A STUDY ON FINANCIAL PERFORMANCE

OF ITC LIMITED
Project Report submitted to

UNIVERSITY OF CALICUT
In partial fulfillment of the requirement for the award of the degree of

BACHELOR OF COMMERCE (PROFESSIONAL)

Submitted by

SREERAM R VARMA
(CCASBCP019)

Under the supervision of

PROF. K O FRANCIS

DEPARTMENT OF COMMERCE

CHRIST COLLEGE(AUTONOMOUS), IRINJALAKUDA

MARCH 2021
 CHRIST COLLEGE(AUTONOMOUS), IRINJALAKUDA

CALICUT UNIVERSITY

DEPARTMENT OF COMMERCE
CERTIFICATE

This is to certify that the project report entitled “A STUDY ON FINANCIAL

PERFORMANCE OF ITC LIMITED” is a bonafide record of project done
by SREERAM R VARMA, Reg. No. CCASBCP019, under my guidance and
supervision in partial fulfillment of the requirement for the award of the degree
of BACHELOR OF COMMERCE (PROFESSIONAL) and it has not previously
formed the basis for any Degree, Diploma and Associateship or Fellowship.

PROF. K.O.FRANCIS PROF. K.O FRANCIS

Co-ordinator Project Guide
 DECLARATION

I, SREERAM R VARMA, hereby declare that the project work entitled

“A STUDY ON FINANCIAL PERFORMANCE OF ITC LIMITED” is a record
of independent and bonafide project work carried out by me under the
supervision and guidance of PROF. K O FRANCIS, Co-ordinator, B.Com
Professional, Christ College, Irinjalakuda.

The information and data given in the report is authentic to the best of my
knowledge. The report has not been previously submitted for the award of any
Degree, Diploma, Associateship or other similar title of any other university or
institute.

Place: Irinjalakuda SREERAM R VARMA

Date: 29/03/2021 CCASBCP019

 ACKNOWLEDGEMENT

I would like to take the opportunity to express my sincere gratitude to all people
who have helped me with sound advice and able guidance.

Above all, I express my eternal gratitude to the Lord Almighty under whose
divine guidance; I have been able to complete this work successfully.

I would like to express my sincere obligation to Rev.Dr. Jolly Andrews,

Principal-in-Charge, Christ College Irinjalakuda for providing various facilities.

I am thankful to Prof. K O Francis, Co-ordinator of B.Com (Professional), for

providing proper help and encouragement in the preparation of this report.

I am thankful to Ms. Teena Thomas, Class teacher for her cordial support,
valuable information and guidance, which helped me in completing this task
through various stages.

I express my sincere gratitude to Prof K O Francis, whose guidance and support

throughout the training period helped me to complete this work successfully.

I would like to express my gratitude to all the faculties of the Department for
their interest and cooperation in this regard.

I extend my hearty gratitude to the librarian and other library staffs of my college
for their wholehearted cooperation.

I express my sincere thanks to my friends and family for their support in

completing this report successfully.

SREERAM R VARMA
 TABLES OF CONTENTS

CHAPTER NO. CONTENTS PAGE NO:

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1 INTRODUCTION 1–5

CHAPTER 2 REVIEW OF LITERATURE 6 – 16

INDUSTRY AND
CHAPTER 3 17 – 27
COMPANY PROFILE

DATA ANALYSIS AND

CHAPTER 4 28 – 44
INTERPRETATION

FINDINGS, SUGGESTIONS
CHAPTER 5 45 – 47
AND CONCLUSION

BIBLIOGRAPHY

ANNEXURE

LIST OF TABLES
TABLE
TITLE PAGE NO:
NO:

4.1 Table showing current ratio 28

4.2 Table showing quick ratio 29

4.3 Table showing debt equity ratio 31

4.4 Table showing proprietary ratio 31

4.5 Table showing leverage ratio 32

4.6 Table showing total liability to total assets ratio 33

4.7 Table showing net profit ratio 34

4.8 Table showing Return on shareholders’ fund ratio 35

4.9 Table showing total assets turnover ratio 36

4.10 Table showing current assets turnover ratio 37

Table showing comparative balance sheet for the year

4.11 38
2015-16 and 2016-17

Table showing comparative balance sheet for the year

4.12 39
2016-17 and 2017-18

Table showing comparative balance sheet for the year

4.13 40
2017-18 and 2018-19

Table showing comparative balance sheet for the year

4.14 41
2018-19 and 2019-20

4.16 Table showing common size balance sheet 42-44

 LIST OF FIGURES

FIGURE
TITLE PAGE NO:
NO:

4.1 Figure showing current ratio 28

4.2 Figure showing quick ratio 29

4.3 Figure showing debt equity ratio 30

4.4 Figure showing proprietary ratio 31

4.5 Figure showing leverage ratio 32

4.6 Figure showing total liability to total assets ratio 33

4.7 Figure showing net profit ratio 34

4.8 Figure showing Return on shareholders’ fund ratio 35

4.9 Figure showing total assets turnover ratio 36

4.10 Figure showing current assets turnover ratio 37

 CHAPTER I
INTRODUCTION
 CHAPTER II
REVIEW OF LITERATURE
 CHAPTER III
INDUSTRY AND COMPANY
PROFILE
 CHAPTER IV
DATA ANALYSIS AND
INTERPRETATION
 CHAPTER V
FINDINGS, SUGGESTIONS AND
CONCLUSION
BIBLIOGRAPHY
ANNEXURE
 INTRODUCTION

Financial performance analysis is the process of evaluating businesses, project,

budgets and other finance related transactions to determine their performance and
suitability. Typically, financial analysis is used to analyze whether an entity is
stable, solvent, liquid or Profitable enough to warrant a monetary investment. The
statement includes the Income statement, Balance sheet, Statement of cash flow,
notes to accounts and a statement of changes in equity. It is used by a variety of
stakeholders, such as credit and equity investors, the government, the public, and
decision-makers within the organization. These stakeholders have different interests
and apply a variety of different techniques to meet their needs. For example, equity
investors are interested in the long-term earnings power of the organization and
perhaps the sustainability and growth of dividend payments. Creditors want to
ensure the interest and principal is paid on the organizations debt securities (e.g.,
bonds) when due.

Common methods of financial statement analysis include fundamental analysis,

DuPont analysis, horizontal and vertical analysis and the use of financial ratios.
Historical information combined with a series of assumptions and adjustments to
the financial information may be used to project future performance. The Chartered
Financial Analyst designation is available for professional financial analysts.

The financial performance analysis of a company or a firm is generally done using

ratio analysis, comparative statements and common size statements. For the purpose
of analysis I also used the above mentioned tools such as the ratios, comparative
statements and common size statement.

