REPORT AND ACCOUNTS 2017 - ITC

1 REPORTANDACCOUNTS2017 ITC: Growing Contribution Across Agriculture, Manufacturing and ServicesBoard of Directors and Committees 01 REPORT on Corporate Governance 12 Shareholder Information 28 REPORT of the Board of Directors & Management Discussion and Analysis 40 Certificate of Compliance from Auditors with respect to Corporate Governance 122 CEO and CFO Compliance Certificate 123 Standalone Financial Statements Balance Sheet 124 Statement of Profit and Loss 125 Statement of changes in equity 126 Cash Flow Statement 128 Notes to the Financial Statements 130 Auditor s REPORT 195 Guide to Subsidiaries, Joint Ventures & Associates 201 Salient Features of the Financial Statements of Subsidiaries, Joint Ventures & Associates (AOC -1) 204 Consolidated Financial Statements 209 Ten Years at a Glance 296 Financial Highlights Business Responsibility REPORT I-XVIB usiness Update : lTC lnfotech Creating Enduring Institutions Awards & AccoladesCONTENTSITC: Growing Contribution Across Agriculture, Manufacturing and ServicesITC s journey to create an exemplary Indian enterprise is inspired by its abiding vision to serve larger national priorities.

2 A journey that has transformed ITC into a multi-business and multi-dimensional corporation, making it one of India s most admired and valuable LimitedREPORT AND ACCOUNTS 2017 ITC s diversified portfolio of businesses, spanning FMCG, Paperboards & Packaging, Agri Business, Hotels and Information Technology, enables it to have a significant presence across all the 3 sectors of the Indian economy, namely, agriculture, manufacturing and services, providing the Company with the unique opportunity to contribute meaningfully to the growth and development of the s commitment to Put India First is manifest in many ways in its strategy to create multiple drivers of growth for the Indian economy through a diversified portfolio of businesses; in the creation of world-class brands that create, capture and retain value in India; in establishing state-of-the-art brick and mortar assets for the nation.

3 In its investment in cutting-edge R&D and in its Social Investment Programmes that address some of the key challenges facing India today poverty, unemployment and environmental s diversified portfolio of businesses, spanning FMCG, Paperboards & Packaging, Agri Business, Hotels and Information Technology, enables it to have a significant presence across all the 3 sectors of the Indian economy, namely, agriculture, manufacturing and services, providing the Company with the unique opportunity to contribute meaningfully to the growth and development of the Agriculture, driven by its celebrated e-Choupal programme, ITC s engagements with farmers across the country to enhance productivity, provide critical market linkages and create rural assets have raised farm incomes, improving the quality of life of the rural population and transforming village Manufacturing, supported by substantial investments in state-of-the-art technology, ITC has created world-class manufacturing facilities across the length and breadth of the country for its FMCG, Paperboards, Packaging and Printing businesses.

4 Powered by deep consumer insights, cutting-edge R&D, superior branding skills, the culinary expertise of hotels chefs, packaging excellence and an extensive trade marketing & distribution capacity, ITC s bouquet of world-class FMCG brands in the Branded Packaged Foods, Personal Care, Education and Stationery, Lifestyle Retailing, Incense Sticks (Agarbattis) and Safety Matches sectors, continue to gain significant consumer franchise, earning market leadership across the Services sector, ITC Hotels is the greenest luxury hotel chain in the world. It is acknowledged worldwide for its iconic properties, its fine art of hospitality, signature cuisine and service excellence. The Company s wholly owned subsidiary, ITC lnfotech, is a specialised full services global player in the Information Technology is today a global exemplar in sustainability.

5 ITC s businesses have generated sustainable livelihoods for 6 million people, many of whom represent the weakest in society. It is the only enterprise in the world to be carbon positive (12 years), water positive (15 years), and solid waste recycling positive (10 years). Over 48% of the total energy requirement of ITC is met from renewable sources. ITC has pioneered the green building movement in India, establishing 22 green buildings. All its premium luxury hotels have the unique distinction of being LEED Platinum LimitedREPORT AND ACCOUNTS 2017 The Journey of Transformation in Creating a New ITCH ighlights TurnoverRs. 55,002 cr11-fold increase from 1996 Profit Rs. 10,200 cr39-fold increase from 1996 Among Top 3in Contribution to the Exchequer Nearly75%of Value-Added accrues to the Central and State ExchequersAroundRs 2,70,000 crContribution to the exchequer since 1996 Market Cap Rs.

