmer needs, is well poised to leverage emerging opportunities for Indian leaf tobacco and sustain its position as a world class leaf tobacco organisation.

Other Agri Commodities

The Indian food grain production for the year is estimated at a record high of over 250 million tonnes mainly on account of increase in production of rice and wheat. Wheat output estimates are at an all-time high of about 90 million tonnes. Rice production, at around 103 million tonnes, was higher than 96 million tonnes in the previous year. Overall oil seed production was also on the higher side at about 30 million tonnes. However, India still continues to import nearly 50% of its requirement of edible oil.

The international soya bean market reflected a slowdown in arrival of quantities with all major producers showing a dip in production. Overall global production was about 8% lower than the previous year. While Brazil, Argentina and the US all reported lower crop outputs, demand from China was on the upswing. Although the Indian crop grew in terms of volume, it suffered in terms of quality due to pre-monsoon showers in the growing areas and as such was not able to leverage the uptrend in global prices. Your Company's uniquely structured commodity sourcing business model with strong competencies in multi-location sourcing, logistics and supply chain management was able to leverage its strengths to improve value capture in the soya market and significantly expand business scale.

Your Company continued to source identity preserved, special varieties of wheat through its e-Choupal network channel for its Branded Packaged Foods business. The continuous focus on minimising bridging costs of wheat for Aashirvaad atta, while seeking to capitalise on geographical and varietal arbitrage opportunities, provided a competitive advantage to your Company's Foods business. The external wheat business successfully catered to a wider range of customers, such as brand owners, private labels, food processors and millers.

In the area of potato sourcing, the business continued to support the Foods business by procuring the highest quality chip stock potatoes for your Company's Bingo! brand of potato chips. The endeavour of partnering with farmers to source locally grown potatoes (closer to manufacturing units) helped minimise logistics costs. Trials for the development of new varieties and new areas continued during the year and such extension efforts helped significantly increase potato crop this year in Gujarat.

India is the world's largest producer, consumer and exporter of spices. Export of spices from India has been growing at 23% per annum over the last 5 years. The growing concerns of food safety and product integrity have increased demand for suppliers with 'end-to-end' capabilities having complete custody of the supply chain, supported by appropriate technology, quality practices and augmented with traceability management systems to provide the required product assurance. Your Company seeks to harness this opportunity by building a business model based on customised products and services with requisite crop development, state-of-the-art infrastructure and tailor-made products and processes to garner an increasing share of the fast growing domestic and export spices marke

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Mar 31, 2011

For the Financial Year Ended 31st March, 2011

The Directors submit their Report for the financial year ended 31st March, 2011.

SOCIO-ECONOMIC ENVIRONMENT

World output staged a smart recovery in 2010 growing by 5% during the year after a decline of 0.6% in 2009. While growth in the first half of the year stood at 5.25%, there was a marked deceleration in the second half which recorded a growth of 3.75%. Receding fears of a global depression in 2009 initially led to a lower rate of destocking by business and subsequently to a phase of rebuilding depleted inventories. This fostered a sharp rebound in industrial production and trade which lasted through the first half of 2010. Simultaneously, accommodative policies adopted by most governments, improvement in business confidence and financial conditions encouraged investments and helped arrest rising unemployment levels and boost consumption. Consequently, recovery has become more self-sustaining and the risk of a double-dip recession in advanced economies has abated. The recovery, however, is broadly moving at two speeds. While economic growth in the advanced economies remained modest at around 3% in 2010 after a decline of 3.4% in 2009, emerging and developing economies recorded robust growth in excess of 7% during the year – led primarily by China and India. According to the International Monetary Fund (IMF), world real GDP growth for 2011 is forecast at 4.4%, representing a modest slowdown from 2010 levels. Real GDP in the advanced economies is expected to grow by 2.5% while that in the emerging and developing economies is forecast to grow by 6.5%. However, downside risks to these estimates continue to outweigh the upsides. In the case of advanced economies, the key concerns revolve around weak sovereign balance sheets, the possibility of financial troubles in peripheral Euro area spreading to core Europe, high levels of unemployment, the continued weakness of the US real estate market and the lack of progress in formulating

medium-term fiscal consolidation plans. In the emerging economies, key risks relate to overheating, asset price bubbles, rapid rise in inflationary pressures, spurt in commodity prices and the potential for boom-bust cycles could eventually result in a hard landing in these economies. With emerging markets accounting for 40% of global consumption and two-thirds of global growth, a slowdown in these economies could dent global recovery significantly.

