The metamorphosis of ITC under Y.C. Deveshwar

How Y. C. Deveshwar turned ITC into a consumer goods business that clocked Rs9,724 crore in revenue in the last fiscal

Y.C. Deveshwar took over as ITC chairman in January 1996. Photo: Mint
Y.C. Deveshwar took over as ITC chairman in January 1996. Photo: Mint

Kolkata: When Y.C. Deveshwar took over as chairman in January 1996, ITC Ltd was going through its worst crisis. The company was facing tax demands and a probe for alleged foreign exchange violations.

Making matters worse, its initial attempt at diversifying had gone haywire and its key foreign shareholder British American Tobacco Plc (BAT) was pushing for greater control.

Within two years of taking the helm, Deveshwar was forced to cut losses and get out of the edible oils and financial services business, but managed to keep BAT from taking control of ITC with the support of Indian institutional shareholders—the erstwhile Unit Trust of India and Life Insurance Corp. of India.

One battle won, plans for diversification were redrawn. Within four years of Deveshwar’s becoming chairman, ITC was again trying to enter new business segments. It started with stationery products and soon launched others such as food.

The company’s biggest strength is its distribution network—ITC reaches 2 million outlets directly and 4 million more indirectly—which, combined with product innovation, has transformed ITC from a cigarette maker into a consumer goods conglomerate.

Through the past 15 years, Deveshwar has realized that dream, building a consumer goods business from the ground up to clock Rs.9,724 crore in revenue in the last fiscal.

He often reminds ITC’s shareholders that multinational conglomerates earn royalties from most consumer goods that Indians use. Why should that happen, he asks.

Though all these new ventures have not started to turn in profits, ITC’s market capitalization has shot up from Rs.5,500 crore to Rs.2.84 trillion in the past couple of decades, which is one of the many metrics by which to measure Deveshwar’s success.

“The way he has built the consumer goods business is unbelievable,” says Sanjiv Goenka, chairman of the RP-Sanjiv Goenka group. “Though I respect his decision, I am kind of disappointed that he decided to give up his executive role.”

Key leaders at ITC saw this coming. Not only had he indicated back in 2011 that he might serve a part of his 2012-17 term in a non-executive role, he has built a pipeline of young leaders to take on greater responsibilities.

These include executive director Sanjiv Puri, president (consumer goods) B. Sumant, head of agri and IT businesses S. Sivakumar, head of trade-marketing Hemant Malik, chief executive of foods division V.L. Rajesh and chief executive of tobacco division Sandeep Kaul, among others.