While stating the performance of the company, the chairman pointed out that the company has registered 10% growth in turnover to Rs 1295 crore during the fiscal 2005, despite the severe restrictions imposed by the government.

In his words: ‘This is particularly commendable (i.e. the 10% growth) against the back drop of severe restrictions imposed on the cigarettes industry with respect to advertising, sale and consumption of tobacco products.’

While discussing the export prospect, the chairman confidently put the figure of export growth at 30% for cigarettes and cut tobacco in subsequent financial year.

The announcement of 220% dividend (Rs 22 on equity shares of face value Rs 10 each) was well appreciated by the shareholders at the meeting and demand for bonus was almost unanimous.

Highlights

Performance highlights

Cigarettes:

• The market share of the company has grown to 11.8% in domestic cigarette market
• Company has test launched a new brand in the name of ‘Force-10’ in Ludhiyana and Nagpur Market during the fiscal
• During first quarter of the current fiscal (ended June 2005) the sales volume has grown by 9.3% to 3117 million cigarettes (against 2853 million)
• The value of cigarettes during the this quarter rose by 12% to Rs 328.96 crore (against 293.48 crore)

Tea:

• The sales quantity grew by 30% to 2889 tonne (2214 tonne) and turnover rose by 36% to Rs 39.61 crore (against Rs 29.16 crore) during the fiscal’05.

• During first quarter of the current fiscal (ended June 2005), the sales of the tea has grown by 2% to Rs 7.96 crore. First two months were affected due to introduction of VAT

Exports:

The aggregate export of cigarettes, tobacco and tea rose during the fiscal by 4.3% to Rs 72.53 crore (FOB value)

The cut tobacco registered an impressive growth of 814% to Rs 3.29 crore against mere Rs 0.36 crore in previous year

The company has introduced its brand in new locations including Guinea and Sierra Leone

The company is targeting a growth of 30% in cigarettes and tobacco segment

Export of un-manufactured tobacco jumped by impressive 43.7% in quantity to 7099 MT (against 4940 MT), while in terms of value the export grew by 34.7% to Rs 51.75 crore. Hence indicates lower realization during the fiscal.

The company is targeting an export of unmanufactured tobacco at Rs 58 crore during 2005-06, i.e. 12% growth over proceeding fiscal.

Cigar:

• The company has established a leadership in Cigar (imported from USA) market with 50% market share
• The aggressive advertisement campaign has resulted in around three times volume growth in its prime brands compared to last year

Shareholder’s quarries

Most of the shareholders were keen to request for bonus share, considering the healthy reserves of the company. The other quarries were mainly related to splitting of shares, market shares in cigarettes, prospect of tea business, effect of increased taxation etc.

The management produced following additional facts in reply to the queries:

• As the dividend is tax free while bonus attracts tax liability, the company has preferred to reward the shareholders through dividend

• Splitting of shares is not a good practice for company dealing in sensitive items like cigarettes, which often results in a erratic share price movement

• During first five months of the current fiscal (April-August’05), the quantity of sales has grown by 10% and value has jumped by 13%. This growth rate is faster than the average industry growth rate

• The Company’s market share in cigarettes business stand at around 12%. ITC commands a dominant position with 71% market share.

• The tea business of the company has faired well during the year and company expects 20-25% growth in this segment

• The company has not given donations to any political parties and figures given in the financial statement basically represents the donations given for educational activities and for tsunami affected purposes.

• Company expects sales turnover of Rs 1475 crore during current fiscal (FY’06) (represents 14% growth).

• Taxation

The tobacco industry is the third largest taxpayer. Over the years taxation has been increasing on cigarettes and that has landed the cigarettes industry in to trouble. For current fiscal (2005-06) excise duty has been further increased by 10%. However, striking off the luxury tax imposed by various states in the light of Supreme Court judgement has resulted in partial relief on overall taxation.

The company has saved Rs 65 crore on account of omission of luxury tax during the fiscal 2005 and the increased provision for tax is due to higher excise duty. The company paid Rs 612 crore-excise duty and Rs 63 crore direct tax during the FY’05.

• Capex

The company has invested Rs 1.70 crore in Andheri (Mumbai) plants and Rs 1.50 crore in R&D at same location.