Closer home, after growing at 8.0% in 2009/10, the Indian economy picked up further steam in 2010/11 recording a real GDP growth of 8.6% during the year. While the Agricultural sector posted an above-trend growth of 5.4% aided in part by a low base effect, Industry and Services grew by 8.1% and 9.6% respectively. After clocking an impressive growth of 8.9% in the first half of the year, the economy showed signs of moderation in the second half especially in capital goods production and investment spending. A good performance on the external front with exports growing by 37.5% even as imports grew by 21.6% during the year helped reduce the Current Account Deficit to approximately 2.5% of GDP from 2.8% in the previous year. The Centres Fiscal Deficit for the year stood at 5.1% of GDP – a significant improvement from 6.4% recorded in 2009/10 – driven by buoyant tax collections and proceeds of the 3G spectrum auction. However, amongst these positives, the persistently high level of inflation in the economy despite good monsoons was a key cause for concern. The year-on-year headline WPI inflation started trending up from December 2009 through to April 2010 when it touched 11%. After remaining in double digits from April 2010 to July 2010, headline inflation moderated progressively to 7.5% in November 2010 before reversing the trend from December 2010 mainly due to supply bottlenecks in food items. Inflation levels remained elevated in the December 2010 to March 2011 period mainly on account of fuel, power and non-food manufacturing products. Thus, the inflationary pressures,which emanated from food items clearly spilled over and became generalised, as the year progressed. The recent slowdown in Industrial growth, as reflected by the Index of Industrial Production (IIP) and data pertaining to the six core industries, is also a cause for concern.

According to the monetary policy statement released on May 3, 2011, RBIs baseline growth projection for the Indian economy is expected to slow down to 8% with year-end WPI inflation estimated at 6% with an upward bias. As the policy challenge shifts to taming inflation, the economy will have to contend with high interest rates which in turn could impact growth. Risks to global recovery as stated earlier, high commodity prices especially of oil - with Brent crude crossing USD 120 per barrel in April 2011 triggered by events in the MENA (Middle East and North Africa) region, elevated levels of inflation including in food prices, high subsidy burden arising out of high oil prices and commitments arising out of the proposed implementation of the National Food Security Bill pose the key downside risks to economic growth in the near term. In the medium to long term, Indias economic growth engine is expected to be powered by multiple drivers such as the increasing momentum in the savings and investment rates (which should further improve with Indias demographic dividend playing out in the ensuing years), a vibrant services sector, a large domestic demand base and the emergence of internationally competitive firms. The challenge of raising the growth bar to the desired double-digit levels, however, remains daunting and would require, inter-alia, significant improvement in agricultural productivity, step up in investments especially in physical and social infrastructure, skill development, achieving energy security, job creation and addressing the governance deficit. As captured in the Union Finance Ministers 2011 Budget speech, "...in the medium term perspective, our three priorities of sustaining a high growth trajectory; making development more inclusive; and improving our institutions, public delivery and governance practices, remain relevant."

Indias rapid economic growth in recent years and the prospects of building further on this momentum in the medium to long-term has led it to command a new respect in the world order. According to recent studies

India is expected to be the third largest economy by 2050. Indias demographic trends indicate that the nation will add over 200 million people to the working age population over the next 20 years, more than any other country in the world. Several studies indicate a near tripling of household disposable incomes and a burgeoning middle-class which will comprise over 40% of Indias population and grow ten-fold to touch 583 million people by 2025. These trends augur well for the nation and could provide enormous opportunities for private enterprise and sustaining the growth trajectory. Yet, with 17% of the worlds population, 2.4% of global land mass, 4% of the worlds freshwater resources and 1% of the worlds forest resources, the pressure of economic growth on the countrys natural capital will be enormous. Equally, the need to make economic growth more equitable and inclusive is compelling.

A comprehensive growth strategy for rural India, including the agricultural sector which continues to underperform, is necessary to address the serious issues relating to sustainability and inclusive growth. The governments focus on social sector programmes such as Bharat Nirman, National Rural Employment Guarantee Scheme (NREGS), Sarva Shiksha Abhiyan, food security legislation and strategies to improve benefit delivery mechanisms have the potential to transform the Indian rural landscape. It is here that unique business models like the ones forged by your Company can supplement the efforts of the government in creating societal value and enhancing societal capital. It is an essential pre-requisite of rural development that markets are co-created with local communities and in a constructive public-private-people partnership.

Your Companys e-Choupal network is a close replica of this model. It provides the farming community with value-added services such as crop advisories, advance weather forecasts, output price discovery, direct communication tools and distribution of unadulterated agri inputs. The footprint of this network is well established to source most requirements of your Companys Branded Packaged Foods business and is poised to grow in line with entry into newer categories. Similarly, your Companys unique and path-breaking ‘Choupal Pradarshan Khet (CPK) initiative, a collaborative and paid extension service aimed towards enhancing farm productivity with emphasis

on adoption of sustainable agricultural best practices, continues to attract the interest of both farmers and partnering companies. The demonstration plots under CPK have recorded significant productivity gains as compared to control plots. An estimated 40,000 farmers participated in this programme during the year.

