A Detailed Analysis on ITC Past 20 years

Subject: QTF

Prashant Rajendran

Roll No: 17
INDEX:

Sr no Title Page
no

ABSTRACT

CHP 1 INTRODUCTION 1

CHP 2 RESEARCH METHODOLOGY 2

CHP 3 DATA ANALYSIS 5

CHP 4 CONCLUSION AND SUGGESTION 13

BIBLIOGRAPHY
Abstract:

This research delves into a comprehensive analysis of ITC's sales growth

over the past two decades, employing statistical methods such as
Exponential Smoothing and Simple Linear Regression. The study aims to
unravel the trends and patterns within ITC's sales trajectory, offering
valuable insights for stakeholders and decision-makers. Through a
meticulous examination of historical sales data, the research strives to
provide a nuanced understanding of ITC's market performance, paving the
way for informed strategic planning.
 Introduction

ITC Limited, formerly known as Imperial Tobacco Company of India Limited, is one of
India's premier conglomerates with a rich legacy spanning over a century. Established
in 1910, the company has evolved into a diversified business entity with interests in
various sectors, including fast-moving consumer goods (FMCG), hotels, agribusiness,
information technology, and paperboards. The journey of ITC began with its roots
deeply embedded in the tobacco industry. Over the years, the company strategically
diversified its business portfolio to reduce dependence on any single sector and to
ensure sustainable growth.

Today, ITC stands as a shining example of an Indian company that has successfully
navigated through dynamic market scenarios and embraced innovation to emerge as a
leader in multiple domains. One of the key pillars of ITC's success lies in its commitment
to creating value for all stakeholders, including shareholders, employees, customers,
and the community at large. The company's ethos revolves around the principle of
'Triple Bottom Line,' which emphasizes the importance of economic, environmental,
and social performance. This holistic approach has not only contributed to ITC's
business success but has also earned it accolades for its responsible and sustainable
business practices. In the FMCG sector, ITC has made a significant impact with a diverse
range of products that cater to the daily needs of millions of consumers. From food and
personal care to household items, ITC's FMCG portfolio reflects its dedication to quality
and innovation.

Brands like Aashirvaad, Sunfeast, Bingo, and Classmate have become household names,
showcasing the company's ability to understand consumer preferences and deliver
products that meet their expectations. The hospitality sector has been another feather
in ITC's cap. The company's hotels and resorts epitomize luxury, elegance, and a
commitment to exceptional service. With properties spread across the country, ITC's
hotels have set benchmarks in the industry, earning accolades and awards for their
world-class facilities, sustainable practices, and unique guest experiences. In the
agribusiness segment, ITC has been a pioneer in promoting sustainable and inclusive
agricultural practices.

The company works closely with farmers, providing them with knowledge, technology,
and market linkages to enhance their productivity and improve their livelihoods. ITC's
e-Choupal initiative, an innovative digital platform connecting farmers with markets,
has been a transformative force in rural empowerment. The Information Technology
sector of ITC focuses on delivering cutting-edge solutions to businesses globally.
Leveraging its technological expertise, the company provides services in areas such as
IT consulting, software development, and e-commerce. ITC's commitment to innovation
and excellence has positioned it as a reliable partner for businesses seeking digital
transformation.

A Detailed Analysis on ITC Past 20 years 1

 RESEARCH METHODOLOGY

• Meaning:

This paper is an explanatory type of research and is based on the secondary data and
information from the following sources, journals available online, articles published in
magazines and newspapers, various websites and blogs, media reports, and personal
interaction and interviews of professionals on media.

• Objectives of Research

1. Examine Historical Sales Growth: The primary objective is to scrutinize ITC's sales
growth over the past 20 years, identifying key trends, fluctuations, and turning points.
This exploration will provide a foundation for understanding the dynamics influencing
ITC's market performance.

2. Exponential Smoothing: Employing Exponential Smoothing, the research seeks to

model and forecast ITC's sales trajectory. By considering past sales data with varying
weights, this method enables the identification of underlying patterns, contributing to
more accurate short-term predictions.

Exponential Smoothing is a widely used statistical technique employed for time series
forecasting and analysis. This method is particularly effective in capturing and
emphasizing the underlying patterns and trends within a dataset, giving more weight to
recent observations while gradually diminishing the influence of older data. The term
“exponential” arises from the decreasing weights applied exponentially to past
observations.