Ratio analysis is the comparison of line items in the financial statements of a

business. Ratio analysis is used to evaluate a number of issues with an entity, such
as its liquidity, efficiency of operations, and profitability. This type of analysis is

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particularly useful to analysts outside of a business, since their primary source of
information about an organization is its financial statements. Ratio analysis is less
useful to corporate insiders, who have better access to more detailed operational
information about the organization.

Common size analysis, also referred as vertical analysis, is a tool that financial
managers use to analyze financial statements. It evaluates financial statements by
expressing each line item as a percentage of the base amount for that period. The
analysis helps to understand the impact of each item in the financial statement and
its contribution to the resulting figure. The technique can be used to analyze the
three primary financial statements, i.e., balance sheet, income statement, and cash
flow statement. In the balance sheet, the common base item to which other line items
are expressed is total assets, while in the income statement, it is total revenues.

The comparative financial statements are statements of the financial position at

different periods; of time. The elements of financial position are shown in a
comparative form so as to give an idea of financial position at two or more periods.
Any statement prepared in a comparative form will be covered in comparative
statements.

.It is important to all sorts of company to access its financial efficiency and financial
health. It is in this context that the present study on ITC Ltd is undertaken.

1.2Significance of the Study

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a. The study helps the stakeholders and the directors to understand the financial
position and the financial performance of the company.

b. The study helps the management to understand the drawbacks of the company
so that the management can rectify the problems and improve the financial
position in the upcoming years.

1.3Objectives of Study

a. To understand the liquidity and solvency position of the company

during the period 2015-16 to 2019-20.

b. To assess the profitability position of the company from 2015-16 to 2019-20.

c.To analyze the financial Position and performance of ITC Ltd

d. To suggest measures to improve the performance of the company based on

findings of the study

1.4Research Design

1.4.1Nature of Study

An Analytical study is conducted.

1.4.2 Nature of Data

The study is based on Secondary data.

1.4.3 Sources of Data

The details related to the study are collected from the published financial
statements of the Company website of the company, books, journals and internet.

1.4.4 Period of Study

The study pertains a period of 5years from 2015-16 to 2019-20.

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1.5 Tools for Analysis

The Tools of Analysis used are:

▪ Ratio Analysis
▪ Common Size Statements
▪ Comparative Statement

1.6 Limitation of Study

1. The time available for the study is limited so indepth study could not be
undertaken.

2. The information provided in the financial statement may not be precise.

3. The result of the study cannot be generalized.

1.7 Chapterisation
Chapter 1: Introduction

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This chapter contains the significance of the study, objectives of the study, tools
used in the study and the limitations of the study.

Chapter 2: Review of Literature

This chapter is divided into two sections: the conceptual review i.e. the concepts
and theories of the study and the empirical literature i.e. the studies previously
conducted in this project

Chapter 3: Industry and Company Profile

This chapter contains two parts: the industry profile and the company profile.
Industry profile is the brief description about the history and evolution of the
conglomerate industry. Company profile is a brief note of the ITC ltd.

Chapter 4: Data Analysis and Interpretation

This chapter contains analysis of the data collected by using ratios, comparative
statements, and common size statement.

Chapter 5: Findings, Suggestions and Conclusions

This chapter includes findings, suggestions and conclusions obtained from the
study.

REVIEW OF LITERATURE

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2.1 CONCEPTUAL REVIEW

Financial performance analysis is the process of identifying the financial strength

and weakness of firm by properly establishing relationship between the items of
balance sheet and profit and loss account. It also helps in short term and long term
forecasting and growth can be identified with the help of financial performance
analysis. To determine the firms efficiency the analyst attempt to measure the firm’s
solvency, liquidity, profitability and other indicator in rational and normal way.

Financial statement analysis is the process of analyzing a company’s financial

statements for decision making purposes. Financial performance analysis includes
analysis and interpretation of financial statements in such a way that it undertakes
full diagnosis of the profitability and financial soundness of the business.

Tools for analysis for financial statement

Ratio analysis

Ratio analysis can be defined as the process of ascertaining the financial ratios that
are used for indicating the ongoing financial performance of a company using few
types of ratios such as liquidity, solvency, profitability, activity.

1. Liquidity ratios

The term liquidity refers to firm’s ability to pay its current liabilities out of its
current asset. Liquidity ratios are used to measure the liquidity position of the firm.

a. Current Ratio

Current ratio establishes the relationship between total current assets and total
current liabilities. Generally current ratio of 2:1 is considered satisfactory or ideal.

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Current ratio = current asset/current liability

b. Quick Ratio

Quick Ratio is the ratio of liquid assets to current liability. It is also called

acid test ratio. Ratio of 1:1 is considered ideal.

Quick ratio = quick asset/current liability

c. Absolute liquidity ratio

This ratio measures the total liquidity available to the company. This ratio only
considers marketable securities and cash available to the company. This ratio only
tests short-term liquidity in terms of cash, marketable securities, and current
investment.

Absolute quick ratio = Cash + Marketable Securities / Current Liability

2. Solvency Ratios

Solvency refers to the ability of the firm to pay its outside liabilities both short term
and long term. Solvency ratios are used to analyze long term financial position of
the business.

a. Debt Equity Ratio

This ratio indicates the relative proportion of debt and equity in financing the asset
of the firm. In short it expresses the relationship between external equity and internal
equity of a company.

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Debt equity ratio = debt/equity

b. Proprietary Ratio
Proprietary ratio establishes the relationship between shareholders fund and total
asset. It is also called net worth ratio. Generally ratio of 0.5:1 is considered as ideal.

Proprietary ratio = shareholders fund/total asset

c. Leverage Ratios
This ratio expresses the relationship between total asset and total liability of a
company. This ratio is also called as total asset to total debt ratio.

Leverage ratio = total asset/total liability

3. Profitability Ratios
To the management, profit is the measure of efficiency and control of the business.
Profitability can be easily measured by profitability ratios.

a. Net profit ratio

Net profit ratio is the ratio of net profit earned by the business and its net sales. It is
a measure of overall profitability. Ideal net profit ratio is 5% to 10%.

Net profit ratio = net profit/net sales *100

b. Return on Investment
It is a profitability ratio based on investment. It establishes the relationship between
profit or return and investment. This ratio is also called accounting rate of return.
The standard return on investment ratio is 15%.

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ROI = profit before interest and tax/capital employed*100

c. Return on shareholder’s fund

It is the ratio of net profit to shareholders fund or net worth. It measures the
profitability from the shareholders point of view. This ratio is also called the mother
of all ratios.
Return on shareholder’s fund = net profit after interest and tax/shareholders
fund*100

d. Return on Equity

This ratio measures Profitability of equity fund invested the company. It also
measures how profitably owner’s funds have been utilized to generate company’s
revenues. A high ratio represents better the company is.
Return on Equity: Profit after Tax ÷ Net worth

e. Earnings Per Share

This ratio measures profitability from the point of view of the ordinary shareholder.
A high ratio represents better the company is.

