No slowdown yet, but inflation and El Niño are risks: ITC's Sanjiv Puri

ITC Ltd chairman and managing director Sanjiv Puri says while there are no signs of any slowdown in the economy right now, inflation and El Nino are key concerns. Talking to ET’s Writankar Mukherjee & Sagar Malviya in a two-hour long interview, Puri said the conglomerate is going to invest Rs 20,000 crore over the medium term across businesses, including hotels. ITC is also going to expand its margins in the FMCG business on a sustained 80-100 basis points every year.

Edited excerpts.

Are you seeing any impact on the economy or consumption due to the West Asia crisis and inflation?


The good news is that despite the turbulence and uncertainties that global economies are going through, India is traversing through this phase quite well. The country is progressing well and is on a strong path, with some bumps along the way.

On a positive side, India’s fundamentals remain strong. Progressive policy measures such as income tax changes, GST rationalisation, and the pickup in public capex have supported growth. We are also seeing strong momentum in rural investments, GCC expansion, and entrepreneurship.

We witnessed benefits from GST rate cuts in the second half of the last fiscal, which supported a period of strong growth. That momentum of healthy growth continues.

While growth is continuing, second-order impacts from inflation remain a key monitorable. It is certainly a concern as historical data suggests that inflation does affect consumption. However, I would not say at this point of time that it has already started impacting in a very significant way.

Another area of concern is El Niño. The government is proactive and will work to mitigate risks. As of now, there is no data or evidence to suggest a slowdown yet. However, it is definitely something to be cautious about.

How is ITC shaping itself up with the changing external factors, including climate change?

Across our core businesses, there is a significant headroom for growth. Therefore, the objective is to continue investing to scale them further. At the same time, there are large adjacency opportunities that allow us to expand our total addressable market.

Change is happening at a very fast speed — driven by evolving consumer preferences, regulatory shifts, technological advancements, and climate change. All of these are also creating new opportunities and unlocking future growth vectors.

Across our businesses, we continuously identify growth vectors and prioritise opportunities through structured investments and innovation. The objective is to bring more disruptive and differentiated offerings to the market.

In terms of capabilities, digital acceleration and building supply chain resilience are today becoming increasingly critical. Organisations need to invest in systems and capabilities to augment these capabilities effectively.

Climate change is today a key trigger, and it reinforces our belief that sustainability is central to business resilience. Nearly 90% of our value chain is in India, which significantly enhances our resilience against external uncertainties.

We have undertaken climate risk assessments at a decadal level and are implementing site-specific mitigation measures. We are also going beyond being water positive at the enterprise level—especially in water-stressed regions—to making entire river basins water positive. We are currently five times net water positive.

ITC has been betting on the FMCG business for a while now. How are your margins improving and plans?

Our aspiration is to become the number one FMCG player, even without cigarettes. This requires sustained investments in innovation, supply chain, brand building and distribution, among others.

Our focus, as a part of the ITC Next strategy, has been on profitable growth and we have seen margins expanding by about 740 basis points between FY17 and FY26. Going forward, we expect to improve margins by 80–100 basis points annually at an aggregate level on an average.

While the progress has been encouraging, there remains a significant headroom for growth. The FMCG business, including inorganic acquisitions, has been cash flow positive.

Our strategic moats including scale, premiumisation, supply chain efficiencies, science-based innovations, and sourcing efficiencies through ITCMAARS and FPOs are yielding competitive advantage, structurally positioning us for margin expansion.

Today’s market spans multiple generations—Gen Z, Gen Alpha, Golden agers —each with distinct beliefs and needs. Consumers are increasingly seeking specialised and personalised solutions. We are investing in these emerging micro-segments that will be increasingly important in the future. The key is to continuously solve the consumers’ needs in emerging and relevant spaces.

Within FMCG, what are the key growth trends?

Nutrition will play a major role going forward, especially in the areas of fibre and protein. For instance, Yoga Bar has pivoted towards protein, and this will be expanded further. This aligns with our broader strategy of focusing on health and wellness, including organic, fibre and protein-based offerings, among others.

India remains a heavily under-penetrated market with low per capita consumption. On one hand there are consumers who are seeking offerings like GLP while on the other hand there are people who do not have enough. Therefore, I think the opportunity is both ways in India.

India is also a protein-deficient market. We already have offerings such as high-protein atta, soya chunks and protein shakes, and we will continue to expand this portfolio.

These categories continue to offer significant headroom for growth. Companies must remain agile to respond to emerging trends, and we are actively building capabilities to understand and respond to the trends of the future.