In line with the national agenda of pursuing sustainable and inclusive growth, your Company is proactively engaged in enlarging its contribution across the three dimensions of the ‘Triple Bottom Line - economic, environmental and social - through investments and operations that foster the competitiveness of entire value chain that it is engaged in. In line with this philosophy, it is your Companys endeavour to embed larger societal goals in its various business models. Major initiatives in this direction include the e-Choupal network which is contributing to increasing rural incomes by providing a wide range of support services to the farming community, the Social and Farm Forestry programmes which create sustainable livelihoods among marginal farmers and poor tribals, adoption of environment friendly technologies including the increasing use of renewable sources of energy, recycling processes and creation of rainwater harvesting structures. Such initiatives have combined to make ITC the only Company in the world, of comparable size, to be ‘carbon positive, ‘water positive and ‘waste recycling positive.

The following sections outline your Companys progress in pursuit of the ‘Triple Bottom Line objectives.

FINANCIAL PERFORMANCE

Your Company, in its Centenary Year, posted yet another year of stellar performance with an impressive topline growth and high quality earnings reflecting the robustness of its corporate strategy of creating multiple drivers of growth. This performance is particularly noteworthy when viewed against the backdrop of the extremely challenging business context in which this was achieved, namely, the steep increase in excise duties in the Union Budget 2010 coupled with the amplified impact of arbitrary increases in VAT on cigarettes, brand building and incubation costs of the new FMCG businesses, the impact of the significant investments made in augmenting distribution infrastructure and the gestation costs of the large investments in the Hotels business.

Gross Turnover for the year grew by 16.5% to Rs. 30604.39 crores. Net Turnover at Rs. 21167.58 crores grew by 16.6% primarily driven by a 23.1% growth in the non-cigarette FMCG businesses, 22.9% growth in Agri business and 17.6% growth in the Hotels segment. Pre-tax profits increased by 20.8% to Rs. 7268.16 crores while Post-tax profits at Rs. 4987.61 crores registered a growth of 22.8%. Earnings Per Share for the year stands at Rs. 6.49 (previous year - adjusted for Bonus Issue - Rs. 5.34). Cash flows from Operations stood at Rs. 7460 crores compared to Rs. 6632 crores in the previous year.

Your Company completed 100 years in August 2010. It is a matter of great pride to reflect on the enormous progress made by your Company over the years. Your Company today is the leading FMCG marketer in India, the second largest Hotel chain, the clear market leader in the Indian Paperboard and Packaging industry and the countrys foremost Agri business player. Additionally, your Companys wholly owned subsidiary, ITC Infotech India Limited, is one of Indias fast growing Information Technology companies in the mid-tier segment.

Over the last fifteen years, your Company has created multiple drivers of growth by developing a portfolio of world class businesses. During this period, your Companys Gross Turnover and Post-tax profits recorded an impressive compounded growth of 12.7% and 21.7% per annum respectively. Profitability, as measured by Return on Capital Employed improved substantially from 28.4% to 43.4% during this period. Total Shareholder Returns, measured in terms of increase in market capitalisation and dividends, grew at a compounded rate of 25.6% during this period, placing your Company amongst the foremost in the country in terms of efficiency of servicing financial capital. It is indeed a matter of pride that your Company was ranked, by The Boston Consulting Group, an international management consultancy firm, amongst the top 10 global consumer goods companies in terms of sustained shareholder value creation for the period 2005 - 2009. Your Company today is one of Indias most admired and valuable corporations with a market capitalisation in excess of Rs. 140000 crores and has consistently been, over the last fifteen years, amongst the top 10 private sector companies in terms of market capitalisation.

Last year, in celebration of your Company completing a 100 years, your Directors had recommended and you had approved a Special Centenary Dividend of Rs. 5.50 per share (adjusted for bonus issue - Rs. 2.75 per share) in addition to a Dividend of Rs. 4.50 per share (adjusted for bonus issue - Rs. 2.25 per share). Your Directors had also recommended and you had approved a 1:1 Bonus issue in the Centenary year. This year, on the occasion of your Company convening its milestone Hundredth Annual General Meeting, your Directors are pleased to recommend a Special Dividend of Rs. 1.65 per share (previous year – Nil) in addition to a Dividend of Rs. 2.80 per share (previous year - adjusted for bonus issue - Rs. 2.25) for the year ended 31st March, 2011.

Total cash outflow in this regard will be Rs. 4002.09 crores (previous year Rs. 4452.33 crores) including Dividend Distribution Tax of Rs. 558.62 crores (previous year Rs. 634.15 crores). Your Board further recommends a transfer to General Reserve of Rs. 498.76 crores (previous year Rs. 406.10 crores). Consequently, your Board recommends leaving an unappropriated balance in the Profit and Loss Account of Rs. 548.67 crores (previous year Rs. 61.31 crores).

