"Naturally, there is a black swan event, so all the investments we will relook at," said company Chairman Sanjiv Puri when asked if the company is taking a relook at its investment plans due to COVID-19 in a video interaction with media.
Diversified business entity ITC will “relook” at its investments in the wake of the coronavirus pandemic, although it has not dramatically altered the plans, company Chairman Sanjiv Puri said on Monday. The company, which is also adopting “asset right” strategy in its hotel business, will go ahead with hotels that are under construction, even though they would be commercialised depending on how the situation unfolds going forward.
“Naturally, there is a black swan event, so all the investments we will relook at,” said Puri when asked if the company is taking a relook at its investment plans due to COVID-19 in a video interaction with media. He, however, added, “At the moment, I would say that it has not dramatically altered our investment plans. Even in the paperboard and packaging, we have seen capacity utilisation in the range of 90 per cent to 95 per cent at an aggregate level.”
According to Puri, ITC’s investments are always in line with “our anticipated forecast for demand and takes significant time to fructify”. The added capacity would be available only after a period of time. “At a general level, for FMCG, because of the surge and the elevated consumption, we are going forward with some of the lines actually, which we could have put a little later,” he said.
For projects in other business such as paperboard, he said the company is bringing in cost efficiency. During the AGM last week, Puri had said the situation undoubtedly called for a strategic response focusing on the vigorous pursuit of value-accretive opportunities including “driving thrift, cost optimisation and conservation of cash”.
Over the capacity expansion for FMCG, Puri said it has happened in-house by commissioning some additional facilities, by re-purposing some facilities and it has also happened along with some of our partners.
The company has built large integrated consumer goods manufacturing facilities in many parts of the country and has the infrastructure to support its scale-up plan to become much larger in the FMCG segment. “So, they have the infrastructure. What we need to do is, we need to add lines over a period of time to scale up capacity. The infrastructure is there. So there is an incremental investment in capacity,” Puri said.
Stating that demand for packaged food has surged in the wake of the health crisis, he said this trend is expected to stay. Therefore we are also making certain investments which are into our existing facilities, there are also certain ICMLs (Integrated Consumer Goods Manufacturing and Logistics facilities) which are under final stages of completion, he said.
These additions, he said, “will cater to the elevated level that we will witness post the pandemic as well as our growth phase”. When asked about the recent consumer trends, Puri added that now some of the discretionary items as perfumes, confectionery and cosmetic have started to recover though they are still depressed.
“The demand for essential items and hygiene products still remain at a higher level,” he said.
Commenting on the hotel business, which was down 93.94 per cent in the April-June quarter last fiscal due to the pandemic, Puri said ITC is focusing on managed properties as part of its asset-right strategy. “As far as the hotel business is concerned, as I have earlier said that we are moving towards an asset right strategy. There are some projects in the pipeline and which have to complete anyway. When we would commercialise it, it would depend on the time as how the situation is unfolding,” Puri said.
On being asked whether the company would demerge its hotel business, Puri said it was “speculative”. Over asset-right strategy, he said that the company has put forward its hospitality brand ‘Welcome’ and has a healthy pipeline for this.
According to Chief Executive, ITC Hotels Division, Nakul Anand, out of 14,000 rooms that ITC is expected to have in the near future, 8,600 rooms would be in the managed segment. “Currently out of 10,000 keys which we have, about 5,300 are in the managed segment. Looking forward, we have around 4,000 rooms under construction, of which 3,000 are in the managed,” he said.
Over the ITC’s plans to foray into the healthcare segment, Puri said ITC is still studying this segment, which would be a new area of business for the company. Now the company has taken a view to approaching it from the CSR angle.
“We are now looking at (healthcare) through the lens of CSR perspective. Now in the wake of the recent pandemic, which we all face, we have decided to focus our CSR activities to meet the immediate needs, which have arisen on account of the situation,” he said. He further said,”Whatever we would do, it would come from the lens of CSR rather than a commercial enterprise.”
Over its IT arm ITC Infotech, which helped the Kolkata-headquartered company to scale up its digital initiatives, Puri added that it was structured as a separate company and “this young company is scaling up the business”.
“It has a good opportunity in the domains it operates after disruption in the market. I believe that it is a good opportunity for a young player like ITC Infotech to scale up. At the moment, we focus on investing and scale up this business,” he added. Puri also said that at the moment there was no plan to list ITC Infotech and come out with an IPO, and would evaluate these options only after the company attains some scale.