ITC chief Sanjiv Puri rejects possibility of business demerger

Turning down any possibility of a demerger of its different businesses, ITC chairman Sanjiv Puri on Friday said the present structure of the diversified conglomerate “makes sense” as it was “creating synergies out of diversities”.

Addressing shareholders during the cigarette-to-hotel-to-FMCG major’s 108th annual general meeting in Kolkata, Puri said, “The whole philosophy of ITC has been to create value out of the businesses within the system. We are able to create a lot of value (for the shareholders). Therefore, it makes sense to operate this way and benefit from the synergy that we have from the diversity.”

Earlier, shareholders were suggesting the conglomerate to review whether the former were better served by single entity or by creating several entities.Talking to the media later in the day, Puri explained that segregation of different business verticals of the Kolkata-based conglomerate would increase logistic and manpower costs, and costs to build distribution chains.

In his maiden address to ITC’s shareholders after taking charge as its chairman and managing director in May, Puri said the company would examine entering into various categories in the FMCG space, where “there are institutional capabilities” and there were “chances to win”.

The company is looking at an “eight-fold jump” in its turnover from its non-cigarette FMCG business. Currently, around 25% of ITC’s segment revenue is from non-cigarette FMCG business.

Notably, an eight times jump would take the company closer to its target amount of Rs 100,000 crore turnover from its non-cigarette FMCG business from the current around Rs 12,000 crore.

Puri said ITC has already put in money into alternative investment funds, which in turn will be investing in start-ups. He, however, did not share the amount of investments made in these funds. This apart, the conglomerate is also open to make direct investment in start-ups, primarily in the FMCG segment.

“The company is currently working closely with some start-ups and if required we may take a decision to invest in them directly,” he added.

On the company’s apparel business, the chairman said restructuring of it was expected to be completed by the end of this financial year. Post restructuring, the company will take a call on future plans there.

“The strategic fit of apparel within ITC is amongst the weakest. We have been unable to scale it up too much,” he stated. From 140-odd stores, the number of stores under the premium WLS brand has come down to 65-70 now.