FOREIGN EXCHANGE EARNINGS

Your Company continues to view foreign exchange earnings as a priority. All businesses in the ITC portfolio are mandated to engage with overseas markets with a view to testing and demonstrating international competitiveness and seeking profitable opportunities for growth. The ITC groups contribution to foreign exchange earnings over the last ten years amounted to nearly USD 4.5 billion, of which agri exports constituted 57%. Earnings from agri exports are an indicator of your Companys contribution to the rural economy through effectively linking small farmers with international markets.

During the financial year 2010/11, your Company and its subsidiaries earned Rs. 3123 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 2814 crores (Rs. 2354 crores in 2009-10), powered by exports of major agri-commodities. Your Companys expenditure in foreign currency amounted to Rs. 1254 crores, comprising purchase of raw materials, spares and other expenses of Rs. 1028 crores and import of capital goods at Rs. 226 crores. Details of foreign exchange earnings and outgo are provided in Schedule 19 to the Accounts.

PROFITS, DIVIDENDS AND RETENTION

(Rs. in Crores)

2011 2010

a) Profit before Tax 7268.16 6015.31

b) Income Tax 2280.55 1954.31

c) Profit after Tax 4987.61 4061.00

d) Add: Profit brought forward from previous year 61.31 858.14

e) Surplus available for Appropriation 5048.92 4919.14

f) Transfer to General Reserve 498.76 406.10

g) Proposed Dividend for the financial year - Ordinary Dividend of Rs. 2.80 per ordinary share of Rs. 1/- each (previous year - adjusted for Bonus Issue - Rs. 2.25 per share) 2166.68 1718.18

- Special Centenary Dividend of Nil per ordinary share of Rs. 1/- each (previous year - adjusted for Bonus Issue - Rs. 2.75 per share) - 2100.00

- Special Dividend of Rs. 1.65 per ordinary share of Rs. 1/- each (previous year - adjusted for Bonus Issue - Nil) 1276.79 -

h) Income Tax on proposed dividends 558.62 634.15

i) Earlier years provision no longer required (0.60) (0.60)

j) Retained Profit carried forward to the following year 548.67 61.31 5048.92 4919.14

TAXATION

As mentioned in the Report of the Directors of earlier years, your Company had obtained Stay Orders from the Honble Calcutta High Court in respect of the Income Tax notices for re-opening the past assessments for the period 1st July, 1983 to 30th June, 1986. This status remains unchanged.

As stated in the Report of the Directors of earlier years, in respect of similar Income Tax notices for re-opening the past assessments for the period 1st April, 1990 to 31st March, 1993, the Honble Calcutta High Court had admitted the Writ Petitions and ordered that no final assessment orders be passed without the leave of the Court. This status also remains unchanged.

PUBLIC DEPOSITS

Your Companys Public Deposit Scheme closed in the year 2000. As at 31st March, 2011, there were no deposits due for repayment except in respect of 2 deposit holders for Rs. 0.20 lakhs which have been withheld on the directives received from government agencies.

There was no failure to make repayments of Fixed Deposits on maturity and the interest due thereon in terms of the conditions of your Companys erstwhile Schemes.

INVESTOR SERVICE CENTRE

During the year, the ISO 9001:2008 Quality Management System Certification for investor servicing by Investor Service Centre (ISC) was renewed by Messrs. Det Norske Veritas (DNV) for a further period of three years. DNV also accorded Level 5 rating to ISC, the highest possible rating level, for the second consecutive year, for its systems and processes, which stands testimony to the exemplary standards of investor servicing practices by the ISC.

ISC continues to operate with an experienced team of professionals backed by state-of-the-art infrastructure and systems focused towards meeting the increasing expectations of investors and regulatory authorities.

DIRECTORS

Mr. Krishnamoorthy Vaidyanath, Wholetime Director, retired from your Company after 35 years of service, with effect from close of business on 2nd January, 2011 on completion of his term. Your Directors would like to record their appreciation of the services rendered by Mr. Vaidyanath. The Board of Directors (the ‘Board) at its meeting held on 22nd December, 2010, appointed Mr. Vaidyanath as Non-Executive Director of your Company with effect from 3rd January, 2011 to draw upon his knowledge and vast experience.

Mr. Anup Singh ceased to be Additional Wholetime Director on 23rd July, 2010, the date of the last Annual General Meeting (AGM) of your Company.

Mr. Nakul Anand and Mr. Pradeep Vasant Dhobale were appointed by the Board at its meeting held on 22nd December, 2010, as Additional Wholetime Directors of your Company with effect from 3rd January, 2011.

By virtue of the provisions of Article 96 of the Articles of Association of your Company and Section 260 of the Companies Act, 1956, Messrs. Vaidyanath, Anand and Dhobale will vacate office at the ensuing AGM of your Company.