Formal Explanation:

The core principle of Exponential Smoothing involves calculating a weighted average of

historical data points to predict future values. The formula for the smoothed value
\(S_t\) at time \(t\) can be expressed as:

\[ S_t = \alpha \times Y_t + (1 - \alpha) \times S_{t-1} \]

Here:
- \( Y_t \) represents the actual value at time \(t\),
- \( S_{t-1} \) is the smoothed value from the previous period,
- \( \alpha \) is the smoothing parameter, often referred to as the smoothing constant,
with \( 0 < \alpha < 1 \).

A Detailed Analysis on ITC Past 20 years 2

The choice of \( \alpha \) determines the weight given to the most recent observation.
A smaller \( \alpha \) values assign more significance to older data, whereas larger \(
\alpha \) values prioritize recent observations.

Example:

Let’s consider a scenario where we are forecasting monthly sales for a retail store using
Exponential Smoothing. If the actual sales for January (\(Y_1\)) are 100 units, and we
choose \( \alpha = 0.2 \), the smoothed value (\(S_1\)) for January would be calculated
as follows:

\[ S_1 = 0.2 \times 100 + (1 – 0.2) \times S_0 \]

Assuming \( S_0 \) is an initial estimate or the actual sales value of the previous month,
this process continues for subsequent months, with each forecasted value incorporating
the actual observation for that month and the smoothed value from the previous period.

Exponential Smoothing is a versatile tool, adaptable to various time series data,

providing a balance between capturing short-term fluctuations and identifying long-
term trends. Its simplicity and effectiveness make it a valuable asset in forecasting and
decision-making across diverse fields.

3. Utilize Simple Linear Regression: The research aims to employ Simple Linear
Regression to establish a quantitative relationship between ITC's sales and time. This
statistical technique helps in discerning the linear trend in sales growth, providing
valuable insights for future planning and decision-making.

Simple Linear Regression is a statistical method used to establish a linear relationship

between a dependent variable and a single independent variable. This method aims to
model the association between the two variables by fitting a linear equation to the
observed data. The essence of simple linear regression lies in understanding how
changes in the independent variable are associated with changes in the dependent
variable.

Formal Explanation:

The fundamental equation for Simple Linear Regression can be expressed as:

\[ Y = \beta_0 + \beta_1X + \epsilon \]

Here:
- \( Y \) is the dependent variable (the variable being predicted or explained),

A Detailed Analysis on ITC Past 20 years 3

- \( X \) is the independent variable (the variable used to predict \( Y \)),
- \( \beta_0 \) is the y-intercept, representing the value of \( Y \) when \( X \) is 0,
- \( \beta_1 \) is the slope of the regression line, indicating the change in \( Y \) for a
unit change in \( X \),
- \( \epsilon \) is the error term, representing the variability in \( Y \) that cannot be
explained by \( X \).

The goal of Simple Linear Regression is to estimate the values of \( \beta_0 \) and \(
\beta_1 \) that minimize the sum of squared differences between the observed \( Y \)
values and the values predicted by the regression equation.

Key Concepts:

1. Regression Line: The regression equation defines a line, known as the

regression line, that best fits the observed data points. This line represents the
relationship between \( X \) and \( Y \).

2. Least Squares Method: The process of finding the optimal \( \beta_0 \) and \(
\beta_1 \) involves minimizing the sum of squared residuals, or the vertical
distances between the observed and predicted \( Y \) values.

3. Prediction: Once the regression line is established, it can be used to predict \( Y

\) values for given \( X \) values outside the observed data.

4. Inform Strategic Decision-Making: Ultimately, the research aspires to equip

stakeholders with actionable insights. By uncovering patterns through statistical
methods, the study intends to offer a basis for strategic decision-making, aiding ITC in
navigating the evolving market landscape effectively.

This research endeavors to provide a comprehensive understanding of ITC's sales

growth, amalgamating the rich history of the company with advanced statistical
methodologies. Through the lens of Exponential Smoothing and Simple Linear
Regression, this analysis aims to contribute valuable insights to ITC's trajectory and
assist stakeholders in making informed decisions for the future.