6 3,74,000 cr(As on ) 67-fold increase from 1996 Total Shareholder Returns CAGR since 1996 (As in March 2017 ) outperforming the Sensex growth of LimitedREPORT AND ACCOUNTS 2017 ITC Today: Business Leadership 13 businesses spanning FMCG, Hotels, Agri-Business, Paperboards & Packaging and Information TechnologyFMCGB usinessesHotels India s leading marketer ITC Foods is the 3rd largest and fastest growing ITC Hotels is world s greenest luxury hotel chain One of the fastest growing hospitality chains in IndiaITC LimitedREPORT AND ACCOUNTS 2017 Agri -BusinessPaperboards & PackagingInformation Technology in profitability Pioneer in Rural Transformation through ITC e-Choupal One of the largest exporters of coffee Market Leader in Revenue & Profits Most environment friendly pulp mill in Asia Sustained investments to enhance competitiveness and import substitution Large-scale Afforestation programme Digital Full Services Global Player 9 Development CentresITC LimitedREPORT AND ACCOUNTS 2017 World-Class Indian Brands ITC

7 LimitedREPORT AND ACCOUNTS 2017 World-Class Indian Brands 25 mother brands in FMCG with an annual consumer spend of nearly Rs. 14,000 crReaches over125 million householdsConsumer spendAashirvaad -Rs 3,500 cr Sunfeast - over Rs 3,000 cr Classmate, YiPPee! & Bingo! - over Rs 1,000 creachVivel, Mangaldeep & Candyman - over Rs 500 creachITC LimitedREPORT AND ACCOUNTS 2017 Non-cigarette businesses account for:58%of net segment revenue 77%of operating capital employed 88%of the employee base40 FMCG categories10,000 SKUsOver 2million outlets directly servicedNearly 7 lakh tons annual paperboards/ paper million of warehousing spaceOver 200factoriesOver 1,00,000markets servedNearly 100hotels80%of aggregate capex over the last 5 years ITC Today: A SnapshotITC LimitedREPORT AND ACCOUNTS 2017 Sustainable livelihoods supported by ITC s businesses:6 million Carbon Positive12 yearsWater Positive 15 yearsSolid Waste Recycling Positive 10 yearse-Choupal:4 millionfarmers empowered Women Empowerment.

8 Nearly 55,000 rural women benefittedHealth & Sanitation: Nearly 24,000 toilets built417 municipal wards64,00,000 citizens25,00,000 school childrenSolid Waste Management: Well-being Out of Waste (WoW) programme covers:Primary Education: Over 5 lakh children benefittedSkilling and Vocational Training: Nearly 44,000 youth benefittedRenewable energy: Over 48% of total energy consumption. Targeting 50% by 2020 Afforestation:Over 6,20,000 acres greenedWatershed Development: Over 7,76,000 acres coveredLivestock Development:15 lakh milch animals servicedThe only Company in the world to bePioneer of green building movement in India: Established 22 green buildingsWorld s greenest luxury hotel chain: ITC Hotels World s highest rated green building: ITC Green Centre, Gurugram World s largest LEED Platinum certified green hotel: ITC Grand Chola, ChennaiWorld s first LEED Platinum certified data centre.

9 ITC Sankhya, BengaluruGlobal Exemplar in Sustainability ITC LimitedREPORT AND ACCOUNTS 2017 ITC s Contribution to AgricultureAn Enduring Relationship with Farmers over DecadesITC is one of India s leading corporates in the agricultural sector & among the largest exporters of agri commodities. The revolutionary ITC e-Choupal initiative is a global model of farmer empowerment. Together with its extensive rural development programmes, ITC s engagement with farmers have raised rural incomes by creating competitive capacity, enabling productivity enhancement, building common assets such as water harvesting structures and diversifying farm income through livestock development, etc. ITC s strategy of enhancing the competitiveness of its agri value chains enables it to make an enduring contribution to national economic e-Choupal has been designed to tackle the unique challenges faced by Indian farmers.

10 In a pioneering move, ITC leveraged the power of Information Technology to set up Internet kiosks, or e-Choupals, in villages to provide to farmers information on weather, agri best practices, know-how, market prices and others. The e-Choupals also transmit market signals to the farmers, which enable them to plan their produce better and align them to market needs, thereby enabling a virtual integration of the supply chain. The initiative has empowered 4 million farmers, whilst providing significant competitive advantage to ITC s Foods businesses by sourcing quality agri-commodities such as wheat, coffee, fruit pulp and e-Choupal - World s Largest Rural Digital Infrastructure ITC LimitedREPORT AND ACCOUNTS 2017 Innovating further to reach the fruits of scientific research to the farmer, ITC e-Choupal offers agri extension services to improve farm competencies.