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ITC to expand its FMCG basket

11-November-2004
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ITC to expand its FMCG basket

ITC Ltd has plans to enter the soaps and detergents business as part of a move to increase its presence in the fast-moving consumer goods (FMCG) segment, sources said.

The cigarettes and tobacco major on Wednesday notified the stock exchanges of its intention to amend its Memorandum of Association so that it can diversify into new areas. The company did not mention any specific area, and ITC spokesman said it is just an enabling resolution without any item in mind.

ITC, in its statement to the bourses, said it has sent shareholders a postal ballot form, seeking their approval to “alter the objects clause of the Memorandum of Association of the company and to enable commencement of businesses envisaged at an appropriate time.”

However, industry sources said soaps and detergents is a likely area that would give ITC an increased presence in the FMCG segment and thereby reduce its dependence on cigarettes and tobacco.

Kolkata-based ITC has four main segments — FMCG including cigarettes, hotels, paper and paperboard, and agri-business, which includes tobacco. Cigarettes alone accounted for 72% of revenues and 88% of profits in the quarter to September 30, 2004.

During that quarter, ITC had reported a net profit of Rs 486 crore on net turnover of Rs 1,738 crore.

Over the past decade, ITC has merged Tribeni Tissues into ITC Bhadrachalam and then ITC Bhadra was merged into ITC. Recently, it announced plans to merge its hotel subsidiaries with the parent.

According to one analyst, a venture into soaps and detergents would increase the FMCG basket.

“It could be part of a broader strategy to reduce dependence on cigarettes, which at one time accounted for 90-95% of its business,” said Mayank Khemka of Smifs Securities.

ITC’s FMCG segment has two sub-groups, FMCG-cigarettes and FMCG-others. The second includes new ventures like lifestyle retailing, branded packaged foods, greeting cards and gifts, safety matches and even incense sticks. Most of these new ventures have shown strong revenue growth, but are still losing money because of high start-up costs.

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