GICS Industry : Tobacco l Sub Industry : Tobacco l Website : www.itcportal.

com

ITC Ltd
Key Stock Indicators
NSE Ticker : Bloomberg Ticker : Face value / Share: Div. Yield (%): ITC ITC:IN 1.0 6.0 CMP (as on 15 Dec 2010Rs/share): 52-week range up to 15 Dec 2010 (Rs)(H/L): Market Cap as on 15 Dec 2010 (Rs mn): Enterprise Value as on 15 Dec 2010 (Rs mn): Div. Yield (%): 0.0 167.0 312.80/152.95 1,282,120 1,269,742 Shares outstanding (mn) : Free Float (%) : Average daily volumes (12 months) : Beta (2 year) : 7677.4 100 4,867,008 0.54

ITC Ltd (ITC), established in 1910, is Indias leading cigarette company with over 80% market share. It also has significant presence in other areas like hotels, agri-business, packaging and paper boards.

Key Financial Indicators

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m. : Not meaningful

KEY HIGHLIGHTS
Indias largest cigarette company ITC is Indias largest cigarette company with over 80% market share. It's highly popular portfolio of brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake. ITC launched new variants of Gold Flake and Navy Cut Filter Kings with innovative product features, limited edition packs of Classic and launch of new brands like Flake Excel Filter and Duke Filter. The business also launched its premium line of hand-rolled cigars in select markets under the brand name Armenteros. During FY10, the business leveraged its existing industrial licence in Maharashtra to set up a cigarette factory at Ranjangaon, Pune. Production has commenced, enabling ITC to service proximal markets. Diversified revenue stream Apart from cigarettes (66% of revenues), ITC has a whole host of other revenue streams viz. hotels (4%), agri-business (8%), paperboards and packaging (7%), and other FMCG products (13%). All these businesses (except other FMCG) are profitable at the operating level. Having revenues from different business segments shields ITC from any downturn in any particular segment. Very strong brands ITC is an extremely brand conscious company and is willing to invest so that the brands have a high recall. In hotel segment, it has 4 key brands: ITC Hotel at the luxury end, WelcomHotel in the 5 Star segment, Fortune in the mid-market to upscale segment and WelcomHeritage in the heritage leisure segment. In branded foods segment it has Aashirwad atta and Sunfeast for biscuits. In the lifestyle retailing segment, it has Wills Lifestyle an established premium lifestyle brand and John Players a leading fashion brand for the youth.

Mar-08 Mar-09 Mar-10 152,705.4 160,595.3 197,097.1 33.5 32.9 33.2 31,860.3 33,694.9 42,170.2 20.9 21.0 21.4 8.5 8.9 11.0 24.4 20.7 15.1 6.4 5.1 4.5 39.2 36.8 42.2 28.2 26.0 30.1 15.1 13.0 9.6

Shareholding (As on September 30, 2010)

Others 50% Promoters 0%

KEY RISKS

DII 36%

FII 14%

Increased taxation and spate of regulations on cigarette manufacturers Fortunes of hotel industry linked to tourism, health of economy as well as factors like terrorist attacks etc Increase in commodity prices negatively affects the branded foods FMCG business

Indexed price chart

(index) 160 140 120 100 80 60 40 20 0 ('000) 25000 20000 15000 10000 5000 0

Stock Performances vis--vis market

Returns (%) YTD ITC NIFTY
Note: 1) YTD returns are since April 1, 2010 to Dec 15, 2010. 2) 1-m, 3-m and 12-m returns are up to Dec 15, 2010.

1-m -4 -7

3-m 5 4

12-m 34 14

29 11

Feb-10

Jul-10

Dec-09

May-10

Aug-10

Sep-10

Jan-10

Jun-10

Oct-10

Volumes (RHS)

Mar-10

ITC

Nov-10
NIFTY

Apr-10

CRISIL COMPANY REPORT | 1

ITC Ltd
BACKGROUND
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. From the year, 2001 onwards, its name was rechristened as 'ITC Limited'. ITC operates in a diverse range of businesses and its multi-business portfolio includes - Cigarettes & Tobacco, Hotels, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care. ITC is Indias leading cigarette player with over 80% market share by value. It has a leadership position in every segment of the market, led by significant investments in marketing, distribution, product design, innovation, manufacturing technology and quality. ITCs distribution reach is one of the largest in India. The FMCG business has a retail network of over 2 mn retailers in the country, ranging from premium outlets in metros to small shops in the interiors of rural India.

