Working Capital Analysis

Borrower’s particulars & proposal

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India
Limited. As the Company's ownership progressively Indianised, the name of the Company was
changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited
in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business
portfolio encompassing a wide range of businesses - Fast Moving Consumer
Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education
and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty
Papers, Packaging, Agri-Business and Information Technology - the full stops in the Company's
name were removed effective September 18, 2001. The Company now stands
rechristened 'ITC Limited,'where ‘ITC’ is today no longer an acronym or an initialised form.

I. PRESENT PROPOSAL: For sanction of Fresh (√)/Renewal/Enhancement of Credit facilities

as follows:

Nature of facility Existing Limits Limits Applied Limits now proposed

Secured Overdraft Term Loan- SOD-Rs.10.00 crores SOD-Rs.10.00 crores
(Cash Credit) Rs. 20.00 crores TL-Rs.20.00 crores TL-Rs.20.00 crores
(Since April 2017) (ENHANCEMENT) (SEPARATELY)

Note: It is assumed that the Term Loan enhancement proposal has been sanctioned separately.

SOD: Secured overdraft (also secured cash credit)

Also Summary of deposit
OCC: open cash credit
TL: Term loan
DPG: Deferred Payment Guarantee
Management
BOARD OF DIRECTORS
Chairman: Yogesh Chander Deveshwar

Yogesh Chander Deveshwar (70), is the Chairman of ITC. He was appointed as a Director on
the Board of the Company on April 11, 1984 and became the Chief Executive and Chairman
of the Board on January 1, 1996. On splitting the role of the Executive Chairman between
Chairman and Chief Executive Officer with effect from February 5, 2017, Deveshwar, at the
request of the Nomination & Compensation Committee and the Board, recognising the need
for orderly transition in a company of ITC's size and complexity, agreed to continue as
Chairman in non-executive capacity and also play the role of Mentor to the new executive
management.

Deveshwar joined ITC in 1968 and is an alumnus of the Indian Institute of Technology, Delhi,
and Harvard Business School. Between 1991 and 1994, he led Air India as Chairman and
Managing Director.

CEO: Sanjiv Puri

Sanjiv Puri (54), was appointed as a Director on the Board of ITC effective December 6, 2015
and Chief Executive Officer effective February 5, 2017 taking independent charge of the
executive leadership of the Company and is the Chairman of the Corporate Management
Committee. He was the Chief Operating Officer (COO) of ITC since July 22, 2016. Before taking
over as the COO, he was responsible for overseeing the FMCG, Paperboards, Paper & Packaging
and Agri Businesses of ITC. Puri is an alumnus of the Indian Institute of Technology, Kanpur,
and Wharton School of Business. He joined ITC in 1986.

Prior to his appointment as Director on the Board of ITC, Puri was President, FMCG Businesses
- Cigarettes, Foods, Personal Care, Education & Stationery Products, Matches and Agarbattis,
since December 2014. He has handled a wide range of responsibilities including business
leadership positions as well as in manufacturing, operations and information & digital
technology. Puri became Divisional Chief Executive of the Tobacco Division in 2009, with
additional responsibility for the Company's Trade Marketing & Distribution Vertical. He has led
ITC Infotech India Limited, a wholly owned subsidiary of ITC, as its Managing Director from May
2006 to August 2009. He was also on the Boards of ITC Infotech's wholly owned subsidiaries in
the UK and USA. Puri served between 2001 and 2006 as the Managing Director of Surya Nepal
Private Limited, a joint venture subsidiary company of ITC in Nepal. He has also been a Director
on the Board of The Tobacco Institute of India and past member of the Board of Governors of
Media Research Users Council.

Puri is a Member of the FICCI National Executive Committee and the FICCI Steering Committee.
He has also served as the Chairman of FICCI's FMCG Committee, the Agri & Food Processing
Task Force of the CII Eastern Region and as a Council Member of the CII Eastern Region. He
was also on the Executive Council of The Indian Society of Advertisers.
Executive Directors:
Nakul Anand

Nakul Anand (60), was appointed as a Director on the Board of ITC effective January 3, 2011.
In addition to overseeing the Hospitality, Travel & Tourism Businesses of ITC, he took over in
December 2014 the responsibility for overseeing the Lifestyle Retailing Business.

An Economics Honours graduate from Delhi University with an AMP Degree from Bond
University, Australia, Anand joined ITC Hotels' Management Training Programme in 1978. He
has also served as the Managing Director of erstwhile ITC Hotels Limited during the period
2003-05.

