ITC sees subdued urban recovery post covid 2.0

ITC Ltd has flagged “heightened uncertainty” around the timing and shape of India’s economic recovery trajectory following the second wave of covid-19 infections.

Urban recovery could be muted compared with the first wave, and the spread of infection to villages may impact rural demand, said the hotels-to-cigarettes conglomerate.

A rapid pace of vaccination and a stronger healthcare infrastructure would be critical to mitigating the impact of any impending outbreaks, it said in its annual report for FY21.

It expects rural demand, robust in FY21, to be impacted because of the virus spreading to rural areas on a relatively larger scale than 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 FY21 on the back of robust agricultural output, government support and reverse migration, may also be blunted by the spread of the virus to the hinterland in the second wave,” it added.

ITC’s gross revenue stood at ₹48,151.24 crore in FY21, while profit after tax stood at ₹13,031.64 crore. ITC said the progressive easing of restrictions and improvement of mobility led to a pick-up in economic activity in the second half of FY21.

Meanwhile, the “ferocity” of the second wave since February has adversely impacted the country’s projected economic prospects for FY22, it said. That’s because most states imposed partial restrictions to contain the spread of the virus. This has slackened the recovery momentum significantly.

ITC’s varied business interests were impacted 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 FY21, 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 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.

ITC 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 packaged consumer goods 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 up ​its direct-to-consumer channel—ITC e-Store. Launched in March 2020, the e-store’s reach was extended to 11 cities during the year.