It also expects rural demand, robust in the previous fiscal, to be impacted owing to the virus spreading in rural areas on a relatively higher scale as compared to the first wave
NEW DELHI: Hotels-to-cigarettes conglomerate ITC Ltd flagged “heightened uncertainty" around the timing and shape of the economic recovery trajectory following the second wave of covid-19 infections in India, adding that urban recovery could be muted compared to the first wave and the spread of infection in India’s villages may impact rural demand.
A rapid pace of vaccination and a stronger healthcare infrastructure would be critical in mitigating the impact of any impending outbreaks, the company said in its annual report for FY20-21 released late on Tuesday evening.
It also expects rural demand, robust in the previous fiscal, to be impacted owing to the virus spreading in rural areas on a relatively higher scale as compared to the first wave. Consumers are also setting aside resources for medical needs, it said.
“On the consumption side, urban-led recovery may be relatively muted compared to the first wave as consumers switch to precautionary savings mode and rising healthcare costs eat into household spending. Rural demand, which remained strong in FY 2020-21 on the back of robust agricultural output, government support and reverse migration, may also be blunted by the large scale spread of the virus to the hinterland in the second wave," it added.
ITC’s gross revenues stood at ₹48,151.24 crore in FY 2020-21; its profit after tax stood at ₹13,031.64 crores in the same period.
The company—whose business spans cigarettes to hotels and packaged consumer staples, soaps and snacks—said that progressive easing of restrictions and improvement of mobility led to a pick-up in economic activity in the second half of last fiscal. The government too responded to contain the spread of the virus by imposing a stringent lockdown and stepped-up efforts to support livelihoods and economic activity through stimulus packages last year, ITC said in its management discussion and analysis.
Meanwhile, the “ferocity" of the second wave in India since February 2021 has adversely impacted the country's earlier projected economic prospects for FY21-22, it added.
That’s because most Indians states imposed partial restrictions to contain the spread of the virus. This has slackened the recovery momentum significantly, it said.
ITC’s varied business interests were impacted by the covid waves—albeit to different degrees. Its fast-moving consumer goods business benefited on account of increased consumption of health-hygiene products such as soaps and sanitizers as well as staples such as pulses, spices, flour and convenience foods in the first half of the year, while the discretionary and out-of-home portfolio reported strong recovery in the latter half.
The company that sells—Aashirvaad flour, Bingo! chips, YiPPee! noodles, Sunfeast biscuits and Classmate notebooks—rolled out over 120 new products last fiscal.
Its over 25 consumer-facing brands represent annual consumer spends of over ₹22,000 crore. The business also saw a shift in consumption habits on account of the pandemic.
Within the FMCG business (excluding cigarettes)—sales through the e-commerce channel more than doubled during the year, taking its salience to over 5% of segment revenue. ITC stepped up efforts to build more digital channels to reach shoppers. In the last fiscal ITC also scaled upits direct-to-consumer channel—ITC e-Store. Launched in March 2020, the e-store’s reach was extended to 11 cities during the year.
“The initiative has been well received by consumers and plans are on the anvil to rapidly scale up the same in the ensuing months," the company said.
The company remains focused on rapidly scaling up the FMCG businesses with a future-ready portfolio, it said. ITC has ambitions to build a stronger packaged consumer goods business in the future.
"Towards this, it seeks to fortify its market standing in the existing core operating categories, in many of which it is already a leading player as aforementioned. It is pertinent to note that these categories, which are largely characterised by low household penetration levels and/or low per capita consumption, offer significant headroom for long-term growth," it added.
ITC called for policy interventions with a focus on supporting sustainable livelihoods and inclusive growth, along with support to sectors such as MSME, travel and tourism.
Even as the Indian economy faces multi-dimensional challenges in the short term, it remains one of the most dynamic major economies in the world with huge potential, it said.
“With structural drivers of growth firmly in place, the pace of economic growth is expected to pick up over time. Policy announcements in the Union Budget 2021 are expected to provide further impetus to build India’s competitiveness and foster inclusive growth," it added
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