In a career that spans close to four decades, Anand has been acknowledged in the hotels and
tourism industry for his vision and commitment. Leveraging the significant learning of
sustainable excellence within ITC, he led the team at ITC Hotels to pioneer the concept of
'Responsible Luxury' in the hospitality industry, securing LEED® Platinum certifications for all
ITC super premium luxury hotels, making it the 'Greenest Luxury Hotel Chain in the world'. He
has formulated value-based strategies to create a unique quality control model. His dynamic
leadership and passion for the business is recognised and acknowledged by his peers. He is a
member of the National Tourism Advisory Council constituted by the Ministry of Tourism,
Government of India, and Chairman of the Federation of Associations in Indian Tourism &
Hospitality. Anand has been a past President of the Hotel Association of India and past
Chairman of the CII National Tourism Committee.

Rajiv Tandon

Rajiv Tandon (63), was appointed as a Director on the Board of ITC effective January 22, 2016.
He is responsible for Finance, Accounting and Internal Audit Functions and Investment
Subsidiaries of the Company. Prior to this, he was the Chief Financial Officer of the Company,
a position that he continues to hold. A Fellow member of the Institute of Chartered
Accountants of India with over three decades of experience, Tandon has held various positions
in ITC including Executive Vice President - Finance & MIS of the Tobacco Division, Executive
Vice President - Corporate Finance, Finance Advisor and member of the Management
Committee of Agri Business and Tobacco Divisions.

Tandon was named the 'Best CFO in India' by Business Today in 2013. He has held several
important positions in various industry bodies including Member, Managing Committee, The
Bengal Chamber of Commerce & Industry; Chairman of the Expert Committee on Banking and
Finance, Indian Chamber of Commerce; Member, Taxation and Company Law Committee, CII
and is currently a member, CII-CFO Forum as well as a member of the Capital Markets
Committee of FICCI.
Non-Executive Directors:
Zafir Alam

Zafir Alam (59), joined the ITC Board as an Additional Non-Executive Director effective October
26, 2016, representing the General Insurers' (Public Sector) Association of India. Apart from
holding a Diploma in Business Management, he is also an Associate of the Insurance Institute
of India.

A Direct Recruit Generalist Officer with United India Insurance Company Limited, Alam has held
various senior positions and has been the Head of several operating Units, including tenure as
Deputy General Manager, Bengaluru Regional Office. He was appointed General Manager of
The New India Assurance Company Limited in May 2014, and is currently in-charge of its Motor
Technical Department which, amongst others, deals with tie-ups with automobile majors.

Alam does not hold directorship of any other company.

Arun Duggal

Arun Duggal (70), joined the ITC Board as a Non-Executive Independent Director on September
15, 2014.

Duggal, a Mechanical Engineer from the Indian Institute of Technology, Delhi, and an MBA from
the Indian Institute of Management, Ahmedabad, is an international banker with global
experience in financial strategy, M&A and capital raising. His professional career includes 26
years with Bank of America (BoA), primarily in the USA, Hong Kong and Japan, with his last
assignment as Chief Executive with BoA, India, from 1998 to 2001. He was the Chief Financial
Officer of HCL Technologies Limited, India, from 2001 to 2003. He has also been the Chairman
of the American Chamber of Commerce, India, and on the Board of Governors of the National
Institute of Bank Management. Duggal is involved in several initiatives in social and educational
sectors and is founder of FICCI's ‘Women on Corporate Boards' Programme.

Duggal is the Chairman of ICRA Limited, Mangalore Chemicals and Fertilisers Limited and
International Asset & Reconstruction Company. He is also Director on the Boards of Dish TV
India Limited and Dr. Lal Pathlabs Limited among others.

Meera Shankar

Meera Shankar (66), DIN: 06374957, was appointed as a Non-Executive Independent Director
on the Board of ITC effective September 6, 2012.

A Post Graduate in English Literature, she joined the Indian Foreign Service in 1973 and had an
illustrious career spanning 38 years. She served in the Prime Minister's Office for six years from
1985 to 1991 working on foreign policy and security matters. Thereafter, she led the
Commercial Wing in the Indian Embassy in Washington as Minister (Commerce) till 1995. She
returned as Director General of the Indian Council of Cultural Relations overseeing India's
cultural diplomacy. She has had extensive experience in South Asia having worked on
Bangladesh, Sri Lanka and Maldives as Under Secretary and Deputy Secretary in the Ministry
 of External Affairs. Later, as Joint Secretary she headed divisions dealing with neighbours,
Nepal and Bhutan, and the South Asian Association for Regional Cooperation (SAARC). As
Additional Secretary, she handled the UN and international security issues.