COMPETITIVE POSITION
Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m: Not meaningful

ITC Ltd. Dabur India Ltd. Hindustan Unilever Ltd. Mar-10 Mar-10 Mar-10 197,097.1 34,126.4 180,339.9 33.2 19.1 15.8 42,170.2 5,024.3 21,646.1 21.4 14.7 12.0 0.2 0.0 11.0 2.5 9.7 15.1 40.4 30.8 4.5 19.8 21.5 42.2 55.4 100.6 30.1 56.9 89.8 9.6 26.6 22.0

Marico Ltd. Mar-10 26,458.6 15.5 2,335.4 8.8 0.9 4.0 31.1 11.2 34.5 47.7 19.5
Key Financial Indicators Units Revenue Rs mil li on Rs mil li on Per cent Per cent Per cent Ti mes Per cent Per cent EBITDA ma rgins Per cent PAT PAT ma rgi ns EBITDA growth PAT growth Gea ring RoCE RoE

FINANCIAL PROFILE
Steady growth in the last 3 years with maintenance of margins ITC registered a steady top line growth of ~ 13.6% CAGR between FY08-10 with the top line growing from Rs 152.7 bn in FY08 to Rs 197.1 bn in FY10. The operating margins have remained ~33% for the past 3 years inspite of competition in the noncigarettes FMCG and hotel businesses

Mar-08
152,705.4 33.5 31,860.3 20.9 19.1 23.7 14.7 0.0 39.2 28.2

Mar-09
160,595.3 32.9 33,694.9 21.0 5.2 3.4 5.8 0.0 36.8 26.0

Mar-10
197,097.1 33.2 42,170.2 21.4 22.7 23.8 25.2 0.0 42.2 30.1

Revenue growth Per cent

INDUSTRY PROFILE
Cigarettes The organised segment of the cigarette manufacturing industry constitutes around 90 per cent of the overall industry, with the remainder made up of contraband and grey market goods. Cigarettes account for only 14 per cent of total tobacco consumption in India as compared to an average over 80 per cent globally. Cigarette sales for organised players in value terms increased to Rs 203 billion in 2009-10 from Rs 173 billion in 2008-09, owing largely to an 8-10 per cent price hike given an increase in excise duties. The ban on smoking in public places, which has been in effect since October 2008, and the ruling that cigarettes have to carry a pictorial warning along with the statutory health warning, has not affected sales and has not had any major impact on the industry. In addition, the government has deferred its decision for cigarette manufacturers to carry more graphic warning pictures by one year in reaction to the shutdown of factories by major manufacturers upon announcement of the decision. The domestic cigarette industry continues to be vulnerable to government policies, with regard to excise duties and imposition of multiple taxes (luxury and entry tax). As part of the Union Budget 2010-11, excise duties for cigarettes were further increased. Moreover, the regulatory impact of the Tobacco Act in terms of restrictions on advertising and distribution of cigarettes hampers the industry's brand-building capabilities. However, increases in the excise duty do not affect the profitability of cigarette companies, as the rise in prices is usually passed on to consumers.

CRISIL COMPANY REPORT | 2

ITC Ltd
ANNUAL RESULTS
Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital Cash flow from operating activities Capital Expenditure Investments and others Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Cash flow from financing activities Change in cash position Opening cash Closing cash
n.m : Not meaningful;

Mar-08 146,380.3 152,705.4 51,154.1 33.5 4,728.7 76.0 -259.0 47,033.9 31,860.3 20.9 3768.6 8.5

Mar-09 158,170.8 160,595.3 52,871.4 32.9 5,808.6 859.8 3,124.2 50,132.5 33,694.9 21.0 3774.4 8.9

Mar-10 194,087.8 197,097.1 65,442.0 33.2 6,439.0 426.6 3,648.2 62,773.4 42,170.2 21.4 3818.2 11.0

Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets Ratio

Mar-08 3,768.6 117,126.3 120,894.9 5,435.7 1,207.5 1,041.7 2,249.2 29,843.4 16,076.1 174,499.3 94,026.9 79,253.5 26,078.9 69,166.9 8,929.6 41,910.7 7,768.2 174,499.3

Mar-09 3,774.4 134,185.2 137,959.6 8,606.0 1,085.7 781.0 1,866.7 32,284.6 16,341.3 197,058.2 110,472.9 89,721.8 25,070.7 82,265.7 8,173.2 47,819.5 13,183.1 197,058.2

Mar-10 3,818.2 138,134.3 141,952.5 7,805.7 992.4 115.3 1,107.7 37,533.5 43,198.6 231,598.0 124,301.3 96,738.7 50,004.8 84,854.5 10,262.4 47,197.2 13,485.8 231,598.0

Mar-08 46,090.4 -14,450.6 4,728.7 441.8 36,810.3 -25,416.2 -1,020.0 -26,436.2 446.3 240.2 -15,568.2 1,410.8 -13,470.9 -3,096.8 10,865.0 7,768.2

Mar-09 49,327.2 -13,267.3 5,808.6 -4,977.5 36,891.0 -16,795.6 1,008.2 -15,787.4 447.5 -382.5 -16,452.1 698.4 -15,688.7 5,414.9 7,768.2 13,183.1