Has quick commerce become the largest channel within alternate channels for ITC?

E-commerce contributes nearly 15% of our business, with 9% coming from quick commerce and modern trade accounting for around 16%.

In the foreseeable future, general trade, which accounts for nearly 70% of shopping, will continue to remain a dominant channel. There is clearly space for growth in health and wellness, premium, indulgence, and convenience segments. E-commerce is a strong channel for trials and discovery, and it will grow in salience. However, general trade will remain a formidable channel.

E-commerce enables us to serve micro-segment demand for consumers looking for specialised offerings. We will invest in micro segments to create new solutions. This is also one of the drivers behind our investments in acquiring D2C brands. Among potential segments, organic remains a strong undercurrent, and frozen foods are an evolving space.

This year, there was an unprecedented increase in taxation in cigarettes. Will that give further impetus to the illegal market?

Tax increases typically lead to price hikes. In such cases, the illicit cigarette industry gains share. We have seen this before. Hence, to minimise the impact on the legal industry and on our business, we adopt a calibrated approach with staggered price increases, instead of hiking prices in one shot. Like in FMCG, we increase price in stages. This remains an area to monitor closely, as there is likely to be an impact on volume, given the increase in illicit trade. At the same time, we are re-architecting our portfolio to mitigate the impact.

ITC in the last 2-3 years is focussing a lot on exports. Is it a new growth driver and what is the potential like?

The free trade agreements (FTAs) are expected to open up opportunities. We see good potential to scale FMCG exports further. Over the past three years, FMCG exports have grown at a 3-year CAGR of 32%.

Through 24 Mantra, we have established a presence in the US, which we are now strengthening by introducing more products. The objective will be to grow at an even faster rate. We are also investing in strengthening our international teams.

FTAs will also enable us at ITC to explore collaboration opportunities— both for distributing complementary international products in India and leveraging partner distribution networks to expand in global markets. We can use their distribution to sell in those countries. Finally, we can together sell in other countries.

In addition, our exports of nicotine derivatives turned profitable in the last quarter.

What are your plans in the agriculture business? Are you moving up the value chain into new areas of demand like ethanol?

At ITC, value-added agriculture has grown at a CAGR of about 33% over the last 5 years. Biological extracts represent the highest end of value addition, and we have progressively strengthened our medicinal and aromatic plant extracts business.

We are making significant investments in a seed potato facility. Once it is commissioned fully, it will be one of the world’s largest pre-basic seed potato facilities.

Our ITCMAARS platform currently connects around 2.5 million farmers and 2,300 FPOs, and we aim to scale this to 10 million farmers and 4,000 FPOs.

We are also developing maize varieties with higher ethanol yields.

Climate-smart agriculture is another major focus area for us, given that a large part of our portfolio is indexed to agriculture. We currently cover 3.2 million acres under climate smart farming, with a target of 4 million by 2030. The impact has been significant. Initial assessments show that when compared to the baseline, about 70% of participating areas demonstrate high resilience and higher yields, along with significant GHG reduction.

We are deploying AI-based models to predict climate risks. These models can help mitigate 70–85% of potential risks. All these initiatives have done well, and they are important medium-term investments to make the company more resilient. They are more knowledge-driven than capex-intensive.

What are your capex plans?

India offers strong growth opportunities, and we will continue to invest across businesses. The group’s capex plan is around Rs 20,000 crore over the medium term. At a group level, this includes hotel expansion.

Strategies should not change easily unless dramatic changes occur. The context is continuously evolving, and therefore different kinds of offerings are being brought to the market. There is a continued pipeline of innovation in products and processes.

What will be the growth outlook?

We continue to seed new businesses within ITC. They have taken off well and continue to be scaled up. India offers a wide range of interesting categories. While we cannot pursue all simultaneously, the portfolio will continue to grow and we will add some more where we have a right to win.

Consumers today are increasingly looking for experiences. Fresh foods, as a segment, has done remarkably well for us, growing at around 100% annually since inception. We now operate 70 kitchens across 5 cities and are expanding into North India with a new central kitchen.

Our goal for mature businesses is to achieve industry-benchmark profitability. In FMCG, we aim for 80–100 bps margin expansion annually on an average. ITC Infotech is progressing well, with EBITDA margins of around 18%, which is at par with the higher end of mid-tier companies. We are scaling it up further.

Our objective is to achieve top-quartile growth, continuously improve margins, and be a leader in quality and innovation.