Earning Per Share: Net Profit ÷ Total no of shares outstanding

f. Dividend Per Share

This ratio measures the amount of dividend distributed by the company to its
shareholders. The high ratio represents that the company is having surplus cash.
DPS: Amount Distributed to Shareholders ÷ No of Shares outstanding

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g. Price Earnings Ratio

This ratio is used by the investor to check the undervalued and overvalued share
price of the company. This ratio also indicates Expectation about the earning of the
company and payback period to the investors.

Price Earning Ratio: Market Price of Share ÷ Earnings per share

h. Return on Assets

This ratio measures the earning per rupee of assets invested in the company. A
high ratio represents better the company is.
Return on Asset: Net Profit ÷ Total Assets

i. Gross Profit

This ratio measures the marginal profit of the company. This ratio is also used to
measure the segment revenue. A high ratio represents the greater profit margin and
it’s good for the company.

Gross Profit Ratio: Gross Profit ÷ Sales × 100

Activity Ratios
a. Total Asset Turnover Ratio
The total asset turnover ratio compares the sales of a company to its asset base. The
ratio measures the ability of an organization to efficiently produce sales, and is
typically used by third parties to evaluate the operations of a business. Ideally, a

10
company with a high total asset turnover ratio can operate with fewer assets than a
less efficient competitor, and so requires less debt and equity to operate
Total asset turnover Ratio = Net sales / Total Asset

b. Current Asset Turnover Ratio

Current Assets Turnover Ratio indicates that the current assets are turned over in
the form of sales more number of times. A high current assets turnover ratio
indicates the capability of the organization to achieve maximum sales with the
minimum investment in current assets. Higher the current ratio better will be the
situation.

Current asset turnover Ratio = Net sales / Current Asset

c. Fixed Assets Turnover Ratio

This ratio measures the efficiency of the firm in utilizing its Fixed Assets. A high
ratio represents efficient utilization of Fixed Assets in generating sales. Formula:
(Sales or Cost of Goods Sold)/ Fixed Assets

d. Working Capital Turnover Ratio

This ratio measures the efficiency of the firm in utilizing its Working Capital. A
high ratio represents efficient utilization of working Capital in generating sales.
(Sales or Cost of Goods Sold)/ Working Capital

i. Stock Turnover ratio

This ratio describes the relationship between the cost of goods sold and inventory
held in the business. This ratio indicates how fast inventory/ Stock is consumed/
sold. A high ratio is good for the company. Low ratio indicated that stock is not
consumed/ sold or remains in a warehouse for a longer period of time.

Cost of Goods Sold/Average Inventory

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Average Inventory = (Opening Stock + Closing Stock)/2

ii. Debtor Turnover ratio

This ratio helps the company to know the collection and credit policies of the firm.
It measures how efficiently the management is managing its accounts receivable. A
high ratio represents better credit policy as compared to a low ratio.

Credit Sales/Average Debtors

Average Debtor = (Opening Debtor + Closing Debtor)/2

iii. Creditors Turnover ratio

This ratio helps the company to know the payment policy that is being offered by
the vendors to the company. It also reflects how management is managing its
account payable. A high ratio represents that in the ability of management to finance
its credit purchase and vice versa.

Credit Purchase/ Average Creditors

Average Creditor = (Opening Creditor + Closing Creditor)/2

Common size statement

Common size statements are a form of analysis and interpretation of the financial
statement. It is also known as vertical analysis. This method analyses financial
statements by taking into consideration each of the line items as a percentage of the
base amount for that particular accounting period. These statements are always
expressed in terms of percentages. There are two types of common size statements.
They are:

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 • Common size income statement
• Common size balance sheet

Comparative Statement

Comparative statements or comparative financial statements are statements of

financial position of a business at different periods. These statements help in
determining the profitability of the business by comparing financial data from two
or more accounting periods.

The data from two or more periods are updated side by side, which is why it is also
known as Horizontal Analysis. The advantage of such an analysis is that it helps
investors to identify the trends of business, check a company’s progress and also
compare it with that of its competitors.

There are two types of comparative statements which are as follows

1. Comparative income statement

2. Comparative balance sheet

2.2 EMPIRICAL REVIEW

Kumar Mohan M.S, Vasu. V. and Narayana T. Aswatha (2016) the study has been
made through using different ratios , mean, standard deviation and Altman’s Z score
approach to study the financial health of the company. The study reveals there is a
positive correlation between liquidity and profitability ratios except return on total
assets as well as Z score value indicate good health of the company.

13
KaurHarpreet (2016) the author tries to examine the qualities & quantities performer
of Maruti Suzuki co. & how had both impact on its market share in India, For this
study secondary data has been collected from annual reports, journals, report
automobile sites. Result shows that MSL has been successfully leading automobile
sector in India for last few years.

Ravichandran, M. &Subramanium M Venkata (2016) the main idea behind this

study is to assessment of viability, stability and profitability of Force motors limited.
Operating position of the company can be measured by using various financial tools
such as profitability ratio, solvency ratio, comparative statement & graphs etc. This
study finds that company has got enough funds to meet its debts & liabilities.
Company can further improve financial performance by reducing the
administrative, selling & operating expenses.

Jothi K. &Geethalakshmi A. (2016) this study tries to evaluate the profitability &
financial position of selected companies of Indian automobile industry using
statistical tools like, ratio analysis, mean, standard deviation, correlation. The study
reveals the positive relationship between profitability, short term and long term
capital.

Kumar, Neeraj & Kaur Kuldip (2016) made an attempt to test the size and
profitability relationship in the Indian automobile industry. To analyze the
relationship linear regression model as well as cross-sectional has been employed
for the year 1998to2014. For profitability analysis two different measures have been
used (i) ratio of net profit to total sales turnover (ii) ratio of net income to net assets
plus working capital and for form size two indicators used namely, total sales turn
over and net assets. The time series analysis showed the positive relationship
between firm size and profitability but cross-sectional show no relationship between
firm size and profitability.

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Agarwal, Nidhi (2015) the study focus on the comparative financial performance of
Maruti Suzuki and Tata motors ltd. The financial data and information required for
the study are drawn from the various annual reports of companies. The liquidity and
leverage analysis of both the firms are done. To analyze the leverage position four
ratios are considered namely, capital gearing, debt-equity, total debt and proprietary
ratio. The result shows that Tata motors ltd has to increase the portion of proprietor’s
fund in business to improve long term solvency position..

Jothi K & Geethalakshmi .A (2008), this study to evaluate the profitability and
financial position of selected companies of KSE ltd using statistical tools like ratio
analysis, mean, standard deviation, correlation. The study reveals the positive
relationship between profitability, short term and long term capital.

