ITC Shareholder’s Wealth Creation

By Group 6, Batch 3
Abhishek Jain
Naman Singh
Mrinal Kumar

Introduction

ITC Ltd. has evolved from Tobacco Company to diversified multi-product multi dimensional
organisation in its splendid 100 years of journey. Although this report requires us to focus upon the
whether ITC was successful in maximising shareholder’s wealth or not, we would like to move a step
further and analyse company in and out. We would analyse how the company has evolved overtime,
how it functions, what are its future goals and its present commitments. Moreover, we would like to
look into the factors that contributed towards its growth and what were the major impediments.

Financial History

Here, we would first identify the parameters on which shareholder’s wealth is measured. Then a
detailed analysis of ITC will be done along with testing it with each of the parameters. This involves
analysing in detail the financial information, its market capitalisation, financial results, milestones,
the impact of major economic events on ITC, profitability with special attention to India’s tax
structure, inorganic growth undertaken, dividends, etc.

Further we will conduct a comparative study of returns from all asset classes with the returns of ITC
over 5 year blocks and investigate into the reasons for superior or inferior returns overtime. Also, a
further investigation would be conducted into as in what were the best periods and the most muted
periods in its history of ITC from wealth creation perspective and reasons thereof.

Organisation History

In organisation history, first task will be to conduct a comprehensive study of organisational

structure of ITC. There upon looking at the evolution of board of directors over time which lead to its
efficient management, possible conflicts of interests and how it has been addressed, transformation
of ITC from single product company to a diversified product conglomerate, the triggers behind its
foray into each sector, each segment’s contribution towards growth of the organisation and
eventually towards shareholder’s wealth creation, the evolution of its management so as to match
up with the size of the organisation, its vision and mission, challenges faced in managing diversified
work force, other challenges faced by ITC during its 100 yr journey, what went wrong and what went
right beyond imaginations, major milestones, etc.

Social Impact Analysis

It has been generally accepted that tobacco products are harmful for society. ITC has been into
cigarette business for last 100 years, yet it has build up its brand image as a responsible social
citizen. The major thrust here would be to understand how ITC effectively managed this ethical
dilemma. A detailed study of impact of legal framework on ITC will be done with special attention to
the impact of ban on public smoking by many states and court’s decision of mandatory cautionary
warning on the cigarette boxes on the company etc.

ITC has proved that community involvement does not have to be relegated to a side project, but
rather can be the primary focus for a firm and lead to not only a better community, but loyal
customers and a reliable well of future talent. This part of this research will focus on the initiatives
taken by ITC for the welfare of the society, the new energy efficient measures taken by them to save
scarce resources such as power etc, impact of its CSR initiatives on overall profitability and brand
perception of the company, contribution of its CSR initiatives towards its long term sustainability,
level of job satisfaction among employees, and other initiatives taken by ITC towards employee skill
development.

Sources of Information

Since the project involves lots of qualitative and quantitative data, multiple sources will be used to
gather information. For quantitative data, we would primarily use information available in public
domain such as Annual reports, sustainability reports, newsletters, journals, research done by others
with due respect to copy right laws, etc. For qualitative information, interview will form a major
source of information. We will try to connect with company’s past and present employees,
managerial staff, accounting and auditing staffs, etc. Internet databases such as capital line, prowess
etc will be extensively used during the project.

End Use of the project

The end use of the project depends upon the kind of report that we are able to make. Our target
would be to make it as a simple as possible. It will give the user a comprehensive idea about the
company and its working, its evolution and development. It could also be used as a reference
material to understand the flashback of the organisation by new employees or those interested in
knowing about the company at a glance.