Your Board at its meeting held on 20th May, 2011, recommended for the approval of the Members the appointment of Messrs. Anand and Dhobale as Directors, liable to retire by rotation, and also as Wholetime Directors of your Company for a period of three years from 3rd January, 2011. Your Board at the said meeting also recommended for the approval of the Members the appointment of Mr. Vaidyanath as Non-Executive Director of your Company, liable to retire by rotation, with effect from the date of the ensuing AGM of your Company.

Your Board at its meeting held on 20th May, 2011 recommended for the approval of the Members the re-appointment of Mr. Yogesh Chander Deveshwar as a Director, not liable to retire by rotation, and also as Wholetime Director and Chairman of your Company, for a period of five years from 5th February, 2012.

Notices have been received from Members of your Company under Section 257 of the Companies Act, 1956 for the appointments / re-appointment of Messrs. Anand, Dhobale, Vaidyanath and Deveshwar, who have filed their consents to act as Directors of your Company, if appointed.

Appropriate resolutions seeking your approval to their appointments / re-appointment are appearing in the Notice convening the 100th AGM of your Company.

In accordance with the provisions of Article 91 of the Articles of Association of your Company, Mr. Hugo Geoffrey Powell, Dr. Basudeb Sen, Mr. Balakrishnan Vijayaraghavan and Mr. Serajul Haq Khan will retire by rotation at the ensuing AGM of your Company and, being eligible, offer themselves for re-election. The Board has recommended their re-election.

CHANGES IN SHARE CAPITAL

During the year, the following changes were effected in the Share Capital of your Company:-

(i) Increase in Authorised Share Capital

The Authorised Share Capital of your Company was increased from Rs. 500 crores to Rs. 1000 crores divided into 1000,00,00,000 Ordinary Shares of Rs. 1/- each, with effect from 23rd July, 2010.

(ii) Issue of Bonus Shares 382,67,01,530 Ordinary Shares of Rs. 1/- each, fully paid-up, were issued as Bonus Shares, in the ratio of 1 (One) Bonus Share for every existing 1 (One) Ordinary Share of Rs. 1/- each held on 4th August, 2010, being the Record Date fixed for the purpose. The Bonus Shares were allotted on 6th August, 2010.

(iii) Issue of Shares under the ITC Employee Stock Option Schemes 9,32,65,960 Ordinary Shares of Rs. 1/- each, fully paid-up, were issued and allotted during the year upon exercise of 93,26,596 Options under your Companys Employee Stock Option Schemes.

Consequently, the Issued and Subscribed Share Capital of your Company, as on 31st March, 2011, stands increased to Rs. 773,81,44,280/- divided into 773,81,44,280 Ordinary Shares of Rs. 1/- each.

The new Ordinary Shares issued during the year rank pari passu with the existing Ordinary Shares of your Company.

AUDITORS

Your Companys Auditors, Messrs. Deloitte Haskins & Sells, retire at the ensuing AGM and, being eligible, offer themselves for re-appointment. Since not less than 25% of the Subscribed Share Capital of your Company is held collectively by Public Financial Institutions, the re-appointment of Auditors is being proposed as a Special Resolution in accordance with Section 224A of the Companies Act, 1956.

EMPLOYEE STOCK OPTION SCHEME

Details of the Options granted up to 31st March, 2011, and other disclosures as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the ‘SEBI Guidelines) are set out in the Annexure to this Report.

Your Companys Auditors, Messrs. Deloitte Haskins & Sells, have certified that your Companys Employee Stock Option Schemes have been implemented in accordance with the SEBI Guidelines and the resolutions passed by the Members in this regard.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm having:

a) followed in the preparation of the Annual Accounts, the applicable accounting standards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

(d) prepared the Annual Accounts on a going concern basis.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard 21 - Consolidated Financial Statements, ITC Group Accounts form part of this Report & Accounts. These Group Accounts also incorporate the Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures as notified under the Companies (Accounting Standards) Rules, 2006. These Group Accounts have been prepared on the basis of audited financial statements received from Subsidiary, Associate and Joint Venture Companies, as approved by their respective Boards.

OTHER INFORMATION

The total number of employees as on 31st March, 2011 stood at 24,027.

The certificate of the Auditors, Messrs. Deloitte Haskins & Sells confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

There were no changes to your Companys significant Accounting Policies.

Particulars as required under Section 217(1)(e) of the Companies Act, 1956 relating to Conservation of Energy and Technology Absorption are also provided in the Annexure to this Report.

There were 31 employees, who were employed throughout the year and were in receipt of remuneration aggregating Rs. 60 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating Rs. 5 lakhs per month or more during the financial year ended 31st March, 2011. The information required under Section 217(2A) of the Companies Act, 1956 and the Rules thereunder, in respect of the aforesaid employees, is provided in the Annexure forming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words "anticipate", "believe", "estimate", "expect", "intend", "will" and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

CONCLUSION

Your Companys Board and employees are inspired by the Vision of sustaining your Companys position as one of Indias most admired and valuable companies through world class performance, creating enduring value for all stakeholders, including the shareholders and the Indian society. Each business within the portfolio is continuously engaged in upgrading strategic capability to effectively address the challenge of growth in an increasingly competitive market scenario. Effective management of diversity enhances your Companys adaptive capability and provides the intrinsic ability to effectively manage business risk. The vision of enlarging your Companys contribution to the Indian economy is manifest in the creation of unique business models that foster international competitiveness of not only its businesses but also of the entire value chain of which it is a part.