.Vanitha S and Selvam M (2007), “financial performance of Indian manufacturing

companies during pre and post – merger” they analyzed the pre and post – merger
performance of Indian manufacturing during 2000-2002 by using a sample of 17
companies out of 58 (third percent of such population) for financial performance
analysis, they used ratio analysis, mean, S.D and ‘t’ test. They found that the
overall financial performance of merged companies in respect of 13 variables were
not significantly different from the expectations

Vijayakumar A. (1996) has studied about ‘Assessment of Corporate Liquidity - a

discriminate analysis approach’ in this research he has revealed that the growth rate
of sales, leverage, current ratio, operating expenses to sales and vertical integration
was the important variables which determine the profitability of companies in the
sugar industry. Also he has studied the short-term liquidity position in twenty-eight
selected sugar factories in co-operative and private sectors. In research a
discriminate analysis has been used by the researcher, to undertaken to distinguish
the good risk companies from poor risk companies based on current and liquidity
ratios. In this study discriminating ‘Z’ scores have been calculated with the help of

15
discriminate function and according to the ‘Z’ scores the companies are ranked in
the order of liquidity.

Mohan Rao (1993) examines the financial appraisal of Indian automotive tyre
industry. The main objective of this study was intended to probe into the financial
condition and financial strength and weakness of Indian tyre industry. Various
financial ratios have been calculated for the financial appraisal of automotive tyre
industry. The studies suggested improving the fixed asset utilization and proper
inventory management

INDUSTRY AND COMPANY PROFILE

3.1 PROFILE OF INDUSTRY

A conglomerate is a corporation that is made up of a number of different, sometimes

unrelated businesses. In a conglomerate, one company owns a controlling stake in

16
a number of smaller companies all of whom conduct business separately and
independently. In simple terms, conglomerate is a combination of two or more
corporations in a single corporate structure. This forms a group of companies that
usually involves a single parent company and different subsidiaries. However, in a
conglomerate, diversification of the business in the companies is normal practice,
and usually these companies depict a multi-industry corporate structure. These
corporate structures are often multinational.

History of conglomerate

In 1960s, conglomerates were popular as the very concept of a corporate structure

was the symbol of the power. This allowed these conglomerates to buy other
businesses at leveraged rates. In that time, the only method to measure the real value
of a company was its return on investment (ROI). Due to this, if the target company
had the profits for a period larger than its interest paid on the loans, it was considered
to grow. Due to their impact, conglomerate also had an improved aptitude in
borrowing than a smaller firm in money market and capital market. This allowed
the conglomerates to raise their stock value for many years as these were considered
the giants in the business. Many investors considered it secure to invest in these
corporate structures. Since the stock permitted them to raise money, these
conglomerates could take out loans and buy more companies.

In the late 19th century many American conglomerates, such as the Standard Oil
Company and Trust, sought to control all aspects relating to the development,
production, marketing, and delivery of their products. Responding to criticisms of
the apparent monopolies enjoyed by such companies, the U.S. Congress enacted
antitrust legislation with the Sherman Antitrust Act (1890) and the Clayton Antitrust
Act (1914).

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A strategy of diversification spurred the formation of many conglomerates in the
mid-20th century, especially as firms sought to acquire unrelated companies whose
products and services might better withstand economic slowdowns. In that era, a
holding company such as the former ITT Corporation or Gulf + Western might have
had interests that included hotels, film studios, telephone service, and insurance. By
the late 20th and early 21st centuries, however, global competition created
conditions that favoured industry consolidation, as evidenced by mergers among
large corporations in the banking, automotive, telecommunications, computer,
retail, and entertainment industries.

3.2 PROFILE OF ITC LTD

History

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Established in 1910, ITC Limited is a diversified conglomerate with businesses
spanning Fast Moving Consumer Goods comprising Foods, Personal Care,
Cigarettes and Cigars, Branded Apparel, Education & Stationery Products, Incense
Sticks and Safety Matches; Hotels, Paperboards and Packaging, Agri Business and
Information Technology. The Company 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 to India
Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In
recognition of the ITC's multi-business portfolio encompassing a wide range of
businesses, 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.

The Company's beginnings were humble. A leased office on Radha Bazar Lane,
Kolkata, was the centre of the Company's existence. The Company celebrated its
16th birthday on August 24, 1926, by purchasing the plot of land situated at 37,
Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000.
This decision of the Company was historic in more ways than one. It was to mark
the beginning of a long and eventful journey into India's future. The Company's
headquarter building, 'Virginia House', which came up on that plot of land two years
later, would go on to become one of Kolkata's most venerated landmarks.

1925: Packaging and Printing: Backward Integration

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Though the first six decades of the Company's existence were primarily devoted to
the growth and consolidation of the Cigarettes and Leaf Tobacco businesses,
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward
integration for ITC's Cigarettes business. It is today India's most sophisticated
packaging house.

1975: Entry into the Hospitality Sector - A 'Welcom' Move

The Seventies witnessed the beginnings of a corporate transformation that would

usher in momentous changes in the life of the Company. In 1975, the Company
launched its Hotels business with the acquisition of a hotel in Chennai which was
rechristened 'ITC-Welcomgroup Hotel Chola' (now renamed My Fortune,
Chennai). The objective of ITC's entry into the hotels business was rooted in the
concept of creating value for the nation. ITC chose the Hotels business for its
potential to earn high levels of foreign exchange, create tourism infrastructure and
generate large scale direct and indirect employment. Since then ITC's Hotels
business has grown to occupy a position of leadership, with over 100 owned and
managed properties spread across India under four brands namely, ITC Hotels -
Luxury Collection, WelcomHotels, Fortune Hotels and WelcomHeritage.

ITC Hotels recently took its first step toward international expansion with an
upcoming super premium luxury hotel inColombo, Sri Lanka. In addition, ITC
Hotels also recently tied up with RP Group Hotels & Resorts to manage 5 hotels in
Dubai and India under ITC Hotels' 5-star 'WelcomHotel' brand and the mid-market
to upscale 'Fortune' brand.

1979: Paperboards & Specialty Papers - Development of a Backward Area

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In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam
Paperboards Limited. Bhadrachalam Paperboards amalgamated with the Company
effective March 13, 2002 and became a Division of the Company, Bhadrachalam
Paperboards Division. In November 2002, this division merged with the Company's
Tribeni Tissues Division to form the Paperboards & Specialty Papers Division.
ITC's paperboards' technology, productivity, quality and manufacturing processes
are comparable to the best in the world. It has also made an immense contribution
to the development of Sarapaka, an economically backward area in the state of
Andhra Pradesh. It is directly involved in education, environmental protection and
community development. In 2004, ITC acquired the paperboard manufacturing
facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil
Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead
time and a wider product range.

