Cigarette-to-hotel-to-FMCG major ITC Ltd on Friday announced the appointment of Sanjiv Puri, its chief operating officer (COO), as the chief executive officer (CEO) of the conglomerate with effect from February 5. Puri will take the independent charge of the executive leadership of the company as Y C Deveshwar, currently chairman & chief executive, will move to a non-executive role from the next month.
The board of the country’s largest cigarette maker has decided to split the post of the executive chairman between non-executive chairman and CEO to elevate Puri as the chief executive.
“The board of directors of the company at its meeting held today appointed Sanjiv Puri, whole time director, also as chief executive officer of the company with effect from February 5, 2017 to take independent charge of the executive leadership of the company, in the context of splitting up of the role of the executive chairman between chairman and chief executive officer…Y C Deveshwar, chairman (and non-executive director with effect from February 5, 2017), will play the role of Mentor from the said date,” ITC said in a stock exchange filing.
Significantly, in a clear indication of its succession plan, the Kolkata-based diversified conglomerate had promoted Puri, 54, to the post of chief operating officer in July last year with full responsibility for the day-to-day functioning of the company. Before taking over as the COO, he was responsible for overseeing the FMCG, Paperboards, Paper & Packaging and Agri businesses of ITC. He was appointed as a director on the board of the company effective December 6, 2015. Prior to his appointment as director, he was president of FMCG businesses – cigarettes, foods, personal care, education & stationery products, matches and agarbattis since December 2014. Puri, an alumnus of the Indian Institute of Technology, Kanpur, joined the conglomerate in 1986.
The elevation of Puri is on expected lines as analysts and observers have earlier tipped Puri as the likely successor of sixty-nine-year-old Deveshwar as the company has identified its fast-growing non-cigarette FMCG division as the major growth engine for it with higher taxes and regulatory pressures impacting its cigarettes business.
Significantly, speaking at the last AGM, Deveshwar, who became chief executive and chairman of the board in 1996, said his company aspired to be No 1 player in the non-cigarette FMCG business and set a revenue target of Rs. 1,00,000 crore by 2030. Currently, the company’s non-cigarette businesses, including foods, personal care, hotels, paper, agriculture, information technology and others, account for over 50% of its net revenues.
ITC on Friday reported a 5.71% year-on-year rise in its standalone net profit to Rs. 2646.73 crore for the quarter ended December 31, 2016 as its revenue from operations grew 4.52% y-o-y amid lower consumer offtake and reduction in trade pipelines due to cash crunch post the government’s demonetisation move.
The company’s revenue from operation during the December quarter rose to Rs. 13,470.89 crore from Rs. 12,887.78 crore during the year-ago period. The company, in a statement, said the operating environment was extremely challenging during the quarter under review.
While cigarette revenue grew 2.24% y-o-y at Rs. 8287.97 crore during the September-December period, other FMCG business revenue posted a marginal 1.67% y-o-y growth at Rs. 3033.69 crore during this period. Operating profit from the cigarette business increased by more than 3% y-o-y to Rs. 2569.26 crore during the quarter under review. However, other FMCG business posted an operating loss of Rs. 19.66 crore during December quarter this fiscal against an operating profit of Rs. 18.75 crore in the corresponding period a year ago.
Although ITC posted a better than expected results, its scrip on Friday closed at Rs. 257.50, down 2.78% on BSE from the previous close.
The company in its statement said the performance of its cigarette business during the third quarter was subdued on account of tight liquidity conditions prevailing in the market and continued regulatory and taxation pressures on the legal cigarette industry in India. “FMCG sales were adversely impacted as a result of lower consumer offtake and reduction in trade pipelines particularly in the immediate aftermath of the government’s decision to withdraw specified high denomination currency notes. While the impact was felt across all operating segments, sales of biscuits, snacks, noodles, personal care products and branded apparel were impacted the most in the initial phase,” the company said.
“The company implemented several initiatives towards mitigating the impact including increasing the service frequency of grocery outlets, enhancing presence in modern trade outlets, increasing direct servicing of select low population group markets and extending temporary credit to select customers. These initiatives, coupled with progressive easing of the liquidity situation, led to substantial recovery of sales momentum towards the end of the quarter,” it added.
On its hotel business, ITC said while segment results improved significantly as compared to the corresponding quarter in the previous year, profitability remained relatively muted due to the challenging business context and gestation costs of the recently commissioned Grand Bharat, Gurgaon.