She served as Ambassador of India to Germany from 2005 to 2009 and then to the United
States from 2009 to 2011.

She is also on the Board of Pidilite Industries Limited and Adani Transmission Limited amongst
others.

Nirupama Rao

Nirupama Rao (66), was appointed as a Non-Executive Independent Director on the Board of
ITC effective April 8, 2016.

A Graduate in English Literature, she was a Fellow of the Harvard University (1992-93), Fellow
of the Brown University, Fellow of the Jawaharlal Nehru University, and a recipient of the
Degree of Doctor of Letters (Honoris Causa) from the Pondicherry University. She was
conferred with the Vanitha Ratna by the Government of Kerala in 2016.

A career diplomat from the Indian Foreign Service from 1973 to 2011, she served the
Government in several important positions including that of the Foreign Secretary of India. She
has represented India in several countries during her distinguished career and was the first
Indian woman to be appointed High Commissioner to Sri Lanka and Ambassador to China. She
was also the first woman spokesperson of the Ministry of External Affairs. After her retirement,
she was appointed Ambassador of India to the United States for a tenure of two years.

She is also on the Boards of KEC International Limited, Network18 Media & Investments
Limited and TV18 Broadcast Limited among others.

Banking arrangements-present & proposed including credits

Complete details of the company’s banking arrangement is not available in the Annual
Report of the company.
a) With our Bank:

The company is enjoying the following credit facility with our bank.

Facility Limit Date of Balance Overdues Rate of Securit

documen as on Interest y
t ……….
Fund Based Nil
Non-Fund Based
(excluding DPG)

Term credit
facilities Rs. 20.00.00 crore
(including DPG)

4. Total indebtedness to our Bank (1+2+3):

a) Fund based Rs.20.00 crore

b) Non-fund based Nil

TOTAL Rs.20.00.00 crore

SWOT Analysis

Opportunities Threat
 Brand Image  Dependence of Tabacco
 Distribution Network Revenues
 Management  Negative association of Tabacco

Strengths Weakness
 Rural Market  Competition-Domestic and
 E-Choupal International
 Increased spending power of  Increasing tax rates charged on
rural sector tabacco

Financials & comments

Amounts in
Rs. Thousand
Last 2 Years Actuals Current Yr. Next Year
Projection
(As per audited BS) Estimates s
Year 2015 2016 2017 2018
No.of months 12 12 12 12
CURRENT LIABILITIES
Short-term borrowing from banks
1. (including
bills purchased, discounted & excess
borrowing placed on repayment
basis)
i. From applicant bank 10.00 10.00
ii. From other banks 0.14 0.02 0.02 0.02
iii
. (of which BP & BD)
Sub-total [i + ii] (A) 0.14 0.02 10.02 10.02
2. Short term borrowings from others 3631.88 3671.18 3854.74 4047.48
3. Sundry Creditors (Trade) 1987.59 1904.62 1714.16 1542.74
4. Advance payments from customers /
deposits from dealers
5. Provision for taxation 225.97
6. Dividend payable 4771.91 5009.70 5510.67 6061.74
Other statutory liabilities (due within
7. 1 year)
Deposits / instalments of term loans
8. /
DPGs / debentures etc. (due within 1
year)
9. Other current liabilities & provisions
(due within 1 year) - specify major
items 886.83 1096.89 1206.53 1327.13
Other short term loans
a. (unsecured) 0.50 0.50 0.50
b. Other Provisions 886.83 1096.39 1206.03 1326.63
c. Acceptances
d. Due to Subsidiary
11504.1 11682.3
Sub total [2 to 9] (B) 8 9 12286.10 12979.09
10 11504.3 11682.4
. Total current liabilities [A + B] 2 1 12296.12 12989.11

TERM LIABILITIES
11 Debentures (not maturing within 1
. year)
12 Preference Shares (redeemable after
. 1 year)
13
. Term loans (excluding instalments
payable within 1 year) 20.00 18.00
14
. Deferred Payment Credits (excluding
instalments due within 1 year) 51.00 38.69 34.82 31.34
15 Term deposits (repayable after 1
. year)
16
. Other term liabilities 1412.05 1738.76 1912.64 2103.90
17
. Total Term Liabilities [11 to 16] 1463.05 1777.45 1967.46 2153.24
18 12967.3 13459.8
. Total Outside Liabilities [10 + 17] 7 6 14263.58 15142.35