1985: Nepal Subsidiary - First Steps beyond National Borders

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint
venture. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and
its name was changed to Surya Nepal Private Limited (Surya Nepal). In 2004, the
company diversified into manufacturing and exports of garments.

1990: Paperboards & Specialty Papers - Consolidation and Expansion

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing

company and a major supplier of tissue paper to the cigarette industry. The merged
entity was named the Tribeni Tissues Division (TTD). To harness strategic and
operational synergies, TTD was merged with the Bhadrachalam Paperboards
Division to form the Paperboards & Specialty Papers Division in November
2002.

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1990: Agri Business - Strengthening Farmer Linkages

Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri
Business Division for export of agri-commodities. The Division is today one of
India's largest exporters. ITC's unique and now widely acknowledged e-Choupal
initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to
10 states covering over 4 million farmers. Also, through the
'ChoupalPradarshanKhet' initiative, the agri services vertical has been focusing on
improving productivity of crops while deepening the relationship with the farming
community.

2002: Education & Stationery Products - Offering the Greenest products

ITC launched line of premium range of notebooks under brand Paperkraft in 2002.
To augment its offering and to reach a wider student population, the Classmate
range of notebooks was launched in 2003. Classmate over the years has grown to
become India's largest notebook brand and has also increased its portfolio to
occupy a greater share of the school bag. Years 2007- 2009 saw the launch of
Practical Books, Drawing Books, Geometry Boxes, Pens and Pencils under the
'Classmate' brand. 'Paperkraft' offers a diverse portfolio in the premium executive
stationery and office consumables segment.

2000: Lifestyle Retailing - Premium Offerings

ITC also entered the Lifestyle Retailing business with the Wills Sport range of
international quality relaxed wear for men and women in 2000. In 2006, Wills
Lifestyle became title partner of the country's most premier fashion event - Wills
Lifestyle India Fashion Week - that has gained recognition from buyers and
retailers as the single largest B-2-B platform for the Fashion Design industry. To
mark the occasion, ITC launched a special 'Wills Signature', taking the event
forward to consumers.
22
2000: Information Technology - Business Friendly Solutions

In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in this area. Today ITC Infotech is one of India's fastest growing
global IT and IT-enabled services companies and has established itself as a key
player in offshore outsourcing, providing outsourced IT solutions and services to
leading global customers across key focus verticals - Banking Financial Services &
Insurance (BFSI), Consumer Packaged Goods (CPG), Retail, Manufacturing,
Engineering Services, Media & Entertainment, Travel, Hospitality, Life Sciences
and Transportation & Logistics.

2001: Branded Packaged Foods - Delighting Millions of Households

ITC's foray into the Foods business is an outstanding example of successfully

blending multiple internal competencies to create a new driver of business growth.
It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat
Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments
with the launch of the brands mint-o and Candyman confectionery and
Aashirvaad Atta (wheat flour). 2003 witnessed the introduction of Sunfeast as the
Company entered the biscuits segment. ITC entered the fast growing branded snacks
category with Bingo! in 2007. In 2010, ITC launched Sunfeast Yippee!to enter the
Indian instant noodles market. In September 2014, ITC launched GumOn Chewing
Gum marking the entry into the category of gums. The Company entered the Fruit-
based juices and beverages market with the launch of B Natural Fruit beverages in
January 2015. ITC's forayed into the dairy segment with the launch of
AashirvaadSvasti Ghee in November 2015. Launched in April 2016, Fabelle
chocolates are ITC's premier offering in the luxury chocolate space. ITC forayed
into the branded coffee category in July 2016 with the launch of Sunbean Gourmet
Coffee. In February 2017, ITC launched ITC MasterChefsuper safe spices - the

23
first-of-its-kind spices launched in India, offering export quality super safe spices
to the Indian homemaker. ITC MasterChef Prawns were launched in June 2017
as the Company entered the Frozen foods segment. ITC's first foray into fresh fruits
and vegetables segment was marked with the launch of Farmland Potatoes in
November 2017. In 2018, ITC forayed into the packaged milk segment with the
launch of AashirvaadSvasti pouch milk and into dairy-based beverages with the
SunfeastWonderz range of milkshakes. The ITC Master Chef Frozen Snacks
range was also introduced the same year, marking the Company's first venture into
the frozen snacks segment.

In just over a decade and a half, the Foods business has grown to a significant size
under numerous distinctive brands, with an enviable distribution reach, a rapidly
growing market share and a solid market standing.

2002: Agarbattis& Safety Matches - Supporting the Small and Cottage Sector

In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the

entire value chain found yet another expression in the Safety Matches initiative.
ITC now markets popular safety matches brands like iKno, Mangaldeep and Aim.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector.Mangaldeep is a highly
established national brand and is available across a range of fragrances like Rose,
Jasmine, Bouquet, Sandalwood and 'Fragrance of Temple'.

2005: Personal Care Products - Expert Solutions for Discerning Consumers

ITC entered the Personal Care Business in 2005 and the portfolio has grown under
'Essenza Di Wills', 'Fiama', 'Vivel', 'Superia' brands which have received

24
encouraging consumer response and have been progressively extended nationally.
In May 2013, the business expanded its product portfolio with the launch of Engage
deodorants. ITC marked its foray into the health space with the acquisition of the
brand Savlon and Shower to Shower in 2015. In 2017, the business acquired the
brand Charmisto enhance its skincare portfolio. In 2018, ITC acquired the brand
Nimyle to enter the floor cleaner space. In 2018, the business also launched the
Dermafique brand, foraying into the premium skincare product territory. In 2020,
the Personal Care Product Business launched multiple personal and home hygiene
products and entered the fruit and vegetable wash category with the launch of brand
Nimwash.

2010: Expanding the Tobacco Portfolio

In 2010, ITC launched its handrolled cigar, Armenteros, in the Indian market.
Armenteros cigars are available exclusively at tobacco selling outlets in select
hotels, fine dining restaurants and exclusive clubs.

ITC is one of India's foremost private sector companies and a diversified

conglomerate with businesses spanning Fast Moving Consumer Goods, Hotels,
Paperboards and Packaging, Agri Business and Information Technology. The
Company is acknowledged as one of India's most valuable business corporations
with a Gross sales value of 76,097.31 crores and Net Profit of 15,136.05 crores (as
on 31.03.2020). ITC was ranked as India's most admired company, according to a
survey conducted by Fortune India, in association with Hay Group.

ITC is the country's leading FMCG marketer, the clear market leader in the Indian
Paperboard and Packaging industry, a globally acknowledged pioneer in farmer
empowerment through its wide-reaching Agri Business, a pre-eminent hotel chain
in India that is a trailblazer in 'Responsible Luxury'. ITC's wholly-owned subsidiary,
ITC Infotech, is a specialized global digital solutions provider.

