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ITC May Add `Home, Personal Care' Products to Sustain Growth

Tuesday, July 24, 2007

ITC Ltd., India's biggest tobacco company, plans to sell "home and personal care'' products to sustain growth as new taxes and curbs on smoking threaten cigarette sales.

The new products will be sold through the company's network of 6,400 Web kiosks and 18 supermarkets, ITC said in its annual report for the year ended March 31. The Kolkata-based company didn't give details of the goods or when they will be available to consumers.

After introducing products ranging from snack foods to incense sticks, ITC plans to diversify further as value-added taxes on tobacco and public smoking bans reduce revenue. The company, which has doubled profit in the past five years, may start selling shampoo and skin cream to compete with the local units of Unilever and Procter & Gamble Co., Anand Shah, an analyst at Angel Broking Ltd. said.

"They are looking at new drivers to reduce dependence on the cigarettes business,'' said K.K. Mital, who manages the equivalent of $37 million in stocks at Escorts Asset Management at New Delhi. "Given the pressure on pricing, this doesn't look easy.''

Founded in 1910, ITC sells its own products and that of 100 other companies through its retail network covering 38,500 villages in nine of India's 28 states. About half the company's sales comes from tobacco.

"These initiatives are expected to provide the basis for sustainable growth,'' the annual report said.

ITC also has interests in businesses as diverse as hotels and paper manufacturing.

Under Pressure

India's states applied a value-added tax of 12.5 percent on cigarettes April 1. ITC said along with a 6 percent excise tax, the total increase in the levy is equivalent to 33 percent.

"It is quite likely that industry volumes will be under pressure,'' the company, which holds its annual shareholder meeting on July 27, said.

The government will make it mandatory for cigarette packets to carry pictorial warnings from Oct. 1, Health Minister Anbumani Ramadoss said last week. It will also enforce curbs on smoking in public places such as railway stations.

Posted by FR at 12:05 AM  


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