Inspired by this Vision, driven by Values and powered by internal Vitality, your Directors and employees look forward to the future with confidence and stand committed to creating an even brighter future for all stakeholders.

On behalf of the Board

Y. C. DEVESHWAR Chairman

P. V. DHOBALE Director

20th May, 2011 Virginia House 37 J L Nehru Road Kolkata 700071 India

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Mar 31, 2010

For the Financial Year Ended 31st March, 2010

The Directors submit their Report for the financial year ended 31st March, 2010.

During the financial year 2009/10, your Company and its subsidiaries earned Rs. 3140 crores in foreign exchange. The direct foreign exchange earned by your Company amounted to Rs. 2355 crores (Rs. 2226 crores in 2008-09), powered by exports of major agri-commodities. Your Company’s expenditure in foreign currency amounted to Rs. 1042 crores, comprising purchase of raw materials, spares and other expenses of Rs. 774 crores and import of capital goods at Rs. 268 crores. Details of foreign exchange earnings and outgo are provided in Schedule 19 to the Accounts.

PROFITS, DIVIDENDS AND RETENTION

(Rs. in Crores)

2010 2009

a) Profit before Tax 6015.31 4825.74

b) Income Tax 1954.31 1562.15

c) Profit after Tax 4061.00 3263.59

d) Add: Profit brought forward from previous year 858.14 724.45

e) Surplus available for Appropriation 4919.14 3988.04

f) Transfer to General Reserve 406.10 1500.00

g) Proposed Dividend for the financial year at the rate of Rs. 4.50 per 1718.18 1396.53 ordinary share of Re. 1/- each (previous year Rs. 3.70 per share)

h) Proposed Special Centenary

Dividend of Rs. 5.50 per ordinary 2100.00 -- share of Re. 1/- each

i) Income Tax on proposed dividends 634.15 237.34

j) Earlier year’s provision no longer required (0.60) (3.97)

k) Retained Profit carried forward to the following year 61.31 858.14

4919.14 3988.04

BUSINESS SEGMENTS

A. FAST MOVING CONSUMER GOODS

FMCG – Cigarettes

India is the third largest producer of tobacco in the world. It is estimated that more than 36 million people including farmers, farm workers, retailers etc. in the country depend upon tobacco for their livelihood. While the economic importance of tobacco has been acknowledged in several Government studies and reports, the cigarette industry in India has been contending with the twin challenges of discriminatory and punitive taxation and increased regulation for several years in succession.

Internationally, more than 90% of tobacco is consumed in the cigarette form, and accordingly tobacco taxation and regulation, in effect, means regulating and taxing cigarettes. However, in India only about 15% of tobacco is consumed in the cigarette form, whilst the remaining consumption is through other forms of tobacco products like bidi, khaini, gutkha, zarda and kimam. It is therefore clear that the spate of taxation and regulations targeted almost exclusively at the cigarette industry in India is influenced by trends that are relevant in the developed world, but have little connection with the realities of the Indian market. Such a punitive and discriminatory approach has resulted in the share of cigarettes in total tobacco consumption in India progressively declining from 23% in 1971/72 to only about 15% currently. In this context, a recap of developments in the past few years would be relevant.

On the taxation front, excise duty rates went up in excess of 6% in the Union Budget 2007 and cigarettes were brought under the ambit of Value Added Tax (VAT) at a rate of 12.5% on invoice price with effect from 1st April 2007, resulting in a total tax equivalent of a 30% increase in excise duties. Other tobacco products were either exempted from VAT or taxed at lower rates. Consequently, cigarette industry volumes came under serious pressure in FY08 as consumers migrated to alternate and lightly taxed forms of tobacco.

The Union Budget 2008 followed through with an unprecedented increase in excise duty of the order of 140% and 390% respectively on regular and micro-sized non-filter cigarettes. This exceptional hike in rates forced the organized cigarette industry to substantially vacate this category. The resultant void created the headroom for tax-evaded cigarettes to enter the market in a big way. These tax-evaded cigarettes sell in the market at prices that do not even cover the cost of taxes payable thereon. Such cigarettes, estimated to constitute more than 8% of the Indian market, not only deprive the legitimate industry of revenues and profits that it rightfully deserves but also deny the Exchequer of its fair share of taxes. It is imperative that the authorities strengthen enforcement to eliminate this fast growing illegal industry.