25
Over the last decade, ITC's new Consumer Goods Businesses have established a
vibrant portfolio of 25 world- class Indian brands that create and retain value in
India. ITC's world class FMCG brands including Aashirvaad, Sunfeast, Yippee!,
Bingo!, B Natural, ITC Master Chef, Fabelle, Sunbean, Fiama, Engage, Vivel,
Savlon, Classmate, Paperkraft, Mangaldeep, Aim and others have garnered
encouraging consumer franchise within a short span of time. While several of these
brands are market leaders in their segments, others are making appreciable progress.

ITC's 'Nation First: Sab Saath Badhein' philosophy underlines its core belief in
building a globally competitive and profitable Indian enterprise that makes an
exemplary contribution to creating larger societal value. As a company deeply
rooted in Indian soil, ITC is inspired by the opportunity to serve larger national
priorities. A global exemplar in Sustainability, ITC is the only enterprise in the
world of comparable dimensions to be carbon-positive, water-positive and
solidwaste recycling positive for over a decade now. ITC has created over 6 million
sustainable livelihoods. Nearly 41% of the total energy consumed in ITC is from
renewable sources. ITC's premium luxury hotels have the unique distinction of
being LEED Platinum certified.

ITC's Well-being Out of Waste programme (WOW) that comprehensively

addresses the problem of solid waste management, of which plastic waste is a
significant component, provides an end-to-end sustainable and scalable solution that
has reached out to over 1 crore citizens in the country.

Together with farmers and local communities, ITC has implemented largescale
interventions in climate-smart and sustainable agriculture that make a meaningful
contribution to the Hon'ble Prime Minister's vision of doubling farmer incomes.
Towards this, ITC has launched an integrated programme titled
'BaarehMahineHariyali' (maximising farm utilisation over 12 months of the year) to
give a new dimension to the complex task of multiplying farmer incomes. ITC is

26
collaborating with NITI Aayog to progressively build capacity of 2 million farmers
in 27 aspirational Districts to help enhance rural incomes.

ITC is investing in India's future by building world-class consumer goods factories

and iconic hospitality assets that will contribute to the country's competitive
capacity. These investment projects underpin the Company's support to the
Government's "Make in India" vision.

VISION

Sustain ITC’s position as one of India’s most valuable corporations through world
class performance, creating growing value for Indian economy and the Companies
Stakeholders.

MISSION

To enhance the wealth generating capability of the enterprise in a globalising

environment, delivering superior and sustainable Stakeholder value.

DATA ANALYSIS AND INTERPRETATION

The data collected are analyzed using several variables and the results are given
below:

1. Current Ratio

27
 Current Asset /Current Liability

Table 4.1

Table showing Current ratio

Current
Year Current Asset(Cr) Current Ratio
Liabilities(Cr)
2015-16 25811.20 14945.09 1.73:1
2016-17 26269.10 7121.01 3.6:1
2017-18 26393.62 9250.15 2.85:1
2018-19 31747.27 10011.99 3.17:1
2019-20 39505.35 9559.77 4.13:1
(Source: compiled from annual report)

The ideal current ratio is 2:1. From the above table it is clear that financial year’s
except 2015-16 has attained the ideal current ratio. This indicates that company is
able to pay off its short term obligations in the financial years 2016 to 2020.

Figure 4.1- Figure showing current ratio

Current Ratio
5
4
3
2 Current Ratio
1
0
2015-16 2016-17 2017-18 2018-19 2019-20

2. Quick Ratio

Quick Asset /Current Liability

Table 4.2

28
 Table showing quick Ratio

Quick Asset(Cr) Current

Year Quick Ratio
Liability(Cr)
2015-16 16654.74 14945.09 1.11:1
2016-17 18153.00 7121.01 2.54:1
2017-18 18898.53 9250.15 2.04:1

2018-19 23887.71 10011.99 2.38:1

2019-20 30626.02 9559.77 3.20:1

(Source: compiled from annual report)

The ideal quick ratio is 1:1. From the above table it is clear that the company has
attained the ideal quick ratio. The ratio is increasing year by year. This indicates that
the short term solvency position of the company is good.

Figure 4.2 – Figure showing quick ratio

Quick Ratio

2015-16
2016-17
2017-18
2018-19
2019-20

3. Debt Equity Ratio

Total Debt / Equity.

Table 4.3
29
 Table showing Debt equity ratio

Total Debt(Cr) Debt-equity

Year Equity (Cr)
Ratio
2015-16 17037.04 34226.74 0.49:1

2016-17 9235.6 46707.67 0.19:1

2017-18 11444.28 52844.58 0.21:1

2018-19 12314.07 59484.34 0.20:1

2019-20 11716.31 65273.26 0.17:1

(Source: compiled from annual report)

The Standard debt equity ratio is 1:1. From the above table it is clear that the
company has not attained the ideal debt equity ratio. It shows that the company tends
to use more of the owners fund than the borrowers fund.

Figure 4.3 – Figure showing Debt equity ratio

Debt-Equity Ratio
0.5
0.4
0.3
Debt-Equity Ratio
0.2
0.1
0
2015-16 2016-17 2017-18 2018-19 2019-20

4. Proprietary Ratio

Proprietor’s fund or Shareholder’s fund/ Total Asset

Table 4.4

30
 Table showing Proprietary Ratio

Proprietor’s Total Asset Proprietary

Year
Fund(Cr) (Cr) Ratio
2015-16 34226.74 51263.78 0.66:1

2016-17 46707.67 55943.27 0.83:1

2017-18 52844.58 64288.86 0.82:1

2018-19 59484.34 71798.41 0.82:1

2019-20 65273.26 77367.04 0.84:1

(Source: compiled from annual report)

The ideal proprietary ratio is 0.5:1. From the above table it is clear that the company
has attained the ideal proprietary ratio. The company maintains a constant
proprietary ratio over the last 5 years.

Figure 4.4 – Figure showing Proprietary ratio

Proprietary Ratio
1

0.8

0.6

0.4 Proprietary Ratio

0.2

0
2015-16 2016-17 2017-18 2018-19 2019-20

5. Leverage Ratio

Total Asset / Total Debt

Table 4.5
31
 Table showing Leverage Ratio

Year Total Asset(Cr) Total Debt(Cr) Leverage Ratio

2015-16 51263.78 17037.04 3.00:1

2016-17 55943.27 9235.6 6.05:1

2017-18 64288.86 11444.28 5.61:1

2018-19 71798.41 12314.07 5.83:1

2019-20 77367.04 11716.31 6.60:1

(Source: compiled from annual report)

The ideal leverage ratio is 1:1. The above table shows that the company has
attained the ideal leverage ratio. This means there is higher degree of solvency.