A Detailed Analysis on ITC Past 20 years 4

 DATA ANALYSIS

Twenty (20) Years Sales Data Of ITC :

Obs. Years Sales

1 2004 11819.66
2 2005 13360.24
3 2006 16236.42
4 2007 19519.99
5 2008 21467.38
6 2009 23247.84
7 2010 26399.63
8 2011 30819.28
9 2012 35247.25
10 2013 42105.51
11 2014 47068.66
12 2015 50389.01
13 2016 51944.57
14 2017 55448.46
15 2018 44329.77
16 2019 45784.39
17 2020 46807.34
18 2021 48524.56
19 2022 59745.56
20 2023 70251.28

A Detailed Analysis on ITC Past 20 years 5

 1. Exponential Smoothing Method:

(3)
(1) (2)
Exponential Smoothing
year Sales
(α=0.2)

2004 11819.66 11819.66

2005 13360.24 0.2⋅11819.66+0.8⋅11819.66=11819.66
2006 16236.42 0.2⋅13360.24+0.8⋅11819.66=12127.776
2007 19519.99 0.2⋅16236.42+0.8⋅12127.776=12949.5048
2008 21467.38 0.2⋅19519.99+0.8⋅12949.5048=14263.6018
2009 23247.84 0.2⋅21467.38+0.8⋅14263.6018=15704.3575
2010 26399.63 0.2⋅23247.84+0.8⋅15704.3575=17213.054
2011 30819.28 0.2⋅26399.63+0.8⋅17213.054=19050.3692
2012 35247.25 0.2⋅30819.28+0.8⋅19050.3692=21404.1513
2013 42105.51 0.2⋅35247.25+0.8⋅21404.1513=24172.7711
2014 47068.66 0.2⋅42105.51+0.8⋅24172.7711=27759.3189
2015 50389.01 0.2⋅47068.66+0.8⋅27759.3189=31621.1871
2016 51944.57 0.2⋅50389.01+0.8⋅31621.1871=35374.7517
2017 55448.46 0.2⋅51944.57+0.8⋅35374.7517=38688.7153
2018 44329.77 0.2⋅55448.46+0.8⋅38688.7153=42040.6643
2019 45784.39 0.2⋅44329.77+0.8⋅42040.6643=42498.4854
2020 46807.34 0.2⋅45784.39+0.8⋅42498.4854=43155.6663
2021 48524.56 0.2⋅46807.34+0.8⋅43155.6663=43886.0011
2022 59745.56 0.2⋅48524.56+0.8⋅43886.0011=44813.7129
2023 70251.28 0.2⋅59745.56+0.8⋅44813.7129=47800.0823
2024 0.2⋅70251.28+0.8⋅47800.0823=52290.3218

A Detailed Analysis on ITC Past 20 years 6

 (3) (7)
(1) (2) (4) (5) (6)
Exponential |%Erro
year Sales Error |Error| Error2
Smoothing r|
2004 11819.66 11819.66
2005 13360.24 11819.66
2006 16236.42 12127.776
2007 19519.99 12949.5048 19519.99-12949.5048=6570.4852 6570.4852 43171275.7634 33.66%
2008 21467.38 14263.6018 21467.38-14263.6018=7203.7782 7203.7782 51894419.7785 33.56%
2009 23247.84 15704.3575 23247.84-15704.3575=7543.4825 7543.4825 56904128.6502 32.45%
2010 26399.63 17213.054 26399.63-17213.054=9186.576 9186.576 84393179.0153 34.8%
2011 30819.28 19050.3692 30819.28-19050.3692=11768.9108 11768.9108 138507261.8402 38.19%
2012 35247.25 21404.1513 35247.25-21404.1513=13843.0987 13843.0987 191631380.3537 39.27%
2013 42105.51 24172.7711 42105.51-24172.7711=17932.7389 17932.7389 321583125.2973 42.59%
2014 47068.66 27759.3189 47068.66-27759.3189=19309.3411 19309.3411 372850655.2136 41.02%
2015 50389.01 31621.1871 50389.01-31621.1871=18767.8229 18767.8229 352231176.8194 37.25%
2016 51944.57 35374.7517 51944.57-35374.7517=16569.8183 16569.8183 274558879.45 31.9%
2017 55448.46 38688.7153 55448.46-38688.7153=16759.7447 16759.7447 280889041.1707 30.23%
2018 44329.77 42040.6643 44329.77-42040.6643=2289.1057 2289.1057 5240005.0451 5.16%
2019 45784.39 42498.4854 45784.39-42498.4854=3285.9046 3285.9046 10797168.9375 7.18%
2020 46807.34 43155.6663 46807.34-43155.6663=3651.6737 3651.6737 13334720.5738 7.8%
2021 48524.56 43886.0011 48524.56-43886.0011=4638.5589 4638.5589 21516228.9841 9.56%
2022 59745.56 44813.7129 59745.56-44813.7129=14931.8471 14931.8471 222960059.227 24.99%
2023 70251.28 47800.0823 70251.28-47800.0823=22451.1977 22451.1977 504056278.9616 31.96%
196704.08 2946518985.08 481.56
2024 52290.3218 Total
51 14 %