The year under review saw several States departing from the consensus VAT rate of 12.5% and increase the rates of VAT on cigarettes from time to time. Certain States also levied entry tax on cigarettes in addition to VAT and some others increased the entry tax rate. Most States, like the Centre, largely targeted the cigarette sector. Consequently, tobacco consumption in the cigarette format suffered.

Further, as a result of such unilateral and arbitrary increases, the incidence of State and other Local taxes varied from 12.5% in some parts of India to as much as 25% in others. Such massive tax differentials between States led to trade diversion that not only compromised the industry’s ability to service the market effectively but also resulted in sub-optimization of cigarette tax revenues to the State Exchequers. Drawing from international experience, it is apprehended that the illegitimate funds generated through trade diversion by criminal syndicates is being used to finance anti-social activities in the country.

During the year, graphic statutory warnings on retail packages of tobacco and tobacco products were introduced and further restrictions on sale of tobacco products were notified. Such graphic warnings, which are more impactful on cigarettes than on other forms of tobacco by virtue of the design specifications, have placed cigarettes in a disadvantageous position.

Such regulations and others like the ban on smoking in public places together with the high incidence of tax on cigarettes encourage consumers to shift to cheaper and lightly taxed tobacco products. Consequently, whilst consumption of tobacco in the cigarette form is on the decline, the overall consumption of tobacco in the country continues to rise.

Tobacco Consumption (Million kg)

Year Cigarettes Non-Cigarette Total

Forms

1981/82 86 320 406

2008/09e 74 421 495

Difference (–) 14% (+) 32% (+) 22%

Source : USDA; Tobacco Institute of India

Paradoxically, the social objective of control of tobacco consumption in the country gets defeated even as the revenue potential of tobacco sector as a whole is sub-optimised. It is relevant to note that every percentage point increase in the cigarette share of tobacco consumption would yield the government additional revenues of Rs. 650 crores annually in duties alone.

Despite having only a 15% share of consumption, cigarettes contribute more than 85% of the tax revenues from the tobacco sector. Taxes realized from every kilogram of tobacco consumed in the cigarette format are 35 times higher than those from other forms of tobacco products. In contrast, a country like China, given its equitable tax regime and a practical regulatory framework, is able to collect tax revenues from cigarettes that are 14 times higher than that in India despite the rate of tax being half of that of India. Clearly, there is a need to pursue a balanced agenda, which is equitable to all stakeholders, even as it progressively achieves the social objective of controlling tobacco consumption.

Notwithstanding these challenges, your Company retained its leadership position in the market and improved its standing in the consumer mind-space, attesting the salience and resilience of its brands. The stability in cigarette excise duties in 2009 resulted in the industry recovering some of the consumer franchise lost earlier.

The potential of the Indian market coupled with its economic outperformance in a year of global downturn is attracting global cigarette majors. They are seeking a direct play in the Indian market by incorporating majority-owned entities to carry on the business of wholesale trading operations in India involving sourcing, selling, distribution and marketing of cigarettes and other tobacco products. Even so, the incidence of smuggled cigarettes continues to be high.

During the year under review, the business effectively met such competitive challenges and improved its market standing through the delivery of superior consumer value based on a combination of deep consumer insights, contemporary product development and cutting-edge technology. Market interventions during the year included the launch of new variants of ‘Gold Flake’ and

‘Navy Cut Filter Kings’ with innovative product features, limited edition packs of ‘Classic’ and launch of new brands like ‘Flake Excel Filter’ and ‘Duke Filter’. The business also launched its premium line of hand-rolled cigars in select markets under the brand name ‘Armenteros’. Manufactured exclusively for ITC by expert cigar rollers in the Dominican Republic, with the finest quality Cuban, Nicaraguan and Brazilian seed tobacco, the ‘Armenteros’ range is truly world-class and has been well received by the most discerning cigar aficionados in the country.

During the year, the business leveraged its existing industrial licence in Maharashtra to set up a cigarette factory at Ranjangaon, Pune. Production has commenced, enabling your Company to service proximal markets. The strategic initiative of upgrading primary and secondary technology platforms at the cigarette factories continued to be implemented. Further improvements in quality and productivity were achieved consequent to the induction of high speed cigarette making and packing machines across all factories. The ‘Process Improvement Practices’ initiative, using structured problem-solving methodologies such as ‘Lean’ and ‘Six Sigma’, contributed to sustainable improvements in key operating metrics and internal processes across all units.

