Board seeks ‘optimal way’ to restructure ITC: Chairman Sanjiv Puri

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September 5, 2020 5:45 AM

The chairman said the company’s focus on ESG (environmental, social and corporate governance) investing, which had created headwinds for tobacco stocks globally, also impacted its stock.

“This is despite the fact that we have a pretty good ESG rating,” he added.“This is despite the fact that we have a pretty good ESG rating,” he added.

Diversified conglomerate ITC’s board is constantly in search of the “optimal way” to restructure the company and will “adopt” the right tools for the maximum benefit of stakeholders, chairman Sanjiv Puri said on Friday.

“The board looks at what is the optimal way of structuring ITC, so that there is maximum benefit to the stakeholders, and this is a process of constant review. What is right for enduring shareholders’ value is what the company will adopt,” Puri told shareholders during the company’s 109th annual general meeting (AGM) here.

“There were certain concerns about the share price, and certain suggestions are also made of buybacks, bonus and restructuring the enterprise. These are valid tools that are evaluated by the board and whatever is the best to create sustainable shareholders’ value is certainly what the board will recommend. And whatever is in the interests of the shareholders, the board will certainly take forward,” Puri said.

He said in the last three years, the earnings per share (EPS) of the company went up 40%. However, this was not reflected in the share price. “Of course, I am sure it is concerning all of you and all the employees because there is performance behind it and yet it is not getting recognised.”

The chairman said the company’s focus on ESG (environmental, social and corporate governance) investing, which had created headwinds for tobacco stocks globally, also impacted its stock.

“This is despite the fact that we have a pretty good ESG rating,” he added.

Puri said the company had realised that there could be headwinds as far as tobacco-related stocks were concerned. So, to deal with such situation, it had adopted a strategy for multiple drivers of growth and, particularly, for the FMCG segment, which commanded “very impressive price-to-earnings multiple”. “That is what drove us. And, as we improve profitability, I think that is going to add more heft to ITC,” he pointed out.

On the FMCG segment’s profitability, he said, “In the last two years, we have improved margins by 300 basis points. And the reason why its profitability is different from what is reflected in the industry. Within our portfolio there are businesses that are nascent. There are businesses that we are incubating and there are businesses that have grown into a certain size. And therefore, there are, in the portfolio, a number of businesses we are investing in and we are continuing to create newer categories.”

In his AGM address, the chairman said other than the hotel segment and ESPB (education and stationery product business), progressive normalisation was witnessed in the later part of the first quarter across all operating segments.

Puri said the pandemic situation undoubtedly called for a strategic response focusing on the vigorous pursuit of value-accretive opportunities — leveraging the company’s institutional strengths while driving thrift, cost optimisation and conservation of cash. He said the company’s hotel business was focussing on “asset right strategy” and managing other properties.

The capital expenditure plan had been around Rs 3000 crore for every year.

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