NET WORTH
19
. Ordinary Share Capital 795.32 801.55 810.00 815.00
20 14686.3 15565.3
. General Reserve 1 1 17121.84 18834.03
21
. Revaluation Reserve 52.41 52.41 52.41 52.41
22 10727.9 14316.4
. Other Reserves (excluding Provisions) 8 2 12659.89 12392.61
23 Surplus (+) or deficit (-) in Profit &
. Loss a/c
23
. a. Others
Share Perimum
(wrong below cell formula)
24 26262.0 30735.6
. Net Worth 2 9 30644.14 32094.05

25 39229.3 44195.5
. TOTAL LIABILITIES [18 + 24] 9 5 44907.72 47236.40

FORM III - ANALYSIS OF BALANCE SHEET (Continued)

ASSETS

IT
Name: C
 Amounts in
Rs. Thousand
Last 2 Years Actuals Current Yr. Next Year
Projection
(As per audited BS) Estimates s
Year 2015 2016 2017 2018
No.of months 12 12 12 12
CURRENT ASSETS
26
. Cash and Bank Balances 3289.37 7588.61 9515.76 11904.70
27
. Investments (other than long term)
Govt. and other trustee
i. securities 6311.26 5963.82 5367.44 4830.69
ii. Fixed Deposits with banks
28 Receivables other than deferred
. i. &
exports (incldg. bills purchased
and
discounted by banks) 2165.36 1722.40 1550.16 1395.14
ii. Export receivables (incldg. bills
purchased/discounted by banks)
29
. Instalments of deferred receivables
(due within 1 year)
30
. Inventory: 7357.78 7836.65 7740.78 7803.82
Raw materials (including stores
i. and
other items used in the process
of
manufacture) 4560.54 4404.52 3964.07 3567.66
a. Imported
b. Indigenous 4560.54 4404.52 3964.07 3567.66
ii. Stocks-in-process 180.82 180.51 198.56 218.42
iii
. Finished goods 2541.48 2744.79 2919.27 3161.20
iv
. Other consumable spares 74.94 506.83 658.88 856.54
a. Imported 74.94 506.83 658.88 856.54
b. Indigenous
31 Advances to suppliers of raw
. materials
and stores/spares 783.51 549.89 439.91 351.93
32
. Advance payment of taxes
33 Other current assets (specify major
. items) 1019.69 293.55 250.00 250.00
a. Advance Reconverable 1019.69 293.55 250.00 250.00
Security Deposit+Retention
b. Money
c. TDS
d. Net Deferred Tax
34 20926.9 23954.9
. Total Current Assets (26 to 33) 7 2 24864.05 26536.29

FIXED ASSETS
35 Gross Block (land, building,
. machinery,
14244.4 15891.2
work-in-progress) 2 8 15567.12 16123.83
36
. Depreciation to date
37 14244.4 15891.2
. Net Block (35 - 36) 2 8 15567.12 16123.83

OTHER NON-CURRENT ASSETS

38 Investments/book
. debts/advances/deposits
which are not current assets 3993.95 3948.00 3976.55 4026.28
i. a. Investments in subsidiary
companies / affiliates 2513.93 2441.64 2319.56 2203.58
b. Others
Advances to suppliers of capital
ii. goods
and contractors 1480.02 1506.36 1657.00 1822.70
iii
. Deferred receivables (maturity
exceeding 1 year)
iv
. Others
Debtors of More than 6
a. months
b. Loans
c. Deferred Revenue Expenses
d.
39
. Non-consumable stores and spares
40
. Other non-current assets including
dues from directors
41 Total Other Non-current Assets (38 to
. 40) 3993.95 3948.00 3976.55 4026.28
 42
. Intangible Assets (patents, good will,
prelim.expenses, bad / doubtful
debts not
provided for, etc. 64.05 401.35 500.00 550.00
43 39229.3 44195.5
. Total Assets (34+37+41+42) 9 5 44907.72 47236.40
44 26197.9 30334.3
. Tangible Net Worth (24 - 42) 7 4 30144.14 31544.05
45 12272.5
. Net Working Capital (34 - 10) 9422.65 1 12567.93 13547.18