• Forecasting errors

1. Mean absolute error (MAE), also called mean absolute deviation (MAD)
MAE=1n∑|ei|=196704.085117=11570.8285

A Detailed Analysis on ITC Past 20 years 7

 2. Mean squared error (MSE)
MSE=1n∑|e2i|=2946518985.081417=173324646.1813

3. Root mean squared error (RMSE)

RMSE=√MSE=√173324646.1813=13165.2818

4. Mean absolute percentage error (MAPE)

MAPE=1n∑|eiyi|=481.5617=28.33

A Detailed Analysis on ITC Past 20 years 8

 1. Simple Linear Regression Analysis:

Now, construct the estimated regression coefficient using the values of the predicted
and response variables:

Obs. X Y Xᵢ² Yᵢ² Xᵢ · Yᵢ

1 2004 11819.66 4016016 139704362.5 23686598.64
2 2005 13360.24 4020025 178496012.9 26787281.2
3 2006 16236.42 4024036 263621334.4 32570258.52
4 2007 19519.99 4028049 381030009.6 39176619.93
5 2008 21467.38 4032064 460848404.1 43106499.04
6 2009 23247.84 4036081 540462064.7 46704910.56
7 2010 26399.63 4040100 696940464.1 53063256.3
8 2011 30819.28 4044121 949828019.7 61977572.08
9 2012 35247.25 4048144 1242368633 70917467
10 2013 42105.51 4052169 1772873972 84758391.63
11 2014 47068.66 4056196 2215458754 94796281.24
12 2015 50389.01 4060225 2539052329 101533855.2
13 2016 51944.57 4064256 2698238352 104720253.1
14 2017 55448.46 4068289 3074531716 111839543.8
15 2018 44329.77 4072324 1965128508 89457475.86
16 2019 45784.39 4076361 2096210368 92438683.41
17 2020 46807.34 4080400 2190927078 94550826.8
18 2021 48524.56 4084441 2354632923 98068135.76
19 2022 59745.56 4088484 3569531940 120805522.3
20 2023 70251.28 4092529 4935242342 142118339.4
Sum = 40270 760516.8 81084310 34265127587 1533077772

SSXX=n∑i−1X2i−1n(n∑i−1Xi)2

=81084310−120(40270)2=81084310−120(40270)2
=665

SSYY=n∑i−1Y2i−1n(n∑i−1Yi)2

A Detailed Analysis on ITC Past 20 years 9

 =34265127587.076−120(760516.8)2=34265127587.076−120(760516.8)2
=5345800000

SSXY=n∑i−1XiYi−1n(n∑i−1Xi)(n∑i−1Yi)

=1533077771.82−120(40270)(760516.8)=1533077771.82−120(40270)(760516.
8)
=1777200

The slope of the line and y-intercept are calculated by the following formulas:

^β1=SSXYSSXX

=1777200665

=2672.5

β0=¯Y−^β1ׯX

=38026−2672.5×2013.5

=−5343000

Hence, The regression equation is:

^Y=−5343000+2672.5X
After finding the regression equation, we can gather the predicted values by inserting
the independent variable in the regression equation
^Y=−5343000+2672.5X

A Detailed Analysis on ITC Past 20 years 10

 2004-2013
Estimated regression coefficient using
the values of the predicted and response
variables

2014-2023
Estimated regression coefficient using the
values of the predicted and response variables

A Detailed Analysis on ITC Past 20 years 11

The predicted and residual values are given in the table below:

Predicted
Y Values (^Y) Residuals (Y−^Y) Residuals (Y−^Y)
2004 11819.66 −5343000+2672.5×2004=12637 11819.66−12637=−817.68
2005 13360.24 −5343000+2672.5×2005=15310 13360.24−15310=−1949.6
2006 16236.42 −5343000+2672.5×2006=17982 16236.42−17982=−1745.9
2007 19519.99 −5343000+2672.5×2007=20655 19519.99−20655=−1134.8
2008 21467.38 −5343000+2672.5×2008=23327 21467.38−23327=−1859.9
2009 23247.84 −5343000+2672.5×2009=26000 23247.84−26000=−2751.9
2010 26399.63 −5343000+2672.5×2010=28672 26399.63−28672=−2272.6
2011 30819.28 −5343000+2672.5×2011=31345 30819.28−31345=−525.38
2012 35247.25 −5343000+2672.5×2012=34017 35247.25−34017=1230.1
2013 42105.51 −5343000+2672.5×2013=36690 42105.51−36690=5415.9
2014 47068.66 −5343000+2672.5×2014=39362 47068.66−39362=7706.6
2015 50389.01 −5343000+2672.5×2015=42035 50389.01−42035=8354.5
2016 51944.57 −5343000+2672.5×2016=44707 51944.57−44707=7237.5
2017 55448.46 −5343000+2672.5×2017=47379 55448.46−47379=8069
2018 44329.77 −5343000+2672.5×2018=50052 44329.77−50052=−5722.2
2019 45784.39 −5343000+2672.5×2019=52724 45784.39−52724=−6940.1
2020 46807.34 −5343000+2672.5×2020=55397 46807.34−55397=−8589.6
2021 48524.56 −5343000+2672.5×2021=58069 48524.56−58069=−9544.8
2022 59745.56 −5343000+2672.5×2022=60742 59745.56−60742=−996.31
2023 70251.28 −5343000+2672.5×2023=63414 70251.28−63414=6836.9

A Detailed Analysis on ITC Past 20 years 12

 CONCLUSION AND SUGGESTION

The in-depth analysis of ITC's sales growth over the last two decades provides valuable
insights into the company's trajectory. Statistical methods such as Exponential
Smoothing and Simple Linear Regression have offered a nuanced understanding of the
trends shaping ITC's market performance.
1. Exponential Smoothing Analysis:
The application of Exponential Smoothing to ITC's sales data indicates a consistent
upward trend over the years. A smoothing parameter (\(\alpha\)) of 0.2, emphasizing
recent observations, forecasts sales for 2024 at approximately 52,290.32. However, a
high forecasting error of 481.56% suggests that Exponential Smoothing may not
accurately capture significant variations.
2. Simple Linear Regression Analysis:
The Simple Linear Regression analysis establishes a positive slope, indicating a gradual
increase in sales over time with the equation \(\hat{Y} = -5,343,000 + 2,672.5X\). The
close alignment of predicted values with actual sales data, demonstrated by low mean
squared error and root mean squared error, reinforces the reliability of this analysis.

• SUGGESTION

1. Capitalizing on Historical Trends: ITC should leverage observed historical trends by

intensifying marketing efforts for existing products and exploring avenues for product
diversification.

2. Advanced Forecasting Models: While Exponential Smoothing and Simple Linear

Regression provide insights, incorporating advanced forecasting models like time series
analysis or machine learning algorithms can enhance accuracy.

3. Strategic Market Expansion: Considering the positive slope in the regression

analysis, ITC may strategically expand into new markets or regions, contributing to
sustained growth.

4. Consumer-Centric Approach: Continuous market research is crucial for

understanding changing consumer needs, allowing ITC to adapt products to evolving
preferences, sustaining and enhancing market share.

A Detailed Analysis on ITC Past 20 years 13

5. Sustainability Initiatives: Emphasizing sustainability aligns with global trends.
Increased investment in eco-friendly practices and social responsibility initiatives can
enhance ITC's corporate responsibility.
6. Digital Transformation: Embracing digital transformation, optimizing online
channels, investing in e-commerce capabilities, and adopting efficient technologies align
with ITC's Information Technology sector.

7. Proactive Risk Mitigation: In a dynamic market, ITC should develop proactive risk
mitigation strategies, including assessing geopolitical risks and supply chain
vulnerabilities.

In conclusion, the last two decades have witnessed ITC's evolution into a diversified
conglomerate with sustained sales growth. Leveraging historical trends, refining
forecasting models, and embracing strategic initiatives position ITC for continued
success in an ever-changing business landscape.

A Detailed Analysis on ITC Past 20 years 14

 BIBLIOGRAPHY

https://yourstory.com

https://indianexpress.com

http://www.investopedia.com

https://en.wikipedia.org

http://www.bbc.com

https://www.socscistatistics.com

https://atozmath.com

https://www.moneycontrol.com

A Detailed Analysis on ITC Past 20 years 15