ITC ready to offer distribution backbone to third parties

Our Corporate Bureau

Kolkata, Aug 3: Tobacco and cigarettes major ITC Ltd, which also has made flourishing businesses of hotels, printing & packaging, paper boards and specialty papers, is eyeing another line of business that will leverage its enormous marketing and distribution network.

According to ITC chairman YC Deveshwar, the company is web-enabling the cigarettes business and is ready for a partner that will bring in know-how and products to ride ITC’s enormous marketing and distribution skills.

“We are looking at our distribution strength and seeing whether we can partner with FMCG companies,” he told reporters.

However, he refused to divulge names or the type of products that ITC would distribute.

“Even multinationals are welcome, provided they set up manufacturing bases in India. We will not import products and market,” he stressed.

ITC is also ready to buy businesses, considering that it has a huge cash hoard and diverse management skills. “I would love to buy. We are always on the lookout, but it must have value,” he added.

But Mr Deveshwar, who had headed national carrier Air-India in the early nineties, again dismissed the possibility of ITC taking part in the government’s divestment process and buying an airline.

While ITC has put into play its “number of core competencies” in launching new businesses like lifestyle retailing, packaged foods and greetings cards, it has no plans to make separate entities of these retail activities, Mr Deveshwar said.

On ITC Global, the troubled Singapore-based subsidiary now in liquidation, he stressed that ITC has no legal liability but is interested in helping settle Global’s dues simply as a matter of maintaining the goodwill of the ITC name.

“It is really a matter of negotiation,” he said, and permission to remit the funds in foreign exchange will be sought only after a deal is struck.

ITC is negotiating with the judicial managers for a deal that will leave no scope for litigation in future, he said. ITC Global owes its creditors around $48 million, and ITC has a general contingency reserve of Rs 360 crore for such cases.

On ITC’s takeover bid for VST Industries via an investment subsidiary, Mr Deveshwar refused to comment, pointing out that a case is pending in the Kolkata High Court. The ITC chairman was dismissive about companies that are rushing to China to set up bases at the first sign of non-competitiveness. Mr Deveshwar was making the comment while clarifying distinction he sought to make between “Indian companies” and companies in India.

He said that an Indian company is one that has a long-term commitment to the local economy. And a company operating in India does not necessarily mean a multinational.

He also said that it is not the source of capital that defines which is an Indian company but it is really the depth of commitment and the orientation that would matter.

“At the first sign of uncompetitiveness, if you rush to China and begin to source shoes, or you rush to China and get garments, and not persist with your own value chain...For a company like ITC which is endowed with resources — human capital, money — I’d rather go and develop vendors within India,” he said.