Figure 4.5 – Figure showing leverage ratio

Levarage Ratio

2015-16
2016-17
2017-18
2018-19
2019-20

6. Net Profit Ratio

Net Profit /Net Sales x 100

Table 4.6

32
 Table showing Net Profit Ratio

Net Profit
Year Net Profit(Cr) Net Sales(Cr)
Ratio
2015-16 9911.61 39066.85 25.37

2016-17 10477.23 58704.52 17.84

2017-18 11492.68 47688.55 24.09

2018-19 12835.90 49862.11 25.74

2019-20 15592.78 51393.47 30.34

(Source: compiled from annual report)

The ideal net profit ratio is 5% to 10%. From the above table it is clear that company
has attained the ideal net profit ratio and the ratio is increasing year by year.

Figure 4.6 – Figure showing net profit ratio.

Net Profit Ratio

2015-16
2016-17
2017-18
2018-19
2019-20

7. Return on Investment

Earnings before Interest and Taxes/ Capital Employed x 100

Table 4.7

33
 Table showing Return on Investment (ROI)
Capital Return on
Year EBIT (Cr)
Employed(Cr) Investment

2015-16 15433.18 36,318.69 42.49

2016-17 16026.32 48822.26 32.28

2017-18 17409.11 55038.71 31.63

2018-19 19149.82 61786.42 30.99

2019-20 20034.57 67807.27 29.54

(Source: compiled from annual report)

The ideal ROI is 10%. The above data shows that the ROI is more than the ideal
ratio and it is increasing year by year. This indicates that the return on investment
shows a positive trend.

Figure 4.7 – Figure showing Return on investment

ROI
60

40

20

0 ROI
2015-16
2016-17 ROI
2017-18
2018-19
2019-20

8. Return on Shareholders fund or Return on Equity

Net Profit / Shareholders fund x 100

Table 4.8

34
 Table showing return on Shareholders fund
Shareholders Return on
Year Net Profit(Cr)
Fund(Cr) Equity

2015-16 9911.61 34226.74 28.95

2016-17 10477.23 46707.67 22.43

2017-18 11492.68 52844.58 21.74

2018-19 12835.90 59484.34 21.57

2019-20 15592.78 65273.26 23.88

(Source: compiled from annual report)

The ideal Return on shareholder’s fund is 15%. The above table shows that

Return on share holders fund is more than the standard for all the 5 years.

This means that ITC provides a fair amount as return to their shareholder’s.

Figure 4.8 – Figure showing return on shareholder’s fund

Return on Equity
30
20
10
0 Return on Equity
Return on Equity

9. Total Asset Turnover Ratio

Net sales / Total Assets
Table 4.9

35
 Table showing Total Asset turnover ratio

Year Net Sales(Cr) Total Asset(Cr) Percentage

2015-16 39066.85 51263.78 0.76

2016-17 58704.52 55943.27 1.04

2017-18 47688.55 64288.86 0.74

2018-19 49862.11 71798.41 0.69

2019-20 51393.47 77367.04 0.66

(Source: compiled from annual report)

The above table shows that the Total Asset Turnover Ratio is Fluctuating. The
highest turnover ratio is in the year 2016-17 and the lowest turnover ratio in the year
2019-20.

Figure 4.11 – Figure showing Total asset turnover ratio

Total Asset turnover ratio

2015-16
2016-17
2017-18
2018-19
2019-20

10. Current Asset Turnover Ratio

Net Sales/ Current Asset

Table 4.10

36
 Table showing current asset turnover ratio
Current
Year Net Sales(Cr) Percentage
Asset(Cr)

2015-16 39066.85 25811.20 1.51

2016-17 58704.52 26269.10 2.23

2017-18 47688.55 26393.62 1.80

2018-19 49862.11 31747.27 1.57

2019-20 51393.47 39505.35 1.30

(Source: compiled from annual report)

The above table shows that the current asset turnover ratio is fluctuating year by
year. The highest current asset turnover ratio is in the year 2016-17
Figure 4.10 – Figure showing current asset turnover ratio

Current Asset turnover ratio

2015-16
2016-17
2017-18
2018-19
2019-20

Table 4.11

Comparative Balance Sheet for the year 2015-16, 2016-17

37
 Absolute
Particulars 2015-16 2016-17 Percentage
Amount
I. Equity and
Liability

Shareholders fund 42940.42 46707.67 3767.25 8.77

Non-current
2093.00 2114.59 21.59 1.03
liability

Current Liability 6658.46 7121.01 462.55 6.94

TOTAL 51691.88 55943.27 4251.39

II. Asset

Non-current Asset

a.Tangible Asset 22394.78 28952.32 6557.54 29.28

b.Intangible Asset 3053.8 721.85 (2331.95) (76.36)

Current Asset 24862.50 26269.10 1406.6 5.65

TOTAL 51691.88 55943.27 4251.39

(Source: compiled from annual report)

During the financial year 2016-17 the company balance sheet shows an increasing
trend. The current asset and non-current asset increased by 10.6% and 5.65%
respectively and the equity and liabilities are also increasing

Table 4.12

38
 Comparative balance sheet for the year 2016-17, 2017-18

Absolute
Particulars 2016-17 2017-18 Percentage
Amount
I. Equity and
Liability
Shareholders
46707.67 52844.58 6136.91 13.13
fund
Non-current
2114.59 2194.13 79.54 3.76
liability

Current Liability 7121.01 9250.15 2129.14 29.89

TOTAL 55943.27 64288.86 8345.59

II. Asset

Non-current
Asset

a.Tangible Asset 28952.32 37116.69 8164.37 28.79

b.Intangible
721.85 778.24 56.39 7.81
Asset

Current Asset 26269.10 26393.62 124.52 0.47

TOTAL 55943.27 64288.86 8345.59

(Source: Compiled from annual report)

During the financial year 2017-18 the company’s balance sheet shows an increasing
trend as compared to the previous financial year and all items in equity and liability
and asset has been increased.

39
 Table 4.13

Comparative balance sheet for the year 2017-18, 2018-19

Absolute
Particulars 2017-18 2018-19 Percentage
Amount
I. Equity and
Liability

Shareholders fund 52844.58 59484.34 6639.76 12.56

Non-current
2194.13 2302.08 107.95 4.91
Liability

Current Liability 9250.15 10011.99 761.84 8.23

TOTAL 64288.86 71798.41 7509.55

II. Asset

Non-current Asset

a.Tangible Asset 37116.69 39204.55 2087.86 5.60

b.Intangible Asset 778.24 846.59 68.35 8.78

Current Asset 26393.62 31747.27 5353.65 20.2

TOTAL 64288.86 71798.41 7509.55

(Source: compiled from annual report)

In the financial year 2018-19 the ITC ltd didn’t had any decrease in the assets and
Liabilities comparing to the previous year. There was a 12.56% increase in
Shareholders fund and the current asset increased by 20.2%. There were also
increases in Current asset and non-current asset of the company.