Assessments

CRISIL's ratings on the bank facilities of ITC Limited (ITC) continue to reflect ITC's excellent
business risk profile with a presence in diverse businesses, dominant position in the Indian
cigarette market, and strong sustainable profitability. The ratings also factor in the company's
exceptionally strong financial position. These rating strengths are partially offset by ITC's
exposure to risks inherent in its various businesses. ITC is the leader in the Indian cigarette
market, driven by an established portfolio of brands and a superior distribution network. The
company has evolved from a pure tobacco company into a well-diversified business
conglomerate with a strong presence in paperboards, printing and packaging, agricultural
commodities, hotels, branded packaged foods, personal care products, branded apparel,
stationery, and other fast-moving consumer goods (FMCGs). ITC has established a strong
presence through brands such as Aashirvaad (staple foods, dairy, spices, instant mixes, and
ready meals), Sunfeast (biscuits, pasta, and instant noodles), Kitchens of India (ready-toeat
gourmet cuisine), Bingo! (potato chips and other snacks) and Minto and Candyman
(confectioneries) in the branded packaged foods segments. The company has recently added
luxury chocolates and ghee business to its branded packaged foods segment. It is present in
lifestyle retailing under the Wills Lifestyle and John Players brands. ITC also operates in the
personal care products segment where it has a range of shampoos, soaps, shower gels, hair-
care range, fairness creams, skin creams, face washes, lip balms, deodorants, and
conditioners under the Fiama Di Wills, Vivel Di Wills, Vivel, and Superia brands. The company
has presence in antiseptic liquids and other skin care products through recently acquired
brands Savlon and Shower to Shower. In the stationery segment, it operates under the
brands Classmate, Paperkraft, and Colour Crew. ITC is the second-largest hotel chain in India,
with over 100 hotels under four brands - ITC Hotels in the luxury segment, WelcomHotel in
upper-upscale segment,

Fortune Hotels in upscale and mid-market space, and WelcomHeritage in the leisure and
heritage segment.
ITC's strong financial position is reflected in its healthy internal accruals, low debt, and robust
liquidity. For 2015-16 (refers to financial year, April 1 to March 31), ITC, on a consolidated
level, posted net margin of 25.7 per cent compared with 25.4 per cent. The company had low
debt of around Rs.1 billion against a large net worth of Rs.335 billion, as on March 31, 2016.
ITC has exceptionally strong liquidity, with cash and liquid investments (bonds, debentures,
mutual funds and bank deposits) of over Rs.170 billion as on March 31, 2016. Consequently,
the company is expected to fund a significant part of its expansion plans through internal
accruals.
ITC, however, remains exposed to risks inherent in the individual business segments in which
it operates. These include regulatory risks in the cigarette business such as increase in excise
duty, and competitive pressures in the
FMCG segment. These risks are partially offset by the company's focus on building cost
efficiencies, and its strong backward integration in the cigarette business through its leaf
tobacco and packaging businesses, and also in the agricultural commodity and packaged food
business through its e-choupal initiative.

Outlook: Stable
CRISIL believes that ITC will maintain its robust financial risk profile and strong position in the
cigarettes, hotels, paperboards, paper, packaging, and agriculture-based products segments
over the medium term. The company's cash flows are expected to be sufficient to fund its
capital expenditure requirements over this period. Downgrade

Scenario-
* Large debt-funded acquisition, thereby adversely impacting financial risk profile.
About the Company
ITC operates in a variety of business segments, including paperboards, paper and packaging,
hotels, lifestyle retailing, safety matches, agarbatti (incense sticks), branded stationery,
agricultural commodities, and FMCG; however, cigarette manufacturing and sales remain its
largest economic activity in revenue terms.

In fiscal 2016, consolidated profit after tax (PAT) was Rs 100.7 billion (Rs 97.7 billion in fiscal
2015) on net sales of Rs 390.6 billion (Rs 384.3 billion). In the three months ended June 30,
2016, on a standalone basis, net profit was Rs 23.84 billion on net sales of Rs 131.6 billion (as
per Indian Accounting Standards), as against Rs 21.7 billion on net sales of Rs 121.5 billion in
the corresponding period of the previous year.

Recommendation
We recommend sanction of the following credit limits on the terms and conditions mentioned
against them, valid up to for a period of 12 months.

Facility Limit (Rs in ROI/Commn Margin Security

Crores )

SOD 10.12 0.5% above 25% on 1st Charge on all

PLR subject to Receivable current assets of the
a minimum of company ranking pari
13.5% p.a. passu with other
working capital
banker.

Collateral Securities: Nil

Name of guarantors: None
Other terms of sanction: None
Asst/Sub Manager Sr Br. Manager
Date of forwarding the Proposal to ZO