ITC's FMCG business has been at the centre of the company's  transformation journey. But the market is not impressed, and investors believe  a demerger is the only way to bring the stock out of the woods. Chairman and MD  Sanjiv Puri is, however, non-committal. In a conversation with Ajita Shashidhar  and Rajeev Dubey, Puri shares his strategy for the company's next level of  growth. Edited excerpts:

It's been three years since you took over as  Chairman and MD of ITC. How has the journey been so far?
 

The overarching  objective has always been to ensure sustained value creation for all  stakeholders. The journey in the last three-four years has been about  architecting the structural drivers for the next horizon of growth and value  creation. The strategy reset that I have focused on is to ensure that the  organisation remains contemporary, future-ready and one that is extremely  consumer-centric and nimble. New vectors of growth have been established across  segments and investments are being stepped up to structurally drive  competitiveness. There has been a substantial scale-up of digital investments  and enabling of agile and purposeful innovation. We have crafted a bold  Sustainability 2.0 agenda to build-back better and address the challenges of  climate change and the pandemic.
 

The last few years have seen increased focus  on FMCG. What has been your vision for that business?
 

It is the youngest  business in our portfolio and also the most promising. The FMCG product  portfolio has been fortified in line with new trends and opportunities and our  enterprise strengths. There is a sharper focus on strengthening the existing  core, addressing adjacencies through mother brands and creating the new core  for the future. We reorganised our structure in the foods business into  clusters with empowered and integrated teams. Purposeful innovation,  multi-channel distribution networks and digitisation, among others, have been  accelerated for powering growth and efficiency. From a topline of around Rs  10,500 crore in FY17, our FMCG business has now grown to nearly Rs 15,000  crore. EBIDTA margins have improved by 640 basis points between FY17 and FY20.  In FY21, ITC's FMCG revenue grew 16 per cent on a comparable basis, nearly  double of the industry average. This excludes our acquisition of Sunrise and  segments such as education and stationery since schools remained closed. Over  75 per cent of our portfolio has grown by 20 per cent.
 

Are you looking to unlock any segment, or  separate those which are growing slowly and affecting your market valuation?
 

We are sharply  focused on creating long-term value for stakeholders. During the three years  from FY17 to FY20, ITC's EPS (earnings per share) grew 47 per cent. Return on  capital employed in the segment has moved up from 61 per cent in FY17 to 72 per  cent in FY20. A sharper capital allocation policy has been articulated and  annual dividend payouts have been stepped up.
 

At one point in  time hotels and paperboard were separate companies, we brought them in with a  purpose, and these businesses have acquired scale and market standing over  time. We have already adopted an 'asset right' growth strategy for hotels to  reduce capital intensity. In our annual report in FY20, we had announced that  we were exploring alternate structures for our hotels business. But at the  moment there is demand destruction in the segment. We will continue to examine  alternate structures. An enterprise exists for stakeholders not just for today,  but for tomorrow as well. It must add value for them on a sustained basis. We  have to recognise that.
 

ITC's stock prices have been stagnant for a  while, is that a concern? Analysts believe unlocking is the only solution…
 

The role of the  management is to create sustained value for stakeholders, and that is what ITC  is focused on. We continue to create new vectors of growth and redouble our  efforts, towards making faster progress.

We are aware that  there are concerns from the ESG (environmental, social and corporate  governance) investment perspective. However, it is well known that ITC has  achieved top scores in ESG from global rating companies. As the ESG investing  momentum increasingly tilts towards a more holistic 'integration' approach, we  are confident that our credentials in the area will stand us in good stead.  Last year, because of the pandemic, there has been an impact on demand in  certain segments. This affected our EPS last year, but the good thing is that  Q4 witnessed appreciable recovery.
 

Analysts feel you are in too many categories  in the FMCG business and there is a lack of focus. You don't have market  leadership position in many categories. What's your take?
 

ITC has achieved  leadership in several operating segments within a relatively short span of  time. I am not aware of any other organisation that has created a portfolio of  brands with a consumer spend of Rs 22,000 crore within such a short period.  Aashirvaad is the market leader in atta, Classmate is the leader in the  notebooks segment, Bingo! is No. 1 in the 'bridges' segment, whilst YiPPee! is  a strong No.2 in instant noodles. When we launched YiPPee!, it was a 90:10  market. Today, we are close to a fourth of the market. The idea is to attain  leadership and that's what we are pursuing. Market share requires sustained  investment and continuous innovation. We are making good progress in many other  segments as well. For example, Savlon has been a pioneer in consumer-centric  innovations during the pandemic and has a consumer spend of nearly Rs 1,200  crore. We are also creating the 'new core' in FMCG such as chocolates, coffee,  dairy and beverages, among others, and therefore brands such as Fabelle,  Sunbean, Aashirvaad Svasti, and B Natural are being developed with a lot of  care. The idea is not necessarily to scale up every category at the same time.  We will progressively scale up as we validate the concept or business model in  select markets.

Read the Article on Business Today :
https://www.businesstoday.in/magazine/cover-story/story/we-are-sharply-focused-on-creating-long-term-value-for-stakeholders-300650-2021-07-08