In line with your Company’s commitment to building sustainable environmental capital, the business is investing in wind farms in certain States to reduce dependence on conventional sources of energy. The cigarette factories continued to recycle 100% of the solid waste generated. They also maintained the highest standards of Environment Health and Safety (EHS) and won recognition by way of numerous awards. The Saharanpur factory won the ‘CII National Award for Excellence in Energy Management’ and the ‘CII National Award for Excellence in Water Management’. The Munger factory was awarded the 1st prize for outstanding performance by CII Eastern Region for Safety, Health Environment (SHE) for 2009-10 as well as the 1st prize for outstanding performance by CII Eastern Region for Energy Conservation for 2009-10. The Kidderpore factory received the CII Eastern

Region SHE Award for 2009-10. The Bengaluru factory was awarded the Safety Award in the Large-Scale Category as well as the Safety award for ‘Best Boiler’ by the Department of Factories, Boilers, Industrial Safety and Health, Government of Karnataka.

Pro-active interventions in employee-relations in all manufacturing units ensured an enabling operating climate. Long term agreements with unionised workforce continue to be leveraged to further improve shop floor productivity, flexibility and responsiveness. During the year under review, the long term agreement at the Saharanpur factory was successfully concluded.

The year ahead will be challenging with continued discriminatory taxation, restrictive regulation and hardening competitive pressures. Cigarette excise duty rates have yet again been increased by about 17% in Budget 2010 and several States have further increased VAT and entry tax imposts in the recent round of budgets. While this is likely to put industry volumes under pressure, the newly created excise duty slab for medium-sized filter cigarettes may provide the legitimate industry a platform to combat the menace of illegal domestic cigarettes.

Your Company will continue to engage with policy makers for a balanced regulatory and fiscal framework for tobacco that addresses the genuine concerns of all stakeholders. The robustness of your Company’s strategies and its execution excellence will enable it to sustain and enhance its leadership position.

FMCG – Others

It is your Company’s strategic intent to secure long-term growth by synergising and blending the diverse pool of competencies residing in its various businesses to exploit emerging opportunities in the FMCG sector. Your Company’s institutional strengths – deep understanding of the Indian consumer, strong trademarks, deep and wide distribution network, agri-sourcing skills, packaging know-how and cuisine expertise – continue to be effectively leveraged to rapidly grow the new FMCG businesses.

Your Company remains bullish on the prospects of the FMCG industry in India. According to a recent study by the Mckinsey Global Institute, it is estimated that India is set to climb from its position as the 12th largest consumer market today to become the world’s fifth largest by 2025. Income levels are set to triple during this period with India’s middle class (annual income ranging from Rs. 2 lakhs to Rs. 10 lakhs) increasing by about ten times its current size to around 583 million people. Favourable demographic trends – with nearly 15 million additions to the working age population every year for the next 10 years and a resultant low dependency ratio – will drive industry growth. Similarly, the trend of increasing urbanisation – with urban population expected to constitute around 44% of the population by 2035 as per United Nations Population Division (UNPD) from less than 30% presently – is expected to provide added fillip to the demand for branded consumer goods. Higher levels of consumer awareness, relatively low levels of per capita consumption and penetration and increased government spending on education are some of the other key factors that are expected to drive transformational change in the Indian FMCG industry.

Over the last few years, your Company has rapidly scaled up presence in its newer FMCG businesses comprising Branded Packaged Foods, Lifestyle Retailing, Education and Stationery products, Personal Care products, Safety Matches and Incense Sticks (Agarbatti) with Segment Revenues growing at an impressive compound annual growth rate of 38% during the last 5 years. Within a relatively short span of time, your

Company has established several strong consumer brands including ‘Sunfeast’ and ‘Aashirvaad’ which are presently clocking annual sales in excess of Rs. 1000 crores each in terms of consumer spend. Segment Results reflect the gestation costs of these businesses largely comprising costs associated with brand building, product development, R&D and infrastructure creation. The year under review saw a 21% growth in Segment Revenues and a significant improvement in Segment Results which recorded a positive swing of Rs. 134 crores at the PBIT level.

Your Company’s unwavering focus on quality, innovation and differentiation backed by deep consumer insights, world-class R&D and an efficient and responsive supply chain will further strengthen its leadership position in the Indian FMCG industry.

CONCLUSION

Your Company’s Board and employees are inspired by their Vision of sustaining ITC’s position as one of India’s most admired and valuable companies through world-class performance, creating enduring value for all stakeholders, including the shareholders and the Indian society. Each business within the portfolio is continuously engaged in upgrading strategic capability to effectively address the challenge of growth in an increasingly competitive market scenario. Effective management of diversity enhances your Company’s adaptive capability and provides the intrinsic ability to effectively manage business risk. The vision of enlarging your Company’s contribution to the Indian economy is manifest in the creation of unique business models that foster international competitiveness of not only its businesses but also of the entire value chain of which it is a part.

In the Centenary Year of your Company, your Directors and employees continue to be inspired by this Vision. Driven by Values and powered by internal Vitality, the entire ITC family stands committed to creating an even brighter future for all stakeholders.

21st May, 2010 On behalf of the Board

Virginia House

37 J L Nehru Road

Kolkata 700071 Y. C. DEVESHWAR Chairman

India K. VAIDYANATH Director