ITC to invest $2 billion under Next strategy, to look for acquisitions

Business conglomerate ITC Ltd on Thursday said it plans to invest around $2 billion (around Rs 14,851 crore) as part of its 'ITC Next' strategy, under which it will explore opportunities to craft "disruptive business models".

Addressing a virtual press conference, ITC Chairman Sanjiv Puri said the investment would be to beef up capacity to meet demand, to remain competitive and in technology and quality upgradation and new vectors of growth that it has identified. Besides, ITC is also looking for acquisitions as part of its expansion plans, the spend on which will be over and above its planned investment, he added.

The company has identified certain future consumer trends, and any opportunity that aligns with these areas and is value accretive, then we will go forward, Puri said. "Now, in terms of investments for those kinds of figures, we have been sharing from time to time, I mean, for building capacity to meet market demands in existing segments for inducting state of the art technology in contemporary investments in Digitals and some of the newer areas that we have identified.

"We are looking at medium term, we are looking at about $2 billion. That's the kind of figure we have. And, of course, inorganic is something that cannot be sized depends on library dollars," said Puri. Though Puri did not share the exact timeline for the investments but said it is a "medium term horizon" and would take a few years.

While sharing detail, Puri said: "The investment would be for capacity gearing as the volume of a particular category increases and utilisation reaches a threshold then we have to add additional lines, that is the one vector and second we have to upgrade the quality from time to time, we need to replace and bring contemporary technology."

The third would be for "new growth areas" such as plastic substitute and super App, ITC MAARS to unlock the potential of small farmers. "We have our investment plans. We are talking upscaling food processing," he said, adding capacity gearing would be in the FMCG business, paper business, agribusiness and even in the packaging business, where ITC is setting up a plant in Gujarat to cater to the growing demand.

The company is also setting up a Nicotine derivative plant under ITC Indivision, while in Andhra Pradesh it is setting up a spice facility to cater to both domestic and export markets for IPM-certified food and spices, which will meet the stringent norms of some of the other countries, Puri added.

The Kolkata-headquartered firm under its "ITC Next" has undertaken an extensive strategy reset and will explore opportunities to craft "disruptive business models anchored at the intersection of digital and sustainability to set up structural drivers for its next horizon of growth". It is investing in cutting-edge digital technologies, create innovative business models and tap newer opportunities.

While talking about the FMCG business, Puri said the company expects the segment to give a "competitively superior performance" with an improved margin trajectory. Over acquisitions in the segment, Puri said it has a "fairly wide portfolio", and areas where someone has a strategic fit, ITC would consider it. "We have identified certain consumer trends, some future trends.

So, any of that, that aligns with these areas, and we find that the acquisition is value accretive, we will be able to run it better than it being as a separate company today," he said. The company is still validating and fine-tuning its dairy business in Bihar and Kolkata, and will take it forward and scale it up.

In the hotels segment, the company would have an "asset right'' strategy. ITC has 12 properties under the Welcome brand, and expects to take the number to 20 by the year-end. "We have already signed six or seven. There are five to seven more under negotiation," said ITC executive director Nakul Anand. "Over three to four years, we see Welcome hotels going from a footprint of 12 to nearly 34 to 35."

The company, which has scaled down its LifeStyle business, said the way business was progressing was not congruent to its expectation. "Unless we find some unique value proposition or something that we believe in to succeed, we will not take it forward," said Puri adding "as of now, it appears very unlikely that we will try to bring it back, but this is something that in the near future, we will have to take a final decision."

Over the recovery in the market, Puri said it is witnessing sequential recovery across categories. "July has been better than the previous month, and August is better than the previous month, so it is progressive." When asked about the company's plans to deal with a possible third wave of Covid-19, Puri said ITC has "lot of learnings" in the two waves and is well prepared to be deal with it and respond.