40
 Table 4.14

Comparative balance sheet for the year 2018-19, 2019-20

Absolute
Particulars 2018-19 2019-20 Percentage
Amount (Cr)
I. Equity and
Liability

Shareholders fund 59484.34 65650.73 6166.36 10.37

Non-current
2302.08 2156.54 (145.54) (6.32)
Liability

Current Liability 10011.99 9559.77 (452.22) (4.51)

TOTAL 71798.41 77367.04 5568.63

II. Asset

Non-current Asset

a.Tangible Asset 39204.55 36067.07 (3137.48) (8.00)

b.Intangible Asset 846.59 1794.62 948.03 111

Current Asset 31747.27 39505.35 7758.08 24.4

TOTAL 71798.41 77367.04 5568.63

(Source: compiled from annual report)

During the financial year 2019-20 the current asset of the company has increased
by 24.4% from the previous year. The Non-Current and current liability of the
company was also decreased by 6.23% and 4.51% respectively.

41
 Table 4.15

Common size balance sheet for the year 2018-19, 2019-20

Absolute Figures(Rs) Percentage

Particulars 2019-20 2018-19 2019-20 2018-19

I. Asset

A. Non-Current Asset

Property, Plant and

19632.92 18625.74 25.37 25.94
Equipments

Capital Work in Progress 3251.61 4126.18 4.20 5.74

Investment Property 385.36 Nil 0.49 Nil

Goodwill on
202.53 202.53 0.26 0.28
Consolidation

Other Intangible Asset 525.37 545.92 0.67 0.76

Intangible asset under

4.85 10.24 0.006 0.01
development

Right to use assets 967.16 Nil 1.25 Nil

Financial Assets 11335.94 14089.50 14.65 19.62

Deferred Tax Assets 56.29 59.37 0.07 0.08

Income Tax Assets 38.42 28.53 0.04 0.03

42
Other Non- Current Asset 1461.24 2363.13 1.89 3.2

B. Current Asset

Inventories 8879.33 7859.56 11.47 10.94

Biological Assets 86.20 84.41 0.11 0.11

Financial Assets 29613.02 23041.24 38.27 32.02

Other Current Asset 926.80 762.06 1.19 1.06

TOTAL 77367.04 71798.41 100 100

II. Equity and Liability

Equity 1229.22 1225.86 1.58 1.70

Other Equity 64044.04 57915.01 82.77 80.66

Non Controlling Interest 377.47 343.47 0.48 0.47

Liabilities

B. Non-Current
Liability

Financial Liability 337.77 81.56 0.43 0.11

Provision 175.37 161.95 0.22 0.22

Deferred Tax Liability 1627.20 2052.06 2.10 2.85

43
 Other Non-Current
16.20 6.51 0.02 0.009
Liability

C. Current Liability

Financial Liability 5088.58 4696.74 6.57 6.54

Other Current Liability 4072.72 1186.16 5.26 1.65

Provision 148.18 51.38 0.19 0.07

Current Tax Liability 248.87 423.69 0.32 0.59

TOTAL 77367.04 71798.41 100 100

(Source: Compiled from annual report)

The above common size statement of ITC ltd show that the asset of the company
shows an increasing trend when compared to that of previous year but the equity of
the company has showed an increase which is good for the company and the
majority of the liability increased when compared to the previous financial years
which is a not positive sign in the companies point of view.

44
 FINDINGS SUGGESTIONS AND CONCLUSION
FINDINGS

1. The company was able to attain the ideal current ratio for the previous 5 years
i.e. from 2015-16 to 2019-20.
2. The company attained the ideal quick asset ratio during the time period
in which the study was undertaken and it also shows a positive trend.
3. ITC limited has a fair liquidity position.
4. The company has not attained the ideal debt equity ratio which means that
the company tends to use more of the owners fund than the borrowers fund.
5. The proprietary ratio indicates that the ITC Limited has a strong financial
position and the company provides greater security to its creditors.
6. The solvency position of ITC Limited is considerably high.
7. The net profit ratio of the ITC Limited is more than the ideal ratio which
means that the company was able to obtain a fair amount as profit after the
deduction of tax and other expenses.
8. The Return on Investment is more than the ideal ratio which means that
company is more efficient and profitable.
9. More investors will be attracted to ITC Limited as the Return on Investment
of the Company is high.
10. The return on shareholder’s fund is more than the ideal ratio which indicates
that ITC limited provide fair amount of return to their shareholders from the
company’s profits.
11. The Total asset turnover ratio of ITC limited shows a decreasing trend over
the period which means that the company is able to generate more revenue
in the last 5 years.
12. The current asset turnover ratio is fluctuating year by year. Increase in
Current asset turnover ratio decrease the value of financial resources.

45
 13. The common size statement of last 2 financial years reveals that the assets of
the company has increased and the liabilities were decreased and the
shareholder’s fund/ equity of the firm increased.
14. The comparative statements of last 2years showed that the liabilities such as
current and non-current liabilities showed a decrease and in the assets part
the Tangible asset showed a decrease when compared to previous year and
all the other items showed an increase.

SUGGESTIONS

1. The company should use more borrowers fund than the owners fund to attain
the ideal debt equity ratio.
2. The company should try to reduce the current asset turnover ratio for getting
increase in the value of the financial resources.
3. The return on investment of ITC limited is more than the ideal ratio but it is
showing a decreasing trend therefore the management should think for more
strategies to increase the return on investment so that they can attract more
investors to invest in their firm.
4. The company should try to increase the value of goodwill that the company
possess.
5. The liability of ITC limited is showing an increase in the years in which the
study was undertaken which is not good for the company so the company
should try to reduce their liabilities in the coming years.

46
CONCLUSION
The project entitled “study on the financial performance of ITC limited” helps to
get a critical analyses of the overall financial health of a firm over a given period of
time and comparison between financial health of similar firms. The study reveals
that the financial performance of ITC limited is satisfactory and the company has a
fair Liquidity, solvency and profitability position. The financial statement is
analyzed and interpreted with the help of Balance sheet and Profit and loss account
of the last 5 years. The financial performance of ITC limited proves that the
company has a bright future.

47
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Jagan Mohan Rao, P.(1993), Financial Appraisal of Indian Automotive Tyre

Industry’, Finance India, Vol.VII, No.3, pp.683-685
Websites

• www.itcportal.com
• www.moneycontrol.com
• www.wikipedia.com
• www.investopedia.com

Books

• Accounting for management – Shashi .K. Gupta, R.K Sharma, Anuj

Gupta
• Financial Management – Dr. R.M Srivastava – Kalyani Publishers
• Ratio Analysis – Dr. H.C Mehrotra, Dr. S.P Goyal – Sahitya Bhavan
Publications