Mar-10 62,224.6 -21,403.5 6,439.0 29,820.1 77,080.2 -13,737.6 -24,934.1 -38,671.7 7,207.3 -759.0 -44,532.8 -21.3 -38,105.8 302.7 13,183.1 13,485.8

Revenue growth (%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax rate (%) PAT margins (%) Dividend payout (%) Return on Equity (%) Return on capital employed (%) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Asset turnover (x) Current ratio (x) Gross current assets (days)

Mar-08 19.1 23.7 14.7 33.5 30.7 20.9 41.4 28.2 39.2 0.0 673.1 0.0 1.8 1.8 161

Mar-09 5.2 3.4 5.8 32.9 26.4 21.0 41.4 26.0 36.8 0.0 61.5 0.0 1.6 2.0 181

Mar-10 22.7 23.8 25.2 33.2 34.1 21.4 90.5 30.1 42.2 0.0 153.4 0.0 1.7 1.5 150

QUARTERLY RESULTS
Profit and loss account (Rs million) No of Months Revenue EBITDA Interes t Depreci a tion PBT PAT Sep-10 3 527,167.0 199,938.0 536.0 16,399.0 183,003.0 124,674.0 100.0 37.9 0.1 3.1 34.7 23.6 % of Rev Sep-09 % of Rev 3 441,372.0 165,856.0 1,814.0 14,839.0 149,203.0 100,991.0 100.0 37.6 0.4 3.4 33.8 22.9 Jun-10 3 494,582.0 173,557.0 580.0 15,968.0 157,009.0 107,031.0 100.0 35.1 0.1 3.2 31.7 21.6 % of Rev Sep-10 % of Rev 6 1,021,749.0 373,495.0 1,116.0 32,367.0 340,012.0 231,705.0 100.0 36.6 0.1 3.2 33.3 22.7 Sep-09 6 863,421.0 313,346.0 2,398.0 29,998.0 280,950.0 188,861.0 100.0 36.3 0.3 3.5 32.5 21.9 % of Rev

CRISIL COMPANY REPORT | 3

ITC Ltd
FOCUS CHARTS & TABLES

Rs mn 60,000 50,000 40,000 30,000 20,000 10,000 0

Quarterly sales & y-o-y growth

Per cent 35 30 25 20 15 10 5 0 -5
Rs mn 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Dec-07

Quarterly PAT & y-o-y growth

Per cent 30 25 20 15 10 5 0 -5 -10 Sep-10 Jun-10

Dec-08

Mar-08

Mar-09

Dec-09

Sep-08

Sep-09

Jun-08

Jun-09

Dec-07

Dec-08

Dec-09

Jun-08

Jun-09

Sep-08

Sep-09

Jun-10

Mar-08

Mar-09

Mar-10

Sep-10

Sales Rs/share 3.5 3 2.5 2 1.5 1 0.5 0

Sales growth y-o-y (RHS)

Net Profit

Net profit growth y-o-y (RHS)

EPS

Per cent 45 40 35 30 25 20 15 10 5 0

Movement in operating and net margins

Sep-08

Sep-09

Mar-10

Dec-07

Dec-08

Dec-09

Mar-08

Mar-09

Dec-07

Dec-08

Dec-09

Jun-08

Jun-09

Mar-08

Sep-08

Mar-09

Sep-09

Mar-10

Jun-10

Sep-10

OPM

NPM

Shareholding Pattern (Per cent) Dec 2009 Mar 2010 Promoters 0.0 0.0 FII 12.8 13.4 DII 37.9 37.2 Others 49.4 49.4

Jun 2010 0.0 14.2 36.1 49.8

Sep 2010 0.0 14.2 36.1 49.7

Board of Directors Director Name Yoges h Cha nder Deves hwa r (Mr.) Ani l Ba i ja l (Mr.) Ra vi nder Kuma r Ka ul (Dr.) Sera jul Ha q Sha rfuddi n Kha n (Mr.) Suni l Beha ri Ma thur (Mr.) Di nes h Kuma r Mehrotra (Mr.)

Designation Executi ve Cha i rma n Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector Non-Executi ve Di rector

Hugo Geoffrey Powel l (Mr.) Non-Executi ve Di rector Pi l l a ppa kka m Ba hukutumbi Ra ma nuja m (Mr.) Non-Executi ve Di rector Anthony Ruys (Mr.) Ba s udeb Sen (Dr.) Anup Singh (Mr.) Kri s hna moorthy Va i dya na th (Mr.) Ba l a kri s hna n Vi ja ya ra gha va n (Mr.)
Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

Non-Executi ve Di rector, Addi tiona l Di rector Non-Executi ve Di rector Whol eti me Di rector Whol eti me Di rector Non-Executi ve Di rector

CRISIL COMPANY REPORT | 4

Mar-10

Sep-10

Jun-08

Jun-09

Jun-10