ITC sees expansion in hotels, consumer goods - Mint
July 23, 2010
Despite difficulties in securing land, the company is pursuing possibilities of building hotels in Hyderabad, Gurgaon and Goa
Addressing shareholders at ITC Ltd's annual general meeting (AGM), chairman Y.C. Deveshwar said on Friday he saw opportunity for his company to invest as much as Rs23,000 crore over the next 7-10 years to expand the hotels, consumer goods, and paper and paperboards businesses.Ambitious plans: ITC chairman Y.C. Deveshwar at the press conference. Indranil Bhoumik / Mint "We are investing all the time to build capabilities for tomorrow," Deveshwar later said at a press conference. "Whether we are able to invest this amount of money depends on our ability."
He said there was scope to invest Rs9,000 crore in the hotels business, Rs8,000 crore in the consumer goods business, and Rs6,000 crore in the paper and paperboards businesses. "I wish these investments happened in five years," Deveshwar added.
In fiscal 2010, the combined revenue of these businesses was at Rs7,600 crore, which was 36.5% of ITC's net turnover.
Following the announcement, the company's shares gained Rs3.10, or 1%, to close at Rs300.70 apiece on the Bombay Stock Exchange, while the bourse's benchmark Sensex index closed 17.83 points, or 0.1%, higher at 18,130.98.
ITC could build three hotels in Mumbai, four-five hotels in Delhi and adjoining areas "if it had the land", Deveshwar said, adding, "What is standing in the way of India's development is land."
Deveshwar is a director of HT Media Ltd, which publishes Mint.
Despite difficulties in securing land, the company is pursuing possibilities of building hotels in Hyderabad, Gurgaon and Goa. Two hotels are currently under construction at Chennai and Kolkata.
ITC has been focusing on "super luxury" properties when it comes to investing in physical assets, according to Deveshwar. It would, at the same time, expand in the five-star and budget hotel segments as well.
Over 100 hotels at 80 locations in India are currently managed or owned by ITC. "At conservative estimates, India needs 50,000 rooms in the next two-three years," Deveshwar said at the AGM.
Asked if ITC was looking to take its hotels business abroad, Deveshwar said he would prefer to invest in India because the country's economy was growing faster than most parts of the world.
"There's huge opportunity within the FMCG (fast moving consumer goods) space," Deveshwar said, adding that the sector is expected to "triple in size" to Rs3.55 trillion by 2018.
ITC's non-cigarette consumer goods business is still not profitable-in the quarter till June, it posted a loss of Rs89.25 crore-but the food business, which contributed at least half of the segment's Rs3,634 crore revenue in fiscal 2010, was expected to turn profitable this year, Deveshwar said.
"India's consumption of paper, paperboards and packaging (materials) is one of the lowest in the world," Deveshwar told shareholders. "With the spread of education and economic growth, demand is expected to grow manifold."
Asked if the company was looking to enter new business segments, Deveshwar said there were no immediate plans of doing so, but healthcare could be considered at a later stage because "running hospitals and running hotels are kind of similar".
